A federal judge in Florida on Tuesday sentenced Orlando “businessman” Frank Amodeo to 22 years in prison for stealing $181 million in payroll taxes – one of the largest employment tax frauds in U.S. history.

Assistant U.S. Attorney Randy Gold in the Middle District of Florida, a tax and money-laundering specialist, prosecuted the case. Gold will be regaling his colleagues for years about this one.

A diminutive disbarred lawyer with a messiah complex, Amodeo owned a Lear jet and once predicted he would dominate world business. 

In fact, Amodeo was pocketing withholding taxes that he was supposed to be remitting to the Internal Revenue Service through a web of payroll check processing companies he owned. He pleaded guilty to five felony charges last September. At a sentencing hearing earlier this month, a psychiatrist testified that Amodeo was ”manic, delusional and grandiose” and “mentally ill,” the Orlando Sentinel reported.

But it was Amodeo’s high-profile political activities that made the case especially weird.

He owned a shadowy “security consulting” firm that sent three employees – including an ex-Secret Service agent named Kevin Billings – to the Democratic Republic of Congo in 2006 to guard a dual U.S.-Congolese citizen named Oscar Kashala, who was running for president.

Billings and two other Amodeo employees were thrown into jail on trumped-up charges of trying to overthrow the government. After their release, they flew to Paris, where Amodeo’s jet picked them up for a return flight to Florida.

Kashala, the failed Congolese presidential candidate, also was a client of the Washington lobbying firm Dutko Worldwide.  Through Kashala, Amodeo hired Dutko to assist him with international business deals. Dutko lobbyist Sally Painter, a former Clinton Commerce Department official active in North Atlantic Treaty Organization expansion issues, tapped him for $100,000 to sponsor a NATO conference in Riga, Latvia in 2006.

 That $100,000 contribution — plus another $5000 he donated to the Republican Party of Florida the day before — got Amodeo into a meeting at the White House in October 2006, where he sat two seats down from President Bush at a meeting to discuss an upcoming NATO summit in Latvia. 

 At the time, Amodeo was under active Justice Department investigation in Florida for the missing withholding taxes. He was known to be erratic and manic, a string of lawsuits alleging fraud had been filed against him, he’d been disbarred as a lawyer, and had already been convicted once of felony fraud in Georgia. Moreover, his company’s murky foray into Congolese politics had been on the front page of the Orlando Sentinel. But the Secret Service still let Amodeo into the White House to sit with the president. Good work, Secret Service.

As for Dutko’s Painter, she later told me for this profile I wrote of her for the Wall Street Journal she’d had no idea of Amodeo’s criminal jeopardy. After his lobbying contract expired, Dutko sued him for failing to pay his bill. The case was settled.

 Read a copy of Amodeo’s indictment here. The Orlando Sentinel’s stories on Amodeo are here. He was sentenced by U.S. District Judge John Antoon II.

Several former executives at Lehman Brothers Holdings Inc. have been questioned by the Justice Department as part of a criminal investigation into whether Lehman sold what they claimed were safe, liquid securities to clients when they already knew that the market for the securities was drying up.

From the Wall Street Journal article:

Prosecutors from the U.S. attorney’s office in Brooklyn and lawyers from the Securities and Exchange Commission in recent weeks interviewed several former executives who ran Lehman’s auction-rate-securities business, these people said. Auction-rate securities are short-term debt instruments in which the interest rates reset at periodic auctions.

The inquiry centers on whether Lehman employees defrauded customers as the market for these securities broke down in 2007. Authorities want to know if Lehman executives got these auction-rate securities off the firm’s books and into client accounts at a time in which the securities were becoming hard to sell, according to the people with knowledge of the matter.

Authorities also want to know if executives knew the market was in trouble and sold their own personal holdings of auction-rate securities, which could constitute insider trading, according to the people.

In a big boost to the Justice Department’s financial fraud efforts, Congress on Monday sent the Fraud Enforcement and Recovery Act (FERA) to President Obama for his signature.

The legislation is in response to the mortgage fraud and financial services meltdown. It strengthens the False Claims Act, the whistleblowing legislation that has helped the U.S. recover more than $15 billion over the last eight years.  As we reported last month, the bill also authorizes $245 million a year over two years to hire more than 300 federal agents, 200 prosecutors and 200 forensic analysts to rebuild “white collar” enforcement efforts that took a back seat after the 9/11 attacks to counter-terrorism. “This bill is a step toward holding accountable those who have caused so much damage to our economy,” Senate Judiciary Committee Chairman Pat Leahy (D-Vt.), a leading sponsor of the bill, said in a floor statement.

Sen. Ted Kaufman (D-Del.), another leading sponsor, said in a statement: “We can’t have separate sets of rules for people who rob  banks and banks who rob people.” Sen. Charles Grassley (R-Iowa) also introduced the bill and made the following statement upon its passage:

This legislation will send a message to those who have defrauded homeowners and mortgage lenders and will send an even stronger message to those who are thinking about committing a future fraud.  It includes the most significant amendments to the False Claims Act since 1986, which will ensure that court decisions that limit the FCA are overturned and congressional intent is restored.  Congress has done the right thing by passing this legislation, and I hope the president signs it as quickly as possible.

The Federal Bureau of Investigation currently has fewer than 250 assigned to financial fraud cases throughout the country, and can’t investigate the more than 5000 mortgage fraud allegations the Treasury Department receives each month, Leahy’s statement said.

The Senate today approved by a vote of 92-4 new legislation to combat financial fraud. The House Judiciary Committee passed a similar measure today, but without the Senate measures to strengthen the False Claims Act, which the House for now is considering in a stand-alone measure.

The Senate version of the Fraud and Recovery Act (FERA) would authorize $245 million a year over two years to hire more than 300 federal agents, 200 prosecutors and 200 forensic analysts to rebuild “white collar” enforcement efforts that took a back seat after the 9/11 attacks to counter-terrorism. “This bill is a step toward holding accountable those who have caused so much damage to our economy,” Senate Judiciary Committee Chairman Pat Leahy (D-Vt.), a leading sponsor of the bill, said in a floor statement.

Sen. Ted Kaufman (D-Del.), another leading sponsor, said in a statement: “We can’t have separate sets of rules for people who rob  banks and banks who rob people.” Sen. Charles Grassley (R-Iowa) also introduced the bill.

The Federal Bureau of Investigation currently has fewer than 250 assigned to financial fraud cases throughout the country, and can’t investigate the more than 5000 mortgage fraud allegations the Treasury Department receives each month, Leahy’s statement said.

Assistant Attorney General Lanny Breuer said financial fraud is one of his top priorities when he announced the indictment of five people for a mortgage scam today during his first press conference as the new criminal division chief at Main Justice.

Breuer, who has been on the job for five days, was flanked behind the podium by Maryland U.S. Attorney Rod J. Rosenstein, Maryland Attorney General Douglas F. Gansler, FBI Executive Assistant Director Thomas J. Harrington and Internal Revenue Service Criminal Investigation Deputy Director Rebecca Sparkman.

Mortgage fraud is a “pervasive problem” that requires the collaboration of federal, state and local authorities, Breuer said. Today’s unsealed indictment of five people for scheming $70 million from 1,000 people for home mortgages is a “perfect example” of the crimes he will prosecute with the assistance of other authorities, he said.

“Our resolve as a group is great,” Breuer said. “We will find you. We will prosecute you and we’re going to put you in prison.”

The full text of today’s news release on  the indictment is below.

FOR IMMEDIATE RELEASE
MONDAY, APRIL 27, 2009
WWW.USDOJ.GOV
FIVE CHARGED IN $70 MILLION “DREAM HOME”
MORTGAGE FRAUD SCHEME
WASHINGTON – A federal grand jury has indicted four defendants, and an information has been filed against a fifth defendant, for their participation in a massive mortgage fraud scheme that allegedly promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves, Assistant Attorney General of the Criminal Division Lanny A. Breuer and U.S. Attorney for the District of Maryland Rod J. Rosenstein announced today.
The indictment was returned on April 22, 2009, and unsealed today.
“The Criminal Division and the U.S. Attorneys’ Offices are jointly committed to redoubling our efforts to uncover and prosecute fraud and abuse in all facets of the housing market – a market upon which so many American families have pinned their hopes and their futures for so many years,” said Assistant Attorney General of the Criminal Division Lanny A. Breuer.  “I want to assure the American public that we will not rest until the tide of this criminal activity is turned.”
“The indictment alleges that the defendants used slick marketing to conceal empty promises,” said U.S. Attorney Rod J. Rosenstein.  “They convinced many victims to invest at least $50,000 by refinancing their existing homes or buying new homes at inflated prices, while claiming that Metro Dream Homes would repay the mortgages with revenue from profitable businesses.  The indictment alleges that there was no revenue to pay the mortgage payments.  Instead, the conspirators used some of the investors’ money to repay earlier investors in the Ponzi scheme and spent the remainder on themselves.”
“The effects of this wide-ranging mortgage fraud scheme are particularly disturbing within the backdrop of today’s economic environment. With our federal, state and local partners working on 18 mortgage fraud task forces and 47 mortgage fraud working groups across the country, the FBI is committed to combating mortgage fraud and other financial crimes nationwide to protect the American homeowner and the national economy,” said Executive Assistant Director Thomas J. Harrington, FBI Criminal, Cyber, Response, and Services Branch.
“IRS Criminal Investigation takes allegations of mortgage fraud seriously,” said “Eileen Mayer, Chief, IRS Criminal Investigation. “These types of crimes drive home owners into foreclosure, erode the integrity of our tax system and threaten the financial health of our communities.”
According to the indictment, from 2005 to 2007 the defendants allegedly used corporate names such as “Metropolitan Grapevine LLC,” “Metro Dream Homes,” “POS Dream Homes,” and “POS DH LLC” (collectively, MDH) to target homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.”  To participate, an investor had to provide a minimum of $50,000 for each home enrolled in the program, in addition to an “administrative fee” of up to $5,000.  In exchange, the program promised to make the homeowner’s future monthly mortgage payments, and pay off the homeowner’s mortgage within five to seven years.  Thereafter, the homeowner and MDH would own an equal interest in the home.
The indictment alleges that Andrew Hamilton Williams, Jr., 58, of Hollywood, Fla., was the founder and owner of MDH; Michael Anthony Hickson, 46, of Commack, N.Y., was the chief financial officer; Isaac Jerome Smith, 46, of Spotsylvania, Va., was the president; and Alvita Karen Gunn, 31, of Hanover, Md., was the vice president of operations.  The information alleges that Carole Nelson, age 50, of Washington, D.C., was the chief financial officer of POS Dream Homes.
The indictment further alleges that Dream Homes Program representatives explained to investors that the homeowners’ initial payments would be used to fund investments in automated teller machines (ATMs), flat-screen televisions that would show paid business advertisements, and “Touch-N-Buy” electronic kiosks that sold telephone calling cards and other
items.  To give the Dream Homes Program a veneer of legitimacy and financial success, the defendants marketed the program through live presentations at luxury hotels in Maryland, Washington, D.C., and Beverly Hills, Calif., among other locations.  The defendants allegedly told some of the investors that they should not worry about the price of the homes or monthly mortgage payments because MDH would make mortgage payments on their behalf.

The indictment alleges that the defendants failed to advise investors that: the ATMs, flat-screen televisions and kiosks never generated any meaningful revenue; the defendants used the funds from later investors to pay the mortgages of earlier investors; and MDH had not filed any federal income tax returns throughout its existence.  The defendants also allegedly failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including the defendants, to: pay salaries of up to $200,000 a year as well as their mortgages; employ a staff of 10 chauffeurs and maintain a fleet of luxury cars; and travel to and attend the 2007 National Basketball Association All-Star game and the 2007 National Football League Super Bowl, staying in luxury accommodations in both instances.  Nor were investors told that investor funds were allegedly used to: pay off investors in a prior failed ATM investment venture that Williams had founded called Bankcard Group; make multiple donations of up to $50,000 each to charitable organizations to allegedly give MDH the appearance of being financially successful; and fund investments in third-party businesses that had not been disclosed to investors.
On Aug. 15, 2007, the Maryland Securities Commissioner issued a cease-and-desist order to Williams, MDH and other related companies directing them to immediately cease the offering and sale of unregistered securities in connection with their promotion of the Dream Homes Program.  However, the defendants thereafter allegedly called additional meetings in which they made additional misrepresentations about the financial success of MDH’s operations.  On Sept. 4, 2007, the defendants filed a legal challenge in federal court in Maryland to the cease-and-desist order.  The indictment alleges that at a hearing on Sept. 12, 2007, Hickson testified that the financial success of the Dream Homes Program did not rely upon new investor funds, when in fact Hickson knew that the sole source of meaningful revenue for MDH was new investor funds.
As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $70 million.  When the defendants stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.
The four indicted defendants face a maximum sentence of 20 years in prison for the fraud conspiracy; 20 years in prison on each of the 15 counts of wire fraud; and 20 years in prison for conspiracy to commit money laundering.  Hickson also faces a maximum sentence of five years in prison for making false statements.  Smith also faces a maximum sentence of 30 years in prison for bank fraud arising out of his alleged misrepresentation of his income in order to obtain a bank loan to purchase a new Bentley automobile. Nelson was charged by information with money laundering, which carries a maximum penalty of ten years in prison.  The indictment seeks forfeiture of the fraud proceeds, including $70 million.
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 proceeding.
This prosecution is being brought jointly by the Maryland and Washington, D.C. Mortgage Fraud Task Forces, which are comprised of federal, state and local law enforcement agencies in Maryland, Washington, D.C. and Northern Virginia.  The Task Forces were formed to promote the early detection, identification, prevention and prosecution of various kinds of mortgage fraud schemes.  This case, as well as other cases brought by members of the Task Forces, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and help to ensure the integrity of the mortgage market and other credit markets.  Information about mortgage fraud prosecutions is available on the internet at http://www.usdoj.gov/usao/md/Mortgage-Fraud/index.html.
Assistant Attorney General Lanny A. Breuer and U.S. Attorney Rod J. Rosenstein praised the FBI, IRS – CI, the Maryland Attorney General’s Office, Securities Division and the Federal Deposit Insurance Corporation, Office of Inspector General for their investigative work; and thanked Assistant U.S. Attorneys for the District of Maryland Jonathan C. Su and Bryan E. Foreman, who are prosecuting the case.

Robert Moran of Lighthouse Point, Fla., owned a yacht company that catered to “Russian oligarchs, Kuwaiti royals and other global jet-setters,”  the New York Times reports. The former deck-hand and sea captain’s plea deal avoids indictment in return for a promise to pay back taxes and penalties and cooperate with the Internal Revenue Service.

Moran’s name was among 285 the bank turned over to the U.S. in February, as part of a $780 million deal to settle charges it helped wealthy Americans hide $20 billion in offshore accounts. The government still has more than 100 tax-evasion investigations open of Americans who used UBS private banking services. The bank also remains under investigation, the Times reports.

Attorney General Eric Holder joined a multi-agency news conference today vowing to crack down on mortgage loan modification scams. Treasury Secretary Tim Geither, Federal Trade Commissioner Jon Liebowitz, and Housing and Urban Development Secretary Shaun Donovan also lent star power to the event. The Obama administration’s financial rescue package includes assistance to homeowners looking to refinance their mortgages on more affordable terms.

Only homeowners whose mortgages are guaranteed by Fannie Mae or Freddie Mac are eligible. But that’s more than four million homeowners – a fat target for fraud, the administration says.

Geithner said Monday that Treasury’s Financial Crimes Enforcement Network (FinCEN) will devote more resources to identifying fraud suspects. Holder noted that the Federal Bureau of Investigation has more than 2,100 mortgage fraud cases open and has created a National Mortgage Fraud Team, based in Washington.

Holder also said:

We are working with the FTC to reinvigorate the Executive Working Group, which brings together DOJ, the FTC, and state attorneys general to coordinate and exchange intelligence on competition and consumer fraud issues, such as the rescue scams we are addressing today

You can read Holder’s prepared remarks here.

The Wall Street Journal grabbed Attorney General Eric Holder on the sidelines of a conference in Mexico about combatting violent drug cartels. Holder said the Department of Justice will soon announce state-federal task forces to investigate financial crime, along the lines of the old Enron task force. Holder’s predecessor as Attorney General, Michael Mukasey, frowned on task forces as inefficient, the WSJ’s Evan Perez writes. Read his report here.

Robert Khuzami, a former prosecutor in Manhattan, will be named the Securities and Exchange Commission’s new chief of enforcement, the Wall Street Journal’s Kara Scannell reports today. Khuzami in 1993 helped convict blind Egyptian cleric Omar Abdel Rahman of masterminding an attempt to blow up New York City landmarks. Now he’ll be overseeing the SEC’s civil action against Wall Street trader Bernie Madoff, who has admitted to blowing up investment portfolios around the world in a Ponzi scheme and reached a partial settlement with the SEC Monday. (Separate criminal charges against Madoff are pending).

Khuzami gave $2300 to John McCain’s presidential bid in 2007 and spoke at last year’s Republican National Convention. He was most recently Deutsche Bank’s general counsel for the Americas. He is also a former head of the Securities and Commodities Fraud Task Force in the U.S. Attorney’s office in the Southern District of New York, where he was an AUSA for 11 years.

UBS AG is in talks with the Department of Justice about ending an investigation into whether the Swiss financial services giant helped some 17,000 Americans evade taxes, the Wall Street Journal reports. One option under discussion: UBS would admit to criminal conduct to head off a felony indictment and pay around $1.2 billion in penalties, the Journal reports.

One former UBS executive has already been indicted in Florida on charges of helping U.S. clients evade taxes. Another former UBS executive, Bradley Birkenfeld, has pleaded guilty to the same charges and is now cooperating with the Internal Revenue Service and DOJ. Justice lawyers are assisting the IRS in a separate civil case seeking the names of the Swiss firm’s American clients.