Thursday, December 9, 2010

85 Years in Prison for Fraud

Mark Alan Shapiro, 50, Avon, Massachusetts, the founder of the Cobalt Companies was sentenced to 85 years in prison on charges stemming from a fraud that raised more than $23 million from over 250 investors in private placement real estate offerings. Shapiro was sentenced in Manhattan, New York, federal court by U.S. District Judge Kimba M. Wood, who presided over the three-week jury trial at which Shapiro, along with co=defendants Irving Stitsky and William B. Foster, was found guilty.
Beginning in late 2003, Shapiro, Stitsky, and Foster founded a group of companies that operated under the name "Cobalt," which purportedly engaged in the acquisition and
development of multi-family real estate properties throughout the United States. Through the Cobalt entities, Shapiro, Stitsky, and Foster fraudulently induced victims to invest by, among other things: (a) misrepresenting Cobalt's operating history; (b) failing to inform prospective investors that Cobalt was owned and controlled by Shapiro and Stitsky, both convicted felons; and (c) misrepresenting and causing others to misrepresent Cobalt's purported ownership interests in certain properties to prospective investors. In fact, Cobalt was a new company with little or no record of real estate investment success, was managed and controlled by Shapiro and Stitsky, and did not own several of the properties that it claimed to own.

In order to carry out their scheme, Shapiro, Stitsky, and Foster established Cobalt's corporate headquarters in Springfield, Massachusetts, a satellite Cobalt office in Miami, Florida, and a telemarketing center in Great Neck, New York. Shapiro controlled and managed all aspects of Cobalt's Massachusetts and Florida offices, while Stitsky was in charge of the telemarketing center in New York. The defendants and their employees solicited funds from investors by making false and misleading oral and written representations about, among other things, the investment for which the investors' funds were solicited, and the identities and relevant background information about the individuals controlling the Cobalt entities.

In addition, in furtherance of the scheme, Shapiro and Foster created and sent false financial statements and fake account statements that purported to show that Shapiro had liquid assets in excess of $3 million.

In addition to the prison term, Judge Wood sentenced Shapiro to three years of supervised release and ordered him to pay $22,075,631 in restitution and to forfeit $23,152,235 in proceeds from his offenses.

Irving Stitsky, 56, Milan, New York, was sentenced to 85 years in prison on July 6, 2010, and William B. Foster, 70, East Hampton, Massachusetts, was sentenced to 3 years in prison on September 22, 2010.

Guaranty Title's owners sentenced in federal court

Richard G. "Rick" Burton, 60, Nixa, Missouri, and Kathy Cyrena Allen, also known as Kathy Stanton, 53, Sarcoxie, Missouri, the owners of Guaranty Title, formerly headquartered in Nixa, Missouri, have been sentenced in federal court for their roles in $4.1 million wire fraud, bank fraud and money laundering conspiracies.

The defendants were sentenced in separate hearings before U.S. District Judge Greg Kays on Tuesday, Nov. 30, 2010. Burton was sentenced to six years and six months in federal prison without parole. Allen was sentenced to three years and three months in federal prison without parole. The court also ordered Burton and Allen to pay $4,150,663 in restitution, for which they are jointly and severally liable.

Burton and Allen participated in a scheme to defraud financial institutions and individuals of more than $4.1 million through a series of illegal financial transfers related to stolen escrow payments. They attempted to conceal their criminal activities through a substantial check-kiting scheme. Both Burton and Allen pleaded guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering. Allen also pleaded guilty to conspiracy to commit bank fraud.

Burton was the president and majority owner of Guaranty Title Company of Southwest Missouri, Guaranty Title Company d/b/a Guaranty Title and Closing Company, and Guaranty Properties, Inc. The companies, referred to collectively as Guaranty, provided real estate title and closing services. Allen, who had a 42 percent ownership interest in Guaranty, was the vice president during the time of the conspiracy. Guaranty's main office was located in Nixa, with at least 10 branch offices located in Aurora, Branson, Mount Vernon, Ozark, Springfield and Republic, Mo.

Monique Le Nguyen sentenced

Monique Le Nguyen, aka Monique Dzung Le, 60, Milpitas, California, a licensed real estate agent, was sentenced by United States District Judge Lawrence J. O'Neill to 20 months in federal prison for conspiring to commit mail fraud in connection with the financing and acquisition of five residential properties in Fresno and Mendocino Counties, California, that were later used for the indoor cultivation of large quantities of marijuana. Nguyen was also ordered to pay restitution to the lenders, which suffered actual losses of $678,224.32 as a result of post-sale foreclosures on the Fresno County properties.