Former Northwest Arkansas Business Developer Pleads Guilty to Three Federal Criminal Charges
|U.S. Attorney’s Office July 31, 2013|
FORT SMITH, AR—Conner Eldridge, United States Attorney for the Western District of Arkansas; Christopher A. Henry, Special Agent in Charge, IRS Criminal Investigation, Nashville Field Office; Glen Perciful, IRS-Criminal Investigation Supervisory Special Agent; and Randall C. Coleman, FBI Special Agent in Charge, announced today that Brandon Lynn Barber, 37, of New York, New York, pleaded guilty to three federal criminal charges: (1) conspiracy to commit bankruptcy fraud; (2) conspiracy to commit bank fraud; and (3) money laundering. The Honorable P. K. Holmes accepted the pleas in United States District Court in Fort Smith.
U.S. Attorney Eldridge commented, “This is a significant step in bringing several individuals involved in committing fraud, including fraud on the federal bankruptcy court, to justice. This case indicates that we are serious about identifying, investigating, and prosecuting those who perpetuate fraud, swindle others out of money, and engage in financial crimes.”
Special Agent in Charge Henry stated, “This investigation is another example of the success that can be achieved when law enforcement agencies join forces. IRS Criminal Investigation, along with our law enforcement partners, plays a very important role in the successful investigation and prosecution of these types of financial crimes.”
“The number of creditors whom Mr. Barber defrauded through his illegal activities—as well as the number of banks who were threatened by his actions—is just staggering,” stated FBI Special Agent in Charge Randall C. Coleman. “In the end, Mr. Barber could not escape the mess he made by moving to New York. He ultimately had to come back to Northwest Arkansas and be held accountable for his actions. I commend the special agents and prosecutors for their important roles in this investigation.”
According to court documents and information discussed in court, the following facts were agreed to by Barber and the United States:
(1) Conspiracy to Commit Bankruptcy Fraud
Beginning in April 2008 and continuing through November 9, 2010, Barber reached an agreement with K. Vaughn Knight and James Van Doren to conceal and disguise income and funds belonging to Barber in order to hide those funds from creditors. The assets were concealed by transferring those funds into and through accounts belonging to Knight and Van Doren. In order to execute and conceal the scheme to defraud creditors, Barber filed a petition for bankruptcy under Title 11. That petition failed to disclose several transfers of funds to Knight and Van Doren. Barber, who was advised by Knight, his attorney of record for the bankruptcy proceedings, also made false and fraudulent representations in relation to his petition and the bankruptcy proceeding. Five groups of transactions were part of the fraud:
- Around April 2, 2008, Barber received $688,937 from a real estate transaction known as the Outfield Development. To conceal this money, Barber instructed the closing agent to wire the money to Knight’s IOLTA account under the false pretense that the money was to pay off Epsilon Investment LLC, a company owned in part by Van Doren. However, the majority of the funds sent to Knight’s IOLTA account were used to pay expenses on behalf of Barber and only $152,735 of the funds were actually paid to Van Doren or Epsilon LLC. None of these funds were disclosed to the bankruptcy court as income.
- On or about September 29, 2008, Barber endorsed a check for $64,000 over to Van Doren to hide the money from his creditors. Van Doren then used those funds to pay for Barber’s living expenses, and Barber did not disclose these funds to the bankruptcy court.
- Between July 2008 and 2009, Barber delivered a briefcase containing $30,000 in cash to Van Doren to hide from his creditors so that Barber could use the money for his personal expenses.
- On about August 12, 2008, Barber transferred $191,000 into an account owned by the Knight Law Firm. On August 13, $151,000 of those funds was transferred to Knight’s IOLTA account. On August 15, funds from the IOLTA account were used to purchase a $95,000 cashier’s check payable to Barber, and those funds were then transferred into an account controlled by Barber. An additional $95,230.03 was also wired from the IOLTA account to make a payment on Barber’s credit card account.
- On about October 7, 2008, Barber was involved in several real estate transactions, collectively known as the Executive Plaza transactions (detailed below). On about October 31, 2008, Barber received $314,000 for his involvement in these transactions, which was paid by Jeff Whorton. In order to conceal this money from his creditors, Barber and Whorton agreed with Knight to have the money wired into Knight’s IOLTA account. On November 14, 2008, approximately $150,000 was transferred by Knight to Epsilon LLC and subsequently funneled back to Barber so that the money could be used by Barber for personal use. None of these funds were disclosed to the bankruptcy court.
(2) Conspiracy to Commit Bank Fraud
From around August 2008 to around December 2008, Barber conspired with Jeff Whorton, Brandon Rains, David Fisher, and others to defraud First Federal Bank. The parties falsely and fraudulently represented the purchase prices of certain lots known as Executive Plaza to be higher than the actual sales prices in order to obtain higher loans from First Federal Bank. Multi-party, multi-property real estate transactions involving the Executive Plaza lots were then structured and closed in a way that excess funds were obtained from the total First Federal Bank loan. Fisher prepared an agreement that divided the excess funds. Whorton disbursed the excess funds, transferring $314,000 to Barber, $100,000 to Rains, and $550,000 to an unnamed co-conspirator.
(3) Money Laundering
Barber engaged in money laundering when he conducted monetary transaction of criminally derived property through a financial institution. As stated above, Barber had agreed with Van Doren and Knight to conceal certain income and transactions from the bankruptcy court. The money laundering occurred when Barber directed Knight to wire funds from Knight’s IOLTA account to Van Doren’s Epsilon LLC bank account and Van Doren’s personal account and then had those funds transferred back to his own bank account. Specifically, these transactions occurred on November 14, 2008, when $150,000 was transferred from Knight’s IOLTA account to a Van Doren controlled Epsilon LLC account at Citibank and on March 16, 2009, when $20,000 was wired from the Epsilon LLC Citibank account to a Barber controlled bank account with First Security Bank in Fayetteville, Arkansas, under the name NWARE Investments, LLC.
Barber and codefendants were originally indicted earlier this year. On January 16, 2013, Barber, Rains, and Whorton were charged in a three-count indictment. David Fisher was added to this indictment on June 5, 2013. On March 6, 2013, Barber, Knight, and Van Doren were charged in a 27-count indictment.
If convicted, the defendant’s sentence will be determined by the court after review of factors unique to this case, including prior criminal record (if any), role in the offense, other relevant conduct, and the characteristics of the violations. The sentence will not exceed the statutory maximum and in most cases it will be less than the maximum. In this case, Barber faces the following maximum penalties for each count: (1) conspiracy to commit bankruptcy fraud—five years in prison and a $250,000 fine; (2) money laundering—10 years in prison and a $250,000 fine; and (3) conspiracy to commit bank fraud—30 years in prison and a $1 million fine.
This case was investigated by the Internal Revenue Service Criminal Investigation Division and the Federal Bureau of Investigation. United States Attorney Conner Eldridge, First Assistant United States Attorney Wendy Johnson, and Assistant United States Attorneys Glen Hines and Benjamin Wulff are prosecuting the case for the United States.
Some of the individuals mentioned in this release have been charged with similar crimes but have not pleaded guilty. They are presumed innocent unless or until they are proven guilty beyond a reasonable doubt in a court of law.