FOR IMMEDIATE RELEASE                                                    Contact ELIZABETH MORSE

www.justice.gov/usao/md                                                              at (410) 209-4885

Baltimore, Maryland – Eric Epstein, age 57, of Pompano Beach, Florida (previously of Owings Mills, Maryland) was arrested today on charges of mail fraud and conspiracy to defraud the Internal Revenue Service. Epstein was indicted on August 24, 2017 and charged with committing mail fraud to obtain more than $50 million in money and property from various businesses through the fraudulent sale of light bulbs and cleaning supplies.

The arrest was announced by Acting United States Attorney for the District of Maryland Stephen M. Schenning; Special Agent in Charge Gordon B. Johnson of the Federal Bureau of Investigation, Baltimore Field Office; Special Agent in Charge Kimberly Lappin of the Internal Revenue Service, Criminal Division; and Inspector in Charge Robert B. Wemyss of the United States Postal Inspection Service, Washington Division.

According to the indictment, in or about 2003, Epsteinco-founded a telemarketingbusiness, Midway Industries, based in Maryland that sold lightbulbs and cleaning suppliesto businesses, schools, churches, non-profit organizations, and government offices. Epstein obtained money from thousands of victim businesses by convincing them to pay for light bulbs and cleaning supplies that they never ordered, and deceived the businesses about the amounts Midway would bill for products.

Epstein sold a majority financial interest in Midway in 2012 for $15 million, however he retained an ownership stake, received a regular paycheck, and continued to advise and supervise Midway employees. From 2003 through 2014, Midway employees would cold call businesses stating that the business had an existing business relationship with Midway, make false representations, send unwanted orders, and inflate the price of products. The inflated prices were regularly 900% greater than the prices Midway paid for the supplies. At times, invoices were more than 8000% higher than the true amount due.

Employees at Midway worked on commission, the amount of which was often determined by Epstein.Epstein offered financial incentives to employees based on customer payments, and employees were rewarded with gift cards in order to induce them to place initial orders.

Epstein caused victims’ checks payable to Midway corporate entities to be cashed at money remitters, while Epstein personally kept and used the money. Epstein and others at Midway used Midway credit cards for lavish personal expenditures, such as luxury furniture and vehicles.

If convicted, Epstein faces a maximum sentence of 20 years in prison for mail fraud conspiracy and 5 years in prison for conspiracy to defraud the Internal Revenue Service. Epstein is scheduled to have an initial appearance in U.S. District Court in Baltimore on September 15, 2017.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

Acting United States Attorney Stephen M. Schenning thanked the FBI, IRS and USPS for their work on the investigation. Mr. Schenning commended Assistant U.S. Attorneys Sean R. Delaney and Harry M. Gruber who are prosecuting the case.

CAMDEN, N.J. - A Camden man was sentenced today to 70 months in prison for his role in a crack cocaine distribution conspiracy operating in Camden, Acting U.S. Attorney William E. Fitzpatrick announced.

Joseph Boyd, a/k/a “Breet,” 32, previously pleaded guilty before U.S. District Judge Jerome B. Simandle to an information charging him with one count of conspiracy to distribute and to possess with intent to distribute cocaine base. Judge Simandle imposed the sentence today in Camden federal court.

According to documents filed in this case and statements made in court:

Joseph Boyd admitted that he sold crack cocaine in and around the 1100 block of Lansdowne Avenue in Camden and supplied crack cocaine to other members of the conspiracy to sell in the area.

Joseph Boyd – along with Jason Boyd, Tony Wilson, Preston Thomas, Derek Stallworth, Jeffrey Whitaker, Nafeez Griffin, and Julian Dickerson – were originally charged by complaint on Sept. 9, 2016, following an investigation by the FBI’s South Jersey Violent Offender and Gang Task Force. Law enforcement officers seized drugs and recovered two handguns that were kept by members of the conspiracy in connection with the organization’s drug trafficking activities.

In addition to the prison term, Judge Simandle sentenced Joseph Boyd to three years of supervised release.

Jason Boyd, Stallworth, and Wilson, who each previously pleaded guilty to drug distribution conspiracy and firearms possession, were all sentenced to 96 months in prison. Dickerson and Griffin both pleaded guilty to their roles in the scheme and await sentencing.

Thomas and Whitaker remain charged by superseding indictment with one count of conspiracy to distribute and to possess with intent to distribute cocaine base. Thomas is also charged with one count of possession of a firearm in furtherance of a drug trafficking crime. The charges and allegations against them are merely accusations, and they are presumed innocent unless and until proven guilty.

Acting U.S. Attorney Fitzpatrick credited special agents of the FBI’s South Jersey Violent Offender and Gang Task Force, South Jersey Resident Agency, under the direction of Special Agent in Charge Michael Harpster; the Camden County Police Department, under the direction of Chief J. Scott Thomson; the Camden County Prosecutor’s Office, under the direction of Prosecutor Mary Eva Colalillo; and the N.J. State Police, under the direction of Col. Rick Fuentes, with the investigation.

He also thanked the Camden County Sheriff’s Department, the Cherry Hill Police Department, and the U.S. Department of Homeland Security Investigations (HSI) for their assistance.

The government is represented by Assistant U.S. Attorney Gabriel J. Vidoni of the U.S. Attorney’s Office Criminal Division in Camden.

Defense counsel: David Rudenstein Esq.

HOUSTON – A local tax return preparer has entered a guilty plea to willfully aiding and assisting in the preparation of a false tax return for one of his clients, announced Acting U.S. Attorney Abe Martinez.

In the plea agreement filed in the record of the case, Ryan Damont Akers admitted he prepared income tax returns for clients and that he opened his own tax preparation business in Houston named Capital Income Tax. Akers willfully placed several false items on the tax return, including false losses from a sole proprietorship, a false net long term capital loss, false amounts of gifts to charity and false unreimbursed employee expenses. Akers further admitted he claimed a false income tax refund on the tax return that resulted in an intended tax harm to the IRS of approximately $16,695.

According to the plea agreement, Akers prepared a total of 32 false income tax returns for clients with a total intended tax loss of more than $134,000. Akers also prepared a false 2014 U.S. Individual Income Tax Return for an undercover IRS agent posing as a taxpayer, claiming a false income tax refund of more than $4,000 when the tax return should have reflected an amount due of $530.

U.S. District Judge Vanessa Gilmore accepted the plea and has set sentencing for Nov. 20, 2017. At that time, Akers faces up to three years in federal prison and a possible $250,000 maximum fine. He was permitted to remain on bond pending that hearing.

IRS - Criminal Investigation conducted the investigation. Assistant U.S. Attorney Charles J. Escher is prosecuting the case.

HOUSTON – A 39-year-old Houston man has been ordered to federal prison following his conviction for possession of a firearm by a convicted felon, announced Acting U.S. Attorney Abe Martinez. Ronnie Thomas pleaded guilty May 15, 2017.

Today, U.S. District Judge Vanessa D. Gilmore handed Thomas a total sentence of 100 months in federal prison to be immediately followed by three years of supervised release.

On Aug. 17, 2016, law enforcement attempted to stop Thomas on Belarbor Street in Houston after he failed to stop at a stop sign and failed to signal a right turn. Instead, Thomas led officers on a car chase through a residential area. Five police vehicles were ultimately involved with Thomas reaching speeds of 80 miles per hour.

After nearly three miles, Thomas crashed into a parked vehicle at a house on Belneath Street. He then got out of the vehicle, carrying a backpack, and led officers on a foot chase through several backyards. He was apprehended as he attempted to climb a fence surrounding a house on Belgard Street.

Upon his arrest, law enforcement officers discovered a gun, two high-capacity extended magazines and nine different types of drugs, including heroin, methamphetamine, zolpidem, cocaine, promethazine, ecstasy, methadone, codeine and marijuana.

Thomas has 12 Texas state criminal convictions as well as two previous convictions in federal court for possession of a firearm by a convicted felon and is thereby, prohibited from possessing a firearm per federal law.

He will remain in custody pending transfer to a U.S. Bureau of Prisons facility to be determined in the near future.

The Bureau of Alcohol, Tobacco, Firearms and Explosives conducted the investigation. Assistant U.S. Attorney Sam Brown IV is prosecuting the case.

CHARLOTTE, N.C. – Three men who burglarized a gun store in Cornelius, N.C. were sentenced to prison today, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina.

Maceo Royster, 20, Emmanuel Hargrove Guy, 19, and Lacedric McMillon, 23, all of Charlotte, were sentenced to 60 months, 57 months, and 40 months in prison, respectively. The defendants were also ordered by U.S. District Judge Robert J. Conrad, Jr. to serve three years under court supervision upon completion of their prison terms.

According to filed court documents and court proceedings, McMillon, Guy, Royster and a fourth individual conspired to burglarize The Range at Lake Norman, located in Cornelius. Court records reflect targeted this particular gun store because a picture on the store’s website showed it did not have bars on its windows. According to court records, on October 23, 2016, the four men drove to the gun store after it had closed for the day. McMillon waited in the car while Guy, Royster and their co-conspirator broke into the store, grabbed rifles and pistols and fled the scene.

According to court records, shortly after the robbery, law enforcement attempted to stop the getaway vehicle but McMillon sped away. After evading law enforcement, the vehicle stopped at a cul-de-sac in a neighborhood and the men fled on foot. McMillon, Guy, and Royster were later arrested. Law enforcement officers also recovered two bags which contained 22 firearms stolen from the gun store.

Royster, Guy, and McMillon pleaded guilty to one count of theft from the premises of a person licensed to engage in the business of importing, manufacturing, and dealing in firearms. They are currently in federal custody and will be transferred to the custody of the Federal Bureau of Prisons upon designation of a federal facility. All federal sentences are served without the possibility of parole.

In making today’s announcement, U.S. Attorney Rose thanked C.J. Hyman, Special Agent in Charge of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and Chief Bence Hoyle of the Cornelius Police Department for investigating the case.

Assistant U.S. Attorney Jennifer Dillon of the U.S. Attorney’s Office in Charlotte was in charge of the prosecution.

          CONCORD, N.H. - Acting United States Attorney John J. Farley announced that Isaiah Johnson, 37, of Dover, New Hampshire, was sentenced to two years in federal prison for being a previously convicted felon in possession of ammunition.

          According to court documents and statements made in court, on September 20, 2016, Dover Police pulled over a vehicle for a traffic violation. During the traffic stop, Police observed Johnson acting suspiciously in the passenger’s seat. Police ordered Johnson out of the vehicle and conducted a safety pat-down, which revealed a loaded ammunition clip in his pocket. As a previously-convicted felon, Johnson is prohibited from possessing ammunition or firearms.

          Johnson pleaded guilty to an indictment in this case on May 17, 2017. Following his term of imprisonment, Johnson will be placed on supervised release for a period of three years.

          This matter was jointly investigated by the Dover Police Department and the Drug Enforcement Agency. The case was prosecuted by Assistant U.S. Attorney Shane B. Kelbley.

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DALLAS— A federal grand jury returned an indictment last week, unsealed today, charging a former LegacyTexas Bank employee with embezzlement. U.S. Attorney John Parker of the Northern District of Texas made today’s announcement.

The two-count indictment charges Susann Nelson, 54, of Greenville, Texas, with one count of bank theft, embezzlement, or misapplication and one count of fraud and false statements in bank entries, reports, and transactions. Nelson surrendered to federal authorities and made her initial appearance in federal court yesterday.

According to the indictment, between 1999 and 2015, Nelson was an employee of LegacyTexas Bank in Richardson, Texas. Starting sometime in 2006 and continuing until 2015, Nelson managed the central vault, where she maintained control over the amount of cash in the LegacyTexas Bank’s vault on a daily basis, including ordering cash from the Federal Reserve Bank and other financial institutions and documenting the receipt of cash into the bank’s books and records.

The indictment alleges, starting in January 2010 and continuing until February 10, 2015, Nelson embezzled cash from cash deposits from the Federal Reserve Bank and made false entries in the books and records of the bank in order to conceal the embezzled cash. Nelson also engaged in a scheme in which successive cash purchases were misapplied to prior cash purchases in order to hide the embezzlement of money.

A federal indictment is an accusation by a grand jury and a defendant is entitled to the presumption of innocence unless proven guilty. If convicted, however, counts carry a maximum statutory penalty of 30 years in federal prison and a $250,000 fine. Restitution may also be ordered.

The Federal Deposit Insurance Corporation Office of Inspector General and Federal Bureau of Investigation are investigating the case. Deputy Criminal Chief Assistant U.S. Attorney J. Nicholas Bunch is in charge of the prosecution.

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Gulfport, Miss. – Leonard Charles Thomas, 39, formerly of Gautier, Mississippi, was sentenced on August 31, 2017, by U.S District Judge Sul Ozerden, to serve 25 months in federal prison for mail fraud in connection with the Deepwater Horizon Oil Spill, announced Acting U.S. Attorney Harold Brittain. Thomas was also ordered to pay restitution in the amount of $118,171.52 to BP America, Inc.

Thomas carried out a scheme to defraud the Gulf Coast Claims Facility by making materially false representations, through wire and mail submissions, that he suffered damages and lost employment as a deckhand and fisherman on a fishing boat in the harbor in Pass Christian, Mississippi. An investigation revealed that Thomas did not work on the fishing boat and did not lose earnings and profits as a result of the oil spill. He received $118,171.52 as a result of his fraudulent scheme.

This case, which was investigated by the U.S. Postal Inspection Service and prosecuted by Assistant U.S. Attorney Andrea Jones, is the result of this District’s partnership with the National Center for Disaster Fraud (NCDF), a nationwide initiative to protect available funds and assistance for those victims of both natural and man-made disasters such as hurricanes, floods, tornadoes and the recent Gulf oil spill. If you have knowledge of fraud, waste, abuse, or allegations of mismanagement involving disaster relief operations, you can contact the NCDF by either calling the hotline at (866) 720-5721, faxing (225) 334-4707, emailing at disaster@leo.gov or in writing to National Center for Disaster Fraud, Baton Rouge, LA 70821-4909.

Jackson, Miss - James P. Cheatham III, 24, of Brandon, a former federal corrections officer, was sentenced today by U.S. District Judge Daniel P. Jordan, III, to serve 15 months in federal prison followed by three years of supervised release, and ordered to pay a $1500 fine, for accepting bribes to introduce contraband into the federal correctional facility in Yazoo County, Mississippi, announced Acting U.S. Attorney Harold Brittain and Special Agent in Charge Robert Bourbon of the DOJ OIG’s Miami Field Office.

Cheatham previously pled guilty to a one-count federal indictment charging him with violation of Title 18 USC 201(b)(2)(C) – being a public official providing to an inmate a prohibited object.

"Greed and corruption have no place in our criminal justice system," stated Special Agent in Charge Robert Bourbon of the DOJ OIG’s Miami Field Office. "We want to thank our law enforcement partners for their continued efforts to ensure that individuals who abuse their position are vigorously investigated, prosecuted, and punished."

The case was investigated by the Department of Justice-Office of Inspector General and the Federal Bureau of Investigation. It was prosecuted by Assistant United States Attorney Erin Chalk.

LAFAYETTE, La. –Acting U.S.Attorney Alexander C. Van Hook announced today that an Opelousas man pleaded guilty to possessing a pistol even though he was previously convicted of a felony and prohibited from possessing a firearm.

Willie Jamal Reynolds, 28, of Opelousas, La., pleaded guilty before U.S. Magistrate Judge Patrick Hanna to one count of possession of a firearm by a convicted felon. The plea will become final when accepted by U.S. District Judge S. Maurice Hicks Jr. According to the guilty plea, police arrested Reynolds on June 3, 2017 for possessing a Smith and Wesson .40 caliber semiautomatic pistol. After further investigation, police found a 15-minute video online of Reynolds and a friend in the presence of numerous firearms. Reynolds is a felon after receiving a conviction in September of 2013 and is not allowed to possess a firearm.

Reynolds faces up to 10 years in prison, three years of supervised release and a $250,000 fine. The court did not set a sentencing date.

This investigation and prosecution is part of Project Safe Neighborhoods, which is a Department of Justice initiative to promote firearm safety and to reduce firearm crimes by preventing the possession and use of firearms by dangerous and persistent felons and others not authorized to possess a firearm.

The ATF and the Opelousas Police Department conducted the investigation. Assistant U.S. Attorney Dominic Rossetti is prosecuting the case.

KANSAS CITY, Mo. – Tom Larson, Acting United States Attorney for the Western District of Missouri, announced that a Kansas City, Mo., man was sentenced in federal court today for his role in a conspiracy to distribute crack cocaine and for illegally possessing a firearm.

Jason L. Clark, 38, of Kansas City, was sentenced by U.S. District Judge Gary A. Fenner to 19 years and seven months in federal prison without parole. Clark was sentenced as an armed career criminal due to his prior felony convictions.

On March 21, 2017, Clark pleaded guilty to participating in a conspiracy to distribute crack cocaine and to being a felon in possession of a firearm.

Co-defendant Carlos A. Hill, 42, of Kansas City, Mo., pleaded guilty on March 15, 2017, to his role in the drug-trafficking conspiracy, to being a felon in possession of a firearm and to distributing crack cocaine. Hill is scheduled to be sentenced on Oct. 11, 2017.

Clark admitted that he and Hill were present at their residence when a confidential informant purchased a stolen Inter Ordnance 7.62 x 39mm rifle on May 25, 2016. When the informant arrived to purchase the rifle, Hill pointed towards the bed of a red El Camino that was parked in front of the residence. The informant picked up a black plastic trash bag with the rifle inside it from the bed of the vehicle. When the informant started to pay Hill $600 for the rifle, Hill directed the informant to pay Clark for the purchase of the firearm. Clark then got into the El Camino and drove away.

On June 14, 2016, the confidential informant again met with Hill at his residence. Hill was packaging crack cocaine into distribution quantities and had approximately 18 ounces of crack cocaine already packaged. The informant saw Clark and others in the kitchen of the residence converting powder cocaine into crack cocaine. The informant saw approximately half a kilogram of cocaine inside the residence.

Clark was arrested on June 21, 2016, following a traffic stop after leaving Hill’s residence. Officers found an FNH 9mm pistol under the center console of the vehicle as well as several plastic baggies of cocaine, marijuana and alprazolam.

Under federal law, it is illegal for anyone who has been convicted of a felony to be in possession of any firearm or ammunition. Clark has three prior felony convictions for distribution of a controlled substance, two prior felony convictions for possession of a controlled substance, and prior felony convictions for trafficking and for aiding and abetting the distribution of crack cocaine.

This case was prosecuted by Assistant U.S. Attorney Jeffrey Q. McCarther. It was investigated by the Kansas City, Mo., Police Department and the Bureau of Alcohol, Tobacco, Firearms and Explosives.

WHEELING, WEST VIRGINIA – Families from across the Ohio Valley will have the chance to see their favorite emergency response, military and construction vehicles up close this weekend, thanks to the United States Attorney’s Office, Cabela’s, first responders, and other businesses in our community. 

Acting United States Attorney Betsy Steinfeld Jividen is proud to announce the second annual “Meet and Greet the Safety Fleet” offering children and their families and chance to “touch a truck.” Participants can sit in their favorite vehicles, take pictures, and meet those who keep our communities safe.

“We are thrilled to once again offer this event, supporting positive interactions with the children in our area and first responders, as well as honoring those who serve our communities and country every day,” said Jividen. 

The event is open and free to the public. It will be held Saturday, September 9, from 10 a.m. to 2 p.m. at Cabela’s in Triadelphia. There will be character appearances, Travis Braden’s racecar, and a special appearance of AirEvac’s medical helicopter.
 

CHARLOTTE, N.C. B Today, U.S. District Judge Robert J. Conrad, Jr. sentenced Fernando Morales-Matos to 188 months in prison followed by four years of supervised release on drug trafficking offenses, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina. Morales-Matos, 45, of Carlsbad, California, pleaded guilty in February 2017 to one count of conspiracy to distribute and to possess with an intent to distribute methamphetamine and three counts of possession with an intent to distribute methamphetamine.

U.S. Attorney Rose is joined in making today’s announcement by C.J. Hyman, Special Agent in Charge of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), Charlotte Field Division and Chief Kerr Putney of the Charlotte-Mecklenburg Police Department.

According to filed court documents and today’s sentencing hearing, from in or about June 2016 until July 27, 2016, Morales-Matos and his cousin and co-defendant, Mario Canino-Morales, were involved in a drug conspiracy with the Mexican cartel responsible for trafficking large amounts of crystal methamphetamine in Mecklenburg County. According to court records, the co-conspirators admitted to being part of the Mexican cartel, with intentions to expand methamphetamine distribution in Charlotte. Court records show that the co-conspirators were responsible for trafficking more than 2.5 kilograms of 96% pure methamphetamine. In addition to the methamphetamine, when the two men were arrested, law enforcement recovered a loaded 9mm handgun.

Morales-Matos is currently in federal custody and will be transferred to the custody of the Federal Bureau of Prisons upon designation of a federal facility. All federal sentences are served without the possibility of parole. Canino-Morales was previously sentenced to 109 months in federal prison for his involvement in this conspiracy.

In making today’s announcement U.S. Attorney Rose thanked ATF and CMPD for leading the investigation.

Assistant U.S. Attorney Sanjeev Bhasker, of the U.S. Attorney’s Office in Charlotte, prosecuted this case.

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that HARRY DUREN, 74, of Waterbury, pleaded guilty today in New Haven federal court to one count of conspiracy to possess with intent to distribute, and to distribute, oxycodone.

According to court documents and statements made in court, between approximately March 2011 and April 2016, DUREN obtained prescriptions for medications containing oxycodone from doctors in Connecticut and then arranged to resell the medications for his own profit. In total, DUREN and his co-conspirators sold approximately 45,000 30mg oxycodone pills. DUREN’s profit from the drug sales was approximately $700,000.

DUREN is scheduled to be sentenced by U.S. District Judge Alvin W. Thompson in Hartford on November 29, 2017, at which time he faces a maximum term of imprisonment of 20 years.

DUREN is released on a $50,000 bond pending sentencing.

This investigation is being conducted by the DEA’s New Haven Tactical Diversion Squad, which includes officers from the Bristol, Greenwich, Hamden, Milford, New Haven, Shelton, Vernon and Wilton Police Departments. The case is being prosecuted by Assistant U.S. Attorney Avi M. Perry.

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that a grand jury sitting in Hartford returned an indictment today charging MOHAMED ABDI, also known as “Vic,” 25, of Worcester, Massachusetts, with conspiracy to commit sex trafficking and sex trafficking by force, fraud or coercion.

As alleged in the indictment, between late December 2016 and January 5, 2017, ABDI recruited, harbored, transported and maintained a female victim to engage in commercial acts, benefitted financially, and used force, fraud or coercion.

ABDI has been detained since his arrest on related state charges on January 5, 2017.

If convicted, ABDI faces a mandatory minimum term of imprisonment of 15 years and a maximum term of imprisonment of life on the sex trafficking charge, and a maximum term of imprisonment of life on the conspiracy charge.

U.S. Attorney Daly stressed that an indictment is not evidence of guilt. Charges are only allegations, and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This matter is being investigated by the Connecticut Human Trafficking Task Force, Federal Bureau of Investigation and Connecticut State Police, with the assistance of the Wethersfield Police Department. The case is being prosecuted by Assistant U.S. Attorney Anastasia E. King.

WICHITA, KAN. – An Army veteran from Reno County was sentenced Wednesday to three years on probation and ordered to pay back $70,000 in benefits he received by pretending to be blind, U.S. Attorney Tom Beall said today. The man’s ex-wife was sentenced to a year on probation for helping with the scheme.

Billy J. Alumbaugh, 62, Turon, Kan., pleaded guilty to one count of conspiracy to defraud the government. His ex-wife, Debra K. Alumbaugh, 58, also of Turon, Kan., pleaded guilty to concealing the crime.

In his plea, Alumbaugh admitted he falsely represented to the Veterans Administration that he was blind and homebound in order to receive special monthly pension benefits. In fact, he was able to drive and engage in other routine life activities without assistance. His wife accompanied him to medical visits in which they pretended he was blind and depended on her for help.

Beall commend the Veterans Administration Office of Inspector General and Assistant U.S. Attorney Brent Anderson for their work on the case.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today that CRAIG CARTON and MICHAEL WRIGHT were arrested this morning and charged with securities fraud, wire fraud, and conspiracy to commit those offenses.

As alleged, CARTON, WRIGHT, and another individual (“CC-1”) worked together to induce investors to provide them with millions of dollars, based on representations that the investor funds would be used to purchase blocks of tickets to concerts, which would then be re-sold on the secondary market. CARTON and CC-1 purportedly had access to those blocks of tickets based on agreements that CC-1 had with a company that promotes live music and entertainment events (the “Concert Promotion Company”) and that CARTON had with a company that operates two arenas in the New York metropolitan area (the “Sports and Entertainment Company”). In fact, neither the Concert Promotion Company nor the Sports and Entertainment Company had any such agreement with CARTON, WRIGHT, or CC-1, or any entity associated with them. After receiving the investor funds, CARTON, WRIGHT, and CC-1 misappropriated those funds, using them to, among other things, pay personal debts and repay prior investors as part of a Ponzi-like scheme.

CARTON and WRIGHT will be presented later today in Manhattan federal court.

Acting Manhattan U.S. Attorney Joon H. Kim said: “As alleged, Craig Carton and Michael Wright deceived investors and raised millions of dollars through misrepresentation and outright lies. Their schemes were allegedly propped up by phony contracts with two companies to purchase blocks of concert tickets, when in fact, Carton and Wright had no deals to purchase any tickets at all. As alleged, behind all the talk, the Wright and Carton show was just a sham, designed to fleece investors out of millions ultimately to be spent on payments to casinos and to pay off other personal debt.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Carton and Wright thought they could get off easy by allegedly paying off their debts with other people’s money. They then attempted to pay off investors with money that would eventually become future debt, as alleged. We see this time and time again, the rise and fall of a Ponzi scheme destined for failure. The truth is, the time will come when your luck runs out. Unfortunately for those arrested today, that time is now.”

According to the Complaint unsealed today Manhattan federal court^[1]:

In the fall of 2016, CARTON, WRIGHT, and CC-1 exchanged emails and text messages regarding their existing debts. On September 5, 2016, for example, WRIGHT emailed CARTON and CC-1, “for the sake of our conversation tomorrow,” and outlined “the debt past due and due next week.” WRIGHT listed several apparent creditors, to whom he, CC-1, and/or CARTON were personally indebted for over a million dollars. WRIGHT listed eight possible options for repaying the debt, including “Run to Costa Rica, change name, and start life all over again – may not be an option.” CARTON responded to WRIGHT and CC-1, stating “don’t forget I have $1m coming tomorrow from ticket investor[.] will need to be discussed how to handle.” On September 7, 2016, CARTON emailed WRIGHT and CC-1, referenced a potential investor (“Investor-1”) in an upcoming holiday concert tour, and suggested “borrow[ing] against projected profits” on that investment.

Later in the fall of 2016, CARTON began negotiating with a hedge fund (the “Hedge Fund”) regarding a transaction in which the Hedge Fund would extend CARTON capital to finance CARTON’s purchase of event tickets, which CARTON would then re-sell at a profit. In early December 2016, CC-1 texted CARTON and WRIGHT and discussed using the Hedge Fund’s capital “to repay debts,” and not for the purchase of tickets.

The next day, December 7, 2016, CARTON emailed the Hedge Fund five agreements between (i) CC-1 and a company controlled by CC-1 (the “CC-1 Entity”) and (ii) the Concert Promotion Company. In each of the purported agreements, the Concert Promotion Company agreed to sell the CC-1 Entity up $10 million worth of tickets to different concert tours. However, as alleged, these agreements were fraudulent and had not, in fact been entered into by the Concert Promotion Company.

The following day, the Hedge Fund and CARTON executed the revolving loan agreement (the “Revolving Loan Agreement”), under which the Hedge Fund agreed to provide CARTON with up to $10 million, for the purpose of funding investments in the purchase of tickets for events. The Revolving Loan Agreement provided, in sum and substance, that the proceeds of the loan would be used only to purchase tickets pursuant to agreements for the acquisition of tickets, including the agreements with the Concert Promotion Company and for limited business expenses. The Hedge Fund would receive a share of the profits from the resale of the tickets.

The Hedge Fund then sent $700,000 to the CC-1 Entity to finance the purchase of tickets pursuant to the agreements between the CC-1 Entity and the Concert Promotion Company. CC-1, however, then sent this money to a bank account controlled by WRIGHT, who then, on December 12, sent $200,000 to CARTON’s personal bank account (the “CARTON Bank Account”), which CARTON then wired to a casino. Also on December 12, WRIGHT sent another $500,000 to an individual who had previously lent CARTON $500,000, which was due to be repaid that day.

Later in December 2016, the Hedge Fund sent an additional $1.9 million to the CC-1 Entity, to finance the purchase of tickets pursuant to agreements between the CC-1 Entity and the Concert Promotion Company. Once again, the Concert Promotion Company had not entered into any such agreements. CC-1, WRIGHT, and CARTON engaged in text messages regarding the disposition of these funds. Some of the money was used by CC-1 to repay two individuals who had previously invested with CC-1 in a related scheme involving the purported investment in the resale of tickets, and by CARTON to pay casinos and to pay Investor-1 a purported return on an earlier investment in a ticket-related venture.

CARTON also induced the Hedge Fund to wire $2 million to the Sports and Entertainment Company, based purportedly on an agreement he had with the Sports and Entertainment Company (the “Sports and Entertainment Company Agreement”). The Sports and Entertainment Company Agreement purportedly gave an entity controlled by CARTON (the “CARTON Entity”) the right to purchase $2 million of tickets to concerts at one of the venues operated by the Sports and Entertainment Company. CARTON, among other things, sent the Hedge Fund a copy of the Sports and Entertainment Company Agreement that purportedly had been signed by the chief executive officer of the Sports and Entertainment Company. However, this agreement was fraudulent and had never been entered into by the Sports and Entertainment Company or signed by the chief executive officer.

On December 20, 2016, when the Hedge Fund wired the $2 million to the Sports and Entertainment Company, CARTON contacted the Sports and Entertainment Company and told them, in sum and substance, that the wire had been sent in error and should be sent to the bank account for an entity operated by CARTON and WRIGHT, for which WRIGHT is the signatory. After the money was rewired to that account, WRIGHT wired $966,000 to WRIGHT’s personal bank account and $700,000 to the CARTON Bank Account. CARTON then wired approximately $188,000 from the CARTON Bank Account, including at least $133,000 in wires to several casinos.

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CARTON, 48, of New York, New York, and WRIGHT, 41, of Upper Saddle River, New Jersey, are each charged with one count of conspiracy to commit securities fraud and wire fraud, one count of wire fraud, and one count of securities fraud. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. The securities fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $5 million, or twice the gross gain or loss from the offense. The wire fraud count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Mr. Kim praised the investigative work of the FBI and thanked the Boston Regional Office of the U.S. Securities and Exchange Commission, which has filed civil charges against CARTON and CC-1 in a separate action. He added that the FBI’s investigation is ongoing.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brendan F. Quigley and Elisha J. Kobre are in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

COUNCIL BLUFFS, IA - On September 5, 2017, William Henry Adkins, 65, of Council Bluffs, Iowa, was sentenced by United States District Court Judge Rebecca Goodgame Ebinger to 360 months in prison for his participation in a conspiracy to distribute methamphetamine and firearms offenses, announced United States Attorney Kevin E. VanderSchel. Co-defendant Windy Marie Hannon, 40, also of Council Bluffs, Iowa, was sentenced by Judge Ebinger on August 9, 2017, to 150 months in prison for her role in the conspiracy to distribute methamphetamine.

On April 17, 2017, Adkins proceeded to a jury trial and was found guilty on all counts -- conspiracy to distribute methamphetamine, two counts of possession with intent to distribute methamphetamine, possession of a firearm during a drug trafficking crime, and possession of a firearm by a prohibited person. Co-defendant Hannon previously entered a plea of guilty on April 4, 2017.

Evidence at trial proved Adkins was responsible for conspiring to distribute over 2,300 grams of methamphetamine. Upon his arrest on federal charges in January 2017, Adkins was found in possession of methamphetamine, scales, baggies, drug ledgers, a loaded .40 caliber handgun, and deposit receipts totaling over $32,000.

This investigation was conducted by the Southwest Iowa Narcotics Enforcement Task Force, which consists of the Council Bluffs Police Department, Mills County Sheriff’s Office, Pottawattamie County Sheriff’s Office, and Iowa Department of Public Safety Division of Narcotics Enforcement. The United States Marshals Service and the Bureau of Alcohol, Tobacco, Firearms and Explosives assisted with the investigation. This case was prosecuted by the United States Attorney’s Office for the Southern District of Iowa.

BOSTON –A Georgia man was sentenced today in federal court in Boston for his involvement in a scheme to defraud Framingham-based Staples, Inc. of more than $1.4 million.

John Douglas, 46, of Alpharetta, Ga., was sentenced by U.S. District Court Judge Indira Talwani to 30 months in prison, two year of supervised release, and ordered to pay $691,327 in restitution and $553,061 in forfeiture. On Jan. 24, 2017, Douglas pleaded guilty to conspiracy to commit wire fraud and mail fraud.

Douglas and alleged co-conspirator Layne Michael Gosnell engaged in a complex scheme to defraud Staples of more than $1.4 million worth of customer loyalty rewards and product rebates by creating more than 1,100 Staples rewards accounts. They did this by using fictitious names, addresses, contact information, and a computer script to query a Staples website and seek unclaimed customer loyalty rewards for purchases that they did not make. The computer script made thousands of queries a day, amassing more than $889,000 worth of rewards in small increments, often less than one dollar at a time. The conspirators then used the rewards like cash at Staples retail locations to buy merchandise that they often sold on eBay.

In addition, Douglas and, allegedly, Gosnell used a similar method to claim more than $527,000 in cash rebates from Staples for products that they did not purchase.

Staples, who has cooperated with the government, discovered the fraud and referred the matter for investigation.

On Aug. 4, 2017, Gosnell was charged in federal court in Boston with conspiracy to commit wire fraud and mail fraud, and is awaiting trial. The details contained in the charging documents are allegations and Gosnell is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Acting United States Attorney William D. Weinreb; Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and Shelly Binkowski, Inspector in Charge of the U.S. Postal Inspection Service, made the announcement today. Assistant U.S. Attorney David J. D’Addio of Weinreb’s Cybercrime Unit prosecuted the case.

BOSTON – A Boston man was sentenced today in federal court in Boston for a federal firearm offense.

Troy Armstrong, 28, was sentenced by U.S. District Court Judge George A. O’Toole Jr. to three years in prison and three years of supervised release. In May 2017, Troy pleaded guilty to one count of being a felon in possession of a firearm and ammunition.

Following an investigation into drug and firearms trafficking in the Bunker Hill Housing Authority in Charlestown, Armstrong and three others, Samuel Jean, 22, of Everett; Jeffrey Joseph, 32, of Boston; and Deon Young, 32, of Hyde Park, were arrested on Dec. 1, 2016. According to court documents, during the investigation, a cooperating witness made controlled buys of guns and drugs at the direction of law enforcement. During the controlled purchases, which, were recorded on video, Jean and Joseph sold seven firearms to the cooperating witness over a one-month period, including at least one stolen firearm. Armstrong sold the cooperating witness three firearms around the same time period, including one firearm with an obliterated serial number. It is alleged that Young conspired with Armstrong to sell firearms to the cooperating witness.

Jean pleaded guilty and was sentenced to two years in prison on March 2, 2017. Joseph pleaded guilty in August 2017 and is scheduled to be sentenced on Oct. 23, 2017. Young pleaded not guilty and is scheduled for trial on Jan. 8, 2018.

Acting U.S. Attorney William D. Weinreb; Suffolk County District Attorney Daniel F. Conley; Mickey D. Leadingham, Special Agent in Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives, Boston Field Division; and Boston Police Commissioner William Evans made the announcement today. Assistant U.S. Attorney Lori Holik, Chief of Weinreb’s Major Crimes Unit, is prosecuting the cases.

The details contained in the charging documents are allegations and the remaining defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in the court of law.