Tuesday, October 02, 2012

Corruption: US - Businessman charged in fraud schemes totaling more than $100 million

U.S. Attorney’s Office 
Southern District of New York 

Preet Bharara, the United States Attorney for the Southern District of New York; Christy Romero, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Mary Galligan, the Acting Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation; José A. Gonzalez, the Special Agent in Charge of the Miami Field Office of the Internal Revenue Service-Criminal Investigation Division (IRS-CI); Benjamin Lawsky, the Superintendent of the New York State Department of Financial Services; James T. Hayes, Jr., the Special Agent in Charge the New York Field Office of the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI); and Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG), announced today the unsealing of a 13-count indictment charging Wilbur Anthony Huff, a Kentucky businessman, and Matthew L. Morris, the former senior vice president of Park Avenue Bank, with conspiracy to commit bank bribery, bank and insurance fraud, and theft of $2.3 million from a publicly traded company. Huff, who is also charged with tax evasion, is alleged to have participated in a variety of fraudulent schemes involving over $100 million. Allen Reichman, the former executive director of investments at an investment bank and financial services company, is also charged in the insurance fraud scheme, a scheme that left an Oklahoma-based insurance company in receivership.

Manhattan U.S. Attorney Preet Bharara said, “Nearly two years ago, we secured the first conviction against a defendant, Park Avenue Bank president and CEO, Charles Antonucci, for attempting to steal $11 million from the taxpayer-funded TARP. Today’s indictment charging two of Antonucci’s alleged co-conspirators represents ‘Part Two’ in our ongoing investigation into the misconduct at the bank that ultimately led to its collapse. As alleged, Wilbur Anthony Huff was a vortex of fraud who also evaded over $50 million in taxes owed to the IRS and, along with Matthew Morris and Allen Reichman, plundered the assets of an insurance company, leading to its business failure. We will not tolerate fraud or those who steal from taxpayers for their own personal gain.”

SIGTARP Special Inspector General Christy Romero said, “Charles Antonucci, the former president and CEO of Park Avenue Bank, was the first person convicted of attempting to steal from TARP, and today, his co-conspirators are charged with their roles in fraud at Park Avenue Bank and elsewhere. Antonucci and his alleged co-conspirators falsely represented that he had invested $6.5 million in the bank in order to convince regulators that the bank had improved its capital position and later attempted to get $11 million in TARP funds. I want to thank Preet Bharara, the assistant United States attorneys, and our other partners in this case for joining SIGTARP’s commitment to hold accountable those alleged to be involved in crimes related to TARP.”

FBI Acting Assistant Director in Charge Mary Galligan said, “The unifying theme of the charges unsealed today is dishonesty. As alleged, the defendants conspired to deceive bank regulators, insurance regulators, and investors, all with the aim of concealing their self-dealing and the diversion of funds into their own pockets.”

IRS-CI Special Agent in Charge José A. Gonzalez said, “Tax evasion is a serious crime against the American public. Mr. Huff allegedly violated his clients’ trust by pocketing payroll taxes that were to be paid to the IRS on their behalf. Today’s indictment clearly shows that those who allegedly violate the tax laws for their personal gain will be held responsible for their actions.”

New York State Department of Financial Services Superintendent Benjamin Lawsky said, “This case once again reminds us that we must vigilantly fight bank fraud in all its many shapes and sizes. DFS bank examiners and our criminal investigators will continue to use every tool we have to ferret out bank fraud schemes and the corrupt individuals who hatch them at our banks. DFS applauds the efforts of the SDNY under the leadership of U.S. Attorney Bharara, SIGTARP, the FBI, and the other law enforcement agencies with whom we partnered on this case.”

ICE-HSI Special Agent in Charge James T. Hayes said, “We at HSI are pleased to put an end to an alleged scam that was motivated by greed. The expertise of our El Dorado Task Force is perfectly suited to prevent the exploitation of U.S. financial systems. This case is an outstanding example of how federal law enforcement agencies can work together to preserve and prevent the exploitation of our banks.”

FDIC Inspector General Jon T. Rymer said, “We are pleased to join our law enforcement colleagues in announcing the indictment of Mr. Huff for his alleged role in schemes that undermined the integrity of the banking and financial services industries. We are particularly concerned when unscrupulous individuals, including those in positions of trust inside the nation’s banks, engage in fraudulent activities contributing to bank failures and corresponding losses to the Deposit Insurance Fund. In the case of Park Avenue Bank, such losses were estimated to exceed $50 million at the time of failure. We are committed to continuing our efforts to help ensure the safety and soundness of our banks and the viability of the fund.”

According to the allegations in the indictment unsealed today in Manhattan federal court:


Wilbur Anthony Huff is a businessman who controlled numerous entities located throughout the United States (Huff-controlled entities). Rather than exercise control of these companies openly, Huff concealed his control by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ titular owners, directors, or officers. However, it was Huff who actually controlled the companies and their finances, using them to orchestrate a number of interrelated fraud schemes. Integral to the success of these schemes was Huff’s corrupt relationship with Park Avenue Bank and its executives, Charles J. Antonucci, Sr., the president and chief executive officer, and Matthew L. Morris, the senior vice president. Allen Reichman, the executive director of investments at an investment bank and financial services company headquartered in New York, New York, also was involved in one of Huff’s and Morris’s corrupt schemes.

Fraud on the IRS and Huff’s Clients

From 2008 to 2010, Huff controlled O2HR, a professional employer organization (PEO) located in Tampa, Florida. Like other PEOs, O2HR was paid to manage the payroll, tax, and workers’ compensation insurance obligations of its client companies. However, instead of paying $53 million in taxes that O2HR’s clients owed the IRS, and instead of paying $5 million to Providence Property and Casualty Insurance Company (Providence P&C)—an Oklahoma-based insurance company—for workers’ compensation coverage expenses for O2HR clients, Huff stole the money that his client companies had paid O2HR for those purposes. Among other things, Huff diverted millions of dollars from O2HR to fund his investments in unrelated business ventures and to pay his and his family members’ personal expenses. The expenses included mortgages on Huff’s homes, rent payments for Huff’s children’s apartments, staff and equipment for Huff’s farm, designer clothing, jewelry, and luxury cars.

Bribery of Park Avenue Bank Officials

From 2007 to 2009, Huff bribed Morris and Antonucci in their capacities as senior officials of Park Avenue Bank so that they would provide him and his businesses with illegal favors in return. Specifically, Huff paid Morris and Antonucci at least $400,000, in exchange for which they: (1) provided Huff with fraudulent letters of credit obligating Park Avenue Bank to pay an investor in one of Huff’s businesses $1.75 million if Huff failed to pay the investor back himself; (2) allowed the Huff-controlled entities to accrue $9 million in overdrafts; (3) facilitated intra-bank transfers in furtherance of Huff’s frauds; and (4) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to the Huff-controlled entities.

Fraud on Bank Regulators and a Publicly Traded Company

From 2008 to 2009, Huff, Morris, and Antonucci engaged in a scheme to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators—a designation that would prohibit the bank from engaging in certain types of banking transactions and that would subject the bank to a range of potential enforcement actions by regulators. Specifically, they engaged in a series of deceptive, “round-trip” financial transactions to make it appear that Antonucci had infused the bank with $6.5 million in new capital when, in actuality, the $6.5 million was part of the bank’s pre-existing capital. Huff, Morris, and Antonucci funneled the $6.5 million from the bank through accounts controlled by Huff to Antonucci. This was done to make it appear as though Antonucci was helping to stabilize the bank’s capitalization problem, so the bank could continue engaging in certain banking transactions that it would otherwise have been prohibited from doing and to put the bank in a better posture to receive $11 million from the TARP. To conceal their unlawful financial maneuvering, Huff created, or directed the creation of, documents falsely suggesting that Antonucci had earned the $6.5 million through a bogus transaction involving another company Antonucci owned. Huff, Morris, and Antonucci further concealed their scheme by stealing $2.3 million from General Employment Enterprises Inc., a publicly traded temporary staffing company, in order to pay Park Avenue Bank back for money used in connection with the $6.5 million round-trip transaction.

Fraud on Insurance Regulators

From July 2008 to November 2009, Huff, Morris, Reichman, and Antonucci conspired to defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of Providence P&C—the Oklahoma insurance company that was owed $5 million by O2HR. Specifically, Huff and Antonucci devised a scheme in which Antonucci would purchase Providence P&C’s assets by obtaining a $30 million loan from an investment bank and financial services company headquartered in New York, New York (the “investment firm”), and by promising Providence P&C’s own assets as collateral for the loan. However, because Oklahoma insurance regulators had to approve any sale of Providence P&C, and, because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, Huff, Morris, Antonucci, and Reichman made, and conspired to make, a number of material misstatements and material omissions concerning the true nature of the financing for Antonucci’s purchase of Providence P&C. Among other things, Reichman directed Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan, and Huff, Morris, and Antonucci conspired to falsely represent to Oklahoma insurance regulators that Park Avenue Bank—not the investment firm—was funding the purchase of Providence P&C.

After deceiving Oklahoma regulators into approving the sale of Providence P&C, Huff, Morris, and Antonucci took millions of dollars of the company’s assets for themselves. Among other things, Morris and Antonucci each received $500,000; Morris received another $170,000 for serving as an executive at the company; and Huff took $4 million, which he used to continue the scheme to defraud O2HR’s clients. Reichman received hundreds of thousands of dollars in commissions as a result of the investment firm’s loan—a loan that Reichman had been repeatedly warned not to extend because it was illegal. Ultimately, in November 2009, the insurance company became insolvent and was placed in receivership after Huff, Morris, and Antonucci had pilfered its remaining assets
* * *
Huff, 51, of Caneyville and Louisville, Kentucky; Morris, 37, of Queens, New York; and Reichman, 52, of Irvington, New York, were arrested at their homes earlier this morning, and they will be presented in federal court later today—Morris and Reichman in Manhattan, and Huff in Louisville, Kentucky. The case has been assigned to U.S. District Judge Naomi Reice Buchwald, and the first conference is scheduled for October 10, 2012, at 3:30 p.m.

Mr. Bharara praised the investigative work of SIGTARP, the FBI, the IRS-CI, the New York State Department of Financial Services, ICE-HSI, and the FDIC-OIG. Mr. Bharara also thanked the United States Attorney’s Office for the Southern District of Florida for its assistance.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

A chart setting forth the charges against the defendants, as well as the maximum penalties associated with each charge, is below.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Zachary Feingold and Janis Echenberg and Special Assistant U.S. Attorney Tino Lisella are in charge of the criminal case.

The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.

U.S. v. Wilbur Anthony Huff, et al.

Count Defendant(s) Offense Maximum Penalty
One Huff 18 U.S.C. §§ 1343 and 2
Wire fraud related to O2HR
20 years in prison, $250,000 fine, or twice pecuniary loss/gain
Two through Six Huff 26 U.S.C. § 7201 18 U.S.C. § 2
Tax evasion
Five years in prison, $100,000 fine
Seven Huff 26 U.S.C. § 7212(a)
Corrupt obstruction of administration of Internal Revenue laws
Three years in prison, $5,000 fine
Eight Huff and Morris 18 U.S.C. § 371
Conspiracy to commit bank bribery
Five years in prison, $250,000 fine, or twice pecuniary loss/gain
Nine Huff 18 U.S.C. § 1349
Conspiracy to commit bank fraud related to $4.5 million in loans
30 years in prison, $1,000,000 fine
10 Huff and Morris 18 U.S.C. § 371
Conspiracy to commit fraud on bank regulators
Five years in prison, $250,000 fine, or twice pecuniary loss/gain
11 Huff and Morris 18 U.S.C. §§ 1005 and 2
Fraud on the bank regulators
30 years in prison, $1,000,000 fine
12 Huff and Morris 18 U.S.C. § 1349
Conspiracy to commit wire fraud related to theft of $2.3 million from GEE
20 years in prison, $250,000 fine, or twice pecuniary loss/gain
13 Huff, Morris, and Reichman 18 U.S.C. § 1349
Conspiracy to commit wire fraud related to Oklahoma Insurance Department
20 years in prison, $250,000 fine, or twice pecuniary loss/gain