Tuesday, October 23, 2007

Senator aided fraud, court told

The Times Picayune has reported that an FBI agent testified in open court Monday that state Sen. Derrick Shepherd helped a twice-convicted felon launder nearly $141,000 in fraudulently generated bond fees last year, keeping close to half the money as part of the arrangement.

Shepherd was easily re-elected to the state Senate on Saturday, winning 61 percent of the vote. Last year, he finished a strong third in a 2006 run for Congress and then endorsed the embattled incumbent, U.S. Rep. William Jefferson, helping him secure a ninth term.

Special Agent Peter Smith testified that Shepherd, a lawyer who often handles personal-injury cases, attempted to make his dealings with bond broker Gwendolyn Joseph Moyo appear legitimate by writing the words "settlement proceeds" on the memo lines of the checks.

However, investigators have found no evidence that Shepherd did any legal work for Moyo, Smith said, although he said that Shepherd had delivered a "vague invoice" to a federal grand jury to explain the payments. The document was basically illegible, Smith said.

"To me, it looks like he was trying to disguise it, to make it look like this was for a personal-injury case," Smith said of the notations in the checks' memo lines.

"I suppose the government takes the position that it's money laundering?" Moyo's attorney, Pat Fanning, asked Smith.

"Yes," Smith testified.

In a telephone interview, Shepherd strongly denied committing a crime.

"At no time have I ever testified before a grand jury, nor at any time have I ever committed any crime whatsoever -- state, local or federal -- in my life," Shepherd said.

"To all of the rest of your questions, no comment," he said.

The allegations involving Shepherd burst into public view during what would normally be a low-key proceeding: a detention hearing for Moyo, who investigators say sold a series of bogus construction bonds.

Moyo, 52, who owns a home in the Eastover subdivision of eastern New Orleans, was arrested at the federal courthouse Thursday after she arrived at the grand jury room without any of the documents she was ordered to bring.

Questioned by FBI

While Moyo is at the center of the government's case, it was clear at Monday's hearing that the government is investigating Shepherd's involvement. Smith said Shepherd has already been interviewed by FBI agents in connection with the inquiry.

They still have questions for him, Smith indicated at another point, saying with a grin that Shepherd has "been invited to the grand jury."

Fanning suggested that prosecutors' desire to jail Moyo was partially borne of a desire to pressure her to "flip" on Shepherd. He noted pointedly that Moyo would not agree to "wear a wire" when the FBI first interviewed her in July.

"Do you remember my client being asked to cooperate against Derrick Shepherd?" Fanning asked Smith.

"I don't remember specifically saying that, but I probably did," the agent said.

Moyo has yet to be charged with a crime, but Assistant U.S. Attorney Mike Magner told U.S. Magistrate Judge Alma Chasez that he expects a grand jury will indict her this week. Moyo was arrested based on a complaint filed by Smith last week.

Moyo's first conviction, for issuing false contractor bonds, came in Arizona in 1989.

She won some notoriety in the Washington, D.C., area when she offered the following year to testify against Mayor Marion Barry, a friend of hers, regarding what the Washington Post described as "alleged drug use and contracting irregularities."

But her attorney said that prosecutors couldn't meet her terms, and she never turned state's evidence. The following year, Moyo was convicted of using a fake Social Security number.

After her first conviction, she was banned by law from the insurance business. But she didn't stay away from it for good.

Her problems in Louisiana started last year when she agreed to provide a contractor bond for a project at Pelican Park in St. Tammany Parish.

Contractor bonds are required on most large projects to protect the owner; they are essentially insurance policies that are cashed in if the contractor does not perform.

The company hired to do the St. Tammany work, Great Southern Dredging Inc. of Mandeville, called a bonding agent it had used before, who referred the firm to Moyo. The dredging company paid Moyo $321,555 for a bond that the project engineer soon noted did not conform to state law because the issuer was located offshore.

Moyo refused to refund the money, however, and GSDI had to purchase another bond for $350,000 from a company licensed to do business in Louisiana. The Mandeville company has sued Moyo and her firm, AA Communications, according to testimony Monday.

West Memphis church

Moyo similarly hornswoggled the congregation of a church in West Memphis, Ark., that was attempting to build a new sanctuary at a cost of $2.8 million, Smith said.

The pastor of the Old St. Paul Missionary Baptist Church, Frederick Anthony, testified Monday that the contractor ran into problems and the church had attempted to put him into default.

Moyo, who received $121,000 for that bond, wouldn't do it, he said. According to Smith, the bond was written in the name of First Nation Insurance Group, a company Moyo used to work with. A year earlier, though, she had been barred from further business with the company, according to a letter Smith read in court.

Fanning disputed the letter, saying it had never been sent and might have been backdated.

Anthony, the pastor, said the church has blown through its whole budget for the project. But only two-thirds of the work has been done, he said.

Smith laid out several other cases, including one in Mississippi and another in Tennessee, in which he believes Moyo issued bogus contractor bonds. The Mississippi case involved the same contractor hired to build the church sanctuary in West Memphis, he said.

In some cases, Moyo used two Chinese citizens who are in America on student visas as proxies for some of the schemes, Smith said. The two work for Moyo and have told the FBI in interviews that they do whatever Moyo tells them to, Smith said. Moyo paid some of the visa fees for at least one of them, Magner said.

In investigating the case, the FBI has been working with the state Department of Insurance, which last year sought and received a court order stopping Moyo and companies with which she is affiliated from selling commercial insurance. The order, issued in November, also allowed the department to seize her records and two bank accounts the department knew about.

It was that order that led Moyo to Shepherd, according to Smith. The agent testified that Moyo spoke with a number of lawyers about her problem, which had left her unable to cash checks made out to her firm.

Smith said that Moyo told investigators that it was Shepherd who, a month after the crackdown, hit on the solution: Moyo would sign over her uncashed checks and he would deposit them in an account he controlled.

According to Smith, Moyo signed over five checks totaling $140,686 to Shepherd's account. Two of the checks indicated they were for bond fees.

During the same week, Shepherd moved $55,000 from one of his accounts to another, and then wrote three checks to Moyo, also totaling $55,000, from the second account. Those were the checks labeled "settlement proceeds."

Shepherd also wrote checks to one of the Chinese nationals who works for Moyo and to a Moyo associate named James Taylor who has at least one fraud conviction, Smith said. The foreigner said he "didn't know anything about" Shepherd or the check for $5,000 in his name, Smith said. In all, Smith said, Shepherd kept about $65,000 of Moyo's money and returned the remaining amount, about $75,000.

Jailing decision delayed

After about three hours of testimony and argument, Chasez wound up delaying a ruling on whether to keep Moyo in jail as opposed to a halfway house. She said she would prefer to know how much prison time Moyo, if convicted, would face under sentencing guidelines, before making a decision.

Prosecutors said their desire to keep Moyo in jail stemmed from two main concerns: her unwillingness to cooperate by providing information and documents and a long history of fraud.

Magner referred to her as a serial fraudster and said it is important to stop her before she defrauds anyone else. He noted that she still owes all but about $100,000 of a $1.3 million restitution order imposed after her 1989 fraud case.

Fanning pleaded with Chasez to allow Moyo to stay in a halfway house rather than the federal wing of Orleans Parish Prison. He said Moyo was scarred by prison during her earlier stint, and said she suffers from claustrophobia and other anxiety-related disorders as well as medical problems ranging from diabetes to sleep apnea.

Fanning also argued that Moyo is not a flight risk, noting that she had showed up for her grand jury appearance last week.

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