FBI Announces Operation Continued Action

Washington, D.C. - The Federal Bureau of Investigation (FBI) today announced action against 205 individuals in the takedown of the largest nationwide enforcement operation in FBI history directed at organized groups and individuals engaged in financial institution fraud.

The ongoing initiative, known as Operation Continued Action, “reflects the FBI’s mission and effort to identify, target, disrupt and dismantle criminal organizations and individual operations engaged in fraud schemes that target our nation’s financial institutions,” said Assistant Director Chris Swecker, FBI Criminal Investigative Division.

Operation Continued Action is targeting a variety of fraud schemes to include mortgage and loan fraud, insider fraud, financial institution failure investigations, identity theft, check fraud and check kiting. Operation Continued Action is representative criminal investigations ongoing in 37 states nationwide of the more than 5,000 cases by the FBI targeting organized criminal groups and individuals engaged in significant financial institution fraud.

This initiative involved the coordination of 47 FBI Field Offices, the Criminal Division of the Department of Justice, participating United States Attorney’s Offices, federal, state and local law enforcement agencies and financial institution regulatory agencies that work with the FBI on a daily basis in combating financial institution fraud.

From its inception in August 2004, until today, Operation Continued Action investigators have identified more than 245 subjects in 158 investigations. More than 151 indictments, informations and complaints have been filed to date. These charges have thus far led to more than 144 arrests, convictions, sentences and millions of dollars in forfeiture and restitution. The cases included in today’s announcement represent potential losses due to fraudulent activities against financial institutions in excess of $3 billions.

From 2000 to the present, the FBI’s investigations in the financial institution fraud arena have resulted in more than 11,466 indictments, 11,362 convictions and approximately $8.1 billion in restitution orders.

“The FBI continues to be the primary law enforcement agency in protecting our nation’s financial institutions and the investigation of major fraud is a high priority,” said AD Swecker.

Some of the actions filed in districts throughout the country include:

Mortgage Fraud

Charlotte Division

Operation Clean Deed: On 09/16/2004, informations were filed in U.S. District Court, Western District of North Carolina, charging six individuals with bank fraud for their roles in a multi-million dollar mortgage fraud. In November 2002, an FBI Undercover Operation was initiated utilizing a cooperating witness to introduce undercover FBI agents into seven organizations involved in a multi-million mortgage fraud ring. Investigation led to the identification of fraudulent loans which exposed financial institutions and mortgage companies to potential losses of $130 million.

Jacksonville Division

REO Flipwagon: In December 2003, the FBI initiated an undercover operation to address the massive amount of mortgage fraud in the Jacksonville area. On 09/16/2004, as a result of this investigation, seven search warrants were executed and two arrests were made. Mortgage broker J.R. Parker, and closing attorney Dale Beardsley, were arrested, via complaint, charging them with bank fraud for their role in this alleged scheme.

Chicago Division

Jeffrey Grossman; Donald Grauer; dba The Churchill Group: On 9/9/2004, Jeffrey Grossman entered a guilty plea in U.S. District Court. On 08/30/2004, Donald Grauer entered a guilty plea in U.S. District Court to bank fraud charges. Grauer and his business partner Grossman, conducted business as the Churchill Group, operating numerous real estate developments in the Chicago area. It is alleged that in the course of constructing two condominium complexes, they submitted numerous fraudulent vouchers as part of their monthly draw requests to Oak Brook Bank and Fifth Third Bank. Losses due to their alleged activities exceed $15 million. Both subjects have been charged with bank fraud and false statements.

Denver Division

Gerald Small, et al, dba Amerifunding: On 08/25/2004, Gerald Small, Kelli Burkhalter-Small, Charles Winnett, Chad Heinrich, and Robert Sigg, were arraigned in U.S. District Court, District of Colorado. These subjects were charged with bank fraud stemming from their alleged roles in a scheme to obtain loans employing stolen identities, and then utilizing these loan proceeds to purchase substandard houses which were used to perpetuate this scheme. Losses attributable to this alleged scheme exceed $19 million.

Kansas City Division

Brent Barber, dba Midtowne Restoration: On 08/16/2004, Chauncey Joseph Calvert, Aronda Lynn Nicodemus, and Roderick Neil Criss were arraigned in U.S. District Court, Western District of Missouri, for their alleged role in a mortgage fraud ring which utilized straw purchasers to purchase property which was then foreclosed upon. This scenario was repeated approximately 300 times, resulting in losses in excess of $15 million. The alleged leader of this organization, Brent Barber, was arrested by agents of the FBI, Internal Revenue Service, and the Department of Housing and Urban Development Office of Inspector General.

Loan Fraud

New York Division

Allied Deals, Inc.: On 09/09/2004, based upon a provisional arrest warrant obtained following his indictment in the Southern District of New York, Gaya Gayarinth, an attorney for Allied Deals, Inc., was arrested in Bangalore, India. On 8/25/2004, Josielynn Salumbides, was sentenced to 63 months in jail and ordered to make restitution in the amount of $683,632,800; Manoj Nijhawan, was sentenced to 41 months in jail and ordered to make restitution in the amount of $683,632,800; and Kaushik Amin was sentenced to 18 months in jail and ordered to make restitution in the amount of $2,211,858. This case was initiated based upon information from a syndicate of U.S. financial institutions alleging Allied Deals, Inc., had executed a world-wide fraud scheme through the pledging of fraudulent bills of lading to obtain credit. This scheme resulted in $500 million in losses to U.S. financial institutions, as well as an additional $500 million in losses to financial institutions in the United Kingdom. To date, 14 individuals have been convicted in this matter.

Check Kiting

Cleveland Division

Steve Myers, dba Steve Myers Auto Sales: On 09/10/2004, Tom Winkle was sentenced to 78 months in prison and ordered to make restitution in the amount of $8,054,000. On 8/23/2004, Myers was sentenced to 60 months in prison and ordered to make restitution in the amount of $8,054,000. Myers, the owner of Steve Myers Auto Sales, teamed with Winkle, the owner of Tom Winkle Chevrolet, to carry out a check kite which resulted in the deposit of more than $495 million in bad checks to banks in the Lima, Ohio area. This check kiting scheme inflicted losses of approximately $8 million and contributed to the failure of the Oakwood Savings Bank.

New York Division

David Schick: On 08/18/2004, David Schick was sentenced to 97 months in federal prison for his scheme to defraud several banks through a check kiting scheme. In this scheme, Schick funneled worthless checks through a network of shell corporations he set up. Losses attributable to this scheme were $2.2 million.

Identity Theft

Detroit Division

Richard Burley; Timothy Clark; Khary Lawson; Theodore Washington, also known as “Cash Money Boys”: On 09/01/2004, these subjects were charged in U.S. District Court, Eastern District of Michigan, on bank fraud and conspiracy charges for their alleged roles in an Identity Theft Ring which derived profits of more than $2 million. This indictment was the result of the investigative efforts of the Detroit Metro Identity Fraud Task Force (DMIFTF). The DMIFTF, comprises agents from the FBI, U.S. Postal Inspection Service, United States Secret Service, the Michigan State Police and several local police departments. Since its inception in 1999, the DMIFTF has accounted for more than 100 convictions for identity theft related crimes.

New York

Philip J. Cummings; Ford Motor Credit - Victim: On 09/14/2004, Philip J. Cummings, former Telecommunications Data, Inc., technical support representative, pled guilty in U.S. District Court, Southern District of New York, to one count of Title (T) 18, United States Code (USC), Section 1343, Wire Fraud, one count of T18, USC, Section 1028, Fraud Related to Identification Documents and Information and one count of T18, USC, Section 371, Conspiracy, for his participation in a massive scheme to steal the identities of individuals which defrauded financial institutions of more than $11 million. It was alleged that Cummings stole the passwords and access codes of Ford Motor Credit and other financial companies, to access Equifax, Trans Union, and Experian credit report records and downloaded credit report information on 30,000 individuals. These credit reports were allegedly sold to a group of co-conspirators. To date, this is the largest identity theft case.

Financial Institution Failure

Salt Lake City Division

Randy K. McArthur, Dean Johnson, Bank of Ephraim - Victim: On 09/13/2004, Randy McArthur, Supervisor of Tellers, Bank of Ephraim, Ephraim, Utah, and his associate, Dean Johnson, entered guilty pleas to bank fraud charges for their alleged roles in a $5 million embezzlement scheme which contributed to the failure of the Bank of Ephraim. This embezzlement took place over a 20-year period.

Internal Thefts

San Diego Division

Cynthia Reynolds, North Island Financial Credit Union - Victim: On 08/20/2004, pursuant to an information, Cynthia Reynolds pled guilty to one count of Title 18 U.S.C. 657 - Embezzlement, and one count of Title 18 U.S.C. 982 - Criminal Forfeiture, before United States Magistrate Judge Jan Adler in the Southern District of California. The plea also directed her to quit-claim her residence to NIFCU, as funds from the fraud had been used to pay for the residence. Cynthia Reynolds was an employee of NIFCU. As part of her responsibilities, she was authorized to move funds in and out of the NIFCU real estate suspense account. Reynolds embezzled at least $917,712.94 from that account by transferring money from the suspense account into a relative’s account at NIFCU. Reynolds also generated official NIFCU checks drawn on the suspense account and improperly used these checks to purchase vehicles, and pay various individuals and businesses for her and her relatives benefit. Reynolds concealed her activity by making false entries into NIFCU’s general ledger system.

Salt Lake City Division

Barbara Jane Coward, Utah Copper Employee’s Credit Union: On 09/15/2004, Barbara Jane Coward was indicted for embezzling from the Utah Copper Employee’s Credit Union (UCECU). Coward was employed as the manger of the UCECU, where she had worked for 54 years. Coward allegedly embezzled approximately $2.4 million from UCECU during a 40-year period, through the creation of fictitious loans.