Home Seattle Press Releases 2009 Father and Son Sentenced to Prison for Defrauding Businesses Around the World
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Father and Son Sentenced to Prison for Defrauding Businesses Around the World

U.S. Attorney’s Office March 06, 2009
  • Western District of Washington (206) 553-7970

SPOKANE—Today, James A. McDevitt, United States Attorney for the Eastern District of Washington, announced that Frederick M. Simon, age 46, and his father, Manfred O. Simon, age 81, were sentenced to prison terms for engaging in a scheme to defraud businesses both across the United States and around the world through the use of the internet. Following a three-week trial during which the Government called 60 witnesses and introduced 285 exhibits, a jury found both men guilty of conspiracy to commit mail fraud and wire fraud. The jury returned additional guilty verdicts against Frederick M. Simon on eleven counts of wire fraud and on eight counts of mail fraud. The jury returned additional guilty verdicts against Manfred O. Simon on eight counts of mail fraud.

The evidence that the Government introduced at trial established that Frederick M. Simon and Manfred O. Simon formed Railway Logistics International Corporation in the summer of 2002. The website described the company as “your world class leader in new and remanufactured spares, parts sourcing, export and importing logistics, consulting and technical services for the railway, marine and power generation industries.” In contrast to this description, the corporate headquarters consisted of a commercial mailbox at a UPS Store in Spokane and lines for a telephone and a facsimile transmission machine were located at Manfred O. Simon’s apartment in Spokane. They opened the company’s checking account at a bank in Spokane. Frederick M. Simon conducted business for the company through the website, e-mail accounts, and a succession of cellular telephones while residing in Germany and then a suburb of Indianapolis, Indiana. Although Frederick M. Simon made references to other employees and although he sent e-mails using accounts in the names of other employees, Railway Logistics International did not have any other employees or any manufacturing facility. Witnesses from companies in Great Britain, Spain, Mexico, Germany, Canada, Switzerland, and the United Arab Emirates joined witnesses from several American companies to tell the jury how Railway Logistics International defrauded their respective businesses. Specifically, Railway Logistics

International would agree to sell components and equipment based on false representations that the company had the components or the equipment available or could acquire them; would insist on a substantial advance down payment or full payment; would fail to deliver some or all of the promised components or equipment; and would fail to refund any of the advance payment. Railway Logistics International also would order components and equipment from suppliers; would agree to pay the suppliers according to the terms that the suppliers set; would arrange with freight forwarders to transport the components or equipment; would agree to pay the freight forwarders according to the terms that the freight forwarders set; and would fail to pay the suppliers and the freight forwarders. Railway Logistics International distributed a fraudulent balance sheet to several businesses representing substantial cash reserves and inventory when, in fact, the company had almost no cash and very little inventory.

Senior U.S. District Judge Wm. Fremming Nielsen sentenced Frederick M. Simon to 125 months in prison, to be followed by a three-year term of release under the supervision of the U.S. Probation Office. Observing that the evidence showed that Frederick M. Simon was the organizer of the fraudulent scheme, that the son had some responsibility for involving his father in the scheme, and that the father was less likely to re-offend, Senior Judge Nielsen sentenced Manfred O. Simon to 24 months in prison and a three-year term of supervised release. The Court also imposed on both men the joint obligation to pay restitution to 21 victim companies in the aggregate amount of $430,818.11.

Before Frederick M. Simon and Manfred O. Simon formed Railway Logistics International in the summer of 2002, Frederick M. Simon owned and operated Engineering International Corporation in Whitefish, Montana. A federal grand jury sitting in Montana had returned a separate indictment against Frederick M. Simon for two counts of wire fraud in connection with a scheme to defraud a British company, Zeefax Limited, which had sent a substantial down payment on an order for a variety of components. Engineering International Corporation failed to deliver any of the components or to refund any of the down payment. In response to a defense request, the U.S. District Court in Montana transferred the case to Eastern Washington for trial. A jury sitting in Spokane found Frederick M. Simon guilty of one of the two counts of wire fraud. Senior Judge Nielsen consolidated the count from the Montana case with the twenty counts from the Eastern Washington case for sentencing. The Court imposed a concurrent five-year prison term and a concurrent three-year term of supervised release on the Montana count. The Court ordered Frederick M. Simon to pay an additional $164,175.60 in restitution to Zeefax Limited and to two American companies that he defrauded through Engineering International Corporation during the first few months of 2002.

The Federal Bureau of Investigation conducted the investigation that led to the prosecutions in both the District of Montana and the Eastern District of Washington. First Assistant U.S. Attorney Kurt G. Alme and Assistant U.S. Attorney Ryan M. Archer prosecuted the Montana case. Special Assistant U.S. Attorney Tom Hopkins prosecuted the Eastern Washington case.

U.S. Attorney James A. McDevitt stated that the fraudulent scheme that Frederick M. Simon and Manfred O. Simon perpetrated through Railway Logistics International serves as a sobering reminder that businesses and consumers alike should exercise caution when conducting business over the internet. Although both Frederick M. Simon and Manfred O. Simon had been convicted of conspiracy to commit wire fraud and mail fraud in Montana in 1997, they were able to clothe themselves in a professional website using a new corporate identity and to defraud new victims through a similar scheme. Mr. McDevitt commended the FBI for aggressively pursuing the investigation literally around the world after receiving complaints from victims through the Better Business Bureau, the Spokane Police Department, and the Washington State Attorney General’s Office. Law enforcement agencies in Spain, India, and South America provided assistance to the FBI. Mr. McDevitt commented that the prosecutions by two U.S. Attorney’s Offices reflect the importance of protecting the reputation of American business in foreign markets.

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