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Bank Beat

Freedom of Information

In SDNY Ex KPMG Sweet Gets Time Served After Middendorf Got A Year And A Day

By Matthew Russell Lee, Patreon Periscope

SDNY COURTHOUSE, Nov 20 – David Middendorf, the ex-KPMG executive convicted of four counts of wire fraud in March, was sentenced to a year and a day in prison and allowed to remain free on bail pending appeal by
U.S. District Court for the Southern District of New York Judge J. Paul Oetken on September 11, 2019, see below.

Now on November 20, 2020, cooperator Brian Sweet came up for sentencing. Inner City Press live tweeted it:

Sweet has a 5K (cooperator's) letter. His lawyer says he's settled administrative charges with the SEC, and pled guilty here even before the indictment. "He spoke with Holder and Middendorf, in person - so the US needed him. He testified for 3 days."

Sweet's lawyer says he also settled some "issues" about his home mortgage, and paid $34,000 in back taxes... Now Sweet had a job for a food company, supervising 28 people. "He's a great candidate for no incarceration."

Sweet himself: "I accept responsibility. I have had time to reflect, I was grateful to cooperate.  I've surrounded myself with men and work colleagues that I'm accountable to. I wish there was a way you could see my heart. I've changed since KPMG.

Judge Oetken: The conduct in this case was serious. It's an unusual fraud case, the corruption of a regulatory process under Sarb-Ox, taking of intangible property from the PCAOB, a company with a government mission... Mr. Sweet did the right thing by cooperating. The 5K motion is granted. I'm imposing time served and supervised release of three years.

Judge Oetken will decide on restitution later.

  As to Middendorf, the sentencing guidelines called for 37 to 46 months. In the SDNY, many defendants after they plead not guilty in Magistrates Court are remanded to the MCC. But Middendorf will continue free, with the consent of Assistant US Attorney Jordan Estes. Who has explain these disparities? More on Patreon here.

 The courtroom was full; next to Inner City Press a man took notes on a legal pad branded for his law firm. Another courthouse inside, both working for the government and for criminal defendants, was there. It was all very genteel, quite contrary to the remands to waiting U.S. Marshals that happen elsewhere in the SDNY.

  Both sides referred to the eight month sentence given to Cynthia Holder. Middendorf's lawyer said he wasn't going to bring her up, he hadn't know it was appropriate - but that she was worse than Middendorf, much higher in KPMG.

  Judge Oetken said Middendorf is not risk to recidivate and has suffered so much, with restitution and the loss of his license. He called the crime "more subtle that stealing money." Sutble indeed. More on Patreon here.

As the the criminal trial involving a scheme to defraud the SEC came back in less than a day from the jury on March 11 in U.S. District Court of the Southern District of New York, the verdicts for former KPMG partner David Middendorf and former Public Company Accounting Oversight Board official Jeffrey Wada were guilty, of conspiring to steal secret PCAOB schedules to benefit, ultimately, companies like Wells Fargo (and of course KPMG which would get paid.) From the U.S. Attorney's statement: " In January 2017, WADA, who had been passed over for promotion at the PCAOB, again stole valuable confidential PCAOB information, misappropriating a preliminary list of confidential 2017 inspection selections for KPMG audits and passing it on to Holder, referring to it in a voicemail as the “grocery list.”  At the same time, WADA provided Holder with his resume and sought her assistance in helping him to acquire employment at KPMG.  Sweet internally shared the preliminary inspection selections provided by WADA with Whittle, another co-conspirator, who in turn shared it with MIDDENDORF, who approved its use to improve the audits on the list.                In February 2017, WADA texted Holder saying, 'I have the grocery list. . . . All the things you’ll need for the year.'" And on the grocery list, not only Wells Fargo but also Deutsche Bank, OFG Bancorp, First Banks, "Citi National," Bank of New York, Associated Bancorp, Hanmi Financial, BancorpSouth (which after a redlining settlement got rid of its holding company to get rid of Federal Reserve regulation) and probably Fulton Financial. Photo here. It was only on Friday March 8 that Judge J. Paul Oetken made just two corrections to his reading of the 50 page jury charge, on pages 7 and 23. The three alternates were released but told to still not research the case; the remaining 12 were told if they send out a note not to indicate where the vote stands. (Across Pearl Street a jury note is US v. Christopher Howard was never made public or read into the record; one wonder would would or will happen here). The jurors had already arranged to leave at 2 pm, so they had only fifteen minutes until Monday at 9:30 am. Back on February 22, witness Brian J. Sweet was subject to re-cross about which companies were on his so-called Wada list pilfered from the Public Company Accounting Oversight Board and given to KPMG, including Citi and Northern Trust. These names were read out after a lengthy sidebar involving all 12 of the defense lawyers and the government's three, compete with white noise so the jury couldn't hear. Sweet's agreement with the government, including not being prosecuted for mortgage fraud, were put into evidence; some expressed surprise that Sweet wasn't in jail already.  "You broke your agreement with the government," Sweet was told on cross.

  "I think that's up for them to determine, Ma'am," Sweet replied. Yes, but how? And when? SDNY Judge J. Paul Oetken canceled his other pre trial conference upstairs scheduled for the morning, to keep the KMPG trial on track.  This is Judge Oetken, who a week before  expressed support for a confidentiality agreement to cover claims that Qatari royals cheat their employees out of overtime, see below. The KPMG case is United States v. David Middendorf, et al., 18 Cr. 36 (JPO); others in the mix include Thomas Whittle 1:18-cr-00036-JPO-3, David Britt 1:18-cr-00036-JPO-4, Cynthia Holder 1:18-cr-00036-JPO-5, and Jeffrey Wada, whose lawyer it was who sought and got into evidence Sweet's bail and bond documents. It is being tried in the same large first floor SDNY courtroom that UN briber Ng Lap Seng was convicted in. Meanwhile in Judge Oetken's smaller courtroom upstairs, the sister of the ruler of Qatar is being sued by at least three employees who say they were made to work six days a week without being paid overtime, and were retaliated against. Inner City Press was the only media present at the initial pre trial conference on the case in the SDNY on February 14, and was tempted to object when the Qatari royal's lawyer from the Proskauer law firm urged SDNY Judge J. Paul Oetken for a confidentiality order.

Royals of a gas-rich emirate that has locked up poets for criticizing them, seeking to cover up their retaliation and refusal to pay overtime? It remains to be seen how much will be covered up in the case. The defendants are Sheikha Al Mayassa bint Hamad Al-Thani and Sheikh Jassim bin Abdulaziz Al- Thani.

For now we can report: the Proskauer firm on February 14 not only opposed any certification of the claim to include other wronged employees of the family, it also proposed to sever the three plaintiff from each other. The plaintiffs' lawyer argued that many of the Qatari royals' employee are afraid to join the lawsuit, absent a noitce or invitation from the court promising them protection from retaliation, because they are in the United States on special visas which only allow them to work for this family, and they could have to leave the country as two of the plaintiffs have.

From the answer to the Complaint: "Defendants admit that Mr. Bancroft began his employment in Doha, Qatar and that he accompanied Defendants when they moved to New York, but otherwise deny the  allegations in Paragraph 39 of the Complaint.  40. Defendants deny the allegations in Paragraph 40 of the Complaint.  41. Defendants admit that Mr. Bancroft accompanied Defendants on their European travels in various countries during the summer of 2016, but upon information and belief,  otherwise deny the allegations in Paragraph 41 of the Complaint.    42. Defendants admit that Mr. Bancroft accompanied Defendants on their trip to Qatar in the summer of 2017, but otherwise deny the allegations in Paragraph 42 of the  Complaint.  43. Defendants admit that Mr. Bancroft accompanied Defendants on their European travels in various countries during the summer of 2018, but upon information and belief,  otherwise deny the allegations in Paragraph 43 of the Complaint.    44. Defendants admit that Mr. Bancroft traveled with the family to Miami and Boston."

 This is the life of corrupt royals and diplomats, such like those at the UN up to and including its Secretary General Antonio Guterres who lives alone in a $15 million mansion on Manhattan's Sutton Place. This is the world of immunity and impunity and now, it is urged, confidentiality. Inner City Press, now covering the SDNY daily, will have on on this.

And on this: before Norman Seabrook, former head of the NYC Corrections Officers union, was sentenced on February 8 by the U.S. District Court for the Southern District of New York to 58 months in prison, a victim's statement to the court cited what it called Seabrook's racist rant on YouTube.

   Afterward on Worth Street Inner City Press asked Seabrook about the YouTube video - actually, an audio file with an array of still photographs.  Seabrook told Inner City Press they doctored it to make him look bad. His (actual) answer on Periscope here - and here now audio file on YouTube, here.

  In the SDNY courtroom it was cognitive dissonance: Norman Seabrook who rose from poverty to head of a union with 10,000 members, who endorsed Michael Bloomberg; Norman Seabrook who asked for tens of thousands of dollars to steer union money into a Cayman Islands hedge fund which failed.

  Prosecutor Martin Bell referred to a Ferragamo bag visible in Seabrook's house for months. When Seabrook spoke he said it was a gift with cigars, taking a cigar out of his suit jacket.

Seabrook's lawyer Paul Shechtman cited Seabrook's work on the so-called feces bill to make throwing excrement at a corrections officer a felony. On the hand Seabrook was accused of threatening his board members with returning to work in a prison as punishment, and of going after anyone who dared run against or otherwise oppose him. Seabrook felt that it was his time to get paid, that he was bigger than the cause he began fighting for, Bell said.

Shechtman also spoke after the sentencing. Inner City Press asked him about Judge Alvin K. Hellerstein's seeming reversal of an initial position that it would be hard to leave Seabrook out on bail pending appeal. Shechtman replied affably that he had to win something, after the 58 month sentence.  Video here.

  An issue on a appeal will be whether Seabrook's second jury should have heard about the $19 million loss.

 Inner City Press asked Shechtman about the restitution, how much would be paid by hedge funders Murray Huberfeld,  Jona Rechnitz and perhaps (Judge Hellerstein indicated) Jeremy Reichberg. Shechtman told Inner City Press, If Norman wins $19 million in the lottery, we'll have about that. For now, $2500 is due in 60 days, through the SDNY Clerk, for the union. We'll have more on this.

   Exiting the courthouse after Seabrook, with a bag of Utz potato chips and a copy of the Daily News was New York Knicks icon Charles Oakley. He said that there are others who need to be locked up as well, and that the Knicks need better players. There was no rebuttal. Periscope video here.

Upcoming in the SDNY is a recently-filed complaint by the Bangladesh Central Bank for the $81 million hacking of its funds, which were then wired through the Federal Reserve Bank of New York, a case that Inner City Press will cover. Times change. Watch this site.


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