Business Crimes Hotline

CALIFORNIA

President of Virginia Star Seafood Sentenced to 63 Months for Fraudulent Labeling

Peter Xuong Lam was sentenced to 63 months in prison for his role in importing frozen catfish from Vietnam fraudulently labeled as sole, grouper, and other more expensive fish.

After a three-week trial in October, Lam was convicted of conspiracy to import mislabeled fish in order to avoid federal tariffs and dealing in fish he knew had been illegally imported. The government alleged that Virginia Star and Silver Seas (another fish importer) imported $15.5 million of catfish illegally labeled as other types of fish. In addition to the prison sentence, Lam will be required to pay more than $12 million to the government for the anti-dumping duties that he avoided.

Arthur Yavelberg of Silver Seas was convicted of misdemeanor conspiracy at the same time as Lam, and was sentenced to one year of probation for his participation in the scheme. The cases against Lam and Yavelburg are a part of a larger investigation by the Department of Justice (DOJ). Thus far, 12 individuals and companies have been convicted of criminal charges related to their avoidance of the importation duties. The alleged ringleader of the conspiracy, Henry Nguyen, is a fugitive.

TEXAS

Tax Lawyers and BDO Seidman Executives Charged with Tax Fraud

Three Jenkens & Gilchrist attorneys were charged with creating fraudulent tax shelters: Paul M. Daugerdas, the former head of both the firm's Chicago office and its tax practice, and two other members of the Chicago tax practice ' Erwin Mayer and Donna Guerin. Also charged: Denis Field, the former Chief Executive Officer and Chairman of the Board of BDO Seidman, and Robert Greisman, a tax partner in BDO's Chicago office. Two investment representatives from an unnamed bank were also charged. All the individuals charged are accountants and six of them are attorneys.

The government alleges that the individuals charged created tax shelters to fraudulently shield wealthy individuals from their federal tax liability. The 27-count indictment charges counts including conspiracy to defraud the IRS and tax evasion. Specifically, the government alleged a 10-year conspiracy to deceive the IRS about the tax shelters they had created and marketed. The defendants allegedly knew that the IRS would have challenged the shelters and sought to retrieve the unpaid taxes, had it known the truth about them. To avoid this, the defendants allegedly created misleading documents that falsely described their clients' motivations for entering into the shelters.

The government alleges that the defendants also provided Jenkens' clients with opinion letters asserting that the shelters were likely to be upheld, and that, through a number of different mechanisms, the defendants created more than $7.3 billion in false tax losses.

Three other former BDO Seidman members have pleaded guilty to related conspiracy and tax evasion charges: Charles W. Bee, Jr., former Vice Chairman and board member; Michael Kerekes, former principal and member of TSG and Tax Opinion Committee; and Adrian Dicker, former Vice Chairman and TSG member. Jenkens & Gilchrist also previously agreed to a non-prosecution agreement with the IRS and paid a $76 million fine. The firm has since closed.

Enron Broadband CFO Pleads Guilty to Falsifying Books And Records

Kevin Howard, the former Chief Financial Officer and Vice President of Finance for Enron Broadband Services, pleaded guilty to one count of falsifying books and records.

The government had alleged that Howard took measures to create false earnings reflected in Enron's 10-K filing. In early 2000, Enron launched Enron Broadband with a projection that the business unit would lose $60 million that year. When Enron Broadband had not created any significant revenue as the year came to a close, Howard and other executives developed a series of transactions in an attempt to show the original financial projection. Specifically, Howard created a joint venture with a video on demand technology company that served to generate 2000 revenue based on a contract Enron Broadband had with Blockbuster which anticipated hundreds of millions of dollars in future revenue. Howard and others told the joint venture partner that they would suffer no financial penalty and were only needed as a “bridge” so that Enron Broadband could survive.

Knowing that the company's auditors would not agree with the recognition of earnings from the transactions, Howard did not inform the auditor of all relevant facts about the transaction.

As a result of his plea, he faces a sentence of up to 12 months of home confinement.

Howard's plea enabled him to avoid his third trial based on the government's allegations. Howard's first trial, in 2005, ended in a hung trial. He was retried in 2006 and found guilty of conspiracy, wire fraud, and falsification of books and records, but the U.S. District Court in Houston later vacated the conviction because of a change in the law after the verdict ' a decision upheld by the Fifth Circuit. Other Enron Broadband executives had previously accepted guilty pleas in 2004.

CALIFORNIA

President of Virginia Star Seafood Sentenced to 63 Months for Fraudulent Labeling

Peter Xuong Lam was sentenced to 63 months in prison for his role in importing frozen catfish from Vietnam fraudulently labeled as sole, grouper, and other more expensive fish.

After a three-week trial in October, Lam was convicted of conspiracy to import mislabeled fish in order to avoid federal tariffs and dealing in fish he knew had been illegally imported. The government alleged that Virginia Star and Silver Seas (another fish importer) imported $15.5 million of catfish illegally labeled as other types of fish. In addition to the prison sentence, Lam will be required to pay more than $12 million to the government for the anti-dumping duties that he avoided.

Arthur Yavelberg of Silver Seas was convicted of misdemeanor conspiracy at the same time as Lam, and was sentenced to one year of probation for his participation in the scheme. The cases against Lam and Yavelburg are a part of a larger investigation by the Department of Justice (DOJ). Thus far, 12 individuals and companies have been convicted of criminal charges related to their avoidance of the importation duties. The alleged ringleader of the conspiracy, Henry Nguyen, is a fugitive.

TEXAS

Tax Lawyers and BDO Seidman Executives Charged with Tax Fraud

Three Jenkens & Gilchrist attorneys were charged with creating fraudulent tax shelters: Paul M. Daugerdas, the former head of both the firm's Chicago office and its tax practice, and two other members of the Chicago tax practice ' Erwin Mayer and Donna Guerin. Also charged: Denis Field, the former Chief Executive Officer and Chairman of the Board of BDO Seidman, and Robert Greisman, a tax partner in BDO's Chicago office. Two investment representatives from an unnamed bank were also charged. All the individuals charged are accountants and six of them are attorneys.

The government alleges that the individuals charged created tax shelters to fraudulently shield wealthy individuals from their federal tax liability. The 27-count indictment charges counts including conspiracy to defraud the IRS and tax evasion. Specifically, the government alleged a 10-year conspiracy to deceive the IRS about the tax shelters they had created and marketed. The defendants allegedly knew that the IRS would have challenged the shelters and sought to retrieve the unpaid taxes, had it known the truth about them. To avoid this, the defendants allegedly created misleading documents that falsely described their clients' motivations for entering into the shelters.

The government alleges that the defendants also provided Jenkens' clients with opinion letters asserting that the shelters were likely to be upheld, and that, through a number of different mechanisms, the defendants created more than $7.3 billion in false tax losses.

Three other former BDO Seidman members have pleaded guilty to related conspiracy and tax evasion charges: Charles W. Bee, Jr., former Vice Chairman and board member; Michael Kerekes, former principal and member of TSG and Tax Opinion Committee; and Adrian Dicker, former Vice Chairman and TSG member. Jenkens & Gilchrist also previously agreed to a non-prosecution agreement with the IRS and paid a $76 million fine. The firm has since closed.

Enron Broadband CFO Pleads Guilty to Falsifying Books And Records

Kevin Howard, the former Chief Financial Officer and Vice President of Finance for Enron Broadband Services, pleaded guilty to one count of falsifying books and records.

The government had alleged that Howard took measures to create false earnings reflected in Enron's 10-K filing. In early 2000, Enron launched Enron Broadband with a projection that the business unit would lose $60 million that year. When Enron Broadband had not created any significant revenue as the year came to a close, Howard and other executives developed a series of transactions in an attempt to show the original financial projection. Specifically, Howard created a joint venture with a video on demand technology company that served to generate 2000 revenue based on a contract Enron Broadband had with Blockbuster which anticipated hundreds of millions of dollars in future revenue. Howard and others told the joint venture partner that they would suffer no financial penalty and were only needed as a “bridge” so that Enron Broadband could survive.

Knowing that the company's auditors would not agree with the recognition of earnings from the transactions, Howard did not inform the auditor of all relevant facts about the transaction.

As a result of his plea, he faces a sentence of up to 12 months of home confinement.

Howard's plea enabled him to avoid his third trial based on the government's allegations. Howard's first trial, in 2005, ended in a hung trial. He was retried in 2006 and found guilty of conspiracy, wire fraud, and falsification of books and records, but the U.S. District Court in Houston later vacated the conviction because of a change in the law after the verdict ' a decision upheld by the Fifth Circuit. Other Enron Broadband executives had previously accepted guilty pleas in 2004.