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A former financial advisor with a lengthy disciplinary history was sentenced today to 168 months in federal prison for a real estate investment con that caused his clients — many of them elderly people who had invested their retirement savings — to lose more than $12 million, according to a DOJ press release. Paul Ricky Mata was sentenced by U.S. District Judge R. Gary Klausner, who also ordered him to pay $12,560,385 in restitution to his victims. Mata was remanded into federal custody at the hearing’s conclusion. On July 19, Mata pleaded guilty to 17 felonies: 11 counts of mail fraud, three counts of wire fraud, one count of making a false statement in a bankruptcy proceeding, one count of concealing assets in bankruptcy, and one count of making a false oath and accounts in bankruptcy. From August 2008 to September 2015, Mata caused victims to invest in several of his businesses, including Secured Capital, Logos Real Estate, and other ventures. Mata failed to disclose his disciplinary history to his victims, including disciplinary actions taken against him by the states of Nevada and California, a one-year suspension and $10,000 fine imposed by the Financial Industry Regulatory Authority (FINRA), and a three-year suspension by the Certified Financial Planner (CFP) Board stemming from various forms of misconduct, including omitting material facts necessary to make other statements not misleading. Mata induced his victims to invest their money in Secured Capital, a real estate investment program that purportedly invested in “government-backed tax liens,” “asset-backed deed certificates,” and distressed commercial and residential properties. Mata guaranteed investors that Secured Capital’s investment return generated annual rates of 5 percent to 10 percent, when in fact, investments in Secured Capital had significant loss risks and did not make a profit from 2011 onward.

Ronya Phillips of Goshen, Ind., was sentenced by U.S. District Court Judge Damon R. Leichty upon her plea of guilty to two counts of suborning perjury, according to a press release from the office of U.S. Attorney Clifford D. Johnson. Phillips was sentenced to serve 18 months home detention. According to documents in this case, Phillips was formerly a bankruptcy petition preparer in the Northern District of Indiana. In that capacity, she prepared bankruptcy petitions and other documents for debtors who filed cases in the U.S. Bankruptcy Court for the Northern District of Indiana. As part of her guilty plea, Phillips admitted that she willfully suborned and procured individuals to commit perjury by submitting materially false declarations in federal bankruptcy proceedings. Certain debtors and clients of Phillips reported that she had induced them to falsely state on their bankruptcy documents that they had paid her half of the amount they had actually paid her for her services. Phillips also persuaded her clients to testify falsely under oath as to how much they had paid her when questioned by the bankruptcy trustee. Finally, Phillips herself submitted false sworn statements in disclosures that only disclosed half of the amount of money she actually had received from clients.

A federal judge convicted a Reston businessman yesterday on a series of fraud charges relating to a bankruptcy case in which he discharged over $6 million in personal debt, according to a DOJ press release. According to court records and evidence presented at trial, on July 13, 2017, the President and CEO of Metropolitan Aviation, Alan Russell Cook, Sr, filed for chapter 7 bankruptcy in his individual capacity. In anticipation of the filing, Cook transferred over $350,000 to his former girlfriend. He directed her to open accounts in her name and in the name of a fake company, Metro Aire, to receive his personal property and revenue from Metropolitan Aviation. In connection with his bankruptcy case, Cook failed to disclose several bank accounts and over $50,000 in casino cash-outs. In addition, at the meeting of his creditors, Cook made several false statements under oath, including that his company was shut down for four to five months and generated no money in 2017. In actuality, Metropolitan Aviation generated revenue every month of 2017, totaling more than $1 million. Cook further failed to disclose making payments for his girlfriend’s luxury vehicle and his access to the fraudulent entity’s bank account, including writing checks for personal expenses, withdrawing cash, and paying for hotel stays. Cook faces a maximum of 20 years in prison when he is sentenced on April 22, 2022.

The U.S. Federal Trade Commission has reached a settlement with Vyera Pharmaceuticals over allegations it sought to block generic versions of its life-saving drug Daraprim, but is preparing for a Dec. 14 trial against Martin Shkreli, who once led the company, Reuters reported. Tuesday's settlement, worth up to $40 million, addressed claims in a lawsuit by the FTC and seven U.S. states that Shkreli and co-defendant Kevin Mulleady launched Vyera with a goal of buying an important drug, raising the price, and using illegal anticompetitive strategies to thwart cheaper generics. The January 2020 lawsuit said Vyera, then called Turing Pharmaceuticals, protected its dominance of Daraprim by ensuring that generic drugmakers could not obtain needed samples for a cheaper version and kept potential rivals from buying a key ingredient. Shkreli gained notoriety when he boosted the price of Daraprim, which is used to treat toxoplasmosis, overnight to $750 from $17.50 per tablet. Toxoplasmosis is a common parasitic infection that can cause serious problems in people with weakened immune systems. The settlement calls for Vyera to pay $10 million upfront plus up to $30 million over 10 years, and stop the anticompetitive practices it used to protect Daraprim. Mulleady, who like Shkreli was also a Vyera chief executive, agreed to a seven-year ban on most roles in the pharmaceutical industry.

A top U.S. banking regulator is cautioning firms to ensure they have robust policies to protect themselves from cyberattacks, saying it is seeing an uptick in ransomware attacks, it said in a report issued yesterday, Reuters reported. The Office of the Comptroller of the Currency said banks must have in place "robust" systems to identify threats and vulnerabilities in their technology, and should back up key systems and records in isolation to guard against hackers looking to disrupt systems for a payout. In its semiannual risk report, the OCC also cautioned banks to be vigilant about third-party relationships, noting bad actors are increasingly exploiting outside vulnerabilities to conduct "malicious cyber activities." The OCC also said credit risk remains moderate for banks, as loan portfolios have weathered the pandemic due to good risk management by banks and government relief programs. However, the OCC noted that banks face some challenges helping clients navigate the conclusion of some of those programs, like the Paycheck Protection Program, leaving banks with heightened compliance responsibilities. On climate, the OCC said it was continuing to work to build a new climate risk framework for nationals banks it supervises, which it plans to first roll out with the nation's largest, most complex firms.

A rushed emergency aid program for small companies devastated by the pandemic improperly sent nearly $3.7 billion to recipients prohibited from receiving federal funds, according to a government audit released yesterday, the New York Times reported. The finding adds to a mountain of evidence chronicling what the Small Business Administration’s inspector general, Hannibal Ware, called an “unprecedented amount of fraud” in the agency’s pandemic relief efforts. In October, Ware’s office chastised the agency for improperly doling out billions in relief money to self-employed people who made “flawed or illogical” claims of having additional workers on their payroll. Its Economic Injury Disaster Loan program distributed more than $210 billion last year in loans and grants. The program was organized in a hurry by the Trump administration as millions of businesses temporarily shut down because of the coronavirus and was designed to quickly send out money to help companies keep up on their bills. But the agency failed to do a legally required check of applicants’ identifying details against the Treasury Department’s Do Not Pay system, according to Tuesday’s report from Ware’s office. The Do Not Pay system was set up in 2011 to reduce improper payments to people who are dead, convicted of tax fraud or barred from receiving federal contracts, among other red flags. Ware found 117,135 applicants who got grants and 75,180 recipients who got loans despite matches in the system indicating a “high likelihood” that the payments were improper. Isabella Casillas Guzman, who became the agency’s administrator in March, said at a House hearing this month that she had heightened the agency’s fraud controls over its COVID-19 relief programs. “The guardrails did not exist” last year, under the prior administration, she said. In a response included in Ware’s report, the Small Business Administration said that on April 6, 2021 — more than a year after the disaster loan program began — it started checking Do Not Pay records before sending out funds. The agency also said that it would review the loans and grants previously made to recipients who were flagged as ineligible.

For the first time in her criminal-fraud trial, Elizabeth Holmes on Tuesday took aim at the most serious allegations made against her by prosecutors, offering a narrative of herself as a well-intentioned if inexperienced entrepreneur who had some success in her effort to transform healthcare, the Wall Street Journal reported. Holmes’s full day of testimony was her longest yet in her defense against 11 charges of fraud and conspiracy relating to her time running defunct startup Theranos Inc., which collapsed in 2018. It followed 11 weeks of testimony supporting the prosecution’s case that Ms. Holmes ran into trouble trying to build her blood-testing company and knowingly misled investors and patients about her technology’s capabilities. Her testimony on Tuesday, her third day on the witness stand, sought to pick apart what lawyers following the trial have deemed the prosecution’s strongest evidence. Holmes told the jury that she added the logos of major pharmaceutical companies to Theranos documents with honest intentions; that she didn’t try to avert regulatory oversight but was transparent with the Food and Drug Administration; and that Theranos turned to using commercial blood analyzers to deal with higher blood-sample volumes caused by a retail partner’s decision, not because it was trying to mislead anyone about what its own devices could do. (Subscription required.)

The Justice Department said yesterday that Bruce Matson, the former chief legal officer at now-defunct law firm LeClairRyan, has been sentenced to 44 months in prison after pleading guilty in July to obstructing a federal probe, Reuters reported. U.S. District Judge John Gibney of the Eastern District of Virginia in Richmond also ordered Matson to pay a $10,000 fine, according to the DOJ. Matson was accused of lying to a DOJ watchdog that was probing his alleged misappropriation of funds from title insurer LandAmerica Financial Group's bankruptcy. Prosecutors had requested 46 months in prison and a $250,000 fine, while Matson's attorneys requested a 37-month sentence. LandAmerica, one of the largest title insurance groups in the U.S., filed for bankruptcy in the Eastern District of Virginia in 2008. Matson, was assigned the role of liquidation trustee for the company's remaining assets while at LeClairRyan. He was found to have embezzled approximately $800,000 from the trust between 2015 and 2018, and misappropriated a total of $4 million, according to court papers. According to prosecutors, in 2019 Matson lied to the U.S. Trustee probing the depleted trust funds, telling them he moved the funds because of high bank fees and tax identification issues. Matson agreed to disbarment in November 2020.