Financial Mines

News and notes from the business reporters for the Connecticut Media Group.

Archive for the ‘Regulatory’ Category

9000 Conn. foreclosure victims might be owed money

Monday, September 24, 2012 by:Rob Varnon

Attorney General George Jepsen says Connecticut residents whose homes were taken through a flawed foreclosure process can now fill out an application to get some restitution.

Post cards notifying eligible victims, those that lost homes between Jan. 1 2008 and Dec. 31, 2012, have already been sent out. About 9,000 residents were identified in the state as having suffered through a foreclosure during a time in which major banks used a flawed process, including the filing of what many have argued were false affidavits.

For more information visit nationalmortgagesettlement.com.

Investors lost more than $1 million in former Newtown man’s alleged M&A fraud

Wednesday, September 19, 2012 by:Rob Varnon

The U.S. Attorney for the District of Connecticut announced Wednesday former Sandy Hook resident Garrett L. Denniston, 62, now of Boothbay Harbor, Maine, was arrested and charged Wednesday with wire fraud.

According to the USA’s Office, Denniston allegedly told investors his company, Consensus One LLC. and other similarly named companies, had access to stocks or promisory notes in companies that were about to merge, or had already done so and could buy them at a “friends and family” discount.

The investors, according to investigators, were told they had to act quickly as the deals were imminent and the window of opportunity was small. He also guaranteed a return on the money.

The complaint says so five victims invested $1.6 million with Denniston

“I urge the investing public to view with suspicion promises of guaranteed returns. I commend the FBI for shutting down this alleged scheme, and I thank the U.S. Attorney’s Office for the District of Maine for their invaluable assistance,” said U.S. Attorney David B. Fein. “The investigation is ongoing, and I encourage any potential victims or anyone with information related to this scheme to contact law enforcement.”

Citizens with information that may be helpful to the investigation are encouraged to contact FBI Special Agent David J. Ford at (203) 382-6645.

SEC brings charges after Danbury advisor admits to criminal fraud

Thursday, September 13, 2012 by:Rob Varnon

Danbury-based investment manager Stephen B. Blankenship has pleaded guilty to mail and securities fraud charges on Wednesday for a scheme that took 8 investors for $500,000, according to the government.

Blankenship, 63 of New Fairfield, owned and operated Deer Hill Financial Group. The U.S. Attorney for the District of Connecticut, said Blankenship admitted to the charges that he operated a Ponzi scheme for almost a decade.

Today, Thursday, the SEC announced it was filing civil charges against Blankenship and Deer Hill for the same matter, though the SEC estimates that Blankenship took $600,000.

Piecing together the two government announcements, it appears Blankenship tapped fellow churchgoers, friends and clients of a broker-dealer, with whom Blankenship was formerly affiliated.

The US Attorney said Blankenship, “falsely represented to numerous individuals that he had investment opportunities that were safe and would pay a consistent return to investors. Blankenship had been affiliated with registered broker-dealers in California and New York, and many of his victims were his prior customers. Blankenship’s false representations to his victims included that Deer Hill was being operated as a legitimate investment management firm, that investors could obtain a greater rate of return by withdrawing money from their existing brokerage accounts and investing directly with him, and that funds would be invested in publicly-traded mutual funds or established securities. In fact, there were no actual investments or investment opportunities, the money was not invested in publicly traded mutual funds, nor was it invested in established securities. Blankenship failed to invest the money as represented and instead used the victims’ funds to pay business expenses and personal expenses for travel, grocery shopping, credit card payments, mortgage payments, and improvements on his home.”

Blankenship is scheduled to be sentenced Dec. 5 and faces a maximum penalty of 20 years in prison for each offense. In a sentencing agreement, prosecutors greed to ask for less than the maximum, and Blankenship must make restitution.

NU cuts jobs might have violated state agreement

Monday, September 10, 2012 by:Rob Varnon

Northeast Utilities appears to have violated a settlement it made with the state that allowed it to merge in the wake of its botched storm responses of a year ago.

NU and NSTAR of Massachusetts merged officially this year after reaching agreements with the states over the distribution of job cuts and the provision of customer credits totaling more than $40 million. NU also had to pledge to not cut any customer and linemen positions after its storm response performance in 2011 was found lacking. Thousands of Connecticut residents were without power for days after Tropical Storm Irene in August and a freak snowstorm hit in October.

Attorney General George Jepsen’s office issued a statement late Monday confirming 33 layoffs were occurring in Connecticut. But the AG’s office noted that it had to reach out to the utility company and was not actually notified of the job cuts.

According to Connecticut’s settlement agreement with NU, the company is required to provide the AG and other agencies with a 30-day notice of those cuts and whether there is a proportional loss of jobs in Massachusetts.

But the accommodative AG has indicated the problem with notification might be procedural.

“The Attorney General was not notified about any layoffs. The Office received several inquiries and as a result, we reached out to NU and was advised that approximately 33 layoffs were occurring in Connecticut. We were further told that they are not linemen or in service-related positions, and the company stated that it met the proportionality requirement as set out in the settlement agreement,” the AG’s office said Monday. “However, the fact that we needed to reach out to NU makes clear the need for this Office and the Office of Consumer Counsel, with NU, to develop a reporting process to ensure the terms of the settlement agreement are being met with any job reductions for the future.”

This comes after Hearst Connecticut Media contacted NU and the Attorney General last week after sources indicated cuts were happening.

NU’s response was nearly as convoluted as its storm response,with some confusion about timing of cuts and an inability to say how many people had been notified their jobs were being cut.

That jobs are being cut is not a surprise, the company reported in filings to the SEC that it would be reviewing operations and that efficiencies would be realized over years.

Bankruptcy no refuge for Westport man heading to jail for bank fraud

Friday, September 7, 2012 by:Rob Varnon

The U.S. Attorney for the District of Connecticut said Daniel J. Lyons Jr., 55, of Westport was sentenced to 45 months in prison for defrauding Citizens Bank of nearly $7 million between 2007 and 2008.

Lyons, according to the Feds, took out a revolving line of credit for his import/export business, Greenwich Trading Company, which also went by the names GTC Worldwide Inc. or Greenwich Brands LLC. The charges against him state that he secured the loan with his accounts receivables, but then inflated the value of those accounts in paperwork he had to submit to the bank as he drew down the loan. He provided audits and other documents indicating GTC has receivables worth as much as $9.2 million.

The scam appears to have been uncovered in Bankruptcy court, when Lyons trying to liquidate the business.

But when Lyons filed a Chapter 7 Bankruptcy case for the business in early 2009, he submitted information to the federal court indicating the value of the receivables was only $380,000.

Lyons pleaded guilty to one count of bank fraud in May and has been ordered to pay the bank $6.98 million.

Trumbull man gets 3.5 years for a different kind of heist

Tuesday, September 4, 2012 by:Rob Varnon

The U.S. Attorney for the District of Connecticut announced Tuesday that Trumbull resident Joseph Sarlo, 56, was sentenced to 42 months in prison for bank fraud.

Sarlo, the CEO of Branford-based New England Cash Dispensing Systems Inc., and his general manager, each pleaded guilty to the charge before being sentenced.

According to court documents, the two executives cut a deal with Domestic Bank of Cranston, R.I., to operate a network of ATMs. But New England Cash also maintained a separate network of ATMS under its own name.

Cranston would provide the money for its ATMs, which New England stocked.

The court record indicates that Sarlo and his accomplice, John DeMilo of Branford, would over order the amount of cash they needed from Cranston and used the extra cash for its own ATMs. DeMilo got 22 months for his role in the scheme.

In all, the FBI estimates Cranston lost $4.8 million over several years.

Sarlo and the other members of New England Cash have been ordered to make restitution.

Publishers to pay $69 million for e-book Apple scandal

Wednesday, August 29, 2012 by:Rob Varnon

Attorney General George Jepsen announced Wednesday three of the five publishers the state is suing for alleged price fixing of e-books with Apple Inc., have settled and agreed to pay $69 million to the states and territories involved in the suite.

Connecticut and Texas led the investigation into alleged price fixing of best sellers that involved Apple Inc., which was trying to wrest a larger portion of the ebook market from Amazon.

The lawsuit is continuing against two other publishers and Apple.

Here’s the official release from Jepsen’s office.

HARTFORD – Connecticut Attorney General George Jepsen along with 54 attorneys general in other states, districts and U.S. territories, announced today that they have reached an antitrust settlement with three of the largest book publishers in the United States.

Hachette Book Group, Inc., HarperCollins Publishers L.L.C. and Simon & Schuster Inc. have agreed to pay a total of more than $69 million to consumers to resolve antitrust claims of an alleged unlawful conspiracy to fix the prices of electronic books (eBooks). They have also agreed to change the way they price eBooks going forward.

The settlement occurs in conjunction with a civil antitrust lawsuit filed today in U.S. District Court for the Southern District of New York against Hachette, HarperCollins, and Simon & Schuster, which alleges that the three settling publishers and others, including non-settling publishers Macmillan and Penguin (collectively, the “Agency Five” publishers), “conspired and agreed to increase retail eBook prices for all consumers” and “agreed to eliminate eBook retail price competition between eBook outlets, such that retail prices to consumers would be the same regardless of the outlet patronized by the consumer.”

“While publishers are entitled to their profits, consumers are equally entitled to a fair and open marketplace,” said Attorney General Jepsen. “This settlement will provide restitution to those customers who were harmed by this price-fixing scheme, but it also will restore competition in the eBook market for consumers’ long-term benefit.”

The lawsuit and today’s settlement stem from a two-year antitrust investigation conducted jointly by the U.S. Department of Justice’s Antitrust Division and the Connecticut and Texas Attorneys General. That investigation developed evidence that the Agency Five conspired to end eBook retailers’ freedom to compete on price by taking control of pricing from eBook retailers and substantially increasing the prices that consumers paid for eBooks. The attorneys general said that the publishers prevented retail price competition resulting in consumers paying tens of millions of dollars more for their eBooks.

“This action sends a strong message that this sort of anticompetitive behavior will not be accepted Through our ongoing litigation, we hope to provide additional restitution to consumers,” Attorney General Jepsen said, “Additionally, I’m especially proud of the exemplary bipartisan cooperation on both the state and federal level on this matter, which involved 54 states and jurisdictions working together on behalf of consumers across the country.”

Under the proposed settlement agreement, which the court must approve, Hachette, HarperCollins and Simon & Schuster will compensate consumers who purchased eBooks from any of the Agency Five during the period of April 1, 2010, through May 21, 2012. Payments will begin 30 days after the court approval of the settlement becomes final.

Consumers in Connecticut are expected to receive up to $1,264,658 in total compensation. The settling defendants will also pay approximately $7.5 million to the states for fees and costs.

In addition to paying the $69 million consumer compensation, Hachette, HarperCollins and Simon & Schuster have agreed to terminate their existing agency agreements with certain retailers, requiring the publishers to grant retailers – such as Amazon and Barnes & Noble – the freedom to reduce the prices of their eBook titles.

Another case against non-settling publishers – Penguin and MacMillan and Apple, Inc. – remains pending in the Southern District of New York.

Assistant Attorneys General Joseph Nielsen, Gary Becker and Kirsten Rigney, Paralegal Holly MacDonald and Assistant Attorney General Michael Cole, chief of the Antitrust Department are assisting the Attorney General in this matter.

Attorney General Jepsen serves as co-chair of the Antitrust Committee for the National Association of Attorneys General.

Greenwich nail salon clipped by feds

Wednesday, August 29, 2012 by:Rob Varnon

The owner of a Greenwich nail salon has pleaded guilty to structuring payments and violating immigration laws.

Jae Hee Yang, 57 of Englewood, N.J., pleaded guilty this week in Federal Court in Hartford to structuring currency transactions and employing an unauthorized alien.

In 2009. Yang, owner of Tip top Nails, withdrew $100,000 in 15 cash withdrawals, to avoid triggering a Currency Transaction Report. Federal law requires all financial institutions to report withdrawals exceeding $10,000 in cash.

The CRT could also generate questions about the use of the funds, so people try to avoid triggering it by structuring the payments.

Yang also ran afoul of federal law because she employed undocumented workers and paid them in cash under the table.

She will be sentenced on Nov. 20. She faces up to five-and-a-half years in prison, a $250,000 fine and has agreed to give up the $100,000 she structured. The money was earned through the business, the U.S. Attorney for the District of Connecticut said.

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