Former CEO Of Publicly Traded Houston Company Sentenced To Three Years In Prison For Accounting Fraud And Misappropriation Schemes

 

Damian Williams, the United State Attorney for the Southern District of New York, announced today that JEFFREY HASTINGS, the former Chief Executive Officer and Chairman of the Board of Directors of SAExploration Holdings, Inc. (“SAEX” or the “Company”), a publicly traded seismic data company based in Houston, Texas, was sentenced today in Manhattan federal court to three years in prison for his role in a scheme to fraudulently and materially inflate the publicly reported revenue of SAEX by tens of millions of dollars, in 2015 and 2016, and also for misappropriating millions of dollars from the Company. On August 13, 2021 HASTINGS pled guilty before U.S. District Judge Gregory H. Woods, who imposed today’s sentence.

According to the Superseding Information, the Superseding Indictment, and the Complaint filed in this case, and statements made in connection with sentencing:

At all times relevant to the Information until August 2016, HASTINGS was the Executive Chairman of the Board of Directors of SAEX (the “Board”). After August 2016, HASTINGS served as both the Chairman of the Board and the Chief Executive Officer (“CEO”) of SAEX until he separated from the company in August 2019. SAEX was a publicly-traded seismic data acquisition company headquartered in Houston, Texas, that traded under the symbol “SAEX” on the NASDAQ. In May 2020, SAEX was delisted from the NASDAQ and, in December 2020, was taken private. SAEX provided land and marine-based seismic acquisition services including program design, planning and permitting, camp services, survey, drilling, recording and processing.  Seismic data is used by oil and gas companies to identify and analyze drilling prospects and maximize successful drilling.

From February 2015 through May 2019, HASTINGS, together with Brent Whiteley, the then Chief Financial Officer and General Counsel of SAEX; Michael Scott, the then Executive Vice President of Operations at SAEX; and the founder, and at various times the President, CEO, and Chief Operating Officer of SAEX (“CC-1”), devised and carried out a scheme to defraud SAEX’s shareholders, bondholders, and the investing public by artificially and materially inflating SAEX’s reported revenue by making it appear that Alaskan Seismic Ventures, LLC (“ASV”) was an independent and reliable source of tens of millions of dollars of revenue.

In February 2015, HASTINGS and Whiteley discussed finding a way for SAEX to take advantage of certain tax credits offered by the State of Alaska to seismic data library companies, to offset the costs of exploring for oil and gas in Alaska (the “Alaska Tax Credits”). The Board of SAEX was opposed to operating its own data library company because of concerns about the ability to ensure payment to SAEX, including through the monetization of Alaska Tax Credits, among other reasons. To avoid the appearance that SAEX was operating a data library company that licensed data to third parties, HASTINGS and Whiteley set up ASV, to purport to operate as an independent customer purchasing seismic data from SAEX and licensing it to third parties. HASTINGS recruited an acquaintance to serve as the owner and sole employee of ASV. In truth and in fact, and as hidden from investors, ASV was not independent and could not pay SAEX for its seismic data.

After setting up ASV, HASTINGS and Whiteley created and caused to be created a number of shell companies (the “Shell Companies”) for the purpose of secretly transferring funds from SAEX into ASV. One of the Shell Companies, Global Equipment Solutions (“Global Equipment”), was purportedly an equipment rental company from which SAEX rented seismic acquisition equipment. In truth and in fact, and as HASTINGS and his co-conspirators well knew, SAEX did not rent any equipment from Global Equipment and did not owe Global Equipment any money. The co-conspirators took steps to make the payments from SAEX to Global Equipment appear legitimate to others at SAEX; for example, Whiteley drafted a lease agreement between SAEX and Global Equipment, and Scott caused fake purchase orders to be created that purported to show expenses incurred by SAEX as a result of renting equipment from Global Equipment.

By the end of 2015, SAEX had recorded on its books approximately $12 million in payables to Global Equipment. HASTINGS and his co-conspirators ultimately routed approximately $5.8 million of SAEX’s funds through Global Equipment, and the other Shell Companies, to ASV. That money then went from ASV back to SAEX to pay outstanding receivables. The fact that these funds belonged to and originated with SAEX was not disclosed to investors.  HASTINGS and his co-conspirators referred to this portion of the scheme as “round-tripping.”     In addition, HASTINGS and Whiteley then misappropriated more than $5 million of the funds that SAEX transferred to Global Equipment for their own use, including making payments to Scott and CC-1, among others.   

In addition to his prison term, HASTINGS, 63, of Anchorage, Alaska and British Columbia, Canada, was sentenced to two years of supervised release and ordered to pay a forfeiture money judgment in the amount of $590,807. Judge Woods deferred determination of restitution for 90 days.

Two co-defendants – Brent Whiteley and Michael Scott – have already pled guilty and await sentencing before Judge Woods.

Mr. Williams praised the investigative work of the Federal Bureau of Investigation and thanked the Securities and Exchange Commission, which brought a separate civil action. 

En Route to White House for Infrastructure Bill Signing, Governor Hochul Announces No MTA Fare Hikes This Year, No Service Cuts Through 2024

 

Governor Hochul: "We anticipate that there'll be no fare hikes for the MTA. So therefore, those of you who are commuters on the MTA and have been anxious about how much this is going to go up, especially in this era of inflation, I'm really excited to say that we will not have to raise the fairs or have any service cuts. The service cuts that were planned for 2023 and 2024 are now off the table for MTA commuters."

 "Good morning and thank you Phil and I am a little bit rushed this morning but what a great reason to be here in this extraordinary airport. I've been here many times Phil as we announced new improvements, new lines for some of the airlines and just talk about how we can expand services so thank you for your leadership.

Also we are joined by Sam the Airport Board President and the great work he does on behalf on the NYS Firefighters Association and my fabulous partners in local government. Mayor Kathy Sheehan and our County Executive Dan McCoy, who has worked with me so closely on many projects. We are very excited to be embarking on a flight right now to leave to go to Washington D.C. I was invited by President Biden along with a select number of governors from states that will be recipients of this funding. 

This is a $1.2 trillion generational opportunity to transform infrastructure in America. And I feel like this is long overdue, it has been long overdue. As a young staffer and attorney for Senator Daniel Patrick Moynihan, who was on the infrastructure committee, we talked about projects like these and investing money earlier so that the cost does not continue to rise. And that's why this is so smart.

I want to thank Senator Schumer and Speaker Nancy Pelosi and all the people who stood up to cast the vote that made this happen. And in order for them to know we are appreciative, I am going to make sure that they know that we are giving credit where credit is due. And it took a lot of negotiation, a lot of involvement of a lot of people and I want to thank our local partners as well as our federal partners for getting this done.

What this means. Billions of dollars coming to the state of New York for critical and long overdue infrastructure projects. More than 14 billion dollars for New York roads and bridges, 10.5 billion for our transit systems across our state, 3 billion for clean water, 100 million for continued broadband deployment, something that we hear about every single day. I continue as Governor and no longer as Lt. Governor, but I still travel the state, I know the vulnerability when our cellphone drops and we say why. So we have to get that fixed as well.

As well as hundreds of millions of dollars for climate resiliency projects across the state. What this means is we will have the 21st century infrastructure that we deserve and to make sure that we focus on projects all the way across the state from the I-81 project in Syracuse, something that was a relic of days past and has divided communities since the days I was a young student at Syracuse University. All the way to Penn Station where I declared that commuters deserve a world-class experience when they visit as well as our visitors from around the world. So the Infrastructure Investment and Jobs Act will help New York create thousands of jobs across the state. 

That's what gets me so excited. This is an opportunity in this post-pandemic world to let people know, get the skills, go into apprenticeship programs, get trained. There's jobs, waiting for you to help rebuild this great state after we were knocked down so far. 

We're going to come back even stronger, even better than before. And I spent a lot of years in local government as well. So when people talk about the need for the infrastructure that you don't see underground, the water, the sewer connections, the storm water drainage programs that we can build better resilience in, so I never have to walk the streets of a place like East Elmhurst in Queens and see people's homes flooded and devastated because they just couldn't withstand the amount of water. This is what our opportunity is before us right now. And I'm looking forward to embrace this. We are at an airport. I want to thank again my local partners.

Money for airports is critically important. Yes, this is people's first impression when they come to a community. You could off the plane, you'll walk through, you take a look around. Is this a community that is proud of itself? Is this something that they want to send a message that this is a community that truly matters? And for too long, our upstate airports were overlooked. They didn't have the funding they required. So we will be receiving, our local airport here, $28.6 million for the Albany Airport. We'll modernize the runways we'll reduce noise and continue new investments right here in this terminal. I also look forward to not just working with President Biden, but his brand new recently named czar of infrastructure spending.

I'll be on speed dial with Mitch Landrieu, former mayor of New Orleans, someone we're going to develop a very close relationship, and to make sure that everyone understands how important this is. So I'm looking forward to going back. If you catch me on the end of the day, I hope to have a big bag of money in my hands - bringing it back for the State of New York, because this is an investment, not just on infrastructure. 

Infrastructure is a term that a lot of people can't quite get their arms around. This is an investment for New York State families. This means that parents do not have to worry about the safety of the water that comes out of the tap for their babies and children to drink. That when people are in their cars, and I know I have a personal experience at just about every pothole in the State of New York. This, this affects your image of a community. The curbs are run down and you're feeling that there's just too many potholes and it's affecting just your overall wellbeing. We can fix those potholes. This is about quality of life issues.

And also again, broadband. How important it is for our rural and urban areas. We talked about the great digital divide that was absolutely exacerbated by what we went through, and kids had to be learning from home and people couldn't apply for jobs because they don't have access to internet or even to apply for school scholarships.

I've seen this way too often, but I'm real excited to make one more announcement. We've done the numbers. And as a result of the money we'll be receiving from the president signing the bill today, I'll be witnessing this. We anticipate that there'll be no fare hikes for the MTA. So therefore, those of you who are commuters on the MTA and have been anxious about how much this is going to go up, especially in this era of inflation, when it just seems when you're just trying to get your head above water and come out from under a long dark period of the pandemic, and you might get a little bit more money in your paycheck, that the cost of living from gasoline to the cost of turkeys in another week and a half, this is really affecting people's ability to just put food on their table. And I'm really excited to say that we will not have to raise the fairs or have any service cuts. The service cuts that were planned for 2023 and 2024 are now off the table for MTA commuters.

So this is important. We'll look forward to working with our stakeholders. Keep investing, keep spending the money. And with that, I'll take a couple of questions, again thank my partners. There'll be willing to stay and take some questions afterward about very specifically how this money will be spent and Phil can join in to describe this, but I'm not going to keep the president waiting more than a couple minutes.

So thank you for joining us today. I'm really excited about this as Governor of the state of New York, who will preside over the comeback of New York State, the timing could not be better. And again, I'm so grateful for our partners in Washington, starting with president Joe Biden, for making this happened for millions of New Yorkers who remember this day is the day that we turned the corner.

We were able to start rebuilding and making up for decades of lost time when the money should have been there. And Joe Biden and our allies in the Senate and the Congress were able to make it happen for us. So thank you."

Manhattan Real Estate Fund Manager Charged With Securities Fraud Offenses

 

 Damian Williams, the United States Attorney for the Southern District of New York, and Philip R. Bartlett, the Inspector-in-Charge of the New York Division of the U.S. Postal Inspection Service (“USPIS”), announced today the unsealing of an indictment charging JOSHUA BURRELL with securities fraud, wire fraud, and aggravated identity theft in connection with his operation of a New York-based investment firm, Activated Capital, LLC.  Based on fraudulent representations, BURRELL sought to raise up to $75 million for Opportunity Zone Funds, which are vehicles for making real estate investments in economically distressed areas.  BURRELL touted Activated Capital’s Opportunity Zone Funds for delivering consistent and stable cash flows to investors through targeted eight percent annual distributions.  However, contrary to BURRELL’s claims, Activated Capital’s funds did not generate enough income on their real estate investments to make those payments, and BURRELL used investors’ money to help make up the shortfall.  BURRELL was arrested this morning in Richmond Heights, Missouri, and is expected to be presented tomorrow before United States Magistrate Judge John Bodenhausen in St. Louis federal court.

U.S. Attorney Damian Williams said: “As alleged, Joshua Burrell solicited investors through a series of lies.  While promising investors transparency, he doctored documents and falsely depicted his firm’s finances.  Now, Burrell faces prosecution for his alleged crimes.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “Mr. Burrell’s scheme is unfortunately not an uncommon scam in the investment community. Investors must always check and double check any firm or individual promising guaranteed positive returns to ensure they will not be taken for a ride. It is a good practice for all investors to trust their gut. If it doesn’t seem right, walk away.”

According to the allegations contained in the Indictment,[1] unsealed today in Manhattan federal court:

From in or about 2019 through in or about 2021, BURRELL sought to obtain tens of millions of dollars of investments for the Activated Tax Advantaged Opportunity Fund, LLC, and Activated Capital Opportunity Zone Fund II, LLC (collectively, the “Activated OZ Funds” or the “Funds”) based on fraudulent representations.  BURRELL represented, in substance, that the money invested in the Activated OZ Funds would be used to purchase real estate properties in Opportunity Zones and that investors would receive distribution payments out of the Funds’ net real estate investment income.  Contrary to those representations, BURRELL caused the Activated OZ Funds to pay putative distributions in amounts greater than the Funds’ net income.  From the inception of the Funds in 2019 through approximately February 2021, BURRELL used investor money to help pay distributions totaling approximately $470,000 in a manner akin to a Ponzi scheme.  BURRELL also falsely inflated Activate Capital’s assets under management in communications with prospective investors.

To attract additional investment capital for the Activated OZ Funds, BURRELL sought to establish a partnership with an investment bank headquartered in Manhattan (“Company-1”).  As part of Company-1’s diligence process, Company-1 asked BURRELL for “[b]acking to show current fund proceeds/acquisitions made.”  In response to these requests, BURRELL fabricated documents to make it appear that the Activated OZ Funds were more successful, owned more properties, and were in better financial condition than was actually the case.  For example, BURRELL sent Company-1 fake bank statements making it appear that, for the period July 2019 through October 2019, one of the Activated OZ Funds had ending monthly account balances of between approximately $2,094,450 and $2,463,100 when the real account statements for that period showed ending monthly balances of between only $116,369 and $154,399.

BURRELL fabricated additional documents to make it appear to Company-1 that an Activated Capital affiliate had purchased nine properties in Detroit, Michigan, when none of the transactions had taken place.  The fabricated documents contained identifying information for two individuals that BURRELL used without lawful authority.

JOSHUA BURRELL, 38, of New York, New York, faces a maximum sentence of 20 years in prison on each of the securities and wire fraud counts and a mandatory sentence of two years in prison on the aggravated identity theft count, which must run consecutively to any other sentence of imprisonment.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of a defendant would be determined by the judge.

Mr. Williams praised the investigative work of the U.S. Postal Inspection Service.  Mr. Williams also thanked the Securities & Exchange Commission, which brought a separate civil action against BURRELL.

The charges contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

[1] As the introductory phrase signifies, the entirety of the text of the Indictment and the descriptions of the Indictment constitute only allegations, and every fact described should be treated as an allegation.

Bronx Menorah Lightings Hosted By The Bronx Jewish Center

 

DEC RECOGNIZES ‘NEW YORK RECYCLES DAY’

 

Annual Recycles Day Raises Awareness of Recycling's Benefits

 New York State Department of Environmental Conservation (DEC) Commissioner Basil Seggos today recognized Nov. 15 as “New York Recycles Day,” celebrating the state’s leadership in promoting recycling and reducing waste. New York’s efforts complement America Recycles Day, a national initiative to raise awareness of the economic, environmental, and social benefits of recycling.

“New York continues to lead the nation in developing forward-thinking recycling strategies, programs, and policies focused on reducing solid waste and protecting the environment,” Commissioner Seggos said. “As recycling markets continue to fluctuate globally, DEC remains focused on streamlining the recycling process and helping communities reach recycling goals. On New York Recycles Day, I encourage all New Yorkers to commit to the core conservation principles of reduce, re-use, and recycle.”

Across the state, individuals, community groups, businesses, schools, and government agencies celebrate New York Recycles Day in a variety of ways, from encouraging others to reduce their waste by pledging to start an office or school recycling program, participating in the New York Recycles poster contest, hosting a reuse exchange, and improving awareness of local recycling requirements. These combined efforts help educate and inform New Yorkers about the advantages of recycling. Additional information about America Recycles Day events is available at the Keep America Beautiful America Recycles Day website (leaves DEC's website).

New York State has a long history of implementing some of the nation’s strongest recycling initiatives, including the Solid Waste Management Act of 1988, which requires the separation of recyclable or reusable materials from solid waste and has inspired local source-separation programs across the state that have captured and diverted millions of tons of recyclable materials from disposal resulting in the reduction of CO2 emissions, energy usage, and the use of natural resources.

Over the last three decades, New York State has invested millions in recycling grants through the State's Environmental Protection Fund to support municipal waste reduction and recycling programs with recycling infrastructure, equipment, collection vehicles, local education and outreach programs, and municipal recycling coordinator salaries. Targeted funding and focus over the last several years include food recovery, food waste collection and organics recycling, as well as electronic waste recycling. Other programs designed to encourage waste diversion in New York include stewardship programs like the electronic waste reuse and recycling act, the rechargeable battery recycling law, mercury thermostat collection act, and the drug take-back law, as well as the lead-acid battery recycling law and the bottle bill.

In 2020, New York adopted the nation's strongest statewide ban of expanded polystyrene, single-use foam food and beverage containers, and polystyrene loose fill packaging materials, commonly known as packing peanuts. The ban will become effective on Jan. 1, 2022. Foam packaging is one of the top contributors of environmental litter, causing negative impacts to wildlife, waterways, and other natural resources, as well as littering our communities and natural areas. It is lightweight, breaks apart easily, and does not readily biodegrade. When polystyrene foam ends up as litter in the environment, it can persist for a long time and may also become microplastic pollution. In addition, foam containers and loose fill packaging, such as packing peanuts, are not accepted in most recycling programs in New York State because the foam is difficult to recycle and has a low value. Proposed Part 353 Expanded Polystyrene Foam Container and Loose Fill Packaging Reduction regulations to implement the provisions of the ban are available for public comment until Nov. 22. ?

To help achieve the State's waste reduction goals and keep land and waterways clean, the New York State Bag Reduction Act took effect on March 1, 2020. This act prohibits the distribution of plastic carryout bags by retailers in New York State and is significantly reducing plastic bag waste. Get more consumer information on the plastic bag ban.

To decrease contamination in recyclables processed through single-stream facilities and increase the marketability of those recyclables, DEC encourages all New Yorkers to 'recycle right.' Each community has specific recycling rules and all New Yorkers should check with their municipality or waste hauler on the types of paper, metal, plastic and glass items that can be recycled. Recyclables have the best marketing value when they are clean and dry before being placed in the collection bin.

Tips to Recycle Right:

Keep recyclable items loose in the bin; do not use plastic bags (unless required by your municipality or waste hauler);

Do not recycle single-use cups and plates, condiment packages, coffee pods, stirrers, straws, paper napkins; plastic cutlery;

Return rechargeable batteries to retail recycling locations;

Compost at home or send yard trimmings and food scraps to a local or municipal composting program;

Donate dishware, mirrors, glassware and ceramics if in good condition;

Donate textiles --even if there no longer wearable or useable, as long as they are clean, they can be recycled;

Do not put any type of rope, hose, or twine into your recycling bin; and

Return needles to appropriate collection locations. Visit DEC's Household Sharps website for more information.

DEC urges the public to "keep it out when in doubt," as contamination in the recycling supply chain reduces the quality of recyclable materials. For more information contact your local recycling coordinator or visit the DEC website for information and resources on the "Recycle Right NY" campaign.

48 Days an Counting

 

Let me see now, I have only forty-eight days left in office while Governor Hochul and Attorney General James will be in office during the primary. They are handing out millions and millions of dollars of money all over the state, and what am I doing, fighting with my union members to get vaccinated.

I may have to think this over, even though I can give millions of dollars as mayor of New York City, but people still want to know where the 875 million dollars I put into THRIVE New York went, while putting my wife Charlene in charge of it. I guess I have enough money to retire if I wanted to. 

Hudson Valley Tequila Producer Pleads Guilty To Securities Fraud Scheme

 

 Damian Williams, the United States Attorney for the Southern District of New York, announced that JOSEPH CIMINO, the founder of a tequila brand based in the Hudson Valley, pled guilty today to securities and wire fraud charges before U.S. District Judge Vincent Briccetti.  CIMINO admitted as part of his plea that he fraudulently solicited investments for his company.

U.S. Attorney Damian Williams stated: “As he admitted in court today, Joseph Cimino lied about his tequila business’s finances to lure investors and then diverted investor funds in order to line his own pockets.  Now Cimino awaits sentencing for his fraudulent conduct.”

According to court documents and statements in court, from in or about 2014 to 2018, CIMINO raised approximately $935,000 from at least 25 investors based on fraudulent representations.  To attract investors, CIMINO falsely inflated the amount of capital that he had raised from prior investors, and falsely described as investors several individuals who, in fact, had not contributed any funds.  CIMINO also falsely inflated his company’s sales.  For example, in July 2017, CIMINO claimed in an investor report that year-to-date sales totaled 3,410 cases of tequila, when the actual sales totaled only 350 cases.  Similarly, in October 2017, CIMINO falsely claimed that year-to-date sales totaled 6,035 cases, which was approximately five times the actual total.  CIMINO further claimed in October 2017 that his company would receive reimbursement for 800 cases of tequila supposedly destroyed at a Puerto Rican warehouse as a result of Hurricane Maria.  In reality, no inventory was destroyed in the hurricane, and the company lacked insurance.

CIMINO also misused a substantial portion of investor money that was intended to fund the operations of his tequila business for personal expenses.  For example, from 2014 to 2018, CIMINO transferred approximately $472,000 of investor money to his personal bank account in order to subsidize his food, entertainment, and other living expenses.

CIMINO, 57, of Warwick, New York, pled guilty to one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  

CIMINO is scheduled to be sentenced by Judge Briccetti on February 18, 2022, at 2:30 p.m.

Mr. Williams praised the investigative work of the Federal Bureau of Investigation.  He also thanked the U.S. Securities and Exchange Commission for its assistance in the investigation.

Bahamian Man Sentenced To Five Years In Prison For More Than $1.2 Million Credit Card Fraud Scheme

 

 Damian Williams, the United States Attorney for the Southern District of New York, and Michael J. Driscoll, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced that KEVIN DION ROLLE, Jr. was sentenced by U.S. District Judge Alison J. Nathan to 60 months in prison for his role in a $1.2 million credit card scheme.  ROLLE, Jr. pled guilty before Judge Nathan on August 5, 2021, to one count of wire fraud.

According to the allegations in the Complaint, the Indictment, and other documents filed in federal court, as well as statements made in public court proceedings:

From October 2015 to September 2020, ROLLE participated in what is known by various credit card companies as a “bust-out” scheme whereby the credit card user applies for a credit card and incurs numerous charges with no intention of paying the balance.  As part of his multi-year fraud scheme, ROLLE submitted multiple credit card applications to American Express (“Amex”), which often included or were supported by documentation containing false identifying information.  Once ROLLE received a credit card, he used the credit card for a short period of time to purchase luxury items, including, among other things, Cartier jewelry and a Bentley. 

In total, ROLLE incurred $1,205,318.18 in Amex credit card charges that remain outstanding and collected an $209,500 in insurance proceeds based on a claim for jewelry pieces purchased with the fraudulent Amex credit cards. 

On the basis of multiple Court filings, ROLLE admitted in the terms of his plea agreement to obstructing justice.  ROLLE made numerous self-serving, false, and/or inconsistent statements to the Court and the United States District Court for the District of Puerto Rico where he was first arrested regarding his personal background, possession of foreign passports, and his purported ties to New York.  At the time of his arrest, ROLLE presented an Irish passport, which was later found to have been obtained with a fake United States passport.  Additionally, ROLLE purported to be the president of a particular college in The Bahamas—the existence of which was unable to be verified by the FBI.

In addition to the prison term, ROLLE, 27, of The Bahamas, was ordered to make restitution in the amount of $1,414,818.18 and forfeiture in the amount of $1,504,818.18.   

Mr. Williams thanked the FBI Foreign Influence Task Force for their outstanding work.