TheDC’s source said officials from both firms were intimately involved in the activity at the heart of the DOJ’s financial-crimes investigation.
The DOJ launched a second investigation of Prosser later in 2010, according to Raynor, who said he was interviewed in November 2010. But by January 2011, he recalled, the DOJ appeared ready to classify Prosser as a victim and put a hold on the bankruptcy proceedings.
By early 2011, Raynor said, he and the rest of Prosser’s legal team had learned that Pelletier at the DOJ “had a grand jury underway investigating CFC, and investigating some of the bankruptcy crimes.”
Pelletier, Raynor said, eventually “authorized the U.S. attorney in the Virgin Islands [Ronald Sharpe] to go ahead and file for a stay” of the bankruptcy proceedings surrounding Prosser’s company, “which means, as we were told clearly, the second investigation had cleared Mr. Prosser again.”
But Sharpe never put the bankruptcy proceedings stay in place.
“Being a U.S. Attorney in the Virgin Islands is like being a diplomat in a small country in South America,” Prosser said. Sharpe, he explained, would have found it difficult to go against the political grain to file the papers necessary to halt the bankruptcy case.
“You’ve got a lot of power,” Prosser told TheDC. “He and the governor are very close. They were in the same social clubs and the same parties.”
“It’s very difficult for him because he knows that once he indicted V&E [Vinson & Elkins], Alvarez [& Marsal], the trustees — he knows the governor is next and tied directly to it. We have emails showing it.”
No prosecutions, no explanations
Pelletier planned his departure from the DOJ for the spring of 2011, officially retiring on May 13. Raynor told TheDC that Pelletier vowed not to retire until the case was closed and arrests were made.
According to Angueira, the attorney who worked with Raynor to present the RICO case to Justice, Pelletier expected a full-scale prosecution to begin immediately after his exit.
“From our conversations with DOJ,” Angueira told TheDC, “I was left with a very strong impression that Paul Pelletier was ensuring that the investigation was proceeding to conclusion and that the case would be taken down in two waves: a smaller case initially followed by a bigger case after the initial takedown of the smaller case.”
“We were not told [the] specifics of … these two waves. However, it was very evident that the case had expanded as a result of the DOJ investigation.”
Pelletier, he said, called him and Raynor shortly after his retirement. “After he left, he advised us sometime in early May — the week after he left — that he was surprised the case had not gone public yet,” Angueira recalled. “As a former federal prosecutor, [he said] matters become public when indictments are announced and arrests are made.”
Angueira wasn’t sure what specific charges would be filed against CFC executives and others.
“The case against CFC involves the use of false and misleading financial statements used to improperly secure federal funds to the tune of several billion dollars,” he explained. “So there is an aspect involving false claims against the U.S. government and U.S. taxpayers, together with various tax crimes related to CFC’s misreporting of income and illegally manipulating co-op rules.”
With the resolution hanging in the air and no arrests made, Raynor said, the next shoe to drop was a third investigation of Prosser.
It “probably started in July 2011 and closed out in early October 2011,” Raynor said.
For a third time, Prosser was cleared of wrongdoing.
DOJ springs a leak
While the DOJ was taking its final look at Prosser, its case against the CFC suspects sprung several leaks.
According to the source on the team preparing to make financial-crimes arrests, DOJ investigators discovered that several members of its team had been compromised, and that at least two were corrupt. Information from the investigation was being passed to the Vinson & Elkins law firm and the Alvarez & Marsal accounting firm.
By this time, the case had grown so large that the DOJ’s team had grown from just two prosecutors to more than 25, making the leak difficult to find.
“What happened was the team was assembled — some members from the U.S. Virgin Islands and some main Department of Justice personnel,” TheDC’s source said. “It was discovered that information that was supposed to have been confidential was leaving U.S. DOJ and going straight into Vinson & Elkins’ and Alvarez & Marsal’s hands.”
“Subsequently, individuals were brought in from all different areas in one meeting. Individuals who were on the team [who were compromised] were then removed. There were 26 or 27 prosecutors that met, [and] were all called into one city.”
The source added that the summit meeting, held during the summer of 2011 in Washington, D.C., led to the discovery that two prosecutors had accepted cash bribes. That led to the team’s partial dismantling.
“There were two individuals who were the main players,” the source said. “What happened was those individuals who were a part of the team — the team broke down significantly. Individuals were moved from the investigation because of their involvement, whether or not they were paid.”
“We have information showing that they — the two main players [who were bribed] — agreed not to move it [the investigation] in the way that it should have. The group of prosecutors from D.C. called CFC ‘the Godfather.’”
By this time, the source added, arrest teams were already in place around the country. “The indictments were to be served with teams already in place. The assets, the residence
— all these things were already identified. The teams were actually marked to strike. And with this issue in DOJ, of course, that whole thing went to sleep.”
“It never happened. There were going to be arrests.”
Alleged bribes and corruption on the Virgin Islands
The alleged corruption ultimately reached the rarefied air of the Virgin Islands’ current governor, Democrat John de Jongh. TheDC’s source alleges that collectively, de Jongh, Attorney General Vincent Frazer, and assorted Virgin Islands legislators accepted at least $20 million in cash bribes to quash local concerns about CFC’s financial irregularities.
That money, the source said, was meant to insure against the possibility that concern about financial crimes at CFC would spring from the Virgin Islands and spread to the nationwide public.
During ICC’s bankruptcy proceedings, CFC officials testified that only two offers had surfaced for the company’s assets — including the Virgin Islands Telephone Company.
At best, they said, CFC would recover between $1 million and $10 million if another buyer purchased those assets. Once expenses were paid, CFC’s net proceeds from its loan to ICC would be next to nothing.
But just days later, CFC’s quarterly filing with the Securities and Exchange Commission showed that it was carrying the ICC loan on its books at a value of $525 million, a massive premium over what its officials told the federal bankruptcy court it was actually worth.
Raynor told TheDC that CFC “had to buy the assets” to justify the financial irregularities on its books — including the funds siphoned from RTFC.
“Now you have CFC in a position where they’re going to be operating the Virgin Islands Telephone Company and they need to get their acquisition through the local PSC [in the Virgin Islands], as not only did the bankruptcy judge have to sign off on it, but the Public Service Commission had to sign off on it,” Raynor said.
“So you had CFC organizing to acquire this company because they can’t afford to recognize the loss to continue their accounting fraud. And that’s where the cooperation with the governor became absolutely key.”
Prosser said CFC needed de Jongh to “make sure that the PSC not only approved the sale, but would, God willing, allow enough cash flow to come through to help them support the [$525 million] valuation that they put on this [loan].”
“When we say the governor was instrumental in this case — without the governor’s involvement that sale never would have happened,” Prosser said.
“At a certain point,” Raynor added, “the Public Service Commission was fighting the bankruptcy and supporting Jeff Prosser. Then all of a sudden, overnight, that attorney got removed, a new attorney came in and they were in line with CFC.”
According to Prosser, the governor fired the PSC’s outside counsel and hired the Virgin Islands attorney general — an employee of the governor — to represent the PSC.
TheDC’s source said the governor and Virgin Islands Attorney General Vincent Frazer have both accepted bribes, explaining that “there have been a significant amount of transactions.”
Speaking of officials in Frazer’s office, the source explained: “What they did — of course this is a civil matter — is arrange these meetings. Then you have the local government behind the stage participating in something they shouldn’t have been participating in and, of course, being financially rewarded for their assistance.”
The source points to an Oct. 6, 2010 CFC press release in which CFC Chief Financial Officer Steven Lilly publicly thanked the Virgin Islands government for supporting the co-op during its purchase of the local phone company, which had been among ICC’s assets.
“CFC thanks Governor John de Jongh, the commissioners, staff and consultants of the Virgin Islands Public Services Commission and other public officials who were supportive throughout this process,” Lilly said in the release.
That same source, who believes the press release was a tactical error on CFC’s part, said de Jongh, Frazer and others ultimately accepted “in excess of $20 million.”
Several individuals who were involved with the scheme and have evidence of the massive bribes, the source added, are now cooperating with federal investigators.
“There are individuals who have been involved with the governor of the Virgin Islands who have been turned,” the source said. “More than one.”
In addition to Frazer and de Jongh, TheDC’s source said, several members of the Virgin Islands legislature are under investigation for their parts in the corruption related to CFC’s alleged financial corruption.
The source pointed to a recent federal law-enforcement raid at the Virgin Islands legislature as evidence. The Oct. 5, 2011 raid, officials told the Associated Press, targeted a government building’s central computer system and the office of at least one Virgin Islands senator.
The Department of Justice has been silent on the reasons for this raid, saying only that 25 agents from the Internal Revenue Service, the Drug Enforcement Administration and the U.S. Marshall Service were involved. The AP reported that an FBI spokesman declined to say who was being targeted and whether any evidence was seized.
Cold case file
As it stands, TheDC’s source explained during an interview, no suspects under sealed indictment have been arrested, but the DOJ is planning to execute arrest warrants at some point in the future. The sticking point, according to the well-placed source, is that the Department of Justice — particularly Attorney General Eric Holder — does not want to admit public officials accepted bribes.
Raynor said that while the DOJ has failed to act on its sealed indictments, his client — Jeffrey Prosser — is still being treated unfairly “as a result of criminal activity that they did in the bankruptcy case and [those under indictment] are still benefiting from.”
“And it’s still ongoing even though they know they’re sitting on sealed indictments.”
Raynor was quick to reiterate that CFC solicits and receives funds from the federal government, adding a new criminal dimension to every financial filing it uses to secure public money.
“Every financial statement they file, every dime they go to get from federal government money, it’s another crime,” Raynor said. “And you have the people who are sitting on sealed indictments who know this is going on. And they’re allowing the criminal activity to continue.”
Bribed officials, he insists, remain on the taxpayers’ payroll at the Justice Department without any accountability.
Reached for comment, Pelletier refused to back up the allegations. “I’m not in a position to comment on the existence or non-existence of a federal investigation,” Pelletier said when TheDC presented him with the facts of the case. “But, what I’ve just heard sounds kooky and implausible.”
Gov. de Jongh’s spokesperson directly attacked the revelations. “What your sources have told you about Governor John P. de Jongh, Jr. (D-VI) is completely false,” de Jongh communication director Jean Greaux told TheDC.
Greaux also made a threat seemingly aimed at scaring TheDC away from running this story.
“Given that your information is false and that you cannot confirm these rumors, you will be going down a slippery slope if you print this story,” Greaux wrote. “If you do print inaccurate information about the governor, we will seek a correction and possible legal action.”
When provided with an outline of this report, Justice Department spokeswoman Tracy Schmaler refused to comment.
Spokespersons for CFC, RTFC, Deloitte, Vinson & Elkins, Alvarez & Marsal, Sharpe and Frazer did not return requests for comment.
During his State of the Union Address on Jan. 24, President Obama directed Attorney General Holder to create a special unit inside the DOJ to address a broad category of financial crimes that includes large-scale institutional fraud.
“We’ll also establish a Financial Crimes Unit of highly trained investigators to crack down on large-scale fraud and protect people’s investments,” Obama said. “Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender. That’s bad for consumers, and it’s bad for the vast majority of bankers and financial service professionals who do the right thing.”
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Article printed from The Daily Caller: http://dailycaller.com
URL to article: http://dailycaller.com/2012/02/01/bribery-compromised-officials-leave-indicted-financial-crime-suspects-free-from-prosecution-under-holders-doj/
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