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White-collar criminals come in all sizes and styles but they share an overarching motive: to steal money. Anyone’s stash will do. According to the FBI, they are experts at “deceit, concealment, [and] violation of trust.” Of the lot, the most complex to prosecute and the likeliest to weasel a light or “deferred” sentence are the fraudsters whose open secret is to appear legitimate, the neighborly crook, the good egg from church. Money launderers, work-site embezzlers, pyramid scammers, phony security traders—nice folk like Gina Champion-Cain. The latest basket term for crimes perpetrated on the near and maybe dear is “affinity fraud,” tricking those the swindler knows, often intimately. The Securities and Exchange Commission notes the affinity con targets people with common interests: “religious or ethnic communities, language minorities, the elderly, or professional groups.” Such scammers stage a commercial enterprise to lure their buddies in like the Chicago ex-Marine who blew his fellow Marines’ savings with his “hedge fund” or the fanatic who entices the witless to sign up for end-times’ housing as Jim Bakker did selling condos to evangelicals in the Ozarks, safe from the Apocalypse. The point is, affinity fraud relies on a relationship the con “artist” has already nurtured, which he then exploits. What follows is a perp walk of recent fraudsters who’ve been charged with a crime, are awaiting trial or sentencing, or have pled guilty. Deceit and deceiver have been documented by multiple agencies, including the FBI, the IRS, the U. S. Postal Inspection Service, and the United States Attorney’s Office, Southern District of California. Trump-appointed U.S. attorney Robert Brewer, who resigned by request of the Biden administration, led prosecutions for these scams. Three of the five cases are in the bag, with fines, restitution orders, and, in some cases, jail time or time served; two are pending. With defense motions and Covid-19 protocols, the wheels of justice turn more slowly than ever. The Miracle Covid Cure Until Dr. Jennings Ryan Staley was indicted last December for fraudulently procuring the controversial “Covid drug” hydroxychloroquine and selling it to clients at his Skinny Beach Med Spas here and in Los Angeles, his Yelp ratings were largely laudatory. The skinny on Staley was that his body wellness procedures were safe and effective—treatments like nonsurgical ultrasound face lifts, Pico laser acne and scar removal, Brazilian/bikini waxes for women and men, and CoolSculpting. One woman wrote on Yelp that she got a “phenomenal deal on my tattoo removal.” Another extolled how Staley practiced “outside the box.” “While under his care, I can attest to restoring my energy levels with proper tests and treatment that I could not get from my primary care physician who is bound by health insurance technocrats sitting behind a desk for deciding my wellness.” But when the doctor failed more than once to refund money for “guaranteed” treatments, a few clients started barking. They complained of Groupon deals dishonored, delayed appointments, skin rashes and blisters after laser procedures, weight-loss medications never delivered. Then, last spring Skinny Beach closed its doors. Staley was charged with hocking “treatment kits” for Covid-19, calling the kit a “concierge medicine experience,” foolproof cures for the virus. Like Mike Lindell pushing pillows, Staley pushed the cure. He boasted to friends and employees that he was buying hydroxy in bulk from China; bags of powder labeled “yam extract” would sail through customs. He bragged in emails of a “magic bullet” and an “amazing weapon” against Covid. He promised clients that after a first telemedicine session he’d send kits with six two-tablet boxes of Azithromycin, an antibiotic; Xanax, “to avoid panic”; and four packets of the hydroxy powder. He professed to abide by the “clinical guidelines set forth by Harvard Medical School and the CDC.” What’s more, he offered “exclusive access to a medical hyperbaric oxygen chamber at separate rates” and “at home and in-store intravenous drips.” The kits were priced at $595, a less-loaded pack, for one person, and $3995 for a family of four with special add-ons. In one instance, Staley copied prescription information for hydroxy from a female employee. Using her name, he counterfeited bogus prescriptions, filled them at pharmacies, and even pretended to be the woman, who suffered from lupus, when ordering online. Over the phone, an undercover agent ordered the treatment kit for his family. In the criminal complaint, Staley told the agent at the pickup that in the event of one family member getting sick, “I will be dosing it. I will activate it. We will load [the hydroxy] and prophylax all of you.” Then, Staley put the sell in overdrive: “It’s incredible. There’s never been before, except for hepatitis C, in the history of medicine . . . where a medication is completely curative of a virus. You could be short of breath and coughing at noon today, and if I start your hydroxychloroquine loading dose, you’ll feel 99% better by noon tomorrow.” Analysis revealed the bulk hydroxy was fake: The 26.5 pounds of so-called “sweet potato” extract sent from China was actually baking soda. A bitter-tasting irony. After a few wronged employees spoke up, the feds swooped in. Staley is charged with mail fraud, importation contrary to law, false statement, and aggravated identity theft. He has pled not guilty. Maximum time for the set of crimes, 47 years. A year after the indictment, his case is still pending; defense delays so far total 46 continuance filings. Swindling the Needy To some, the married pair called their charitable organization, On Your Feet, and to others, Family Resource Center. In fact, both entities were the same—tax-exempt, nonprofit purveyors of clothing and shoes for the needy. Beginning in 2009, Geraldine and Clayton Hill of Bonita collected donations from clothing retailers such as Forever 21, Feed the Children, and Brooks Sports. As tax-deductible gifts, companies gave overstock, unsold, and unfashionable items believing the Hills would not sell the goods for a profit and dispense them to organizations here and in Mexico. The Hills agreed. To prove their intent, they cut inside labels in half or defaced them with a permanent marker. In June 2015, Forever 21 donated 161 pallets of clothing, retail value, $5.6 million. The following year, the Hills told Forever 21 that they planned a “Christmas Giveaway” and requested more goods: the company ponied up 16 more pallets, valued at $314,371. Between 2011 and 2016, Forever 21 and Feed the Children gave $16 million worth of apparel, shoes, toys, household items, and other aid to On Your Feet. The charity touted these donations would assist “low-income families and individuals in need to better their living conditions and quality of life.” Benefitting were local shelters, missions, board and care facilities, schools, hospitals, emergency disaster relief groups—the care list went on and on. Such was the Hills’ claim. It stood unchallenged until a few wily employees from Walt Disney, whose logos are used on clothing sold by Forever 21, spotted apparel with depictions of Simba and Hua Mulan in new condition for sale at discount clothing stores and flea markets. Apprised of the fraud, the local U.S. attorney’s office began digging into the couples’ benevolent operation. Investigators described the Hills as “brazen,” motivated by “personal greed and an indulgent lifestyle.” They were selling donated goods to for-profit middlemen and wholesalers—for cash. The cash proceeds were sizeable; over a five-year period, they pocketed $1.34 million. Some $380,000 of that went for vacations and entertainment, a $124,000 Mercedes-Benz, and rent on a Bonita home with seven bedrooms and seven bathrooms. Phony tax stubs put their qualifying income to rent at $100,000 a year. To look good, they tithed a healthy potful to their church. As a tax-exempt nonprofit, the Hills filed false charitable tax returns, claiming they earned less than $50,000 per year. Eventually, the U.S. attorney’s office called in the IRS, which discovered an unpaid tax liability of $50,933. That figure, as IRS restitution, was part of the 2020 indictment of the Hills; another order of restitution for “donor victims” remains in the works. Husband and wife pled guilty to conspiracy to commit mail fraud and tax evasion. Geraldine Hill received 15 months in jail, Clayton Hill, nine. U.S. Attorney Robert Brewer, commenting on the seriousness of the crimes, noted that “the conduct by the Hills is particularly offensive because they have undermined the faith of donors in charitable giving.” Charities operate—or should operate—on trust between donors and receivers that what is given will get to the poor. Based on such trust, organizations receive tax-exempt status. The best guide to assessing whether that status is reputable is www.charitynavigator.org. On Your Feet, which remains open, retains a “high advisory concern.” The warning is for “illegal activity, improper conduct, or organizational mismanagement.” Elder Fraud Insurance agent Shawn Heffernan set up shop in Mission Valley in 2004, which, according to his LinkedIn page, would help “retirees and pre-retirees plan their “second life.” In fact, he specialized “in retirement lifestyle planning with an emphasis on tax efficiency and lifetime income.” In ads, he slathered on the self-lauding: He was president of The Heffernan Group (a one-man operation), managed more than $100 million in assets, volunteered as a coach with the San Diego State Aztec soccer team, and sported an A+ rating from the Better Business Bureau. No surprise; most of it was untrue. Daily, he worked the phones, but he also put on hotel-based “Investment Seminars.” Enlisting seniors, he kept connected with dinners, gift cards, the occasional banquet. His wealth vehicle was the annuity: lifetime income generated by a lump-sum or recurring investment, backed by a reputable financial planner (Heffernan) who actively manages a stock-and-bond portfolio. As he wrote, he offered “a new way to think about money, investing, and retirement planning.” He added that his strategies meant the elderly person’s “money will last as long as they do.” More than a dozen fixed-income seniors with nest eggs signed contracts—with Heffernan and the insurance company whose annuities he sold. From the company, Heffernan pocketed a sales commission; the larger the nest egg, the more he made. Many seniors need money now, not in the future. So Heffernan sold them a variable annuity, which may produce a higher income than a more conservative fixed annuity. The higher the income the client sought, the greater the investment’s risk. To “lower their risk,” as he told investors, Heffernan used the illegal maneuver called “churning.” Once he gets Mrs. Butterworth to buy an annuity, he convinces her to sell it for another one that disburses higher amounts, takes a ten percent “surrender” fee for the sale (best done in the first year), and either repeats the purchase for another annuity or tells the woman she should invest directly with his high-earning, self-managed portfolio. Each “new investment” brings him an administrative fee. One senior’s outsized account was churned multiple times. The final tab in surrender fees was $490,000 with Heffernan’s commissions totaling $280,000. The San Diego Regional Fraud Task Force indicted Heffernan in 2017, and the shyster pleaded guilty to a raft of felonies in 2018. There were several counts of elder fraud and grand theft, one of forgery, and one of filing a fraudulent tax return. He stole property or siphoned money from two dozen people, half of them seniors, his ill-gotten gain, $1.5 million. He spent his profits on the usual froth: a Maserati, three rental condos, luxury vacations, jewelry, and a pricey wedding for him and his fiancée. His insurance agent’s license revoked, Heffernan is serving nine years in state prison. A white-collar crime enhancement was added to the plea, which let prosecutors freeze and seize his assets for restitution. Selling Heffernan’s condos and sports car and adding $75,000, that is, what was left of others’ actively managed funds, the state got 14 victims $320,000, around a fifth of what they lost. Largest Telemedical Medicare Fraud Ever In the annals of elder fraud—that is, conning infirm Americans over 65 who are Medicare, Medicaid, Medi-Cal, or military beneficiaries—this San Diego-based scam is to white-collar crime what Game of Thrones is to TV drama: one of the highest grossing spectacles of all time. The two originating, local actors probably had no idea that over a four-year period they and dozens of co-conspirators, a.k.a. underlings, would defraud the government out of nearly $1 billion! Beginning in 2014, businessmen Charles Burruss and Ardalaan “Armani” Adams created two healthcare “management” companies to sell orthotics—leg, arm, back, and neck braces—to elderly patients. That is, patients for whom such devices are “medically necessary,” those with painful knees, weak backs, injured or deformed spines, diseased limbs, as well as shoulder, wrist, and ankle problems, chronic or post-surgery. Medically necessary products must be approved by a doctor’s in-person examination at a “staffed physical facility.” Burruss and Adams offered patients new devices “for free.” To smooth the deal, they’d facilitate contact with a patient’s physician or with a doctor from their list. In the meantime, the pair created a host of shell companies, which contracted with Medicare. The main one was Ever Prime DME, incorporated in 2017, whose purpose was to umbrella 30 companies, move “Durable Medical Equipment,” and bill Medicare, Medi-Cal, or the military. The 30 companies were registered to subsidiary “nominee” or straw owners. Burruss and Adams controlled them all. The pair next hired subordinates to hire “marketers.” These subcontractors ran the core swindle, purchasing or stealing patient information with “personal identifiers” such as a beneficiary I.D. or a signed doctor’s order for a durable medical device. Working out of India, the Philippines, and Mexico, high-pressure salespeople cold-called the infirm elderly—medical equipment, no charge. The most aggressive are known to stand outside hospital exit doors and inquire of seniors who are leaving if they need braces. Once “trust” or “confusion” with a client was established, the upsell began. The ultimate package was the “Iron Man Kit”—two wrist braces, two arm/shoulder braces, two knee braces and one back brace. This expensive kit, produced by medical brace manufacturers, was sold to people who needed only one brace, yet they were instructed to keep the other devices for possible future use. Patients were assured that either their doctor or “a” doctor had pre-approved the product or, if they had questions, they could speak to a physician on the phone who would do a telemedical exam. All these braces were sent gratis, without co-pays, and billed to the government. For their part, elderly and military patients figured, correctly, that this is how healthcare products are sold—by private contractors, operating with approval from their doctors or HMOs. As long as the equipment came in the mail, few disputed the benefit, though some did try and return unused devices—to no avail. On the financial end, Burruss and Adams paid “marketing fees” of $280 for every brace the marketers sold. Once the braces were delivered to clients, the two men charged Medicare and other programs a few thousand dollars, typically for each “Iron Man Kit.” From August 2017 to January 2019, sales skyrocketed, between $2 and $4 million per month. Eventually, the nationwide multi-level operation sold equipment to 181,218 Medicare beneficiaries, which included 11,312 Californians. The claims Burruss and Adams submitted totaled nearly $872 million of which their “profit,” minimally shared with their device pushers, came to nearly $425 million. Too much money for two men to make, the radar of the local U.S. Attorney’s office pinged. Linking up with several agencies, the office playfully named their sting, “Operation Brace Yourself.” Defendants Burruss and Adams were charged on September 28, 2020 in New Jersey, Florida, and California with conspiracy to commit wire fraud and criminal forfeiture. Using “deceit, craft, and trickery,” they fraudulently billed government programs, concealed the con, and paid kickbacks and bribes to straw owners and cold-callers. More than 250 doctors and medical professionals (their names remain unpublished) who participated in the scam have lost their “Medicare billing privileges.” (Americans complain about “socialized medicine.” But that’s a canard. The truth is, Medicare and other government programs contract their services with hospitals, doctors’ groups, specialty clinics, private manufacturers, and other professionals who to qualify must abide by stringent regulations. It’s not the government who defrauds. It’s the private contractors.) The number of telemedical fraudsters classed under this case is staggering. Last September, as part of the Burruss and Adams indictments, 345 nongovernment defendants in 51 federal districts were brought up on charges of medical fraud. These defendants submitted fake claims to private insurers and Medicare and military programs to the tune of $6 billion—the majority of it based on the electronic and in-person stalking of patients for devices, procedures, and plans. Burruss and Adams are each out on bond of $10,000. So far, Burruss has forfeited one ill-got bank account, $718,500. Further confiscation, complex plea deals, and jail time for the kingpins look as likely as tomorrow’s sunrise. The Poway Rabbi and His Cohorts Chabad of Poway is familiar to most of us from the assault that rocked the synagogue on April 27, 2019. Twenty-year-old Josh Earnest shot his way into the Chabad on the last day of Passover services. He wounded three, killed member Lori Gilbert-Kaye, and maimed the right hand of Rabbi Yisroel Goldstein whose lost his index finger. During the attack, witnesses said Gilbert-Kaye gave her life, shielding Goldstein from the gunman’s fire. President Trump visited and invited the rabbi to the White House. In both venues, he became the voice of calm, the persona of peaceable assembly and mourning. And yet, as early as November 2016, the FBI had begun tracking the Chabad’s finances. Federal agents had gone undercover, examining the rabbi’s charitable work and so-called gifts to the synagogue from wealthy donors—very large sums, in fact. Check by check, investigators slowly unraveled an incredibly complex fraud that began with the rabbi and a few associates in the 1980s. That’s when Goldstein founded the Chabad, a tax-exempt organization that serves its Jewish congregants, in a Poway storefront. He helped erect a 20,000-square-foot new home for the group with money from members and from FEMA. Over the years, Goldstein directed some solicitations to charity programs for members—outreach services, housing needs, recruitment. The Chabad account fattened with funds for emergencies, government awards for community programs, and private loans from banks to aid those with mortgages or those behind on payments. Building rapport with three Fortune 500 companies, he claimed certain congregants and associates performed hundreds of community-service hours whose good deeds made the Chabad one of Poway’s best tax-free partners. The contributions, however, were dirty. Typically, the rabbi received hundreds of thousands of dollars, up to a few million, funneled 90 percent of it back to the donor, and kept 10 percent for himself—not the Chabad. The donor claimed the money as a charitable deduction, evading taxes and garnering accolades for his putative generosity. At times, Goldstein paid the 90 percent kickback with cash, gold coins, gold ingots, or as payments to a donor’s creditors for home construction or college tuition. (One son of a co-conspirator had his dental school tuition, graduate degree included, paid by Goldstein: $368,000!) He’d text a donor—called the “baker”—that his money—termed the “challah”—was all set: “The baker came in early and has today 22 [$22,000] challah ready for pickup.” Among Goldstein’s nine convicted cohorts, including his brother, Mendel, who cheated the IRS out of $156,000, was the crookedest of the co-conspirators—real estate agent, Alexander Avergoon. Avergoon recruited donors and put their money in numerous bank accounts and shell companies. One was called “Imagination Construction Company,” (apparently, pun intended), which promised repairs on the Chabad after the 2007 Witch Creek Fire. Avergoon hid his and others’ money like Jeffrey Epstein’s accountant. For services to the Chabad, he faked competitive bids for grants, then used the do-re-mi to pay low-bid contractors for actual work or to pocket funds without doing any improvements. What’s more, Avergoon built a separate real estate Ponzi scheme, faking the purchase of rental property with phony deeds of trust and mortgage notes as well as fictitious “fictitious names.” New investors, lulled in with fake loan agreements, were paid “rental” dividends from previously lulled-in investors. These retirees—who, it should be noted, had nothing to do with the kickback scheme—were fleeced of $12 million. On October 17, 2018, six months before the shooting, agents with the IRS and the FBI executed search warrants of the Chabad and Goldstein’s home. Aware that he was under investigation, the rabbi warned his co-conspirators, writing in an email that “the internet is not a [sic] safest place” to discuss transactions. The scoundrels panicked trying to hide the conspiracy, including Avergoon, who left the country. One defendant to whom Goldstein had given $1 million in coins brought them to the rabbi’s home at midnight on the day of the raid. The coins were later confiscated. Who were the victims of this fraud? For starters, tax cheats victimize all of us; Goldstein’s faked invoices to federal and state emergency services resulted in an $860,000 loss to those agencies. The total amount of “contributions” is estimated at $6.2 million with Goldstein stashing 10 percent, more than half a million. Twenty cheaters who were in on the grift—among the worst other offenders are Bijan Moossazadeh, Yusef Shemirani, Boris Shkoller, Stuart Weinstock, owner of a grocery business in Escondido, and Qualcomm engineer, Rotem Cooper—owe more than $1.5 million to the IRS. Other harm, some of it direct, was generously spread. Three large corporations asked employees to donate and each corporation matched the gift, with some companies doubling the amount; Chabad members were unaware that certain members had, as the rabbi lied, performed hundreds of hours of community service on behalf of their “sentencing requirements for criminal offenses”; legitimate donors to the Chabad foundation, the “Friendship Circle of San Diego,” were misled that their gifts supported the needy and Chabad education programs, with, in one instance, the fraudsters thieving a $600,000 grant from the Clarence Brooks Foundation; five people were snookered by the real estate Ponzi scheme; and the Chabad members who believed they were getting new carpeting, an air-conditioning upgrade, and replacement copies of used or damaged religious texts saw none of these things materialize. In addition, a promise to the Chabad of an ancient Iranian Torah, purchasable with an in-kind donation, turned out to be a hoax. The $1.2 million floated to buy the text was faked, its appraisal was faked, its provenance was faked, and the book itself never existed. (Lest we judge too severely, all the paperwork looked real.) The crime was born once the swindler, Bruce Baker, deducted 10 percent of the purchase price, $120,000, and his “appraisal fee,” $20,000, from his taxes. It’s little known that Chabad is an Orthodox Jewish Hasidic movement whose beliefs and rituals, girded by classic and mystical Judaic texts, are strictly followed. The sect gives humanitarian aid and education to the underserved, especially Jewish groups, throughout the world. Perhaps the worst affinity crime is one that preys on ethnic and religious bonds among those with more than a common interest—a calling, as it were, to Orthodox Judaism. After Alexander Avergoon was found in Latvia and extradited to San Diego, he signed a plea deal: wire fraud, aggravated identity theft, and money laundering. He faces a maximum fine of $1 million, maximum jail-time of 42 years. He’s forfeited his property and $5.2 million in cash. He owes restitution to a dozen individuals, government programs, and a foundation: that debt is the largest, $7.01 million, due to a plaintiff with the initials A.U. Avergoon will be sentenced soon. Some of the eight other swindlers have received a “deferred prosecution agreement,” a bit of cooperative leniency the U.S. Attorney’s office parlays with a defendant. The terms state that one admits guilt, agrees to stipulations like testifying against others, particularly the ringleaders, and pays the prescribed restitution. If one follows the pact for two years, the case is dismissed and the conviction expunged. Rabbi Goldstein, who will be sentenced in October, may receive the least onerous settlement of all, considering how long and corrupt his deception became. The U.S. Attorney’s office has said it will seek no prison time for the rabbi. Instead, the office seeks to mitigate his guilt by boldly asking the judge to forgive Goldstein. He has admitted the crime, cooperated with the investigation, forfeited the lion’s share of his $2.5 million lucre, and helped “heal the community” after the Chabad shooting, even as he knew the U.S. attorney would expose his fraud. According to Brewer, now retired, Goldstein’s “role after the 2019 terrorist attack was exemplary. He became a significant advocate for peace.” One of Brewer’s bequests is that the rabbi deserves the mercy of the court.
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(San Diego Reader May 6, 2021)