Houston-Based Principals of A&O Entities Sentenced in Virginia for $100 Million Fraud Scheme
|U.S. Department of Justice September 28, 2011|
WASHINGTON—Two principals of A&O Resource Management Ltd. have been sentenced for their roles in a $100 million life settlement fraud scheme, which included more than 800 victims across the United States and Canada.
Today, Adley H. Abdulwahab, 36, of Houston, a hedge fund manager and part owner of A&O, was sentenced to 60 years in prison. Yesterday, the co-founder and vice president of A&O, Christian Allmendinger, 40, also of Houston, was sentenced to 45 years in prison.
U.S. Attorney for the Eastern District of Virginia Neil H. MacBride and Assistant Attorney General Lanny A. Breuer of the Criminal Division made the announcement today after the two A&O principals were sentenced by U.S. District Judge Robert E. Payne.
“The victims of A&O’s scam were looking for a conservative investment, and they were manipulated into believing A&O was a safe, secure, no-risk investment. It was all a big, fat lie; A&O was a sham, a financial house of cards waiting to collapse,” said U.S. Attorney MacBride. “Hundreds of elderly retirees saw their life savings vanish, and their lives have been devastated by their loss. The Virginia Financial and Securities Fraud Task Force is dedicated to pursuing national impact frauds whose scams affect not only those on Wall Street, but folks on Main Street who work hard, play by the rules and try to provide for their families.”
“These defendants used the savings of their unsuspecting, often elderly, investors to live the high life—luxury houses, fancy cars, and even a 15-karat diamond ring,” said Assistant Attorney General Breuer. “Having wiped out the life savings of many of their victims and stolen funds marked for retirement, Mr. Abdulwahab and Mr. Allmendinger appropriately now face significant prison terms. We will continue to aggressively pursue financial fraud throughout the country, and bring to justice those who illegally use the financial system for personal benefit.”
On Sept. 7, 2010, a federal grand jury returned an 18-count indictment against Abdulwahab, Allmendinger, and David White, 41, the former president of A&O. White and four others associated with the fraud scheme pleaded guilty in the fall of 2010. Allmendinger was convicted at trial on March 23, 2011, and Abdulwahab was convicted at trial on June 10, 2011.
According to court records and evidence at trial, the principals at A&O engaged in a scheme to defraud investors by making misrepresentations about such things as A&O’s prior success, its size and office locations, its number of employees, the risks of its investment offerings, and its safekeeping and use of investor funds. Both Abdulwahab and Allmendinger were active in the day-to-day management of the companies, as well as in the marketing of A&O life settlement investment products to investors. Abdulwahab also lied to investors about having a college degree in economics, as well as failing to disclose to investors that he previously pleaded guilty to a felony charge of forgery of a commercial instrument in Texas state court.
When state regulators began to scrutinize A&O’s investment products, Abdulwahab and others manufactured a sham sales transaction to “sell” A&O to a shell corporate entity named Blue Dymond and later to another shell corporate entity named Physician’s Trust. This sale ended Allmendinger’s association with the fraud scheme; however, A&O and Physician’s Trust were still secretly controlled by Abdulwahab and his co-conspirators, who continued the fraud scheme through September 2009. The A&O fraud scheme caused more than 800 investors, many of whom were elderly, to lose more than $100 million. The vast majority lost all of their investment, which represented for many all of the money they had saved for their retirement.
Evidence at trial showed that A&O principals used the investors’ money for personal enrichment, including purchasing multi-million dollar homes, luxury cars, a 15-carat diamond ring, and other property.
“The A&O scheme wreaked havoc on the lives of hundreds of investors, and now those responsible will be held accountable as a result of the outstanding and collaborative work of task force members,” said Lorin Reisner, Deputy Director of the U.S. Securities and Exchange Commission’s (SEC) Division of Enforcement
“The U.S. Postal Inspection Service is committed to protecting consumers from falling victim to fraud scheme that facilitate the use of the U.S. Mail. We have dedicated resources, which focus on identifying and eliminating fraud schemes that target consumers and cost citizens and financial institutions billions each year.” said Keith A. Fixel, Inspector in Charge of the U.S. Postal Inspection Service - Charlotte Division.
On June 22, 2011, five individuals connected with the A&O fraud scheme were sentenced: Russell E. Mackert, 52, general counsel for A&O, was sentenced to 188 months in prison; Brent Oncale, 36, former owner and founder of A&O, was sentenced to 120 months in prison; White, the former president of A&O, was sentenced to 60 months in prison; Eric M. Kurz, 47, a wholesaler of A&O investment products, was sentenced to 60 months in prison; and Tomme Bromseth, 69, an A&O sales agent in the Richmond area, was sentenced to 36 months in prison.
This investigation was conducted by the U.S. Postal Inspection Service, Internal Revenue Service and FBI, with significant assistance from the Texas State Securities Board, the Virginia Corporation Commission and the SEC. These cases are being prosecuted by Assistant U.S. Attorneys Michael S. Dry and Jessica Aber Brumberg from the Eastern District of Virginia and Trial Attorney Albert B. Stieglitz Jr., of the Criminal Division’s Fraud Section.
The investigation has been coordinated by the Virginia Financial and Securities Fraud Task Force, an unprecedented partnership between criminal investigators and civil regulators to investigate and prosecute complex financial fraud cases in the nation and in Virginia. The task force is an investigative arm of the President’s Financial Fraud Enforcement Task Force, an interagency national task force.
President Obama established the Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.