McHenry County Blog

Andy Zinke

John Koziol

My battery died last night, so I missed the hearing in which Sgt. John Koziol was asking Judge Thomas Meyer to appoint a Special Prosecutor to investigate Undersheriff Andy Zinke’s alleged misdeed with reference to a Drug Enforcement Administration  probe in McHenry County.

The principals were walking down the hallway as I arrived.

Bummer.

Suffice is to say that Judge Meyer declined to make such an appointment,  tossing the situation to McHenry County State’s Attorney Lou Bianchi, the same thing he did with Deputy Zane Seipler’s request.

When contacted, Bianchi said,

“I have contacted the U.S. Attorney’s Office and the Office of the Appellate Prosecutor.”

Instead of taking over two years, as it did with Seipler’s request, Judge Meyer took less than two weeks.

A press release from the U.S. Attorney’s Office:

U.S. ATTORNEY’S OFFICE TO CONDUCT ELECTION DAY MONITORING ELECTION DAY HOTLINE: (312) 469-6157

CHICAGO — The U.S. Attorney’s Office will monitor the general election in Chicago and surrounding suburbs on Tuesday, Nov. 6, 2012, Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, announced today.

As part of the monitoring effort, the office will operate a hotline for candidates or the public to call to report any complaints relating to voting.

In addition, Assistant U.S. Attorneys and other personnel will be monitoring certain polling places, while other attorneys will be available to respond to complaints as needed.

The hotline number, staffed on Election Day only, is (312) 469-6157.

Gary Shapiro

“This office has a long tradition of monitoring the polls on Election Day to help protect the integrity of the voting process,” Mr. Shapiro said. “No one who is entitled to vote should in any way be inhibited from doing so, and we stand ready to ensure a fair process for all.”

Assistant U.S. Attorney Stephen Heinze coordinates the office’s election monitoring efforts and subsequent investigations, if any, in consultation with the Justice Department. The Chicago Office of the Federal Bureau of Investigation and the U.S. Marshals Service will assist in this effort by following-up, if necessary, on any election fraud and voting rights complaints.

Complaints about ballot access problems or discrimination can also be made directly to the Civil Rights Division’s Voting Section in Washington at 1-800-253-3931 or 202-307-2767.

Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input. It also contains special protections for the rights of voters and provides that they can vote free from acts that intimidate or harass them. For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them, or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting may violate federal voting rights law. Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice.

Violations of federal voting rights statutes carry penalties ranging from 1 to 10 years imprisonment and fines up to $250,000.

Chicago Tribune columnist John Kass reminded me Sunday why I didn’t support former Massachusetts Governor Mitt Romney four years ago.

Mitt Romney has never committed to keep equal opportunity political corruption fighter Patrick Fitzgerald on the job, if he became President.

He refused to say he would retain Patrick Fitzgerald as Chicago’s U.S. Attorney.

Call be crazy, but I don’t think if Fitzgerald had been replaced or if he is replaced in the future with an attorney with local contacts that the campaign against the corruption so infecting the body politic in Illinois would have (will) continue.

The irony is that both Senator Dick Durbin and pre-President Barack Obama promised to keep Fitzgerald on, even though he was getting close to Mayor Richard Daley.

The reason the GOP establishment wants us to believe that its members want to get rid of Fitzgerald is that he prosecuted and convicted Vice President Dick Cheney’s assistant Scooter Libby for perjury.

Lying to a Federal Agent.

Some of us think the real reason that Fitzgerald was named as Special Prosecutor in the Valerie Plame leak case was to distract him from rooting out political crooks in Illinois.

Fortunately, that strategy did not work.

Besides that diversion, I’m been told that his Chicago office was assigned the task of reviewing a treaty on Antarctica.

Just the place where you’d think you would find experts on that subject, right?

Anything to put Fitzgerald assistants to work on anything but political corruption.

Romney’s answer to Don Wade and Roma on WLS-TV was

“Oh, I can’t possibly make that, he-heh, assessment now. It’s a little ahead of my time. A little presumptuous of me to be picking U.S. Attorneys.”

Let’s see.

The two Democrats who would make the choice say they would keep Fitzgerald, but a leading Republican couldn’t say the same thing.

I thought that spoke volumes then.

It still does.

If I ever get a chance to ask him a question, that will be the subject.

Thought you might find this of interest.

CHICAGO U.S. ATTORNEY’S OFFICE COLLECTED $99 MILLION IN CIVIL AND CRIMINAL DEBTS AND FORFEITURE ACTIONS IN FISCAL YEAR 2010

Chicago office contributes to record financial recoveries nationwide

CHICAGO — The U.S. Attorney’s Office for the Northern District of Illinois collected approximately $99 million in fiscal year (FY) 2010, bringing its total collections for the last three fiscal years to nearly $550 million. The collection of more than $72.5 million in criminal and civil debts, coupled with an additional $26.4 million collected through asset forfeiture, means that the office’s total collections this past fiscal year amounted to more than three times its annual budget of approximately $32 million, Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, announced today.

Nationally, collections by the U.S. Department of Justice in criminal and civil actions in FY 2010 reached an all-time high due to the record-breaking efforts of the 94 U.S. Attorneys’ offices, which contributed to the collection of $6.68 billion during the government’s fiscal year.

During FY 2010, the U.S. Attorney’s Office in Chicago collected $21.5 million in criminal actions, including more than $6.5 million in criminal fines; more than $4.7 million in restitution owed to the federal government; and more than $9.9 million in non-federal restitution owed to victims, including the victims of various investment frauds and Ponzi schemes. In civil actions, the office collected $51 million, including more than $23.3 million from affirmative enforcement actions, with more than $22.1 million of that amount resulting from health care fraud cases. The office’s Financial Litigation Unit, which pursues post-judgment recoveries, collected more than $27.5 million during the fiscal year.

U.S. Attorney Patrick Fitzgerald

“I am grateful for the hard work of the men and women in the office — and in particular the often overlooked work of our Civil Division and our Financial Litigation Unit,” Mr. Fitzgerald said. “Our primary mission is to enforce the criminal and civil laws of the United States by prosecuting those who break the law, defending various United States agencies in civil suits and affirmatively enforcing the civil rights and remedies of all the residents of our district. But the attorneys and staff have done their work in a manner that not only pays for the entire budget of the office but returns an even greater sum to victims and to the government to fund other programs.”

On the civil side, the office also negotiated an additional $20 million settlement with a former Chicago area physician, who was sentenced in August to five years in prison for stealing $13 million from Medicare and more than 30 other public and private health care insurance programs. The government anticipates concluding litigation relating to approximately $10 million in funds seized from the physician in Fiscal Year 2011.

The U.S. Attorney's press release laid out the benefits (money brought in). This Sun-Times story outlines the costs. Referring back to Rod Blagojevich attorney Sam Adams, Sr.'s rant that trying the ex-Governor cost $25-30 million, the paper points out the entire cost of the U.S. Attorney's Office in Chicago was about $32 million.

The office’s largest single collection in the last three fiscal years, which accounted for half of the $550 million total collected during that time, was a $225 million civil settlement paid by a health insurance company to resolve findings by a federal jury and a judge that its former Illinois subsidiary systematically avoided enrolling pregnant women and other high-risk patients in its Medicaid managed care program in Illinois.

In addition to the debts actually collected on the criminal side, the office currently has pending in various stages of litigation nearly 30 investment fraud cases, about half of which involve classic Ponzi-type schemes, while others involve an array of illegal investment and trading practices.

These cases combined involve approximately $800 million in losses to more than 10,000 individual victims.

The single largest of these cases alone alleges that thousands of victims lost approximately $300 million through fraudulent investments in promissory notes and time-share resorts in Mexico.

The U.S. Attorney’s Office is responsible for enforcing and collecting civil and criminal debts owed to the United States and criminal debts owed to federal crime victims.

When defendants are convicted and sentenced in criminal cases, judges must impose restitution to victims of certain federal crimes who have suffered a physical injury or financial loss.

The U.S. Attorney’s Office is authorized to make efforts to collect criminal debts for 20 years after defendants are released from custody.

Statistics from the Justice Department indicate that the total amount collected nationwide in FY 2010 in criminal actions totaled $2.84 billion in restitution, criminal fines, and felony assessments.

While restitution is paid by Courts directly to the victim, criminal fines and felony assessments are paid to the Department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.

In additionally to criminal and civil debts, the U.S. Attorney’s Office in Chicago collected approximately $26.4 million in criminal and civil forfeitures, contributing to the nationwide collection of $1.8 billion in asset forfeiture actions in FY 2010.

Forfeited assets are deposited into either the Department of Justice Asset Forfeiture Fund or the Department of Treasury Forfeiture Fund and are used to restore funds to crime victims and for a variety of law enforcement purposes.

The statistics also indicate that $3.84 billion was collected nationwide in civil actions. The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights or environmental laws.

In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, and Small Business Administration.

The nationwide collection totals for FY 2010 represent nearly a 30 percent increase in criminal collections and a 57 percent increase in civil collections over FY 2009. In FY 2009, the U.S. Attorneys’ offices contributed to the collection of more than $4.6 billion. Of the amount collected, $2.23 billion was collected criminally and $2.44 billion was collected civilly. The significant increase in collections was due to various large criminal restitution cases as well as large health care fraud cases.

For further information, the United States Attorneys’ Annual Statistical Reports through FY 2009 can be found on the internet at http://www.justice.gov/usao/reading_room/foiamanuals.html.

Both the Cook County State’s Attorney and the United States Attorney have taken an interest in the overpayment of former Metra Executive Director Phil Pagano.

First to serve a subpoena was the State’s Attorney. You see it below (click to enlarge):

Requested were personnel records back to January 1, 2000. Interestingly, the documents says,

“Your (sic) are not to disclose the existence of this request.”

Phil Pagano

Since I got the May 5th record through the Freedom of Information Act, I guess it trumps the instruction on the subpoena.

The U.S. Attorney’s subpoena was dated May 20th.

It asks for “all computers, cellular telephones and/or handheld communications devices and any related computer media that Metra issued to Phil Pagano during his tenure at Metra,” plus his personnel file in a separate subpoena.

The U.S. Attorney’s Office has entered an arena where I have not seen it before: worker’s comp. Here is the press release:

CHIROPRACTOR AND PHYSICIAN AMONG THREE DEFENDANTS
INDICTED IN ALLEGED $1 MILLION HEALTH CARE FRAUD SCHEME

CHICAGO — A chiropractor, a medical doctor and a billing employee at a clinic owned by the chiropractor in Maywood were indicted on federal health care fraud charges, federal law enforcement officials announced today. 

The defendants allegedly illegally submitted false claims totaling more than $1 million to obtain payments from workers’ compensation and other insurers for services that were not provided and for inflated claims for services that were provided. 

The physician signed false documents and the chiropractor forged doctors’ signatures on documents supporting the false claims, according to an 18-count indictment returned yesterday by a federal grand jury. 

Most of the patients of the clinic, the Spine and Joint Rehabilitation Center, were U.S. Postal Service employees who were eligible for benefits from the U.S. Labor Department’s Office of Workers’ Compensation Program.

The chiropractor, Darwin Minnis, 54, of West Chicago, owned and operated the clinic from at least 1998 through 2009.  He was charged with 18 counts of health care fraud. 

The physician, Dr. Jacob Salomon, 63, who worked at the clinic from approximately July 2004 to September 2007, and the clinic employee, Gary Strauss, 31, who worked as a biller and claims processor between 2003 and 2007, both of Chicago, were each charged with one count of healthcare fraud.  All three defendants will be arraigned at a later date in U.S. District Court.

The indictment was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; L. Scott Caspall, Special Agent-in-Charge of the Great Lakes Field Office of the U.S. Postal Service Office of Inspector General; James Vanderberg, Special Agent-in-Charge of the Chicago Region of the U.S. Department of Labor Office of Inspector General; and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation.

Mr. Caspall said:

“Workers’ Compensation is a valuable healthcare program that provides a safety net to hardworking people injured on the job.  This investigation is an effort to dismantle a group of medical providers and billers who the indictment alleges were abusing that program.  In an age when individuals, businesses and the federal government are paying more for healthcare, this case is a prime example of the excellent results that come from combining the forces of federal law enforcement agencies.”

Mr. Vanderberg said:

“This indictment is the result of collaboration by several federal agencies working together to root out federal workers’ compensation program fraud allegedly being perpetrated by medical providers.  We will continue to detect and quickly respond to alleged fraud schemes committed against Department of Labor programs.”

According to the indictment, the defendants and others intentionally created and submitted false claims and information to the federal Workers’ Comp office and other health care insurers to obtain payment for the clinic and for patients.  The false claims and information related to patients’ work-related injuries, including medical, diagnostic, and physical therapy services that were not provided or were inflated.

As part of the scheme, Minnis allegedly forged and caused others to forge physicians’ signatures on various documents falsely representing that services, treatment, physical therapy and/or testing had been provided, ordered or supervised by medical doctors. 

Minnis allegedly forged the doctors’ signatures, and caused them to sign reports without having done patient exams, knowing that Workers’ Comp would not accept a chiropractor’s opinions or reports as medical evidence to support patients’ claims. 

Under the Federal Employees’ Compensation Act, chiropractors were not qualified physicians and their opinions did not constitute medical evidence except in very limited cases involving specific spine problems.

Minnis also falsely told patients that he was qualified to prepare impairment rating reports and to order and provide testing and treatment, and he failed to disclose that Workers Comp would not pay for services provided by a chiropractor except in very limited circumstances, the charges allege. 

Salomon and others allegedly signed false documents making it appear that Salomon or another licensed physician had examined or treated patients.  Minnis and Salomon and others allegedly prepared false progress notes and fee sheets showing that patient services were rendered when, in fact, they were not. 

Strauss allegedly forged physicians’ signatures on claim forms certifying that they were accurate, even though he knew that many were false, including whether the services were provided and by whom.  He also prepared false itemized billing statements in personal injury cases to support payments to the clinic and patients. 

In addition, Minnis and Straus double-billed Workers Comp for disability exams that Minnis performed because he made every patient pay so the clinic was paid twice for the same service, the indictment alleges.
       
Each count of health care fraud carries a maximum penalty of 10 years in prison and a $250,000 fine.  If convicted, however, the Court would determine a reasonable sentence to be imposed under the advisory United States Sentencing Guidelines.
       
The government is being represented by Assistant U.S. Attorney Jacqueline Stern.
       
The public is reminded that an indictment contains only charges and is not evidence of guilt.  The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

BERWYN BUSINESSMAN ARRESTED ON FEDERAL ILLEGAL GAMBLING AND
TAX FRAUD CHARGES; ADDED AS EIGHTH DEFENDANT IN NEW INDICTMENT

CHICAGO – A Chicago man who allegedly helped a criminal organization run its illegal gambling activities was arrested today on federal gambling and tax fraud charges, federal law enforcement officials announced.

The defendant, Casey Szaflarski, acting through his Berwyn business, Amusements, Inc., was charged with conducting an illegal gambling business since 2002, along with two other men, among seven total, who were charged previously.

The gambling and tax charges against Szaflarski were brought in a superseding indictment that was returned by a federal grand jury last week and unsealed today following his arrest.  The charges allege that Szaflarski failed to report more than $255,000 of business income between 2004 and 2006, and that he failed to file a federal income tax return for 2007.

Szaflarski, 52, was scheduled to be arraigned at 2:30 p.m. today before U.S. Magistrate Judge Nan Nolan in Federal Court in Chicago.

He was charged with one count of conducting an illegal gambling business, three counts of filing a false federal income tax return and one count of failing to file a federal income tax return, for a total of five counts in the 16-count superseding indictment.

The new indictment was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Andrew L. Traver, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives.

Federal officials commended the assistance of the Berwyn Police Department and the Cook County Sheriff’s Department.

The charges against Szaflarski were brought in a superseding indictment in United States v. Polchan, et al., 08 CR 115, in which seven other defendants were indicted in May 2009 on racketeering conspiracy charges alleging eight years of

• criminal activity, including
• armed robberies and thefts,
• illegal gambling,
• obstruction of justice and
• arson, including the pipe-bombing of a competing Berwyn video and vending machine business in 2003.

Szaflasrki was not charged in the racketeering conspiracy or arson counts.  He was charged with conducting an illegal gambling business, ongoing since at least 2002, with co-defendants Michael Sarno and Mark Polchan.

Today’s indictment adds a new forfeiture allegation seeking at least $3,607,201 from Szaflarski, Sarno and Polchan as proceeds of the alleged illegal gambling activity.  The indictment results, in part, from federal search warrants that were executed at more than two dozen suburban locations, including bars and restaurants, on May 27, 2009.

The three counts of filing false federal income tax returns allege that Szaflarski failed to report the following income from his closely-held business, Amusements, Inc.:

• at least $78,417 for 2004 when he reported total income of $373,736;
• at least $82,355 for 2005 when he reported total income of $262,842; and
• at least $94,593 for 2006 when he reported total income of $286,071.

The indictment further alleges that Szaflarski failed to file a federal income tax return for 2007 when he received gross income of at least $95,911.

The government is being represented by Assistant U.S. Attorneys T. Markus Funk and Amarjeet S. Bhachu.

The counts against Szaflarski alone carry the following maximum terms of incarceration:  operating an illegal gambling business — 5 years; filing false federal income tax returns — 3 years; and failing to file a federal income tax return — 1 year.  In addition, each count carries a maximum fine of $250,000, except the failing to file count, which is a misdemeanor and carries a maximum fine of $100,000.  Defendants convicted of tax offenses must be assessed mandatory costs of prosecution and remain liable for any back taxes, interest and penalties owed.  If convicted, the Court must determine a reasonable sentence under the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt.  Szaflarski and the defendants charged previously are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

= = = = =

Below are the paragraphs that mention video gambling.  The machines, of course, are really slot machines:

COUNT ONE
THE SPECIAL JANUARY 2009 GRAND JURY charges:

I. THE ENTERPRISE

The illegal activities of the enterprise included, but were not limited to:

1. committing armed robberies and thefts from jewelry stores, businesses, and private residences;
2. transporting stolen goods across state lines;
3. committing thefts, and obtaining stolen items, from interstate shipments of goods;
4. 

   Video poker games next to the Happy Trails Restaurant in Wisconsin.

   purchasing, possessing, and selling stolen goods;

5. using threats, violence and intimidation to advance the interests of the enterprise’s illegal activities;
6. committing arson;
7. operating and facilitating illegal gambling businesses, which included the use of video gambling machines;
8. obstructing justice and criminal investigations by tampering with and intimidating witnesses;
9. obstructing justice and criminal investigations by gathering information concerning the fact of, and extent of, ongoing federal criminal investigations from, among other sources, corrupt local law enforcement officers and law enforcement databases; and
10. traveling in interstate commerce to further the goals of the criminal enterprise…

COUNT TWO

THE SPECIAL JANUARY 2009 GRAND JURY further charges:
Beginning no later than 2002 and continuing through the date of the return of this indictment , in the Northern District of Illinois, Eastern Division, and elsewhere,

MARK POLCHAN,
MICHAEL SARNO, also known as,
“Big Mike,” “Mikey,” “Large,”and “the Large Guy,” and
CASEY SZAFLARSKI,

defendants herein, together with other persons known and unknown to the Grand Jury, knowingly conducted all or part of an illegal gambling business, that is, a business involving the use of video gambling machines and devices, which business was in substantially continuous operation for a period in excess of thirty days, which involved five or more persons who conducted, financed, managed, supervised, directed and owned all or part of the business, and which was a violation of the following laws of the State of Illinois: 720 ILCS 5/8-2, 5/28-1(a)(3) and (5)…

A Crystal Lake video poker machine.

DEFENDANT MICHAEL SARNO

Defendant MICHAEL SARNO, also known as, “Big Mike,” “Mikey,” “Large,” and “the Large Guy,” oversaw, directed and guided certain of the enterprise’s illegal activities. Among other things, SARNO caused members of the enterprise, including defendants MARK POLCHAN and SAMUEL VOLPENDESTO, to bomb “C & S Coin Operated Amusements,” a video gaming device business located in Berwyn, Illinois, for the purpose of eliminating business competition, and for the purpose of protecting and enhancing the enterprise’s own business relationships. SARNO oversaw the enterprises’s illegal gambling ventures, and received a share of the enterprise’s profits from POLCHAN…

DEFENDANT MARK POLCHAN

7. Defendant MARK POLCHAN also occupied a leadership role in the enterprise. He supervised the activities of the enterprise, identified targets for robbery and other illegal enterprise activity, and directed the activities of others employed by and associated with the enterprise. POLCHAN, moreover, utilized his business, a sole proprietorship operating under the names “M. Goldberg Jewelers,” and “Goldberg Jewelers,” located at 1203 South Cicero Avenue in Cicero, Illinois, to

• conduct meetings with various criminal associates, as well as to
• obtain, store, and sell stolen goods, including stolen goods transported in interstate commerce, stolen goods obtained through robbery, goods obtained from theft from interstate shipments, and goods obtained through the fraudulent use of access devices, including goods obtained through such illegal activities by defendants SAMUEL VOLPENDESTO, JAMES FORMATO, MARK HAY and ANTHONY VOLPENDESTO.

POLCHAN further used Goldberg Jewelers as a location to

• plan the enterprise’s illegal gambling activities with SARNO, and to
• temporarily house video gambling devices obtained from Casey Szaflarski prior to their distribution to various locations, including to clubhouses operated by the Outlaws Motorcycle Club, an organization of which POLCHAN was a member.

POLCHAN also used Goldberg Jewelers as a location to meet and confer with corrupt local law enforcement officials, including but not limited to defendant DINO VITALO, a Cicero police officer who POLCHAN utilized to perform counter surveillance and to advise him of on-going federal law enforcement activity in the vicinity of Goldberg Jewelers.

Further, POLCHAN was also responsible for making on-going payments to SARNO, from cash derived from the enterprise’s illegal activities. At times, POLCHAN used his residence, located in Justice, Illinois, to meet with members of the enterprise in furtherance of their joint illegal activities and to store unlawfully-obtained items.

The Chicago Tribune is reporting that Frank Castaldi has plead guilty in Federal court.

If you would like to read the U.S. Attorney’s press release about the charges in the $31 million scheme, you can find it here.

It’s Ponzi scheme attack week for Chicago’s U.S. Attorney’s office. Yesterday, it $77 million was identified. Today it is “more than $10 million.”

Projects mentioned in the indictment of Forrest David Laidley are

• Glen Gateway Partners and The Glen Gateway Shopping Center at the former Glenview Naval Air Station, which he sold before completion, and
• Round Lake Properties and Cedar Road Shopping Center and the Schroeder Nursery properties, neither of which did Laidley or his company have a financial interest in.

Banks from whom loans are said to have been obtained are the Libertyville Bank and Trust Company, Northside Community Bank, CIB Bank and Union Bank (not the bank in Union, Illinois).

The following press release has arrived from the U.S. Attorney’s office:

FORREST DAVID LAIDLEY CHARGED WITH ALLEGEDLY SWINDLING INVESTORS AND FINANCIAL INSTITUTIONS IN A MULTI-MILLION DOLLAR FRAUDULENT FINANCING SCHEME

CHICAGO – A Libertyville, Illinois real estate developer, who offered and sold limited partnership interests and short term, high interest, guaranteed promissory notes to the public, was indicted by a federal grand jury yesterday and charged with mail fraud, wire fraud and bank fraud in connection with a scheme to fraudulently obtain, retain and use more than $10,000,000 from investors and financial institutions.

Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, announced the return of the fourteen-court indictment against Forrest David Laidley today.

In doing so, they also thanked Lake County State’s Attorney Michael Waller and his office for their assistance in the investigation.

Laidley, 65, of Libertyville, Illinois owned and operated Forrest Properties Inc., which was engaged in the real estate development business in the northern suburbs.

According to the indictment, Laidley through Forrest Properties, fraudulently obtained funds from investors, financial institutions and others by misrepresenting the expected return on investments, the risks associated with investments, his ownership of property, his ownership of loan collateral, his financial condition, the status of investments and the use of proceeds obtained.

The indictment further alleges that Laidley commingled the fraudulently obtained funds and at times misappropriated them to make ponzi-type payments to investors, to repay delinquent loans including bank loans, to benefit unrelated real estate development projects and to benefit himself.

According to the indictment, as a result of the defendant’s scheme, limited partnership interest investors and promissory note purchasers lost over $8,000,000.

If convicted, each mail fraud, wire fraud and bank fraud count carries a maximum penalty of 30 years in prison and a $1,000,000 fine, or the Court may impose an alternative maximum fine totaling twice the loss or twice the gain, whichever is greater. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The government is being represented by Assistant United States Attorney Edward G. Kohler.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

The U.S. Attorney’s Office has issued the following press release about another alleged Ponzi scheme in Chicagoland:

FRANK A. CASTALDI CHARGED WITH ALLEGEDLY SWINDLING MORE THAN 450 INVESTORS IN $77 MILLION PONZI-SCHEME

CHICAGO – A suburban businessman who offered and sold purported investments to hundreds of investors was charged in an information filed yesterday by the United States Attorney’s Office with allegedly operating a more than 20-year Ponzi scheme that resulted in more than 300 investors sustaining losses totaling over $31.5 million.

The information alleges that, over the years, Frank A. Castaldi fraudulently induced more than 450 investors to invest over $77 million in purported 6-month promissory notes, which Castaldi falsely represented would pay guaranteed returns of 10% to 15%.

Castaldi was charged with two counts of mail fraud and one count of corruptly endeavoring to impede the Internal Revenue Service in an information that was announced today by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, and Alvin Patton, Special Agent-in-Charge of the Chicago Field Office of the Internal Revenue Service-Criminal Investigation. In addition to the mail fraud and IRS-related counts, the information seeks forfeiture of approximately $31.6 million.

Castaldi, 56, of Prospect Heights, was initially charged with a single count of mail fraud in a criminal complaint filed in U.S. District Court in Chicago on January 23, 2009.

According to the information, between at least March 1986 and December 2008, Castaldi engaged in and operated a “Ponzi” scheme by continually raising funds through the offer and sale of promissory notes to make purported “interest” payments to earlier investors. During the scheme, Castaldi made false representations and promises regarding the risk involved in the investment, the manner in which investors’ funds would be used, and the source of returns generated by the investments, it alleges.

Castaldi allegedly fraudulently induced prospective investors to purchase promissory notes, and investors to roll over promissory notes, by falsely representing the risks involved in the investment and the source of the promised 10% to 15% returns. Castaldi also allegedly personally guaranteed the safety of the investors’ principal, when he knew that he did not have the ability to make good on such guarantees without operating his Ponzi scheme.

The information further alleges that Castaldi falsely represented to certain prospective investors and investors that their funds would be invested in several different ways, including:

1. in certificates of deposit-like instruments, which were insured for up to $250,000;
2. in defendant’s businesses; or
3. with financial institutions with which Castaldi claimed he had “special relationships.”

In reality, the information alleges:

1. none of the investors’ funds were invested in certificates of deposit or any similar investments;
2. none of the investors’ funds were insured;
3. Castaldi had no “special relationships” with any financial institutions;
4. none of the investors’ funds were invested with any financial institutions; and
5. in general, Castaldi’s businesses were unprofitable and the only way he could make the promised payments was through the operation of his Ponzi scheme.

The information also alleges that Castaldi used a significant portion of investors’ funds to make Ponzi-type payments to earlier investors as part of his scheme.

The information further alleges that, during the operation of his Ponzi scheme, Castaldi corruptly endeavored to impede the IRS in the due administration of the Internal Revenue Code and the ascertainment and collection of income tax revenue by, among other things, failing to report to the IRS his receipt and use of investors’ funds.

If convicted, each mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or the Court may impose an alternative maximum fine totaling twice the loss or twice the gain, whichever is greater.

The charge that Castaldi corruptly endeavored to impede the IRS carries a maximum penalty of 3 years in prison and a $250,000 fine. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The government is being represented by Assistant United States Attorneys Christopher Veatch and Sunil Harjani.

The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Companies mentioned in the indictment are

• Blackhawk Commons,
• Cumberland Accounting Services,
• Cumberland Accounting Services,
• C-Z Travel, Inc.,
• First State Travel Service, Inc.,
• Parkway Towers Insurance Agency, Inc.,
• Re/Max Cumberland Realty, Inc., and
• Vitangelo’s Pizza & Restaurant, Inc.,