Minnesota U.S. Attorney B. Todd Jones on Tuesday announced the creation of the Civil Frauds Unit in the office’s Civil Division.
The unit will focus on fraud in several areas, including financial, health care, mortgages, banks and federal grants.
The unit will work with the office’s Criminal Division in handling fraud cases and freezing assets before indictments are filed. The unit will also team up with the Civil Division’s Asset Forfeiture Unit to freeze and seize money in pending criminal fraud cases for use as restitution to victims.
Assistant U.S. Attorney Jerry Wilhelm will be leading the new unit. While Wilhelm will be the only prosecutor solely dedicated to the unit, at least a couple other civil litigators will spend the majority of their time working on civil fraud, according to spokeswoman Jeanne Cooney.
“Fraudsters can be found in almost every community in the country. No area is immune from these people, who prey on the trust or vulnerabilities of others,” Jones said in a prepared statement. He added, “Over the past several years, the U.S. Attorney’s Office has prosecuted a number of such individuals and will continue to do so. It is our hope that this new Civil Frauds Unit, where combating fraud will be the focus each and every day, will enhance our efforts.”
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Forbes magazine last week released its list of the top 10 CEOs who “showed enough greed, hubris and chutzpah” to give confessed Ponzi schemer Bernard Madoff “a run for his (stolen) money.”
We’ve added some information that Forbes left off its list — the top federal prosecutors who get to go after these alleged financial fraudsters, even though some of the investigations began before their time.
Winning a conviction in a high-profile financial case adds a notch to a U.S. Attorney’s belt. A prosecutor might even get to step out at a news conference or two, as Southern District of New York U.S. Attorney Preet Bharara did on Nov. 5 when announcing insider trading arrests related to the Galleon hedge fund run by billionaire Raj Rajaratnam.
To be sure, not everyone on the Forbes list is accused of an actual crime. With that caveat, we present Forbes’s “Biggest CEO Outrages of 2009″ list:
1. Lloyd Blankfein. The chairman and CEO made $73 million in 2007 and $25 million in 2008, as the economy entered a deep recession. Although his salary is not a legal offense, Forbes deemed it practically criminal.
2. John Thain. The former CEO of Merrill Lynch approved $3.62 billion in bonuses for his executives last December as the company was being taken over by Bank of America and reporting a fourth-quarter loss of $15.3 billion.
3. Raj Rajaratnam. The founder of the hedge fund Galleon Group was charged with insider trading which allegedly helped him earn more than $33 million in illicit profits. He is being prosecuted in Manhattan by Bharara’s office.
4. Byrraju Ramalinga Raju. The founder of the Indian outsourcing company Satyam Computer Services in January confessed to overstating the company’s profits and fabricating its cash balance of more than $1 billion. He hasn’t been charged.
5. Thomas Petters. The former CEO and chairman of Petters Group Worldwide was charged with orchestrating a $3.5 billion pyramid scheme fraud. He is being prosecuted by the office of Minnesota U.S. Attorney B. Todd Jones.
6. Edward M. Liddy. The former CEO of American International Group (AIG) faced criticism this year for high salaries and bonuses in addition to expensive retreats the company funded after receiving a considerable sum as part of the bank bailout of 2008.
7. Danny Pang. The founder of Private Equity Management Group was accused of running a Ponzi scheme that defrauded his investors of hundreds of millions of dollars. Pangdied of an apparent suicide in September at age 42. Had he lived, he would have been prosecuted by the U.S. Attorney’s office in Los Angeles, currently headed by acting U.S. Attorney George S. Cardona.
8. R. Allen Stanford. The Texas financier allegedly sold $7 billion worth of certificates of deposit through his Stanford International Bank and misappropriated most of the money. He is being prosecuted by the U.S. Attorney’s Office for the Southern District of Texas, currently headed by interim U.S. Attorney Tim Johnson. UPDATE: Stanford also is being prosecuted by the fraud section of DOJ’s criminal division.
9. David Rubin. The head of CDR Financial Products was indicted in October on charges of conspiracy and fraud related to rigging auctions to help determine which banks would assist governments in raising money. He will be prosecuted by Bharara’s office in Manhattan.
10. Robert Moran. The CEO of Moran Yacht & Ship pleaded guilty to tax fraud to avoid indictment. He also promised to pay back taxes and penalties and cooperate with the Internal Revenue Service. He was prosecuted by the office of R. Alexander Acosta, then-U.S. Attorney for the Southern District of Florida.
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A MAIN JUSTICE EXCLUSIVE
“Where IS Rachel Paulose these days?” one of our readers recently asked us. You remember her, the former U.S. attorney in Minnesota who resigned under a cloud in November 2007?
Her tenure was marred by staff rebellions and a federal probe into her handling of classified information. Paulose’s defenders said she was scorned, unfairly, for her conservative Republican bent and her outspoken Christian beliefs. Her detractors said she was impossible to work for and questioned whether she had the requisite experience for the job. (At the time of her resignation, Paulose was 34 years old.) Three lawyers in the office resigned their management positions in protest of her policies and management style, and more threatened to defect if Paulose remained at her post.
After stepping down, she returned to Main Justice as a counsel in the Office of Legal Policy. Then came this news release, last December, from the Office of Special Counsel, which concluded that Paulose retaliated against the No. 2 official in her office who reported her for carelessly handling classified homeland security reports. (“Based on considerable evidence of intent, animus, and motive, OSC concluded that Ms. Paulose constructively demoted” John Marti, the office’s first assistant, after he reported her conduct to Justice Department officials, the release said.)
We assumed Paulose would make a swift exit from public service after the OSC aired its findings — or at least wash out quietly during the presidential transition.
We were wrong.
Paulose is back! She’s landed a job as a senior trial counsel in the Securities and Exchange Commission’s Miami regional office. Her first appearances as an SEC lawyer, as far as we can tell, were entered in late March. Click here, here and here for copies of the filings.
A spokesman for the SEC confirmed that Paulose was hired in March but declined to offer further details. Paulose did not return calls seeking comment.
The SEC’s Miami outpost has 100 employees, including about 40 lawyers.
Joe Palazzolo can be contacted at email@example.com
Note: This post has been updated.