How to Blow the Whistle on Bank Fraud

The Federal Government offers potentially significant rewards to whistleblowers who provide information to the government that helps protect financial institutions by “deterring would-be criminals from including financial institutions in their schemes.” United States v. Serpico, 320 F.3d 691, 694-95 (7th Cir. 2003).

The Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and the Financial Institutions Anti-Fraud Enforcement Act (FIAFEA) enable the Attorney General to investigate and bring a civil suit against a perpetrator for criminal conduct which “affect[s] a depository institution insured by the Federal Deposit Insurance Corporation or any other agency or entity of the United States.” 12 U.S.C. § 4202(2).

Whistleblowers who provide information to the government that leads to a successful investigation and prosecution could be eligible to receive an award of up to $1.6 million. FIRREA reports can involve any of the following types of conduct involving financial institutions:

  • Giving corrupt gifts, offers, or promises
  • Stealing, embezzling, or misapplying by bank officer or employee with the willful with intent to injure the bank
  • Making of false entries, reports, or transactions (including FDIC transactions)
  • Making false statements for loan and credit applications, renewals and discounts, or crop insurance
  • Fraudulently obtaining loans or credit through false pretenses, representations, or promises
  • Making false statements, entries, overvaluation of securities, embezzlement, concealment, or misrepresentations
  • Making false, fictitious, or fraudulent claims to the Government
  • Concealing assets from a conservator, receiver, or liquidating agent
  • Conducting mail or wire fraud

This includes conduct where the financial institution is either the victim or perpetrator of the fraud. See Paul Lawrence, Whistleblower Cases Involving Securities and Financial Fraud, American Association for Justice Annual 188, (2012).

The fraud is reportable if it happened in the last ten years.

To be eligible for a reward, your report must lead the government to recover money. Whistleblowers get 20-30% of the first million dollars recovered, 10-20% of the next four million dollars recovered, and 5-10% of the last five million. There is a maximum bounty of 16% of 10 million – or $1.6 million.

In addition, the Department of Justice may award money to a whistleblower when there is either a criminal conviction or where the government is able to acquire funds or assets that were based in whole or in part on the information you provide.

HOW TO SUBMIT YOUR CLAIM

To submit a whistleblower claim, you must file a “Declaration of Violation,” under oath, which explains the fraud in detail. This declaration must contain specific facts regarding the fraud, the basis for that knowledge, and at least one new fact that was unknown to the government. This declaration cannot be based on information that has been publicly disclosed, unless you are the original source of the public information. During the investigation, the declaration you submit will remain confidential.

Do you think you have information that might qualify for an award? Contact our legal team to help you navigate this complex process and ensure that your claims are handled correctly.

Copyright © 2019 by Mark W. Pugsley. All rights reserved.

Note: This article was written with the assistance of Lydia Rytting, who is student at the University of Utah, S.J. Quinney College of Law.

Chad Deucher of Marquis Properties Has Been Indicted.

DOJI previously wrote about the SEC’s lawsuit against Chad Deucher of Orem, Utah.  As is often the case, the criminal authorities have now brought separate criminal charges against him in connection with the alleged $28 million Ponzi scheme that defrauded more than 250 investors throughout the United States.  Yesterday the U.S. Attorney’s Office for the District of Utah announced that it has obtained a criminal indictment against him charging 18 counts of wire fraud and one count of fraud in connection with the purchase and sale of securities.

Prosecutors alleged that Deucher used direct solicitations, radio advertisements, a website, and real estate and retirement seminars, among other things, to find investors for three types of investments offered through his company.  The investment options included turnkey cash flow real estate investments, promissory notes secured by real properties, and joint ventures.

The indictment alleges that Deucher made oral and written misrepresentations about the investments in communications with potential investors. He represented that Marquis located, purchased, renovated and sold single family and small, multi-family homes in lucrative areas of the country.  Deucher told investors that Marquis retained renovation crews, property managers and realtors on the ground to assist with all stages of the projects, eliminating the need for direct involvement.  According to the indictment, Deucher represented that investors could earn a significant return on their investments.  Some investors were promised approximately 8 percent per year for three years, while others were promised 16 percent to 22 percent over an investment period of about one year when rental income was considered. Later in the scheme, according to the indictment, some investors were promised 12 percent to 18 percent for a period of about two weeks to around two months, or 10 percent for investments of about two to six weeks.  In truth, the indictment alleges, Deucher tailored the terms of return based on his need for money and what he believed would induce the investor to invest in his company.

According to the indictment, Deucher failed to disclose to investors that the property Marquis offered as collateral were not owned by the company, were substantially encumbered, or were in uninhabitable or blighted condition.  He also did not disclose that Marquis was insolvent, the indictment alleges, and was unable to make interest and principal payments to investors and that investor returns were being paid from the funds of new investors.  Deucher also allegedly failed to disclose that the securities he offered were not registered and that he was not registered or associated with a securities broker or dealer, all required by law, the indictment alleges. The indictment also alleges that Deucher transferred several million of dollars of investor money from business accounts he controlled for his own business and personal interests unrelated to the acquisition or rehabilitation of real property.

The potential maximum penalty for each of the 19 counts in the indictment is 20 years in federal prison.  The potential fine for the securities fraud count is $5 million.  Each wire fraud count has a potential $250,000 fine.  The case is being prosecuted by the U.S. Attorney’s Office in Salt Lake City and investigated by FBI special agents.  The Orem Police Department and investigators with the Utah County Attorney’s Office also participated in the investigation.

If you are a victim of the Marquis Properties Ponzi scheme please contact us, and feel free to tell your story in the comments below.

Copyright © 2016 by Mark W. Pugsley.  All rights reserved.

Why Mortgage Fraud Often Involves Affinity Fraud

A 10-count federal indictment was unsealed by the FBI and Thursday that charges Utah resident Christopher D. Hales with mail fraud, wire fraud, and bank fraud and with money laundering in an alleged mortgage fraud scheme. The indictment was one of many that have been investigated by Utah’s new Mortgage Fraud Task Force.

According to the FBI’s press release Hales and others conspirators “executed a scheme to produce income from false appraisals to artificially inflate the purchase price of the residences. Hales arranged to purchase the homes through straw buyers and took the false equity proceeds stemming from those sales for himself, the straw buyers, and the co-conspirators.” Continue reading “Why Mortgage Fraud Often Involves Affinity Fraud”

SILVERLEAF FRAUD FILING

Dwight Shane Baldwin, who ran several “venture capital” funds called the Silverleaf Companies has been charged by the Utah Division of Securities with securities fraud and theft, prosecutors said Monday.  Previously the Division had charged him with securities fraud.  The Division’s civil complaint is available here.

According to the allegations in the complaint, In January of 2008,  Baldwin solicited a total of $200,000 from two Utah investors.  He told the investors that would use their money to invest in a California company called GarageCo, Inc., which manufactures a plastic toy called “Yo Baby.”  Baldwin told investors they would receive a return of their principal plus a profit in about three to five months. One of the investors recalled Baldwin saying the profit would be around approximately $300,000. Baldwin also promised the investors they would receive an equity interest in GarageCo and Silver LeaBaldwinf Capital.

The complaint alleges that Baldwin personally guaranteed the investment to one investor, and gave both investors a written guaranty from Silverleaf Companies.  To date, the investors have received no return of their principal, have received no profit or equity ownership in GarageCo or Silver Leaf Capital.
Here is a detailed article about the case that appeared in the Salt Lake Tribune.