Principal Defendants in Massive Cybercrime Conspiracy to Defraud Telecommunications Companies are Sentenced to Lengthy Federal Prison Terms and Ordered to Pay Millions in Restitution
Defendants Received 40, 30 and 9-Year Sentences
DALLAS — Three key defendants who were convicted for their roles in what Chief U.S. District Judge Sidney A. Fitzwater called “a massive, complicated, multi-year scheme to defraud a large number of victims,” were sentenced today to lengthy federal prison terms and ordered to pay millions of dollars in restitution, announced U.S. Attorney Sarah R. Saldaña of the Northern District of Texas. Two of those defendants, Nathan Todd Shafer, 32, of Irving, Texas, and Matthew Norman Simpson, 26, of Red Oak, Texas, were convicted in December 2011 following a 10-week trial before Judge Fitzwater.
Simpson, who has been in custody since his arrest, was sentenced to 40 years in federal prison with restitution of approximately $17.6 million and a forfeiture money judgment of the same amount. In addition, the Court also forfeited specific assets such as precious metal certificates worth approximately $3 million and additional cash and computer equipment worth approximately $2 million more. He was convicted at trial on one count of conspiracy to commit wire fraud and mail fraud, one count of fraud and related activity in connection with electronic mail, one count of obstruction through destruction of evidence and one count of false registration of a domain name. Additionally, shortly after Simpson’s conviction at trial, the Court entered an order finding that Simpson committed perjury during his testimony.
At today’s sentencing hearing, Judge Fitzwater noted that Simpson had “used his intelligence and talents to engage in deleterious criminal conduct,” and added that Simpson “never accepted responsibility for his actions or expressed remorse.” In addition, the Court stated it believed that Simpson was still a threat and would continue his criminal activity, having no respect for the law.
Shafer, who was convicted at trial on one count of conspiracy to commit wire fraud and mail fraud, was sentenced to nine years in federal prison with restitution in the amount of approximately $3.3 million as well as a forfeiture money judgment of the same amount. He was ordered to surrender to the Bureau of Prisons on July 3, 2012.
Michael Blaine Faulkner, of Southlake, Texas, was sentenced to 30 years in federal prison plus approximately $18.2 million restitution and a forfeiture money judgment of the same amount and a host of computer equipment. Faulkner pleaded guilty in October 2011 to one count of conspiracy to commit wire and mail fraud and one count of obstruction through hiding assets. His wife, Chasity Lynn Faulkner, who also pleaded guilty in October 2011 to one count of conspiracy to commit electronic mail, postal mail and wire fraud, is scheduled to be sentenced on June 1, 2012.
According to documents filed in the case Michael and Chasity Faulkner fled to Mexico in 2009 after they learned of the FBI’s investigation into their activities. They lived in Mexico, under assumed aliases, until January 2010 when they were arrested and returned to the U.S. to face charges. Michael Faulkner has been in custody since that time; Chasity Faulkner has been on bond. (Note: Chasity is the correct spelling.)
There were a total of 19 defendants originally charged in this massive telecommunications fraud conspiracy. Two defendants remain fugitives and are believed to be living outside of the U.S. Two defendants were acquitted at trial. Of the remaining defendants, all have pleaded guilty with five having been sentenced and the remainder to be sentenced on various dates throughout the summer.
In March and April 2009, the FBI executed numerous search and seizure warrants at the Faulkner’s residence in Southlake, at Faulkner’s business known as Crydon located at 1950 Stemmons Freeway in Dallas, at Matthew Simpson’s residence, at a business operated by Simpson known as Core IP located at 2323 Bryant Street in Dallas and at other related businesses.
During trial, the government presented evidence that Simpson, Shafer and their coconspirators conspired to defraud various telecommunications companies including AT&T, Verizon, XO Communications, Excel Communications, Waymark Communications, Bandwidth.com, and CommPartners; the lessors of properties at 2020 Live Oak, 2323 Bryan Street and 1950 Stemmons Freeway, in Dallas; leasing companies and creditors, including Wells Fargo and AT&T Capital Services; credit reporting agencies; and various other service providers, such as power companies, insurance companies, air-conditioning companies, web site developers and others for goods and services amounting to more than $20 million.
The conspirators also made false representations to obtain goods, such as computers and telecommunications equipment and infrastructure, to include racks to hold computer equipment, generators to provide power for the equipment, and office space to install the equipment, as well as services related to the operation and use of computers and telecommunications. The conspirators created, purchased and used shell companies to hide the true identity of the owners or operators of the companies, or the relationships between the companies. The conspirators paid persons including homeless persons for the use of their identities to “act” as the officers, directors or managers of the shell companies. They also used P.O. Boxes, commercial remailer services, shell offices, apartments or other physical locations to hide owners’ or operators’ identities or the relationships between the companies. They assumed other identities to hide true ownership of the shell companies and made materially false representations to their victims, by mail, fax, telephone, email or other communications, to obtain goods and services from them.
The case was investigated by the FBI, with assistance provided by the Texas Workforce Commission, the Texas Secretary of State, the Dallas Police Department, the Southlake Police Department, Dallas Sheriff’s Office, Ellis County Sheriff’s Office, the Duncanville Police Department, the Longview Police Department, the New Orleans Police Department, the American Registry for Internet Numbers (ARIN), the Federal Trade Commission, the Federal Communication Commission and various state public utility commissions.
Assistants U.S. Attorneys C.S. Heath and Aisha Saleem were in charge of the prosecution. The forfeiture was handled by Assistant U.S. Attorney Walt Junker.
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