Securities Industry Commentator by Bill Singer Esq

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SEC Charges Stericycle with Bribery Schemes in Latin America / Medical Waste Management Service to Pay More Than $84 Million to U.S. and Brazilian Authorities (SEC Release)

Recidivist Fraudster Indicted In Connection With At Least $40 Million Ponzi Scheme, SBA Loan Fraud, And Another Fraud Scheme / Co-Defendant Charged in SBA Loan Fraud Scheme (DOJ Release)

New York Couple Sentenced to Prison for Roles in $4 Million Extortion Scheme / Defendants' Son Pretended to Be a New York Mobster as Part of Scheme (DOJ Release)

Texas couple who stole over $4 million from Georgia company sentenced to more than six years in prison (DOJ Release)

SEC Charges North Carolina Broker and Investment Adviser with Operating a Multi-Million Dollar Ponzi Scheme (SEC Release)

SEC Charges Obtains Emergency Relief Against Four Individuals Charged with Engaging in International Pump-And-Dump Schemes (SEC Release)

[S]tericycle, a leading provider of medical waste and other services in 16 countries worldwide, paid millions of dollars in bribes to obtain and maintain business from government customers in Brazil, Mexico, and Argentina from at least 2012 to 2016. According to the SEC's order, Stericycle staff kept and emailed spreadsheets that identified government customers who received bribes. The bribes were referred to with code names, including "alfa" - short for alfajores, a sweet cookie popular in Argentina. The scheme also included sham third-party vendors who used false invoices to conceal cash payments to government clients. Stericycle also failed to have sufficient internal accounting controls in place, such as a centralized compliance department, to prevent or even detect the misconduct, and failed to implement its FCPA policies or procedures prior to 2016.

Beginning in at least June 2021, FRANKLIN RAY began to offer investors an opportunity to invest in his trucking and logistics company, CSA Business Solutions LLC (the "Truck Investment Scheme").  Specifically, RAY and the investors entered into contracts pursuant to which, for each $20,000 contributed by the investor, CSA Business Solutions LLC would procure and operate a truck in its trucking business.  RAY told investors that the trucks would perform delivery services for a multinational e-commerce company and/or a multinational shipping company, and that the investors would be entitled to 77% of the net income of the trucks.  After the investors purchased the rights to trucks from CSA Business Solutions LLC, RAY sent them falsified spreadsheets at regular intervals, purporting to show the performance of their trucks during the relevant period.  In truth and fact, CSA Business Solutions LLC operated few trucks and had minimal revenues from trucking activities.  Instead, investors in the Truck Investment Scheme received payments from new investments into the scheme or from other sources.  RAY ultimately induced approximately 275 investors to purchase over 2,000 trucks, totaling at least $40 million in fraudulent investments.

RAY is also charged with carrying out fraudulent schemes to obtain over $1.9 million in government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic on behalf of CSA Business LLC and another Michigan-based trucking company (the "SBA Loan Fraud Schemes").  In connection with the SBA Loan Fraud Schemes, RAY submitted false information and forged documents to the SBA and commercial lenders.  RAY claimed that these businesses engaged in significant trucking business, but they had minimal revenues and trucking activity.  A co-defendant, JOSEPH WINGET, is charged with participating in one of the SBA Loan Fraud Schemes, on behalf of CSA Business Solutions LLC, resulting in $1.1 million in fraudulently obtained loans.

Finally, RAY is charged with fraudulently inducing a New York City based real estate company to pay a $175,000 deposit in order to pay for startup costs associated with setting up a joint venture between the company and CSA Business Solutions LLC (the "Joint Venture Fraud").  RAY induced the company to enter into the Joint Venture by misrepresenting CSA Business Solutions LLC and his own personal business experience.  RAY spent the funds on personal expenses, including private airplane trips.  The Joint Venture was never formed.

RAY and WINGET were arrested in early March 2022, and a CSA Business Solutions LLC bank account was seized at that time.  After his arrest, RAY continued to operate the Truck Investment Scheme.  RAY misled investors about why he did not make expected payments after his arrest and hid the fact of his arrest and the seizure of the bank account.  During this period, RAY caused the opening of new bank accounts on behalf of CSA Business Solutions LLC and continued to solicit and accept investor funds for trucks that did not exist.

As part of the scheme, a New York woman conspired with Kaslov, Candy Evans, Tony John Evans, Corry Blue Evans, Robert Evans, and Russell to extort money and gold bars from the Maryland man, which caused him to embezzle funds from his employer between January 2017 and March 2017. He converted the funds to cash and gold bars and delivered the money and gold bars to New York drop-off locations, including a hotel room, believing the funds were going to mobsters to whom the New York woman owed money. In reality, all of the funds he embezzled and delivered to New York went to members of the Evans-Kaslov family.

Kaslov pleaded guilty in September 2020 to conspiracy to commit wire fraud. As part of his guilty plea, he admitted that he drove members of his family around New York with cash obtained from the scheme. On one such occasion, he drove to the New York diamond district on 47th Street, where he and family members spent tens of thousands of dollars in criminal proceeds from the scheme on watches, including Rolexes.

Kaslov also admitted that, after the Maryland man delivered approximately $2 million in gold bars to Tony John Evans and other individuals, Kaslov and others turned around and sold the gold bars for cash. Kaslov also traveled to Texas in May 2017 with a family member, where the two paid more than $300,000 in cash, the majority of which was proceeds from the scheme, to purchase a Rolls Royce Phantom Drophead from a car dealer.  In January 2020, Kaslov and Candy Evans sold that Rolls Royce in New Jersey for $120,000.

Candy Evans pleaded guilty in September 2020 to tampering with a witness by corrupt persuasion or misleading conduct. As part of her guilty plea, she admitted that once the FBI launched its investigation, she counseled the New York woman whom the Maryland man met on Backpage to lie to people, including the FBI. In April 2017, Candy Evans, believing that married individuals could not be compelled to testify against each other, advised the New York woman and Russell to get married to prevent such testimony about the scheme in Court.  The New York woman and Russell married at City Hall in New York. 

Candy Evans further panicked and wanted a letter that would exonerate her, Kaslov, and their three sons from any involvement in the scheme to get money from the Maryland man. Thus, she directed Russell and the New York woman to sign a handwritten, notarized confession attempting to fully implicate themselves and to exonerate Candy Evans, Kaslov, and their sons. Later that month, when the New York woman was scheduled to meet with the FBI, Candy Evans counseled the woman to lie by telling the FBI that there actually never had been an extortion scheme and that the Maryland man had invented the entire story about mobsters to justify why he embezzled money from his employer. In October 2017, two days after the FBI executed search warrants at various Evans-Kaslov family members' residences, Candy Evans called an FBI special agent who was investigating the case and told him that Kaslov and two of her other sons had not done anything illegal, which she acknowledged was false, and that it was just Tony John Evans, Russell, and the New York woman who had committed the crimes.  In November 2017, prior to Russell's interview with the FBI, Candy Evans also instructed Russell to lie to the FBI.

On May 6, 2021, the Vice President of Investigation and Fraud for a New York bank informed the government that Candy Evans had attempted to withdraw $50,000 in cash from an account that she recently opened. The bank contacted the government after it conducted due diligence regarding the attempted withdrawal and learned, from a prior Department of Justice press release, that Evans had been involved in the above-described criminal scheme. The government successfully moved the Court to restrain Evans from dissipating the $50,000 in funds. Today, Judge Sullivan said he will grant the government's motion requiring that the bank pay the $50,000 in restrained funds towards Evans' restitution obligation, which will be distributed to the victim from whom the Maryland man embezzled the funds.

Kaslov and Candy Evans are the second and third defendants to be sentenced in connection with this case. In September 2018, their son, Tony John Evans, now 33, pleaded guilty to interference with interstate commerce by extortion. Judge Sullivan sentenced him to five years in prison.

Their son, Robert Evans, now 34, pleaded guilty in April 2021 to interference with interstate commerce by extortion. He is awaiting sentencing. Russell, now 33, also pleaded guilty in July 2019 to interference with interstate commerce by extortion and is awaiting sentencing. Charges remain outstanding against Corry Blue Evans, 29, who has pleaded not guilty.

[A]pril Thompson worked in Texas for Kingwood Forestry Services ("Kingwood"), which is a natural resource consulting firm that provides a variety of forestry services to landowners. FIA contracted with Kingwood to retain contractors to provide field services on behalf of FIA's clients, such as clearing land, road grading, or other services, subject to an agreed upon annual budget. After the work was completed, Kingwood would send invoices to FIA for the work performed by the contractors. FIA, in turn, paid the invoices directly to the contractors. At Kingwood, April Thompson was responsible for managing the submission of invoices to and requesting payment from FIA.

Between approximately May 2011 and April 2019, April Thompson submitted over 400 fraudulent invoices totaling more than $4 million to FIA for work that her husband, James Thompson, had allegedly performed at FIA timber properties. Not one of these invoices was true. James Thompson never worked as contractor for FIA or Kingwood and had never performed work on any FIA timber property. After April Thompson submitted the invoices, FIA mailed checks to the Thompsons in Texas, which they deposited into bank accounts they jointly controlled. The Thompsons used the stolen money for their own personal benefit, including to operate James Thompson's trucking businesses, support his race car hobby, purchase silver and gold coins, install a pool at their home, and even treat themselves and friends to a Hawaiian vacation.

In addition to the criminal charges against the Thompsons, FIA had separately filed a civil suit against them in the U.S. District Court for the Eastern District of Texas ("Texas court"). As part of the civil litigation, the Texas court appointed a Receiver to manage and control the Thompsons' finances, which included granting him full access and control over their bank accounts, as well as the authority to take custody, control, and possession of their property, and authority to determine their reasonable and necessary living expenses. The Texas court also required that the Thompsons respond promptly and truthfully to all requests for information and documents from the Receiver.

The Texas court twice found the Thompsons in contempt for violating its orders, including after they had both pleaded guilty in Georgia. The Texas court found that that they had willfully disregarded its orders related to the preservation of assets by withholding, concealing, or otherwise failing to provide truthful information to the Receiver. The Thompsons likewise failed to make complete financial disclosures to the U.S. Probation Office in advance of their sentencings, including hiding the existence of a bank account in which they were receiving their salaries and failing to account for how thousands of dollars of cash had been spent in the months leading up to their sentencings.

[G]ood raised at least $4.8 million from five of his clients at Morgan Stanley-including retirees and a single mother of young children-to make supposedly low-risk investments in tax-free bonds and land-development projects. Rather than invest the money, however, the complaint alleges that Good used the funds to repay other victims and to pay for his own personal expenses, including luxury cars, international travel, and approximately $800,000 in credit card bills.

[B]etween January 2016 and December 2018, the defendants and their associates obtained a controlling interest in the securities of the microcap issuers through a series of transfers and purchase agreements with nominee shareholders. Once they had amassed a significant majority of the shares of the stocks, certain defendants secretly funded campaigns to promote the stocks to unsuspecting investors in the United States and elsewhere. As alleged, when those campaigns triggered increases in the demand for the stocks, the defendants sold the stocks via offshore trading platforms for significant profits. The SEC's Complaint also alleges that some of the defendants used encrypted text and phone applications, and arranged to buy and sell penny stocks from multiple offshore accounts, in furtherance of the fraud. According to the Complaint, the defendants and their associates yielded net proceeds of over $39 million from the sale of shares of the issuers.

• Securities Industry Commentator
• Bill Singer