When Football Stars Turn Into Fraudsters

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Sarah Hofmann
ACFE Public Relations Specialist

Although still not officially a U.S. holiday, the Super Bowl ranks up there with the Fourth of July and Thanksgiving as one of the most American days of the year. Families and friends gather around food and yell at the television as if the players can hear them. While football players are often lauded as heroes on the field, some players fall far from grace by turning to fraud when their sometimes short careers are over. Here are some of the most notable footballers-turned-fraudsters.

Will Allen
After 11 years in the NFL as a cornerback, Allen found himself intercepted by the SEC when he was arrested for orchestrating a $32 million Ponzi scheme. The former New York Giant and Miami Dolphin ran Capital Financial Partners LLC with his partner Susan Daub. Allen convinced investors the company would provide short-term, high-interest loans to athletes, while he pocketed nearly $4 million for himself. When questioned by the SEC, Allen allegedly forged signatures on important documents to cover up his crimes. He has yet to be formally charged but faces 23 felony counts and up to 240 years in prison.

Irving Fryar
Fryar may have been lucky enough to score the only touchdown for the New England Patriots in Super Bowl XX in 1986, but the wide receiver’s luck ran out 15 years after he retired from the league. In 2015, Fryar and his mother were found guilty of mortgage fraud in New Jersey Superior. In 2009, they obtained multiple home equity loans while using the same property as collateral. Fryar was ordered to pay $615,600 in restitution to the banks affected by the fraud and was sentenced to five years in prison.

Freddie Mitchell
He played in Super bowl XXXIX, but former Philadelphia Eagles wide receiver Mitchell may have flown a little too high when he created the company Chameleon LLC. That company, along with him as an individual, filed a number of fraudulent tax returns, amounting up to $3.3 million. He pleaded guilty and, according to Accounting Web, he blames multiple concussions he sustained during his football career for making him too trusting of a person. He alleges that he was the victim of a fraudster posing as an IRS agent. He was sentenced to 37 months in prison in 2013.

Arthur J. Marshall Jr.
Marshall Jr. never made a splash on the field, spending only five years in the NFL from 1991-1996, but he managed to leave his mark in another way when he was convicted of an elaborate mortgage fraud scheme in 2009. He was charged with 22 felonies including falsifying sales contracts and personal finance records that left multiple banks on the hook for millions in bad debt. He was ordered to pay $3.6 in restitution and was sentenced to 69 months in prison.

Mark Ingram Sr.
Ingram Sr. may have a Super Bowl ring from being a wide receiver for the Super Bowl XXV champion New York Giants, but he also has a less impressive record as a felon. He retired from football in 1996 and was charged with federal money laundering and bank fraud charges in 2008. He was sentenced to seven years in prison and was ordered to pay $252,000 in restitution. His son, Mark Ingram Jr. is currently a running back for the New Orleans Saints; he was picked in the same round and at the same number as his father.

So while you cheer on your favored team in the big game, keep in mind that there may be a future fraudster playing on that field.

The Human Impact of Fraud

SPECIAL TO THE WEB

Annette Simmons-Brown, CFE

When you work in criminal justice, the endless examples of man's inhumanity might not desensitize you, but they certainly will acclimate you. The report that makes your jaw drop in week two can make you yawn at week 202. This is true for those who work on non-violent financial crimes or violent physical crimes. For the former, the shock-and-awe value of the case is usually driven by the dollar amount of the theft. However, it's easy to lose sight of the horrific damage that financial crime can inflict on individuals and businesses even when the loss doesn't reach Bernie Madoff proportions.

But then you meet these individuals face-to-face as part of the investigation of crimes, preparation for criminal trials, testimony in sentencing hearings and research for a restitution memorandum. Then victims' anguish becomes all too real — even for the most seasoned criminal justice professionals. Sometimes, hearing their stories and looking into their eyes is almost too painful to bear.

Here I highlight this impact of fraud beyond the statistics in these six financial-crime victims' stories from criminal prosecutions I assisted as a paralegal CFE.

We're all are aware of the sweeping damage that mortgage fraud has inflicted on the U.S. and global economies. My office, one of many worldwide, has dedicated significant energy to the prosecution of mortgage fraud. As part of that effort, I met with numerous individuals who suffered from fraudulent mortgage transactions. Though the lenders in these cases were identified as victims, these individuals suffered nonetheless.

A DYING HUSBAND'S WISH

Leticia Watkins lived in north Minneapolis — an area ravaged by real estate fraudsters of all stripes. She and her husband, both modest earners, had managed to cultivate a nest egg of about $100,000 by the time their children were grown. Watkins' husband fell terminally ill, and had a few serious talks with her. When I met with her, she said her husband told her, "Tish, if you're careful, this money will take care of you until Jesus comes for you, even if he's walking real slow."

After his death, Watkins decided to refinance her house's mortgage. She was referred to M.P., a corrupt mortgage broker who was part of the scourge of the north side. Instead of simply finding Watkins a good refinance vehicle, he quickly persuaded her to become a real estate "investor." She purchased four homes at inflated prices with kickbacks built in to each. These kickbacks included money from the purchase price, were more than M.P.'s normal fees, were undisclosed to the lender and would illegally go to M.P.; however, he promised to use these amounts to make the monthly mortgage payments. He told her that given how quickly housing prices were rising, she could sell within a year and make a profit of her own, or she could easily rent the homes to tenants and receive Section 8 housing assistance.

Well, M.P. didn't pay a dime of the monthly payments, none of the houses rented, the market started to tank and Leticia was left with four stiff monthly mortgage payments which quickly drained her nest egg.  When she met with us to prepare for her testimony in the criminal trial against M.P., she was living with her adult son and thought she'd have to do so for the rest of her life. She shook her head, and said more than once, "I let everyone down. I was so stupid. I let everyone down, especially my husband. He warned me. He warned me."

TRUCKER LOSES NEST EGG

Jerome Peters, like Watkins, was a hard worker of modest income. He was a long-distance trucker who also had carefully amassed a nest egg that he hoped would carry him and his wife through retirement. He too had the misfortune of meeting a mortgage fraudster who advertised for amateur real estate "investors" to buy properties, rent them out and sell at a profit in an endlessly rising market. Just as in Watkins' case, kickbacks were built into these purchase prices, the mortgage broker promised to make monthly payments and then broke that promise. Peters couldn't sell the houses, and his nest egg was drained as he and his wife fought off foreclosures. They lost their fight, and soon after went broke.

I met with Peters and the prosecutor to prepare for his testimony in the ensuing criminal trial. He was somber, remote and sat in his chair with his entire torso curved inward as if to protect himself. He had to confirm every detail of his previous statements and identify all the loan documents that spelled his financial doom. I remember what our office's investigator, another CFE, told me about his interview with Peters: "At the end I asked him if he had anything to add. He was quiet for a minute, and then said, ‘I . . . just . . . wish . . .  I'd never met this man.' And then he hung his head and sobbed." 

Read two more examples of the toll fraud can take on its victims on FraudMagazine.com.

'Buy Low, Sell High': Rory the foreclosure fraud lizard king

SPECIAL TO THE WEB

Rory Sykes was about a foot shorter than Bam-Bam Baker but just as clever. He briefly operated as a traditional real estate agent before opening his own business, Sykes Real Estate Services, in 1999, which focused on the acquisition of residential properties in the late stage of foreclosure and quick-turnaround sales. "Buy low, sell high" was Rory's secular mantra.

Rory had a deep understanding of the complex minutiae of the foreclosure process and an equally deep understanding of the lack of scrutiny exercised on the contents of documents filed in the county recorder's office. Rory wanted to gain an advantage over his numerous competitors in acquiring specific properties after a sheriff's foreclosure sale, and to enhance the likelihood of owning these properties at the end of the redemption periods at the least possible expense. So he filed documents — affidavits, lien notices, documents of conveyance — containing one or more false statements designed either to discourage redemption by others or to minimize the cost of his acquisition of the properties. He also timed the filings of these fraudulent documents so that no others could have a good chance at redeeming.

FALSE FILINGS GALORE

The Hennepin County Attorney's Office detailed Rory's acquisitions of seven properties in its case against him. In three of these acquisitions, Rory filed Notices of Lien for Payment of Property Taxes, Notices of Intent to Redeem Under Property Tax Lien, an Affidavit of Amounts Owed and a subsequent Corrected Affidavit of Additional Amounts, all falsely stating he or Sykes Real Estate Services had paid property taxes on the parcels.

In five of these acquisitions, Rory filed other Affidavits of Amounts Owed on Redemption or on the Sheriff's Certificate, which falsely claimed expenses that were never incurred, that were misstated as to type of expense (certain expenses incurred in the acquisition of a foreclosed property are allowed, others are disallowed) and/or that were grossly inflated.

In two of these acquisitions, Rory filed quitclaim deeds (QCD) conveying the properties from the owners to him after he had directly paid each of these owners $2,500 and $6,250 respectively. (A quitclaim deed transfers the owner's interest in a parcel of real estate to another with no warranties of the status of the property title.) A false statement was printed on each of these QCDs — "total consideration is less than $500" — which resulted in the minimum deed tax assessment of $1.70 rather than an accurate deed tax calculated on the actual consideration paid to the owners.

In one acquisition, Rory filed an Assignment of Sheriff's Certificate for the benefit of and on behalf of Sykes Real Estate Services, falsely stating "[t]he total consideration for this transfer of property is $500 or less," for which a deed tax of $1.70 was again assessed. This property was being foreclosed based on a default of townhome association dues of a fairly minimal amount.

In one acquisition, Rory filed a mortgage that falsely stated that it had been issued "in consideration of the sum of $5,000 to Mortgagor in hand paid by Mortgagee" rather than the accurate figure of $6,250, and filed a Notice of Intention to Redeem upon the mortgage containing the false statement. In another acquisition, Rory filed a mortgage from himself to his corporate alter ego, Sykes Real Estate Services, and a subsequent Mortgage and a Notice of Intent to Redeem from the Mortgage, signed by Rory, resulting in an issuance of a Sheriff's Certificate of Redemption to Sykes Real Estate Services.

BUY LOW, SELL HIGH

While the false statements in these documents may seem picayune to the outside observer, they had their desired effect. Rory acquired certain properties at amounts significantly beneath their true market value and cost — after he'd discouraged others from redeeming or buying them — and shortly afterward resold the properties at substantial profits. Owners or estate heirs redeemed back other properties or competitors acquired them after they paid inflated amounts back to Rory. One of the property owners was in prison, another was suffering from profound lung problems that required him to use an oxygen tank, another was dead, two were elderly and one was being foreclosed upon for default on a $15,000 second mortgage that would have been forgiven had she been able to remain in the property for a few more years. Buy low, sell high.

Read the rest of the article and find more exclusive content on Fraud-Magazine.com.

The Top 5 Frauds of 2013

AUTHOR’S POST

Mandy Moody, CFE
ACFE Social Media Specialist

As we say farewell to one year and look ahead to a new one, we would like to look back and take note of the top fraud cases that brought many people, cities, states and countries together. While these top five fraud stories of 2013 seemingly highlight the “bad guys,” we would like to pay tribute to all of the “good guys” out there who saw these cases through investigation, prosecution and, for some, sentencing. So here’s to all of the investigators, fraud examiners, attorneys, auditors, accountants and government officials who worked behind the scenes to get these stories where they belong: on the front pages of Financial Crime sections all over the world.

Here are our top five frauds of 2013:

1. Cars, Houses & Horses
   Dubbed as “one of the worst abuses of public trust” in the state of Illinois’ history, the embezzlement case involving a devoted city bookkeeper stole international headlines when it was finally settled in February. Rita Crundwell was sentenced to almost 20 years, the same duration as her fraud, for stealing $53 million from the small town of Dixon, Ill. Crundwell used her home town’s hard-earned money almost as a weekly allowance to pay for vacations, properties, cars and an extravagant horse-breeding hobby. Thankfully, even all bad things must come to an end.
2. Ahab’s Whale Wounded
   The Hunt for Steve Cohen began years ago, but it wasn’t until July that his company, SAC Capital was officially indicted on four counts of securities fraud and one count of wire fraud for insider trading dating back to 1999. The future looks grim for the already shrinking company facing some long and grueling legal battles.
3. The Citadel Falls
   In June, a cyber gang responsible for creating a massive network of malware came crashing down. “Citadel,” the name of the network of botnets, stole more than $500 million from the bank accounts of more than 5 million infected computers over an 18-month period. Microsoft led the coordinated effort with more than 80 other entities worldwide to take down one of the largest cyber crime rings in the world. Lights out, Citadel.
4. The GlaxoSmithKline of 2013 Award Goes To…
   Last month, Johnson & Johnson, one of the U.S.’s biggest pharmaceutical companies, settled one of the largest health care settlements in the country’s history. J&J agreed to pay $2.2 billion ($1.72 billion for civil settlements and $485 million in criminal fines and forfeited profits) for promoting three drugs not approved by the Food and Drug Administration (FDA). This quote from Zane Memeger, U.S. Attorney for the Eastern District of Pennsylvania, pretty much sums it up: “J&J's promotion of Risperdal for unapproved uses threatened the most vulnerable populations of our society - children, the elderly and those with developmental disabilities.”
5. Biggest Mortgage Fraud Settlement Ever
   Also last month, JPMorgan Chase settled the U.S.’s largest-ever mortgage fraud case for $13 billion. Picking up Bear Stearns and WaMu might have seemed like a great idea in 2008, but the ghosts of the financial crisis’ past came back to haunt JPMorgan. Oh yeah, and they were also responsible for millions of faulty mortgages. One victory in a battle sure to go on longer than the Game of Thrones.

Want to read other stories from 2013? You can find more of the year’s top fraud headlines on our news blog, FraudInfo.com. 

The Bizarre, the Gross and the Just Plain Weird

AUTHOR’S POST

Mandy Moody
ACFE Social Media Specialist

I didn’t have to look any further than my Twitter feed this Halloween to find some truly disturbing and eerie fraud news. From the stranger-than-fiction characters to the Hollywood-like dramatic plots, stories of fraud can leave you feeling many different emotions: shocked, angry, sad or, as fitting for today, really creeped out.

Here are the top three new stories that made me cringe, slightly uncomfortable and even a little nauseous:

Bizarre: An interview with Conrad Black, the Canadian media mogul turned convicted fraudster, began to derail almost as soon as the cameras began rolling last week on the BBC. Reporter Jeremy Paxman repeatedly attempted to make sense of the madness but unfortunately instead had to endure an interview in which Black denied any wrongdoing, praised his own ability to withstand prison and took pride in his control over not “smashing [Paxman] in the head.” Hopefully Black can channel his urges into smashing some pumpkins this holiday.

Gross: Spreading possum urine around your home might not deter eager trick or treaters, but it will keep potential home-buyers a safe distance away. This unsavory practice is typical of a new mortgage fraud scheme: flopping. Homeowners make properties look as unappealing as possible for potential buyers by tactics like preparing fake repair estimates, tearing out cabinets and, yes, even splashing a little rodent urine around the house in hopes of an accomplice buying it at a low price. The accomplice can then flip it in a short amount of time and make a hefty profit to split with the original seller.

Just plain weird: I had to reread this story about a bank robbery case in Austria before it actually sank in. After pleading guilty to a bank robbery almost 20 years ago and serving three and half years in jail, Otto Neuman was returned 51 pounds. Yes, you read that correctly. The bank robber was returned some of the money he stole. And the reason he was returned the money? Wait for it…apparently no one else wanted it! The bank was insured for the money, and the insurance company “had no entitlement to it.” Weird, yes. Ethical, no.

For more fraud news and commentary, follow the ACFE on Twitter or check out our news blog at FraudInfo.com. Happy Halloween!