PENSION ABUSE INITIATIVE HIGHLIGHTS

Accomplishments of the Pension Abuse Initiative, in the past two weeks, include:

BOSTON

Roofers Locals 33 and 248 Pension Plans

•  Arthur Grodd, the owner of two Massachusetts roofing companies, based in the Boston and Chicopee areas, was charged today with embezzling from the pension and retirement plans of Roofers Locals 33 and 248, with attempting to bribe a union official not to enforce his obligations to the pension plans, and with conspiracies in connection with the defrauding of the pension plans. It is estimated that the pension and retirement plans lost $1 million. Also charged today were three of the roofing subcontractors-Francis X. Sartain, John S. Ponte, Timothy J. Daly--who allegedly conspired with Grodd to defraud the pension plans., U.S. v. Arthur Grodd; U.S. v. Francis X. Sartain; U.S. v. John S. Ponte; and U.S. v. Timothy J. Daly.

Alonzo Reed 401 (k) Plan

• John E. Flynn Jr., the president and owner of Alonzo B. Reed Inc.--a Boston based engineering company, was charged today with allegedly embezzling $6,1 00 from his company's 401 (k) pension plan by not forwarding employee salary withholdings to the plan. U.S. v. Flynn

H.H. Aerospace Corporation Defined Benefit Plan

•  Alfred C.W. Daniels, the owner of H.H. Aerospace Corporation--a former government contractor located in Lexington and Bedford, Massachusetts, was indicted on May 14, for embezzling more than $240,000 from the company's pension plan. Daniels is also charged with income tax evasion for failing to report his personal use of the embezzled funds as income. The company has since gone out of business and Daniels has filed for bankruptcy. There were 170 participants in the plan, which was underfunded more than $1.2 million when it was terminated and placed under trusteeship by the Pension Benefit Guaranty Corporation. U.S. v. Daniels

ATLANTA

Center for Financial Planning

• The Center for Financial Planning Inc.--an investment advisor registered with the SEC, and two of its officers, Homer W. Forster and Donna S. Lynch, were indicted on May 13, for embezzling more than $1.6 million from client accounts and employee benefit plans. U.S. v. Forster

CALIFORNIA (Fresno)

Kovac Equipment Co. Profit Sharing Plan

• Michael Kovaco the owner of a now defunct Fresno farm equipment company, Kovac Equipment Company, was charged on May 14, with the theft of $98,000 from his company's 401 (k) plan. U.S. v. Kovac

SAN FRANCISCO

M.P. Rosen Inc.

• Mike P. Rosen, a San Francisco real estate developer, was charged on May 1, in connection with a $6.5 million real estate investment scheme which defrauded, among others, various pension plans. The information also alleged a $250,000 embezzlement from a money purchase pension plan. U.S. v. Rosen, is being handled by the U.S. Attorneys office for the Northern District of California with the assistance of the Investigative Task Force--IRS, FBI, Department of Labor's DLR, California Department of Corporations, Rohnert Park Department of Public Safety, and the County D.A.'s office.

CINCINNATI

Blue Chig Healthcare Inc. 401 (k) Plan

• On April 30, a federal grand jury convicted Thomas L. Sharpe, the president of Blue Chip Healthcare--a home healthcare company based in Boca Raton, Florida--for embezzling nearly $7,000 in employee contributions to the company's 401 (k) plan. The case, U.S. v. Sharpe, was handled by the U.S. Attorneys office for the Southern District of Ohio with the assistance of the Department of Labor's PWBA.

DENVER

Knapp Financial Services

• Lawrence Knapp, the owner of a registered broker/dealer--Knapp Financial Services--was charged on May 13, with embezzling $30,269 from the Personal Assistance Services of Colorado Inc. 401 (k) pension plan. Knapp, who provided financial services to the pension plan, is alleged to have embezzled both employer and employee contributions to the plan which he failed to forward to the designated investment. The case, U.S. v. Knapp is being handled by the U.S. Attorneys office for the District of Colorado with the assistance of the FBI and the Department of Labor's PWBA.

DETROIT

Peet Packing Company Pension Plan

• Former Detroit Tigers pitcher, Denny McLain, was sentenced on May 7, to 97 months imprisonment for embezzling $3.06 million from the Peet Packing Company pension plan. McLain co-owned the Peet Packing Company with his co-defendant, Roger Smiegel. Peet Packing has since gone out of business. Smiegel was sentenced to 84 months imprisonment. Both were ordered to pay restitution of $2.5 million. The cases, U.S. v. McLain, et al., were handled by the U.S. Attorneys office for the Eastern District of Michigan with the assistance of the Department of Labor's PWBA and the FBI. Press

MINNEAPOLIS

Woodmaster Inc. 401 (k) Plan

• John M. Lambert, the, president and sole owner of an Eagan, Minnesota based cabinet manufacturing company, Woodmasters Inc., was indicted by a federal grand jury on May 7, for embezzling more than $82,000 from his employees' 401 (k) pension plan. The case, U.S. v. Lambert, is being handled by the U.S. Attorneys office for the District of Minnesota with the assistance of the Department of Labor's PWBA.

JACKSON, MISSISSIPPI

Professional Staffing Service Money Purchase Plan

• John Francis Schmelzer, the owner and pension fund trustee of Professional Staffing Service, a Jackson, Mississippi-based employment service, was charged on May 14 with embezzling nearly $95,000 from the pension fund of the company. The case, U.S. v. Schmelzer, is being handled by the U.S. Attorneys office for the Southern District of Mississippi with the assistance of the Department of Labor's PWBA.

MISSOURI

Double Eagle Construction Company Pension Plan

• Steve Graham, former owner of Double Eagle Construction Inc. of Grain Valley, Missouri, pleaded guilty on May 12, to a misdemeanor charge related to his embezzlement of $35,000 from his company sponsored 401 (k) pension plan. Graham has already reimbursed the pension plan for its losses, plus interest. The case, U.S. v. Graham, is being handled by the U.S. Attorneys office for the Western District of Missouri with the assistance of the Department of Labor's PWBA.

NEW ORLEANS

Teamsters Local 875 Pension Plan

• A Louisiana securities dealer, Glenn P. Pelligren, pleaded guilty on May 9, to embezzling $400,000 from the New York-based International Brotherhood of Teamsters Local 875 Pension Plan. Pelligren's embezzlement charge is related to another case brought in New York. In that case, federal prosecutors successfully prosecuted Sanford E. Pollack, an attorney for the Local 875 Pension Plan, for his participation in a conspiracy to receive kickbacks for his influence in investing plan monies. Pollack pleaded guilty to inducing the pension fund to invest $9.3 million in overseas debentures which resulted in a $9.15 million loss to the pension fund. Pollack was sentenced in April to 71 months imprisonment for this and other offenses and ordered to pay $9,1 5 million in restitution to the pension fund. The case, U.S. v. Pel , is being handled by the U.S. Attorneys office for the Eastern District of Louisiana with the assistance of the FBI and Department of Labor's DLR.

NEW YORK

Somerstein Caterers of Lawrence Inc., Pension Plan

• Convictions were obtained on May 3, against catering business owners, Stuart Somerstein and his wife Marianna, for conspiring to defraud the benefit plans of the Hotel and Restaurant Employees Local 100 that represented their employees. Stuart Somerstein was also found guilty of embezzling $1 55,000 from the private pension plan of Somerstein caterers. The case, U.S. v. Somerstein, was handled by the U.S. Attorneys office for the Eastern District of New York with investigation by the Department of Labor's PWBA and Division of Labor Racketeering, the Postal Inspection Service, and Nassau County New York police and fire authorities.

Teamsters Local 707 Pension Plan

• Five individuals, with alleged Colombo Family connections, pleaded guilty in connection with a scheme to embezzle $500,000 from the Teamsters Local 707 pension fund. John Orena was sentenced on May 9, 1997 to 16 months imprisonment and ordered to make restitution of $500,000 to the pension fund. Thomas Petrizzo, was sentenced on January 8, 1997, to 33 months imprisonment, $60,000 in fines and $500,000 restitution. John McNeil, the former president of Local 707, was sentenced to 12 months incarceration and $500,000 restitution. Alan D'Alessio and Kenneth Paszkewicz are awaiting sentence. The case, U.S. v. Orena, et al., was prosecuted by the U.S. Attorney's office for the Eastern District of New York with the assistance of the FBI and the Department of Labor's PWBA.

ROCHESTER, NEW YORK

Fasino Power Brakes, Inc., 401 (k) Plan

• Linda Fasino, owner of Fasino's Power Brake Inc. of Rochester, pleaded guilty on May 7, to embezzling $32,000 from the company's 401(k) pension plan. The case, U.S. v. Fasino, is being handled by the U.S. Attorneys office for the Western District of New York with the assistance of the FBI and the Department of Labor's PWBA.

RALEIGH, NORTH CAROLINA

R&E Electronics Inc., 401(k) Plan

• Edward Wayne Mayorga, President and owner of R&E Electronics Inc., located in Wilmington, North Carolina, and his wife, Kelly B. Mayorga, were indicted on May 1, for embezzling $31,105 from the company's medical plan. Edward Mayorga also was charged with embezzling $8,439.86 from the company's pension. The case, U.S. v. Mayoroga, et al., is being handled by the U.S. Attorneys office for the Eastern District of North Carolina with the assistance of the FBI and the Department of Labor's PWBA.

PHILADELPHIA

JLC Construction Pension Plan

• Jeffrey E. Frey, the owner of Columbia, Pennsylvania-based JLC Construction Co. Inc., was indicted on May 14, for allegedly stealing $53,000 from the company sponsored pension plan. The case, U.S. v. Frey, is being handled by the U.S. Attorneys office for the Eastern District of Pennsylvania with the assistance of the Department of Labor's PWBA.

Highlights of the Pension Abuse Initiative, since October 1996, include:

MANHATTAN

Towers Financial Corporation

• Steven Hoffenberg was the former chairman, president and chief executive officer of Towers Financial Corporation. On March 7, 1997, he was sentenced to 20 years in prison, fined $1 million and ordered to pay $462 million in restitution for defrauding more than 3,000 investors in connection with the sale of Towers notes and bonds. Hoffenberg deliberately falsified Towers' financial statements to show substantially higher assets, revenues and net income to fraudulently induce potential investors to buy Towers' , securities. He used the millions reaped by the sale of the Towers' securities to repay earlier investors and enrich himself and others. As a result of this scheme, the estimated losses to pension plans invested in the Towers' securities was $56 million. An undetermined amount of money was also lost from individual retirement accounts (IRAs) which had been invested in Towers. The case, U.S. v. Hoffenberg, was handled by the U.S. Attorney's office for the Southern District of New York with the assistance of the Securities and Exchange Commission, the FBI and the IRS.

George B. Buck Consulting Actuaries Inc., Retirement Fund

• A former payroll manager at George B. Buck Consulting Actuaries Inc., was sentenced to 52 weekends in jail, a term of five years probation, and ordered to make restitution of $529,000 for stealing from the retirement plan of Buck Consulting. Donna Moreno, who was sentenced January 28, 1997, prepared more than 225 fraudulent pension checks between October 1989 and November 1994. The plan covers more than 1,250 workers and has assets of $83 million. The case U.S. v. Moreno, was handled by the U.S. Attorney's office for the Southern District of New York with the assistance of Department of Labor's PWBA.

BROOKLYN, NEW YORK

Greater Blouse, Skirt and Undergarment Association Pension Plan

• Joseph lannaci, an alleged member of the La Cosa Nostra, Colombo Organized Crime Family, was indicted by federal grand jury on October 29, 1996 on charges of extortion. The indictment alleges that lannaci received $72,621 from the Greater Blouse, Skirt and Undergarment Association Pension Plan but had not done any work for the Association. The case, U.S. v. Iannaci, is being handled by the U.S. Attorney's Office for the Eastern District of New York with the assistance of the FBI and the Department of Labor's DLR.

CONNECTICUT

Roofers Local Union 12 Pension Plan

• August Mezzetta was a pension fund investment manager to the Roofers Local Union 12 pension plan based in New Haven and Bridgeport, Connecticut. On December 5, 1996, he was sentenced to 87 months imprisonment and was ordered to pay $2.8 million in restitution following his conviction after trial on embezzlement, theft and conspiracy charges. G.B. Resources, and Gotham Associates Limited Partnership were also convicted. Co-defendant Barbara Nolan pleaded guilty prior to trial and was sentenced to 37 months. Her sentence was subsequently reduced to 16 months. The case, U.S. v. Mezzetta, et al., is being handled by the U.S. Attorney's Office for the District of Connecticut with the assistance of the Department of Labor's DLR and the FBI.

Construction Industry Benefits Group

• Kevin Casey, owner of Hartford based Construction Industry Benefits Group -- which establishes pension and employee welfare benefit plans, pleaded guilty on March 12, 1997 to mail fraud and submitting false account statements in connection with a scheme to defraud his clients of more than $210,000. Nine company plans with $590,906 in assets covering 219 workers are affected. The case, U.S. v. Casey, is being conducted by the U.S. Attorney's Office for the District of Connecticut with the assistance of the Department of Labor's PWBA and the FBI.

NEW JERSEY

Compton Press Employee Profit Sharing Retirement Plan

• Leonard Pelullo, owner of Compton Press located in Morris Plains, New Jersey, was convicted on November 9, 1996, of embezzling $4 million from the Compton Press Employee Profit Sharing Plan. Sentencing is pending The case, U.S. v. Pelullo, is being handled by the U.S. Attorney's Office for the District of New Jersey with the assistance of the Department of Labor's DLR and PWBA and the FBI.

Micro-Products Engineering Pension Plan

• William Helbling, the former president of Newark based Micro-Products Engineering, was indicted for allegedly looting more than $550,000 of pension plan monies. Helbling allegedly converted the company's Profit Sharing Plan to an Employee Stock Ownership Plan which allowed him to substitute worthless company stock for retirement monies taken from the Profit Sharing Plan. In March 1997, two attorneys assisting in the cover-up, Gerald Susman of Philadelphia, and Stephen Sokolic of Langhorne, Pennsylvania, pleaded guilty. Their sentencing is pending. A trial date for Helbling has not been set. The cases, U.S. v. Helbling and U.S. v. Susman and Sokolic, are being prosecuted by the U,S. Attorney's Office for the District of New Jersey with the assistance of the FBI, the Department of Labor's PWBA and the IRS.

PHILADELPHIA

Dr. Lawrence Manin Profit Sharing Plan

• Dr. Lawrence Manin was indicted by a federal grand jury on April 8, 1997 for stealing more than $25,000 from his medical practice's employee profit sharing plan. The case, U.S. v. Lawrence Manin, is being prosecuted by the U.S. Attorney's Office in the Eastern District of Pennsylvania with the assistance of the Department of Labor's PWBA.

INDIANAPOLIS

Diversified Planning Associates

• The owner of Indianapolis based Diversified Planning Associates, Carl Winkler, who was also a district manager for New York Based Guardian Life Insurance Company of America, was charged, on February 28, 1997, with pension embezzlement, mail fraud, and filing false tax returns. He is accused of embezzling more than $500,000 of plan assets, under reporting his taxable income by $260,000, and his income tax by $80,000. The plans had combined assets of $1.1 million and covered 53 participants. The case, U.S. v. Winkler, is being prosecuted by the U.S. Attorney's Office for the Southern District of Indiana with the assistance to the FBI, the Department of Labor's PWBA and the IRS.

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