North Canton man charged with conspiracy to commit wire fraud and bankruptcy fraud
A two-count criminal information was filed against James W. Wallace, of North Canton, charging him with conspiracy to commit wire fraud and bankruptcy fraud, said Carole S. Rendon, Acting U.S. Attorney for the Northern District of Ohio,and Stephen D. Anthony, Special Agent in Charge of the FBI's Cleveland Office.
Aged Shelf Corporation Scheme
The information alleges that Wallace, and Joseph Beck of Allentown, Pennsylvania, acting together and with others, from approximately January 2009 through December 2012, engaged in a scheme to defraud at least fifteen small business owners of at least $1,500,000 through an investment and loan scam. Wallace and Beck, acting through their companies Wallace Financial and Washington Integrity, fraudulently induced individuals to purchase “aged shelf corporations,” which served no legitimate business purpose other than to funnel money back to Wallace and Beck for their personal use. Wallace and Beck told potential buyers, who were individuals who often could not get funding from traditional financial institutions, that they could get them loans substantially greater than any available to them from commercial institutions through the purchase of an “aged shelf corporation” through Wallace Financial and Washington Integrity.
“Aged shelf corporations” were corporations that had been created some years before, but had never engaged in any business and were corporations on paper only. Wallace and Beck allegedly induced the would-be borrowers to believe that with the purchase of these previously created but dormant corporations they would qualify for private loans, credit cards with high credit limits, and other credit opportunities in amounts greater than were otherwise available to them from financial institutions. It is further alleged that Wallace and Beck misinformed buyers by telling them that they had “private lenders” waiting to lend money to the owners of these “aged shelf corporations” when they knew that no such private lenders existed. Wallace and Beck allegedly also falsely told would-be borrowers that other individuals had successfully obtained funding, but shrouded the details of their prior “successes” as well as the identities of their “private lenders” under a veil of mystery, citing proprietary and trade secrets, when no customers in fact received any private funding.
The information further alleges that Wallace and Beck fraudulently misrepresented that the money that customers paid to Wallace Financial and Washington Integrity for aged shelf corporations was used to obtain trade references, gain high PAYDEX scores (credit scores for corporations), and effect private placement of the loans. Wallace and Beck falsely told customers that their profit in the transaction would come later, after loans had been funded, from a percentage of the loans they succeeded in acquiring. Meanwhile, Wallace and Beck allegedly used a substantial share of the money to pay for personal expenses including strip clubs, jewelry, tattoo salons, meals at restaurants and bars, vacations and resort hotels, testosterone supplements, luxury products, sports equipment, tanning salons, payments on personal loans and mortgages, cash withdrawals, and transfers to personal accounts.
The information also alleges that, after agents with the FBI executed a search warrant on Beck’s residence and offices in Pennsylvania, and after former Wallace Financial and Washington Integrity customers filed civil lawsuits against Wallace, that he filed a false bankruptcy petition, under penalty of perjury, in the Northern District of Ohio. It is alleged that in the bankruptcy petition, titled In re: James Wallace, Case No. 12-61185, Wallace falsely withheld information regarding: his involvement with Beck and Washington Integrity; the number and amounts of creditors and debts owed by Wallace and his companies; bank accounts he possessed; his interests in executory contracts in the forms of the aged shelf corporation agreements he held with customers of Wallace Financial and Washington Integrity; and by falsely claiming a negative gross income for the two years preceding his bankruptcy filing.
If convicted, the defendant’s sentence will be determined by the Court after review of the factors unique to this case, including the defendant’s prior criminal record, his role in the offense and the characteristics of the criminal conduct. In all cases, the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.
This case is being prosecuted by Assistant U.S. Attorney Om Kakani, following an investigation by the Federal Bureau of Investigation.
An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove the defendant guilty beyond a reasonable doubt.