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Philadelphia Businessman Sentenced In Manhattan Federal Court In Connection With Multiple Investment Fraud Schemes

FOR IMMEDIATE RELEASE
Thursday, October 31, 2013

Hundreds of Thousands in Fraud Proceeds Spent on Red Carpet Gala at Philadelphia Ritz-Carlton

Preet Bharara, the United States Attorney for the Southern District of New York, announced that TYRONE L. GILLIAMS, JR., a Philadelphia businessman, was sentenced today in Manhattan federal court to 10 years in prison after having been found guilty at trial in February 2013 of engaging in securities and wire fraud in connection with two separate schemes. In the larger of the two schemes, GILLIAMS and co-defendant Everette L. Scott, Jr., solicited and misappropriated $5 million in investments in a bogus United States Treasury Strips investment program. In the other scheme, the defendants solicited and misappropriated a $450,000 investment in a Utah coal mine. In addition to buying luxury cars, jewelry, and other items, GILLIAMS spent hundreds of thousands of dollars of investor money organizing and promoting a multi-day festival in Philadelphia that headlined Sean “Diddy” Combs. GILLIAMS was sentenced today by U.S. District Judge Deborah A. Batts.

Manhattan U.S. Attorney Preet Bharara stated, “With the lengthy sentence imposed today, Tyrone Gilliams has been dealt a penalty appropriate to his unlawful scheme, which took advantage of well-meaning investors and used their money to satisfy his own appetite. Our office is committed to pursuing and prosecuting those who commit similar offenses that victimize innocent investors.”

According to the Indictment and the evidence presented at trial:

In 2009 and 2010, GILLIAMS was the owner of TL Gilliams, LLC, which purported to engage in transactions in commodities like oil and gold. Scott was an attorney at a small law firm in New Jersey and acted as TL Gilliams, LLC’s general counsel.

In the summer of 2010, GILLIAMS solicited $5 million from two investors for purposes of trading in U.S. Treasury Strips, which are a derivative of U.S. Treasury Bonds. GILLIAMS and Scott arranged for the investors to make their investments by wiring them into an attorney trust account maintained by Scott’s law firm. Upon receiving the money, Scott – at GILLIAMS’s direction – misappropriated more than $700,000 to satisfy expenses stemming from an unrelated and failed venture to buy a coal mine in Utah. Scott also claimed $50,000 of the investment money for himself as purported fees. At GILLIAMS’ direction, Scott transferred most of the remainder to bank and brokerage accounts that GILLIAMS controlled.

At most, GILLIAMS purchased $250,000 worth of Treasury Strips with the more than $4 million in investment money transferred by Scott. Over a span of less than six months, GILLIAMS spent more than $1.6 million on an unrelated gold investment; more than $200,000 to purchase a commercial warehouse in Denver; at least $100,000 to buy or lease luxury cars; at least $50,000 for construction work on his home; at least $100,000 on luxury hotel and travel expenses; and more than $500,000 promoting two events. The first event was a festival called “Joy to the World,” which involved an album release party with Jamie Foxx at the Vault nightclub in Philadelphia, and a red carpet, black tie gala at the Philadelphia Ritz-Carlton, headlined for a $120,000 fee by Sean “Diddy” Combs. The second event was a December 2010 comedy performance in Nassau, Bahamas, called the “Gatta Be Jokin’ Comedy Jam.”

GILLIAMS did not engage in any trading of Treasury Strips and, as a result, did not derive any profits. Nonetheless, during the period when he was spending investor money, GILLIAMS provided them with false reports of trades and profits, and made occasional, nominal payments that he falsely claimed represented profits from Treasury Strips trading. Other than these purported profit payments, which totaled approximately $100,000, neither investor received any of their combined $5 million investment back.

In a separate scheme, GILLIAMS and Scott arranged in late 2009 for an investor to transfer $450,000 to Scott’s attorney trust account, to be held in escrow until used in connection with a venture to purchase the assets of a bankrupt Utah coal mine. Once the money was in Scott’s account, he secretly misappropriated approximately $112,000 by claiming it as purported fees, and transferred the rest to GILLIAMS or other individuals and entities at GILLIAMS’ direction. Until August 2010, GILLIAMS and Scott falsely assured the victim that his $450,000 remained safely in escrow, long after Scott’s escrow account had been emptied. Although the victim repeatedly demanded the return of his funds, GILLIAMS and Scott pacified him by producing forged bank documents and a false attorney attestation letter written by Scott purporting to show that GILLIAMS was in possession of the millions of dollars necessary to purchase and operate the Utah coal mine. In August 2010, after an attorney for the victim threatened Scott with professional discipline for his failure to return the escrowed funds, GILLIAMS and Scott paid the victim $450,000 using funds they raised for investment in Treasury Strips.

*                      *                      *

In addition to the prison term, Judge Batts sentenced GILLIAMS, 46, of Philadelphia, Pennsylvania, to three years of supervised release. GILLIAMS was also ordered to make restitution in the amount of $5 million, to forfeit $5 million, and to pay a $300 special assessment fee.

In September 2013, Scott, 51, of Sewell, New Jersey, was sentenced to a 30 months in prison, to be followed by three years of supervised release.

Mr. Bharara praised the work of the Criminal Investigators of the United States Attorney’s Office and the Federal Bureau of Investigation, which jointly investigated this case. He also thanked the U.S. Securities and Exchange Commission.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive,

coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20

federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition

of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases

against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For

more information on the task force, please visit www.StopFraud.gov.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Michael A. Levy and David B. Massey are in charge of the prosecution.

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