Local Businessman Charged with Wire Fraud for Using Investors’ Funds for His Personal Use

ATLANTA—The co—founder of Geometrix has been charged in a federal criminal information with defrauding business investors of approximately $800,000. Kevin Patrick Loughery, 49, of Atlanta, Georgia, who co-founded Geometrix in 2007, was arraigned today before United States Magistrate Judge Alan J. Baverman on the federal charge of wire fraud and was released on bond.
“Instead of keeping his business investors’ funds secure in an escrow account, the defendant is charged with using hundreds of thousands of dollars to support his lavish lifestyle,” stated United States Attorney Sally Quillian Yates. “The charges against Loughery reflect our ongoing commitment to crack down on investment fraud.”
Mark F. Giuliano, Special Agent in Charge, FBI Atlanta Field Office, stated, “When the defendant diverted investor funds to his personal account, he left behind his multiple investors-turned-victims now suffering substantial financial losses while he pursued a life of affluence. The FBI remains well-suited and committed to investigating such cases of wire fraud that often significantly impact many victims.”
According to United States Attorney Yates, the charges, and other information presented in court: In 2008, Kevin Patrick Loughery began soliciting investments from his friends and business associates in Geometrix, a Georgia start-up company that he co-founded in 2007. Loughery assured investors both telephonically and via e-mail that their investment would remain in escrow until the completion of Geometrix’s issuance of stock and accompanying documentation.
In an e-mail to one such investor, Loughery assured the investor that the money would be kept in an escrow account, and Loughery instructed the investor to wire the money into such an account. However, the money never went to an escrow account because Loughery’s wiring instruction was not for an escrow account but rather was for Loughery’s own account for a separate business, KLM Investments, of which Loughery was the sole proprietor. The investor wired over $300,000 into the account. Loughery then sent the investor an e-mail stating that the investor would receive 400,000 shares of Geometrix for his investment. The investor never received those shares.
In total, Loughery solicited $780,000 in investments from various investors that were supposed to be kept in escrow but instead were spent by Loughery. Loughery subsequently declared bankruptcy.
This case was investigated by special agents of the Federal Bureau of Investigation.
Assistant United States Attorney Karlyn J. Hunter is prosecuting the case.
For further information please contact the U.S. Attorney’s Public Information Office at USAGAN.Pressemails@usdoj.gov or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is www.justice.gov/usao/gan.

Colorado Man Sentenced for Scheming Investors Out of $7 Million

MINNEAPOLIS—Earlier today in federal court, a 37-year-old Colorado man was sentenced for scheming investors out of more than $7 million. United States District Court Judge Patrick J. Schiltz sentenced Evan Matthew Flaxman, of Silverthorne, Colorado, to 52 months in prison on one count of mail fraud in connection to the crime. Flaxman was charged on June 14, 2012, and pleaded guilty on July 25, 2012.
In his plea agreement, Flaxman admitted that from December 2009 through March 2012, he induced investors to give him money, telling them he had extensive financial expertise and personal wealth and resources. That was not the case. He subsequently provided one investor with documents indicating investment gains. In reality, however, Flaxman had used investment funds for personal use, including the purchase of a Ferraris and Porsche automobiles and a Rolex watch. He also paid his taxes with the money.
This case was the result of an investigation by the U.S. Postal Inspection Service and the Federal Bureau of Investigation. It was prosecuted by Assistant U.S. Attorney Thomas Calhoun-Lopez.

C. Ray Nagin, Former New Orleans Mayor, Indicted on Federal Bribery, Honest Services Wire Fraud, Money Laundering, Conspiracy, and Tax Charges

NEW ORLEANS—C. Ray Nagin, 56, a resident of Frisco, Texas, and formerly the mayor of New Orleans, was charged in a 21-count indictment with bribery, honest service wire fraud, money laundering, conspiracy, and filing false tax returns, announced U.S. Attorney Dana J. Boente, FBI Special Agent in Charge Michael Anderson, and Internal Revenue Service-Criminal Investigation (IRS-CI) Special Agent in Charge James Lee.
According to today’s federal grand jury indictment, between December 2004 and the present, Nagin and several others participated in a conspiracy to commit bribery and honest services wire fraud. The indictment alleges that Nagin, in his role as chief executive, devised a scheme to defraud the city of New Orleans and its citizens of his honest services through bribery and a kickback scheme, whereby Nagin used his public office and official capacity to provide favorable treatment, including awarding contracts, that benefitted business and financial interest of individuals providing him with bribes and kickbacks in the form of checks, cash, granite inventory, wire transfers, personal services, and free travel. The indictment charges Nagin with accepting numerous bribes and payoffs from consultants and contractors, money laundering conspiracy, and filing false tax returns for the years 2005 to 2008.
“This office will continue its history of investigating and prosecuting public corruption,” said U.S. Attorney Dana J. Boente. “This is an important part of the office’s mission to serve the citizens of the Eastern District of Louisiana and make certain they have honest public officials.”
“This indictment should serve as a reminder to current and former public officials that, in the interest of full accountability, the FBI pursues corruption even after an official leaves office,” said Michael Anderson, Special Agent in Charge of the FBI’s New Orleans Field Office.
“IRS will continue to do our part to hold the elected officials of New Orleans accountable for their actions,” stated Damon Rowe, IRS-CI Acting Special Agent-in-Charge. “No one is excused from obeying the laws of this country.”
According to the indictment, in January 2005, Nagin created Stone Age LLC, a granite company based in New Orleans.
The indictment alleges, among other things, that Nagin accepted approximately $72,250 in bribes from Rodney Williams and his company, Three Fold Consultants LLC. The indictment also alleges Nagin accepted bribes from Frank Fradella, including $50,000, granite inventory, and nine payoffs in the form of wire transfers from Fradella totaling $112,500. In some cases, money was deposited into Nagin’s Stone Age corporate account, or free granite inventory was provided to Stone Age.
If convicted of conspiring with others to commit bribery and honest services wire fraud (count one), Nagin faces statutory penalties of up to five years in prison, a $250,000 fine, and three years of supervised release. If convicted of accepting a bribes (counts two through seven), Nagin faces statutory penalties of up to 10 years in prison, a $250,000 fine, and three years of supervised release on each count. If convicted of accepting payoffs that caused interstate wire communications to occur between Louisiana and other states (counts eight through 16), Nagin faces statutory penalties of up to 20 years in prison, a $250,000 fine, and three years of supervised release on each count. If convicted of conspiring to commit money laundering (count 17), Nagin faces statutory penalties of up to 10 years in prison, a $250,000 fine, and three years of supervised release. If convicted of filing false tax returns for years 2005 through 2008 (counts 18 through 21), Nagin faces statutory penalties of up to three years in prison, a $100,000 fine, and three years of supervised release on each count.
The indictment also contains notices of forfeiture which puts the defendant on notice that the government intends on forfeiting any and all property and profits concerned with and/or derived from any illegal activity referenced in the indictment.
U.S. Attorney Boente reiterated that today’s indictment describes allegations and that the guilt of the defendant must be proven beyond a reasonable doubt.
The case was investigated by the FBI, the IRS-CI, and the New Orleans Office of Inspector General. U.S. Attorney Boente would also like to acknowledge the assistance provided by the New Orleans Inspector General’s Office and the Metropolitan Crime Commission. The case is being prosecuted by Assistant U.S. Attorneys Matthew M. Coman and Richard R. Pickens, II.

Former Grand Rapids-Area Financial Adviser Sentenced to 54 Months in Prison for Wire Fraud

GRAND RAPIDS, MI—U.S. Attorney Patrick A. Miles, Jr. announced today that Lawrence Maxwell McCoy of Bitely, Michigan, was sentenced by U.S. District Judge Janet T. Neff to 54 months in prison for wire fraud. The U.S. Attorney’s Office filed a one-count felony information on September 7, 2012, charging McCoy with a scheme to defraud. McCoy pled guilty to the charge on September 20, 2012, pursuant to a plea agreement.
McCoy sold mutual funds and insurance in and around Holland and Grand Rapids, doing business as Hallbrook Asset Management and Hallbrook Group LLC. Under these auspices, McCoy provided legitimate investment advice and services but also defrauded six of his clients, causing total losses of $708,267.37 between 1995 and 2009. To perpetrate his fraudulent scheme, McCoy fabricated an investment that he called “Marsico Private Ledger.” He represented to his clients that Marsico Private Ledger was an investment offered through Marsico Capital Management LLC, a real mutual fund provider based in Colorado. McCoy then induced many of his existing clients, who otherwise had legitimate investments managed by McCoy, to invest in Marsico Private Ledger. After McCoy received his clients’ money under these fraudulent pretenses, he diverted it to his own use. To cover up the fraudulent scheme, McCoy fabricated investment return information and published it to his clients by manually entering the phony returns on a legitimate third-party Internet reporting site dedicated to wealth management reporting. McCoy also sent e-mails to his clients to communicate the phony return information and to assure them that their investments in Marsico Private Ledger were safe. McCoy specifically targeted clients that he knew would not have an immediate need for their money. Through his scheme, McCoy stole clients’ nest eggs and money earmarked for college funds.
In handing down McCoy’s sentence, Judge Neff pointed out that McCoy’s behavior was “not aberrant” but, rather, “a thread in his history.” In 2009, McCoy was sentenced in 28th Circuit Court in Cadillac, Michigan, to five years of probation for embezzling money from investments that he managed for a family member. Judge Neff added, “When people fall prey to this type of financial misconduct, it is really devastating.”
U.S. Attorney Miles stated, “Financial fraud often is a silent crime that can go undetected for months, if not years. When that happens, the impact on a victim’s nest egg is truly devastating. The United States Attorney’s Office for the Western District of Michigan is committed to pursuing and bringing to justice financial professionals who defraud their clients.”
In addition to his 54-month prison sentence, McCoy was also sentenced to two years of supervised release and was ordered to pay restitution in the amount of $690,267.37.
The case was prosecuted by Assistant U.S. Attorney Joel Fauson and was investigated by the Federal Bureau of Investigation, Grand Rapids Resident Agency.