Board Member Sentenced To 10 Years’ Imprisonment For His Role In $10 Million Advance Fee And Gold Mine Investment Schemes
Advance Fee Scheme Targeted Developers In Areas Devastated By Hurricane Katrina
Earlier today, Brad Russell, a member of the Board of Harbor Funding Group, Inc. (HFGI), was sentenced in federal court in Brooklyn, New York to 10 years’ imprisonment. In March 2014, following a six-week jury trial, Russell was convicted of all counts of the indictment for defrauding: (i) developers and their clients in areas devastated by Hurricane Katrina of more than $9 million through an advance fee scheme; and (ii) investors of almost $1 million through an Alaskan gold mine investment scheme. As part of the sentence, Russell was also sentenced to 3 years’ supervised release and ordered to pay a total of $10,707,894.59 in forfeiture and restitution to the victims of the two schemes. Co-defendant Kristofor Lange, the Vice President of Black Sand Mine, Inc. (BSMI), who was also convicted following trial, was sentenced earlier today to 5 years’ probation and ordered to pay $780,000 in forfeiture and restitution for his role in the Alaskan gold mine investment scheme.1
The sentences were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Philip R. Bartlett, Inspector in Charge, New York Division, U.S. Postal Inspection Service (USPIS), and Frank Montoya, Jr., Special Agent in Charge, Federal Bureau of Investigation, Seattle Field Office (FBI).
“After the devastation wrought by Hurricane Katrina, many individuals looked to help the storm-tossed area recover. Russell and his co-conspirators looked to line their own pockets, pretending to be able to finance redevelopment projects but in reality fleecing unsuspecting developers and investors of millions. After Russell and his co-conspirators spent the money they stole from their victims, they embarked on a gold mine scheme that too was built and sold on lies and deceit. Those who seek to take advantage of tragedies to line their own pockets are on notice that they will be brought to justice and held accountable for their crimes,” stated United States Attorney Lynch. Ms. Lynch thanked the USPIS and the FBI for their hard work and dedication through the course of the five-year investigation and prosecution. Ms. Lynch also extended her appreciation to the United States Attorney’s Office for the Western District of Washington for their assistance in the case.
Russell, together with others at HFGI, executed an advance fee scheme by targeting regions affected by Hurricane Katrina. They told land developers and their clients that HFGI had lenders and funds available to provide financing for their real estate projects, but as a condition for financing, HFGI required its clients to place ten percent of the loan amount in an attorney escrow account. Contrary to their representations, HFGI did not have lenders or funds available to finance the loans and stole the deposit money placed in escrow. Russell was the loan processor at HFGI and prepared and maintained the loan documents and escrow agreements. Through this scheme, Russell and his co-conspirators stole more than $9 million from approximately 300 individuals.
At trial, the government also proved that Russell and Lange, together with others, executed an investment scheme where they induced investors to invest in BSMI through lies and deceit. BSMI claimed that it was going to mine gold and other precious metals on Sitkinak Island in Alaska. Through the use of in-person presentations, cold calls and “webinars,” Russell, Lange, and their co-conspirators, convinced investors to invest in BSMI by lying to them about the credentials of BSMI’s officers and directors, BSMI’s assets and liabilities, the intended use of investor funds, and by concealing their prior involvement in HFGI.
The sentences were imposed by United States District Judge Dora L. Irizarry.
The government’s case was prosecuted by Assistant United States Attorneys Winston M. Paes, Alixandra E. Smith and Melanie Hendry.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force which was created in November 2009 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 is 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 more than 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, visit www.stopfraud.gov.
BRAD A. RUSSELL
Residence: Gig Harbor, Washington
KRISTOFOR J. LANGE
Residence: Gig Harbor, Washington
E.D.N.Y. Docket No. 10-CR-968
1 Kristofor Lange was not charged in the advance fee scheme.