Bank Fraud Defendants Sentenced to 60 and 70 Months

Defendants Fraudulently Obtained $19.67 Million from Washington Mutual

SAN FRANCISCO—Michael Ohayon and David Papera were sentenced yesterday to 60 and 70 months in prison, respectively, and ordered to pay more than $10.5 million in restitution for conspiracy to commit bank fraud and money laundering, United States Attorney Melinda Haag announced.

Ohayon pleaded guilty to conspiracy to commit bank fraud, bank fraud, and money laundering on May 24, 2010. Papera pleaded guilty to conspiracy to commit bank fraud and money laundering on April 19, 2012.

Ohayon and Papera formed a company called Sage Creek Ranch LLC for the purpose of developing multiple parcels of property in California’s Napa County. According to the plea agreements, they admitted to obtaining millions in loans from Washington Mutual Bank by submitting fraudulent loan applications in the names of “straw buyers”—i.e., individuals with good credit scores who would each obtain a residential loan to purchase a parcel from Sage Creek Ranch LLC, but who would in reality make neither down payments nor mortgage payments on the property. Ohayon and Papera admitted that they knew that the straw buyers’ loan applications included materially false information about the buyers’ income. They further admitted that they used more than $1.25 million of the loan proceeds to pay down one of Papera’s loans on a separately owned property.

Ohayon, 44, of San Francisco, and Papera, 50, of San Rafael, California, were indicted by a federal grand jury on February 11, 2010. They were charged with conspiracy to commit bank fraud, bank fraud, and money laundering.

In addition to Ohayon and Papera, six of the straw buyers were charged with and pleaded guilty to tax felonies for failure to report as income approximately $50,000 they each received from Ohayon and Papera for allowing their names and credit to be used in the bank fraud scheme.

The sentence was handed down by U.S. District Court Judge Charles R. Breyer following Ohayon’s guilty plea to conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349; bank fraud, in violation of § 1344; and money laundering, in violation of 18 U.S.C. § 1957; and Papera’s guilty plea to conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349; and money laundering, in violation of 18 U.S.C. § 1957. Judge Breyer also sentenced the Defendants to a five-year period of supervised release and ordered them to make restitution to Chase Home Finance (Washington Mutual’s successor) in the amount of $10,586,079.73. Ohayon is scheduled to begin serving his sentence on January 4, 2013. Papera is scheduled to begin serving his sentence on November 2, 2012.

Tracie L. Brown and Denise M. Barton are the Assistant U.S. Attorneys who prosecuted the case with the assistance of Rayneisha Booth, Elizabeth Garcia, and Maryam Beros. The prosecution is the result of a lengthy investigation by Internal Revenue Service-Criminal Investigation and the Federal Bureau of Investigation.

Federal Grand Jury Returns Indictments

MADISON, WI—A federal grand jury in the Western District of Wisconsin, sitting in Madison, returned the following indictments today. A charge is merely an accusation, and a defendant is presumed innocent until and unless proven guilty.

Fitchburg Man Charged with Fraud Scheme

Christian Peterson, 42, Fitchburg, Wisconsin, is charged with four counts of bank fraud, four counts of making a false statement to a financial institution, and four counts of money laundering. The indictment alleges that Peterson misrepresented to banks that loans and a business line of credit were intended for a legitimate business purpose when, in fact, he used all or a portion of each loan and line of credit to gamble at casinos or for personal expenses. The indictment also alleges that Peterson claimed that certain accounts receivable were loans when, in fact, they were the result of gambling debts.

If convicted, Peterson faces a maximum penalty of 30 years in federal prison on each bank fraud and false statement count and a maximum penalty of 10 years on each money laundering charge. The charges against him are the result of an investigation by the Internal Revenue Service-Criminal Investigation and Federal Bureau of Investigation. The prosecution of this case has been assigned to Assistant U.S. Attorney Paul W. Connell.

Minnesota Man Charged with Producing False Identification Documents

Cherub Kumar, 19, Woodbury, Minnesota, is charged with two counts of producing a false identification document, two counts of transferring a false identification document, and one count of trafficking in false authentication features for use in false identification documents.

The indictment alleges that Kumar produced and transferred a false Florida driver’s license in February 2012 and produced and transferred a false Ohio driver’s license in March 2012. The indictment also alleges that he transported 300 counterfeit holographic overlays for use in producing false drivers’ licenses.

If convicted, Kumar faces a maximum penalty of 15 years in federal prison on each count. The charges against him are the result of an investigation by U.S. Immigration and Customs Enforcement, the U.S. Postal Inspection Service, and University of Wisconsin Police Department. The prosecution of this case has been assigned to Assistant U.S. Attorney Meredith P. Duchemin.

Superior Resident Charged with Possessing Child Pornography

Samuel L. Dewitt, 40, Superior, Wisconsin, is charged with distributing visual depictions of minors engaging in sexually explicit conduct and with possessing a computer hard drive containing visual depictions of minors engaging in sexually explicit conduct. The indictment alleges that he distributed the child pornography on November 6, 2011, and that he possessed the hard drive on December 15, 2011.

If convicted, Dewitt faces a mandatory minimum penalty of five years and a maximum penalty of 20 years in federal prison. The charges against him are the result of an investigation by the Wisconsin Department of Justice, Division of Criminal Investigation and the Lake Superior Forensic Technology and Internet Crimes Against Children Task Force. The prosecution of this case has been assigned to Assistant U.S. Attorney Elizabeth Altman.

Watertown Man Faces Child Pornography Charges

Russell J. Forsman, 43, Watertown, Wisconsin, is charged with knowingly receiving visual depictions of minors engaging in sexually explicit conduct. The indictment alleges that on February 28, 2005, Forsman received an e-mail containing a child pornography video. The indictment also charges Forsman with possessing child pornography. The indictment alleges that on October 27, 2011, he possessed CDs containing visual depictions of child pornography.

If convicted, Forsman faces a mandatory minimum penalty of five years and a maximum penalty of 20 years in federal prison. The charges against him are the result of an investigation by the Federal Bureau of Investigation and Milwaukee Police Department. The prosecution of this case has been assigned to Assistant U.S. Attorney Elizabeth Altman.

This case, and the Dewitt case, were brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc. For more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab “Resources.”

Madison Man Charged with Illegal Possession of Firearm

Christopher Carthans, 23, Madison, Wisconsin, is charged with being a felon in possession of a firearm. The indictment alleges that he possessed a 9mm pistol on May 15, 2012.

If convicted, Carthans faces a maximum penalty of 10 years in federal prison. The charge against him is the result of an investigation by the Madison Police Department; Fitchburg Police Department; and Bureau of Alcohol, Tobacco, Firearms, and Explosives. The prosecution of this case has been assigned to Assistant U.S. Attorney Rita M. Rumbelow.

Rhinelander Man Charged with Gun Crimes

John W. Houghton, 43, Rhinelander, Wisconsin, is charged with being a felon in possession of ammunition and possessing ammunition after previously being convicted of a misdemeanor crime of domestic violence. The indictment alleges that he possessed the ammunition on May 31, 2012.

If convicted, Houghton faces a maximum penalty of 10 years in federal prison on each count. The charges against him are the result of an investigation by the Rhinelander Police Department and Oneida County Sheriff’s Department. The prosecution of this case has been assigned to Assistant U.S. Attorney Rita M. Rumbelow.

Chicago Man Charged with Making a False Statement When Attempting to Purchase a Firearm

Jeffrey R. Vali, 32, Chicago, is charged with making a false written statement when attempting to purchase a 9mm semi-automatic pistol from a licensed firearms dealer in Prairie du Chien, Wisconsin, on June 22, 2012. The indictment alleges that Vali falsely stated he was a resident of Wisconsin and resided in Neenah, Wisconsin.

If convicted, Valli faces a maximum penalty of 10 years in federal prison. The charge against him is the result of an investigation by the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The prosecution of this case will be handled by United States Attorney John W. Vaudreuil.

Madison Man Charged with Distributing Cocaine

Rodolfo Juarez, 37, Madison, Wisconsin, is charged with distributing cocaine. The indictment alleges that he distributed 500 grams or more of cocaine on June 25, 2012.

If convicted, Juarez faces a mandatory minimum penalty of five years and a maximum penalty of 40 years in federal prison. The charges against him are the result of an investigation by the Drug Enforcement Administration and Wisconsin Department of Justice, Division of Criminal Investigation. The prosecution of this case has been assigned to Assistant U.S. Attorney Munish Sharda.

Four Charged with Illegally Re-Entering United States

In separate indictments, four individuals have been charged with reentering the United States after previously being deported. The persons charged are:

1. Arturo Gomez-Maturin, 41, a citizen of Mexico, found in Dane County on June 14, 2012;

2. Alvaro Cano-Oyarzabal, 31, a citizen of Mexico, found in Clark County on June 14, 2012;

3. Isaac Gutierrez-Blandon, 33, a citizen of Nicaragua, found in Dane County on July 2, 2012; and

4. Rafael Carrera-Flores, 39, a citizen of Mexico, found in Juneau County on May 4, 2012.

If convicted, each person faces a maximum penalty of 20 years in federal prison. The charges against them are the result of investigations by U.S. Immigration and Customs Enforcement. The prosecution of these cases will be handled by Assistant U.S. Attorney Timothy M. O’Shea.

Federal Grand Jury Returns Indictments

MADISON, WI—A federal grand jury in the Western District of Wisconsin, sitting in Madison, returned the following indictments today. A charge is merely an accusation, and a defendant is presumed innocent until and unless proven guilty.

Wausau Man Charged with Fraud Scheme

Timothy I. Mathwich, 62, Wausau, Wisconsin, is charged in a 24-count indictment with engaging in a scheme to defraud River Valley Bank in Wausau. The indictment alleges that Mathwich, in his role as the president and chief operating officer of J.N. Manson Agency Inc. (Manson), a corporation operating as an insurance agency, acted with David Schofield and Susan Brockman to sell forged insurance premium financing notes to the bank.

According to the indictment, if a customer requested financing for an insurance premium, Manson would prepare an insurance financing premium note for the customer to sign, and it would be sold to River Valley Bank, and the bank would pay Manson for the note by crediting Manson’s account with the bank or by issuing a check to Manson. The indictment alleges that Mathwich and other representatives of Manson prepared insurance premium financing notes in the names of Manson customers who had not requested financing, forged the customers’ signatures on the notes, and then forwarded the forged notes to River Valley Bank. The indictment alleges that from February 2008 to December 2008, forged notes were sold to River Valley Bank that had a face value of over $3.7 million, resulting in a loss to the bank of more than $1.9 million.

If convicted, Mathwich faces a maximum penalty of 20 years in federal prison on each count charged in the indictment. The charges against him are the result of an investigation by the Wausau Resident Agency of the Federal Bureau of Investigation. The prosecution of this case has been assigned to Assistant U.S. Attorney Grant C. Johnson.

Madison Man Charged with Theft of Social Security Funds

Clyde Dingledine, also known as Clyde Malone, 63, Madison, Wisconsin, is charged with converting to his own use money belonging to the Social Security Administration. The indictment alleges that Dingledine converted just over $60,000 to his own use from June 2004 to May 2012.

If convicted, Dingledine faces a maximum penalty of 10 years in federal prison. The charge against him is the result of an investigation by the Social Security Administration. The prosecution of this case has been assigned to Assistant U.S. Attorney Rita M. Rumbelow.

Mexican Citizen Charged with Illegally Re-Entering the United States

Adolfo Galvin-Lopez, 38, a native of Mexico found in Portage County, Wisconsin, is charged with re-entering the United States after previously being removed. The indictment alleges that he was found in the United States on April 17, 2012.

If convicted, Galvin-Lopez faces a maximum penalty of 10 years in federal prison. The charge against him is the result of an investigation by U.S. Immigration and Customs Enforcement. The prosecution of this case has been assigned to Assistant U.S. Attorney Paul W. Connell.

F&S Oil Company Auditor Sentenced to Federal Prison for Role in Bank Fraud Scheme

The United States Attorney for the District of Connecticut announced that Dale K. Ciccarelli, 57, of Southbury, was sentenced today Senior United States District Judge Alfred V. Covello in Hartford to five months of imprisonment, followed by five months of home confinement and one year of supervised release, for his role in a scheme by principals of F&S Oil to defraud Citizens Bank of millions of dollars.

According to court documents and statements made in court, Ciccarelli, a certified public accountant, served as the external auditor for F&S Oil Company Inc. (“F&S Oil”), which was in the business of providing heating oil to residential and commercial customers in the Waterbury area.

As primarily a seasonal business with fluctuating cash flow, F&S Oil needed access to a banking line of credit to conduct its business on an ongoing basis. As a result, F&S Oil had a banking relationship with RBS Citizens, NA (“Citizens Bank”), which included three outstanding lines of credit or loans secured by the assets, inventory, and receivables of F&S Oil. Citizens Bank would routinely extend funds to F&S Oil under the existing line of credit based, in part, on information provided by Christopher Carr, the president of F&S Oil, including F&S Oil’s certified financial statements, and periodic submissions of borrowing base certificates. The borrowing base certificates would itemize F&S Oil’s total gross accounts receivable and would include a listing of the aging of the receivables and a total fuel inventory. In or before August 2006, as F&S Oil experienced cash flow problems, Carr falsified the accounts receivable listed on the borrowing base certificates to support a $4.5 million line of credit from Citizens Bank.

In summer 2006, Carr also falsified F&S Oil’s financial statements, which fraudulently overstated assets and liabilities, namely, the accounts receivable and unearned customer payments, in order to support the false figures that had previously been provided to the bank. At that time, when reconciling the financial statements with the detailed F&S Oil books and records, Ciccarelli learned of the discrepancy between the true receivables and those listed on the financial statements and the borrowing base certificates previously provided to the bank. Carr instructed Ciccarelli to adopt the false accounts receivable and unearned customer payments in certifying the financial statements to support the false borrowing base certificates.

On August 24, 2006, Ciccarelli falsely certified the accuracy of F&S Oil’s financial statements for the fiscal year ending March 31, 2006. F&S Oil provided the financial statements to Citizens Bank, which continued to extend monies on a line of credit until February 2008.

In August 2007, Ciccarelli again falsely certified the accuracy of F&S Oil’s financial statements, which he knew continued to misrepresent the relevant financial information from the 2006 certified financial statements.

Ciccarelli also has admitted that he knew that Richard A. Stevens, the owner of F&S Oil, and other employees of the company were using F&S Oil monies to pay non-deductible personal expenses, as well as non-deductible wages for no-show employment of others. Nonetheless, Ciccarelli prepared F&S Oil’s corporate federal tax returns, deducting the above items as legitimate deductible business expenses.

Judge Covello ordered Ciccarelli to pay restitution of $1.7 million to Citizens Bank.

On February 2, 2012, Ciccarelli pleaded guilty to one count of conspiracy to commit bank fraud and one count of aiding and assisting the filing of a false federal tax return.

On May 24, 2011, Carr pleaded guilty to one count of bank fraud. He awaits sentencing.

On August 11, 2010, Stevens pleaded guilty to one count of willfully filing a false U.S. tax return. On March 3, 2011, he was sentenced to five months of imprisonment, followed by five months of home confinement.

This case has been investigated by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation. The case is being prosecuted by Assistant U.S. Attorney Christopher W. Schmeisser.