Cca Selected 1994 Documents

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H

If

F~-;02 (Rev-

---;)

3-10-82)

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I

-.L: FEDERAL BUREAU OF INVESTIGATION

Date o(lnUlIcnptaon

I

1/18/94

I

certified Public Accountant, Hemming Morse Inc., CPA firm, 160 Bovet Road, San Mateo, California 94402, telephone (415) 574-1900, met the interviewing agent at the HAMILTON TAFT (HT) offices on the 25th floor of the Russ building at 235 Montgomery Street, San Francisco, California Accompanying the interviewing agent was Financial Analyst, Federal Bureau of Investigation. I fgave the following information:

I

]

The HT employees had described their payroll processing system to himself and the Trustee. The dates expressed on the laser ledger are not always exactly accurate. Checks picked out to be withheld by HT were checks over a certain threshold which required a second personal signature by the HT President. These checks were presented for signature and certain checks_-wer.e picked out by the HT President or someone appointed by the Pr~sident. Federal Income Tax Withholdings (FITW) payments to the Internal Revenue Service (IRS) were the ones withheld. b7C

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HT had approximately 250 clients in 1991. I I employee of HT, had assisted him with compiling a i~st of withheld checks.

I former

HT's deficit was approximately 18 million dollars at the time CONNIE C. ARMSTRONG take over. possibly this was the amount of available float at HT. During the buyout by MAXPHARMA INC. of HT from CIGNA it was agreed that CIGNA would pay any outstanding liabilities for penalties incurred during the time CIGNA operated HT. CIGNA paid only approximately $27,000 for those penalties after the MAXPHARMA buyout of CIGNA. This may be a good barometer for the normal penalties incurred by HT when operating normally. c:::Jgave the interviewing agent copies of documents that indicated the extent of IRS penalties incurred by HT. These documents will be incorporated into this FD-302 as an attachment.

InvcstJ.galion on

by

-=1.../,-,1::;4;:..L-/9=4

." San Francisco, CA

SA WILLARD L. HATCHER, JR.'WLHW11~

F~,'

D,.. d"..1cd

196A-SF-93255 SUB C-c/ -,1"',-,1,,,4!.L',,9"'4

Tl::us document conlama DCitbcr rccommcndationa not COncluilons of the FBI It is the property ofU.c FBI and l' loaned 10 your agency; It and n. contcnulU'C not to be dtstnbutcd outlidc your aBeaty.

_

:Memorandum

To

SAC, SAN FRANCISCO

From

SA WILLARD L. HATCHER, JR.

Sub""

CONN:q;: CHIP ARMSTORNG, JR; ET ALf'--_

D.le

(196A-SF-93255)

1/28/94 (P)

FBW(A) , ''Mf SF "'_

00:

Enclosed for the file is a facsimle copy of the Dresdner $18.9 million note to Hamilton Taft.

,~-

File (196A-SF-93255)

~H/Wlh 1.

HEMMING MORSE Certified Public Accountants and Consultants 160 Bovet Road, 4th Floor San Mateo. California 94402 \, (415) 574-1900 Facsimile iF: (4151378-4090

FACSIMILE LEAD SHEET 01/18/9403:02 PM

Date/Time:

I

~..':P~LE,=,A~S~E:..~O~EL,=I~VE~R~T!:!H=E.!:F:.=O~L:.'::L.O~W=IN~G:"-.'.T~O::..:

~,'

Name: Will Hatcher

I

Firm: Federal Bureau of InveslJgalion

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Facsimile: (510) 834-6551

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-==-=-:-:---=:-:-:=-=-:-=-:::-=-==-=-=-==---:_ _ ,---.1

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TOTAL PAGES INCLUDING THIS PAGE' 4

Fromtl..

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Client: Hamilton Taft & Company

Enclosed IS the a copy of the Dresdner Note dated April 10, 1989, The second paragraph descnbes the principal as due

In

five years.

The information contained in this facsimile is confidential and may also be attorney-privileged. The information is intended only for the use of the individual or entity to Whom it is addressed. If you are not the intended recipient, or the employee or agent responsible to deliver it to the intended recipient.

you are hereby notified that any use, dissemination, distribution or copying of this communication is strictly prohibited. If you havo received the facsimile In error, please immediately notify us by telephone. and return the original message to us at the address above via the U. S. Postal Service. Thank you, Please call 415) 574-1900 if an error occurs.

I

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April 1.0, 1.989

Dallas county, Texas

$18,962,255.00

roll VlIL'lI1I IUlCBIVlD, the undersi9Jl9d (the "Maker") promises to order of liudltolll. Taft & eompany, a california corporation (the IIHolder"), at 74 N_ iklntqomery, San Francisco, Californla 94105, or at such other place or places as any ho1.der of this promissory Note may designate in writing, the principal lliUlll ot Eighteen Million Nine Hundred Sixty Two Thousand Two Hundred Fifty Five and NO/lOO Dollars ($18,962,255.00) in legal and lawful money of the United states of America, together with interest on the unpaid balance from time to time remaining unpaid prior to maturity at t.he l.eeser of (a) the maxi= l.awful. rate (as hereinafter defined) or (Ill nine percent (9%) per annum. Int.E.lrest. shall be cCl1llPuted on the basi$ of a 360 day year and for the actual number of days elapsed (inclUding the first day but aXcludinq the last day), unless such calculation would result in a usurious rate, in whic.~ case intsrc&t shall be calculat=d en a per annum basis of a year of 365 or 366 days, as the case may be.

pay t.o the

Waxer shal.l pay to Holder hereof quarterly installments of interest hereon commencing' october 1, 1989, and continuing for five (5) years with the final quarterly paY1llent consisting of all of the outstanding principal in addition to the accrued interest as set forth herein. Such quarterl.y paYlllSnts shall be made by Maker on or before October 1, January 1, April 1 and JUly 1 of each year until maturity on July 1, 1994. All paY1llents are to be applied fl.rst to acorued interest and t.he balance to reduction ot the unpaid principal until the princip!ll is paid in full. This promissory Note may be prepaid in part or in full at any time without penalty at ~he discretion of the Maker. Maker hereby pled9~s to Holder, as eecurity for the full and tilllely payment of this Note, all of Maker'!I rights, title and interest in, to and under that certain Renewed, Modified and Increased Promissory Note. in the amount. of $1,500,000 by and between GUlfte~ Financial Corporation, a Texas corporation, Gulfstates Management Corporation, a Texas corporation, Whitehall. Interests, Inc., a Texas corporation, and Whitehall General Interests, Inc., a Texae corporation, as makerS and Hamilton Taft & company, as payee, dated February 16, 1989 (the "Gulftex Note") , which Gulftex Note was sold to Maker pursuant to that certain Sale and Assignment of Promissory Notes and Accounts Receivable, by and between Holder and Ma~r, dated April 10. 1989, and the collateral securing such Gulftex Notal provic1ed that Mall:er reservelil the right to convert the !4a.ker'lll interest. in the GUlftex Note into an equity interest in the makers of the Gul.ftex Nota or their underl.yinq businesses1 provided furthat' that upon lIIuch conversion, the Maker's equity interest ehall be pledgllad to Holder alii security for the full and time1.y ptAY1llent of thu Bot••

PROMISSORY NoTE - page 1

F-~81

1· •U)"',\ '\. W:\

T~08

P-003

JHIJ 1:3 "34 15.02

'.11,1'4

"

'i.r

Al.l Pllllt due principal and interest shall bear interest until paid at th'll maximUlll lawful rate of interest. in accordance with the

laws of the State of Texas and the united states. I t d.fault iIlI lllBde in the paYllaent of any installment of princ:lpal or interest under this Promissory Note, then Holder lIUl.y, at its option, declare the entire unpaid principal balance of and accrued and unpaid interest on this PrODissory Note to be imnadiately due and payable without notice or demand, foreclose all liens and sec:urity interaste securing the payment of this promissory Note, or any part thereof, and offset against this Promissory Note any sum or sums owed by the Holder to Maker, all at the option of the Holder.

The undersigned and all other parties now or hereafter liable for the payment hereof, whether as endorser, guarantor, surety or otherwise, severally waive notice of demand, notice of acceleration, notice of presentment, demand, presentment, notice of dishonor, diliq3nc= in collectinq, y.!.aoe and protest. and consent to all extensions that from time to time may be granted by the Holder hereof and to all partial paYllaente hereon, Whether before or after demand. No delay or omission on the part of the Holder in exercising any right hereunder. shall operate as a waiver of sUch right or of any other right under this Promissory Note, A waiver on anyone occasion shall not be construed as a bar to Qr waiver of any right or remedy on any future oooasion. If this Promissory Note is not paid When due, or if it is collected through a bankrUptcy, probate or other court, the undersigned agrees to pay all costs of collection, including, but not limited to, reasonable attorney's tees, filing fees, costs of court and other costs and expenses inourred by the Holder hereof.

This promisso~ Note sball be binding upon and inure to the benefit of the part~es hereon and their respective successors and assigns. The Holder may aseiqn any of it.s right, title or interest in and. to this promiesory Note or any security agreements or collateral in connection herewith without the consent of the Maker hereof. This Promissory Note shall be construed accordance with the laws of the state of 'l'exalll.

under

and

in

NotWithstanding anything to the contrary contained in t.his Promissory Note or in any other a9'reolllllent ent.ered into in connection with or seourinq the indeJ:>tedness evidenced by this ProRissory Note, whether now existing- or hereafter arising and whether written or oral, it is agreed that the aggregate ot all interest and any other charqee constitutinq interest, or

Ei9MXSSORY NOTE - Paqe 2

adjudicated as constitutinq interest, and contracted for, cbarqeable or receivable under this Promissory Note or otherwise in QClMElction with thi. loan transaction, ahal.l under no cirCU1lUlltanees ..xe.... d the total alDount of interQlllt permitted at: the _xilll\lJll lawfUl rate. U' from any cirCUlllliltancs the Holder shall ever reclilive interest, or any other cha~es constitutin<;J interest, or adjUdicated as constitutinq interest, in exce.... of the total amount of interest which would have been earned at the maximum lawful rate. the amount of suoh exceSB interest shall be applied to the reduction of the principal amount owinq on this Promissory note or on account of any oth..r principal indebtedn...... of Maker to the holder, and not to the paym..nt of interest. If the amount of such excells interest exc..eds the unpaid principaL balance of this Pro~issory Note and such other indebtedness, the amount of such excess interest that exceeds the unpaid principal balance of this ~romissory Note and such oth..r indebtsdness shall be refunded to Maker. All sums paid or aqreed to be paid to the Holder for the USIlI, fOrbearance or detention of the indebtedness of Maker to the HolQer shall 1:>.. amortized, prorated, allocated and spread throuqhout the fUll term of this promissory Note until payment in full so that the actual rate of interest on account of such

indebtedness i . uniform throughout the ter: of this Promissory

Note.

Xii' W:t'l1l111il~ QEUOlli', the. Maker has caused this Promi5sory Note to he made and eXeClUted as <:If the day and year first above written.

DUllDlma IllJi'11lilRftIsBs, :INC ••

• Texas Co:po:.ticn

BY:& :. (! 4L :Its,

PBQM:ISSORX NOTE - Page 3

,

.t t,I.

'1"" fo

~-31-91)

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Director, FBI (196B-DL-6652il Attn CID, ECONOMIC CR.Ll'1ES

•

.. Date

2/1/94

Section

r=Dc::.A=.L=LA==;S~

( 196B-DL-6652yl( P)

\

~OHPU-CHECK' FBI., nn. 1.

for Emergency Use of Consensual Monotorlng EqUIpment (Nontelephonic)

b7C

Form must be submitted within 5 working days of the date authonzabon was granted

n7"T.T.7'lC

Reason for Proposed Use (Check) Corroborate 0 Protect Consenting Testimony Party Other (SpeCify)

J"'

Lb2

b7D

(Name)

~ Cooperative Wrtness

5

fJf]PPPfYXJPPPFPF pH; []!I:; fJ!J;: UE EfI1 Date Authonzed

nUPi

8

2£1f' 4

IX

i

6

r: II

I

DOJ notification reqUIred

o

o o o o o o

4

Sec(s)

0

Yes

It!- No

USC

.. ,,

Intercentee(s" {Include Title rt Public OffiCial'

1 and other

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aSSOclates 7

Location where equipment Will be utilized (City and State) Dallas,

9

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1343

Recorder

I

In Offlce

18

o Concealed

o Other (Specify)

InstallatIOn of Equipment (Check) 0 In Vehicle lSi! Other (Specify)

-t

I 11

o

o Concealed on Person o In Motel Room

The follOWing reqUIrements have been fulfilled a Consenting party has agreed to testlfy_ b Consenting party has executed consent form c Recording/transmitting deVice Will only be activated

1" Vlolatlon(s) Tltle(s)

Type of Equipment (Check) Microphone! Receiver Amplilier

~ Transmrtter!

Government Property

Consenting Party (Check

o Nonconfldenllal Party o Conlidentlal Source

2

o Protect

I:ll:

o 3

Notification of SAC Authority Granted

C. I,RMSTRONG, aka STRONG'

Title

Texas

Government attorney In JudiCial district where interception will take place foresees no entrapment and concurs In the use of this technique being appropnate. t;i[Yes 0 No Date 10(27/93 Identity of Gov~ Ally AUSA 'I'D:LtRY mil;.'...' JudiCial District Northern Dlscrlct of Texas

If 'Yes' check reason below

Interception relates to an Investigation of a member of Congress. a Federal Judge, member of the Executive Branch at Executive Level IV or above, or a person who has served In such capacity Within the prevIous 2 years Interception relates to an investigation of any public official and the offense investigated IS one involVing bribery, conflict of Interest, or extortion relating to the pertormance of his/her offiCial duties Interception relates to an Inveshgatlon of a Federal law enforcement offlClal- - - - -- - - - - - - ------- - _•• - - - Consentlng/nonconsenllng person IS a member of the diplomatiC corps of a foreign country Consentlng!nonconsenling person IS or has been a member of the Witness Security Program and that fact IS known to the agency Involved or ItS officers Consentlng/nonconsenllng person IS ,n the custody of the Bureau of Prisons or the U S Marshals Service Attorney General, Deputy Attorney General, AsSOCiate Attorney General, ASSistant Attorney General for the Crlmmal 01 ISlon, or the U S Attorney In the district where an mvestlgatlon IS being conducted has rrquested the mvestogatl')9 ~ency to bl I rIor written consent for making a consensual Interception In a speCIfic Investlgallon / n • - ""

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12 SynopsIs of Case (Attac

P

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an lS t e su Jec~ 0 lnvest1gatlon ln San FranC1SCO D1V1Slon W1ere he busted out a company called HM~ILTON~~r. ARMSTRG~G may also be sk1mmLng a loan oDtalned from an lnvestrnenL company orlgL~al£y made for the beneflt of COMPU-CHECK. ~l

TRON

!~~

b7C ureau (Substantive Deskl

SIgnature :.;.~c..,~~~~~~~=-To be executed at FBIHQ (LCD) (Complete only d OW notification IS necessary) Signature 'Date

o 17

;',

0-621 (Rev

4.-12-89)

(Nontelephonlc C.

MOnitoring UUlIe Report)

AIRTEL cf?:filj~

Federal Bureau of Investigation

From

SAC, DALLAS

(196B-DL-66524) (P) (WCC5)Date

To

DIRECTOR, FBI Attn ELSUR Index

5/4/94

,0

Subject

CONNIE C. ARMSTRONG, aka

I

(h)': Armstrong i

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COM U-CHECK; FBW; 00: DALLAS

__ X__ Emergency Authonty

Dallas

2/1/94 FD-759 to FBlHQ dated captioned as above ____ Romme AuthOrity Re to FBIHQ ":"a-:-n"d'Bn"u-;_-_-_-""-;,..,-:-_-_-_-_-_-_-_-_-_-_-_-:-_-_-_ to _ dated dated captioned as above, Re

NOTE, If no confirming communication received from FBIHQ in response to your request for routine use of a nontelephonic consensual monitoring device, mark below: ____ No confIrming commUnicatIOn receIved from FBIHQ to date. The followmg mformatlon relates to the use of the equipment' _ _ _ Its use prOVIded informatIOn whlch corroborated or assisted corroboratmg the allegation or suspicIOn X It was used, but no mformatlon of value was obtamed It was not used --(Only one of the above applIes)

10

Complete and submn WIthin 30 days of expiration of each and every period of authOrIzation granted for nontelephonIc consensual monitoring by either the SAC, DOJ or FBIHQ-CID (Whether an mltIal Or a subsequent authorizatIOn). and for each extensIon or renewal thereof Transmit to FBIHQ ' Index, FBlHQ."

~

a sealed brown envelope labeled "Director. FBI, ELSUR J) c:~J! If) )

rO&~I'A, I{'//1;;-I }

2 Bureau 3 - Dallas MSM/rlh (5 )

10

(2 (1 -

7'1

UL-IO~- f;l-/M~t . . tv....:-v

196B-DL-66524) 196B-DL-66524 Sub A)

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' FD-302 (Rev 3-1(}'82)

- 1-

FEDERAL BUREAU OF INVESfIGATION

;}! ~/ 'iii 2{25{94

Dale or lnU15cnpbon

On the morning of February 8, 19941~ interviewed at interview were

I__;::========~;--=-~

sAl

I

IOf

I stated

~==,.---

I

lwas

Present during this the FBI, and

I

I

that his home telephone number is

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By way of background, he advised that he was

formerly employed with Hamilton Taft on{or about April 1, 1990, through March 31, 1991.

He stated that he was hired as the

Executive Vice President for Sales and Marketing.1

,.....="""""::....!:::::=,------l

I the

volunteered that he is a good friend ofl former in-house counsel for Hamilton Taft.

with regard to his

job duties he succinctly stated that his primary job duty was to grow the business.

He stated that CONNIE ARMSTRONG, the CEO of

Hamilton Taft told him that he was going to bring Hamilton Taft back to Dallas.

Prior to actually accepting an employment offer

with Hamilton TaftJ....._ _.....J!stated he attempted to get information on the company which proved to be somewhat difficult in that it is not a publicly traded company.

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I

Iadvised

tha~=====~~lgave him some insight into Hamilton Taft's history and

I

Invcstlgllhon on

by

~L..

Isaid that one of the problems with Hamilton Taft had

/\

~(~2L/~8L/9~4~)

'al

Dallas, Texas

Fdel

196A-SF-93255 SUB C -1f;$,

~_/'

.......;Ii-L{---",g"",l_b_7_C_-

nUB document contalllll neither recommendllhons nor conclUl>lons of' the FBI It lind Its contenta are not 10 be dl5tnbu~ out:udo 'Your Bicney

De" d"teted

2/16/94

It IS the property of Ihe FBI and 1S loaDed to your agency.

•

•

f FD-302a (Rev 11·15-83)

196A-SF-93255 SUB C

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_ _ _ _ _ _ _ _ _1 - -

ConlmuaUon ofFD-302 of

been its historical weak management. ~

' On _ _ 2..:../_8..:../_9_4_ _• P.go _ _2_ _

On the positive side,

Istated that Hamilton Taft appeared to have a good client

base. __________________________lthat he was unaware of the problems at Hamilton Taft.

~kescribed CHIP ARMSTRONG as a flamboyant,

L-

colorful individual.

I

lwas favorably impressed with CHIP's

vision and initial presentation regarding the future of Hamilton Taft.

I

Ire iterated that he was hired on April 1, 1990, and

I President,

he reported tol thatl

Hamilton Taft.

He stated

Iwas hired onlor about the same time and

she was supposed to be working on marketing for Hamilton Taft. I-

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~Ititle was

Marketing Vice President.

he had an interview Withl

/prior to being hired.

Istated He advised

that each time he inquired about the financial health of Hamilton Taft he couldn't get any information. ~~asically

I-

He repeated the fact that

the same thing; that there wasn't

much information available regarding the financial well being of Hamilton Taft.

______~Istated that he was never aware of the withholding of client tax payments except upon hearing this from

•

FD-302a (R.v 11-15-83)

•

196A-SF-93255 SUB C

ContlRUll.tlOn of FD-302 of

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L

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one client, commercial Credit Corporation.

2{8{94

,On

,PlIgC _ _3_ _

He said that Hamilton

Taft was very compartmentalized. ~

Istated that any company can save money by

outsourcing some administrative functions such as accounting, payroll, etc.; because they have lower costs when those tasks are done by professionals whose primary business is the accomplishment of those particular tasks.

With regard to selling, he stated that the Client Services Division prepared the calculation used in sales marketing proposals which were sent out to a prospective client. The proposals used the overnight funds rate as the basis of their calculation. Sales closings were always made in San Francisco. The idea was that it would be impressive to bring a prospective b7C

client to the offices located at 74 Spear Street.

This was

almost a necessity because of the fact that he didn't have any financials to show the prospective clients.

According tol~

_

the contracts guaranteed the payment of late taxes in the payment of penalties and this was used by sales people to allay fears that late payments might be a problem. 1~ tOldl~

lstated that he

lof the difficulty in selling the product without

•

_r FD-30Z. (ReY 11-15-83)

•

196A-SF-93255 SUB C

Contlnuatton of FD-302 of

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J

.....

'

O

n _--'---'2/8/94

4

' png'

current financia1s and that the current or standard response from ~kegarding

.....

this problem of the lack of

current financials was that Hamilton Taft was in the process of compiling current financial information.

According to~I b7C

~lsales grew approximately $1

billion during his tenure at Hamilton Taft.

He advised that he

regularly told ARMSTRONG that sales could have grown $5 billion in 1990 if Hamilton Taft had possessed current audited financial statements from a big six accounting firm.

I

I stated

that

when he would tell ARMSTRONG this, CHIP would respond by simply saying that they were working on it.

lstated that there

were six sales people covering the entire united states.

These

individuals werel

with respect to late payments,I~

lstated it was

his understanding that there were very few late payments while he was there.

He stated that he was not aware of the fact that

there were $8 million in late penalties.

I

Istated that he

couldn't sell Hamilton Taft's services if he had to tell prospective clients that their tax payments would be withheld.

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FD-302a (Rev 11-15-83)

•

196A-SF-93255 SUB C

Contlnuatton of FD-302 of

-'========::L ~

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2/8/94

,On

• Pace

_..:5:...-_

Istated that he wouldn't have stayed around

Hamilton Taft if he had known the true condition of Hamilton Taft because a person like himself works on some kind of an incentive basis.

Thinking back on it,

I

Istated that he was the

victim of omission on the part ofl

land ARMSTRONG in that

they never told him that the payments of client's taxes were being withheld.

with respect to clients who were brought in

during his tenure,

I

I cited R.R.

Donnelly out of Chicago,

Scott Paper Company, plus a division of Reckitte maker of condiments and mustards, etc.

I

pohlman, a

Istated that each

of these clients required new sales contracts.

~

ldescribedl~

~~I~a~s~a bright person who made

a positive contribution to sales. also CHIP ARMSTRONG's girlfriend.

I stated that

she was

He stated that she had good

credentials in that she possessed an MBA Degree and was a CPA. She did not assist in making presentations to prospective clients. IL

lrePlaced AL MAY

one Friday at Hamilton Taft

even though there were several people who were more qualified, but then

I

girlfriend. AL MAY.

Istated that

I

Iwas ARMSTRONG's

He assumes that is why she was selected to replace

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"D-31lli (Rev 11·15·83)

•

196A-SF-93255 SUB C

ConlmualJon of Fo-302 of

-'========"",JL

~

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, On _ _2..:../_8..:../_9_4_ _, P.ge

~=6~_

Istated that he used CHIP's Turtle Creek office

for three months after March 31, 1991, when he was laid off by the trustee.

I advised

that CHIP ARMSTRONG told him that

he, CHIP, made investments that he wanted to make and nobody told b7C

him how to make investments. tOL'

Late payments were never brought up

.....Ilby ARl'lSTRONG.

I..-

Iadvised that 1

relation person whilel----Iwas there.

1 was

a client

\

)-,59 (Rev 5-31-91)

)'

Date

Director, FBI (196B-DL-66524 ) Attn CID, _-'li\ilh~itt.
die

C.~TRONG

Notification of SAC Authority Granted forl"PEJijP5?{' Use

FBW; HF 00:

)(P)

(196B-DL-66524

De1 J as

CONNIE ET AL:

3/2/94

Section

01 Consensual Monitoring Equipment (Nontelephomc)

DALLAS

Form must be submitted within 5 working days of the date authonzatlon was granted Reason for Proposed Use (Check) []: Corroborate D Protect Consenting Testimony Party D Other (SpeCIfy)

2 Government Property

(Name)

[X Cooperative Witness Duration of proposed use

(11111111111 I I

7

Date Authonzed

lillllllillill

m:

TV

X~

b2 -

&/171

o

9

& Gt a

J

Sects}

134-j

7

! ....'

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Location where equipment Will be utilized (City and Stater Dallas, Texas

Government attorney rn JudiCial dlstnct where Interception Will take place foresees no entrapment and concurs In the use of thiS technique being appropnate Yes D No Date 12/2/93 fdentlty of Gov1 Ally AJISA I,INDA GROVES JudiCial Dlstnct Northern District of Texas

rn

Lb7E:

"olatlon(s) Tltle(s) J 8

L

b-;('~

CONNIE C. ARMSTRONGJ I on, ~.'-~-~

:qUlpment (l;neCK) Installat []I Concealed on Person D In Vehicle Other (Specify) In Motel Room

The follOWing requrrements have been fulfilled Consenting party has agreed to testily b Consenting party has executed consent form c Recordlng/transmltllng deVice Will only be activated

'.

I

o

3~1~94

Recorder

Interceptee(s) (Include Title If Public Official)

4

t 1 I,-,_, 6

Ei Concealed

D Other (SpeCify)

I

Consenting Party (Check on
D Nonconfldentlal Party D Confrdentlal Source

Type of Equipment (Check) Transmitter! D Microphone! Receiver Amplifier

I2Il

D Protect

USC

D Yes IX No If ·Yes· check reason below D Interception relates to an investigation of a member of Congress, a Federal Judge, member of the Executive Branch at Executive

1. DOJ notrtlcatlon reqUired

Level IV or above, or a person who has served In such capacity wlthrn the prevIous 2 years Interception relates to an Investigation of any public offiCial and the olfense Investigated IS one InvolVing bnbery, conflict of Interest, or extortion relating to the performance of hls!her offiCial duties D Interception relates to an investigation of a Federal law enforcement offlclal- D Consentlng/nonconsentlng person IS a member of the diplomatiC corps of a foreign country D Consentlng/nonconsentlng person IS or has been a member of the Witness Secunty Program and that fact IS known to the agency Involved or Its offIcers D Consentlng/nonconsentlng person IS In the custody of the Bureau of Pnsons or the U S Marshals Service D Atlorney General, Deputy Attorney General, ASSOCiate Attorney General, ASSistant Attorney General for the Cnmlnal DIVISion, or the U S Attorney In the dlsfnct where an Investigation IS being conducted has requested the Investlgatrng agancy to obtain pnor wntl n consent for makIng a consensual Interception In a speCifiC investigatIon ,/ _ ... (; _ , ; -

D

t'd'- //

2 SynopsIs of Case (Atlach additional page If necessary) ARMSTRONG

Cooperating

has

that

I

I...,--~~~~.,........,=--..---..----,,~ investigation in the San Francisco •

)«Or Date~

~~~~Dale b7C

?

Bu"eau 'Substanhve Desk\

COpy'

--

Signalu

o ~~n:~u~rm!mmn:Pl"I'75Irm:~iI1!'n!lT!Jr!\I~~te~ o 17 To be executed at FBIHQ (LCD) (Complete only If DOJ notificatIon IS necessary) Signature

Date

% '

D-6:l1 (Rev (-12-89)

~.

(Nontelephonlc Cr

AIRTEL I

SAC, DALLAS Attn

I

Federal Bureau of Investigation

~IRECTOR,

T

MOnltormg Unge Report)

(196B-DL-66524) (P) (WCC5)Date

FBI

I'

-J-.

6/3/94

_-"-!.-=.!.~'----

ELSUR Index

n Subject

CONNIE C. ARMSTRONG; ET AL;

FBW; MF; 00:

DALLAS

Emergency Authority. Re Dallas FD-759 to FBIHQ dated 3/2/94 captiOned as above. _ _ _ RoutIne Authonty Re to FBIHQ to dated and Bu ------dated captiOned as above. X

NOTE: If no confirming communication received from FBIHQ in response to your request for routine use of a non telephonic consensual monitoring device, mark below: ____ No confIrmIng commUDlcallon receIved from FBIHQ to date. The folloWIng Information relates to the use of the equipment _ _ _ Its use provIded Information which corroborated or assisted In corroboratIng the allegatiOn or suspicion __X__ It was used, but no InformatIon of value was obtained. It was not used --(Only Qill\ of the above appltes) Complete and submit wIthin 30 days of expiratiOn of each and every period of authoTlzatiOn granted for nontelephonic consensual mOnltoring by either the SAC, DOJ or FBIHQ-CID (whether an inItial or a subsequent authorization), and for each extenSiOn or renewal thereof TransmIt Index, FBIHQ."

:0 2

FBIHQ '

In

a sealed brown envelope labeled "Director, FBI, ELSUR

/(/1;)

Bureau - Dallas

MSM/rlh

(5)

to

(2 -

(1

196B-DL-66524) 196B-DL-66524 Sub A)

rD·759 (Rev 5-31-91)

To

Director, FBI ( ) T...A"'R........ CR""T.uME=Attn CID, _WHWLTJ..TuE......C,LOLLI.... SAC,

nATT At:

.

3-7-94

196B-DL-66524 ) (p )

C.~STRONG;

Title

Date Secllon

CONNIE ET AL;· FBW; MF 00: DALLAS

I

Notification of SAC AuthOrity Granted

/

for Emergency Use of Consensual MonitorIng Equlpmenf (Nontelephonic) Form must be submitted Within 5 working days of the date authOrization was granted

Reason ror Proposed Use (Check) Protect Testimony Consenting Party Other (Specify)

1

o

IXJ Corroborate

Government Property

o 3

Consenting Party (Check one)

o Nonconf,dentlal Party o Confidential Source

IU

I

6. . 7'

~

8

(.Gail.S}

6

4

11

I

b7D

18

DOJ notification reqUIred

Sects)

0

Yes

Recorder

I

Installation of EqUIpment (Check) 0 In Vehicle In Motel Room Other (Specify)

o

7

b7C

I -

LocatIon where equIpment Will be utilized (City and State) Dallas, Texas

9

USC

1343

I:l: No

Government attorney In JudiCial district where interception Will take place foresees no entrapment and concurs In the use of thiS teChnique being appropriate 12-2-93 aYes No Date Identity of Gov1 Atty AUSA LINDA GROVES Northern District of Texas JudiCIal District

o

1blE

VlolatlOn(s) Trtle(s)

o Concealed

CONNIE C. ARMSTRONG,I and others

I:l: Concealed on Person

The follOWing requirements have been fulfilled Dca Consenting party has agreed to testify §tb Consenting party has executed consent form c BecQrdrogOfijQswl!tInq deYlce WIll 90rv be activated

,"

o

Interceptee(s) (Include Tille If Public OffiCial)

_

o

q'f

I

Type of Equipment (Check) Microphone! Receiver Amplifier

ex Transmitter!

o Other (SpeCify)

Ib2

Cooperative Witness

~ ~ ~ Date AuthOrized 3-7-94

5

2

o Protect

II "Yes' check reason below

o Interception relates to an investigation of a member of Congress, a Federal judge, member of the Executive Branch at Executive Level IV or above, or a person who has served In such capacity within the prevIous 2 years o Interception relates to an Investigation of any publiC offiCial and the offense investigated IS one InvolVing bribery, conflict of Interest, or extortion relating to the performance of his/her offiCial duties o InterceptIOn relates to an Inves1lgatlOn of a Federal law enforcement offiCial - -. - - - - - - -- - - - ---o Consentlng/nonconsentlng person IS a member of the diplomatiC corps of a foreIgn country o Consentlng!nonconsenllng person IS or has been a member of the Witness Security Program and that fact IS known to

o o

lhe agency Involved or ItS officers Consentlng/nonconsentlng person IS In the custody of the Bureau of Prisons or the U S Marshals Service Attorney General, Deputy Attorney General, ASSOCiate Attorney General, ASSistant Attorney General for the Criminal DIVISion, or the U S Attorney In the district where an Invesligatlon IS being conducted has requested the Investigating agency to obtain prior written consent for making a consensual Interception In a speclflc Investlgatlon

12 SynopsIs of Case (Attach addllional page If necessary)

,,j

Cooperating Witness has advised that

',-,

an investigation in the San Francisco Division where he busted out

;4

(S~~CY u.se~al

/J /'

Slgnatur~~Date

D

b'lC

~~gn:~ur

ate

J . J-.,/'

-r /iJ/ T'i

i;d/f,'i

D t6 To De execu Slgnatulre::::.ai':t::iL...,,!:&;c.&!~~{.J~'4!!-

2 Bureau (Substanllve Deskl

COpy t

-

~

'0

D 17 To be executed at FBIHQ (LC (Complete only tf DOJ notlflGatlon IS necessary)

. I AfJ%L-::::Slg~natu~re=====.:D:::.::ate===.J

;.

, 0-621 (Rev "'-12-89)

(Non telephonIC: Cc-

Momtorlng Ulaie Report)

AIRTEL

~

Federal Bureau of Investigation

~tt SAC, DALLAS O~DIRECTOR, FBI Altn

Subject

(196i3-DL-66524) (P) FvCC5)Date' --=6..:../-=1.::.3",-/::..94.:.-_ _

ELSUR Index

CONNIE C Ure1STRONG; ET ALi FBW; :1F; 00: DALLAS

X

Emergency AuthOrIty. Re Dallas FD-759 to FBIHQ dated 3/7/94 captIoned as above. ____ RoutIne AuthOrity Re to FBlHQ dated and Bu to dated captIoned as above. ------NOTE: If no confirming communication received from FBIHQ in response to your request for routine use of a non telephonic consensual monitoring device, mark below: ____ No conflrmmg commUnIcatIOn receIved from FBIHQ to date. The followmg mformallon relates to the use of the equipment _ _ _ Its use prOVIded Information which corroborated Or assisted in corroborating the allegatIon or suspicion. _-..,_ It was used, but no mformation of value was obtained. X It was not used (Only ~ of the above applies)

i

Complete and submll WIthin 30 days of expiration of each and nery period of authOrIzatIon granted for nontelephoDlc consensual monitoring by either the SAC, DO] or FBIHQ-CID (whether an initIal or a sUbse~ent aj\thorization), and for each extens~o7 or renewal thereof. ~ Transmll to FBIHQ 10 a sealed rown envelope labeled "Director. 'FBi, ELSUR , Index, FBIHQ."

J., D -

/.

)

I __2 - Bureau 3 - Dallas :1SH/rlh (5 )

(2 - 196B-DL-66524j (1 - 196B-DL-66524 Sub A)

t L - lR (p te;:J-'t - /

0-621 (Rev "-12-89)

(NontelephoOlc. Cr

Momtormg Uaaa:e Report)

A1RTEL I

~

~. T

II

Federal Bureau of Investigation SAC, DALLAS

~IRECTOR, FBI Attn

oj_

(196B-DL-66524) (P) (WCC5)Date _-"6,L1.=.3L,/=:..94"---_ _

ELSUR Index

n

Subject

CONNIE C. ARMSTRONG; ET AL; FEW; MF; 00: DALLAS

Emergency Authority. Re Dallas FD-759 to FBIHQ dated 3/2/94 captIoned as above. ____ Routine Authonty Re to FBIHQ dated and Bu to dated captlOned as above. ------X

NOTE: If no confirming communication received from FBIHQ in response to YOUT request for routine use of a nnntelephonic consensual monitoring device, mark below: ____ No confIrm1Og commUnIcatIon receIved from FBIHQ to date. The follow1Og mformation relates to the use of the equipment _ _ _ Its use prOVIded 1Oformation which corroborated or assisted corroborat1Og the allegatIon or suspicion __X__ It was used, but no Information of value was obtained. It was not used --(Only Qilll of the above apphes)

10

Complete and submit WIthin 30 days of expiratIon of each and every period of authonzatlOn granted for nonrelephonic consensual mODltoring by eIther the SAC, DOlor FBIHQ-CID (whether an inItial Or a subsequent authorization), and for each extensIon or renewal thereof TransmIt to FBIHQ Index, FBIHQ.· '

N 2

10

a sealed brown envelope labeled "Director, FBI, ELSUR

/6·J;} Bureau - Dallas

MSM/rlh

(5)

(2 (1 -

196B-DL-66524 ) 196B-DL-66524 Sub A)

-;

...

•

-',

FD·302 (Rev 3·10·82)

- 1•

•

FEDERAL BUREAU OF INVESTIGATION

Dull: of Imn~cnphon

6/21/94

I

Control Purchasing Manager, Nations Bank, form-e-r~l~y--k~n-o-w-n--a-s~N~o~rthCarolina National Bank (NCNB) at 101 Tryan street, Charlotte, North Carolina 25255, was telephoned by the intrnrjAlc't:ng agents at her office, telephone number (704) 386-6351. L .was advised of the ipterYirWing agents' identity and of the purpose of the interview. L . gave the following information: The interviewing agents askedl Ito describe the process of which Hamilton Taft & Company (HAMILTON TAFT) checks drawn on NCNB were processed when these check~ade payable to Security Pacific Bank (SECURITY PACIFIC). xplained that HAMILTON TAFT's account at NCNB was a "Con ro isbursement Account" (COA). She explained that a COA is an account where the customer is allowed to write checks drawn on the COA but the customer did not have to deposit funds to cover these checks until these checks made their way through the Federal Reserve Bank system and were later presented to NCNB for payment.

b7C

I further

explained COAs with the follOWing

statements-.--~T~h~e advantage of a COA is that the customer enjoys

approximately one day of "float". with float being described as the time the customer receives credit for payment when a check is presented and the time the customer must deposit funds with NCNB to cover this check.

I

lunderstood that NCNB's slster bank, SECURITY PACIFIC, "wired" funds to cover HAMILTON TAFT's checks drawn on b7C it's COA at NCNB. Normally SECURITY PACIFIC would send one "wire" to cover all of HAMILTON TAFT's checks drawn on the HAMILTON TAFT NCNB COA which had arrived at the Federal Reserve Bank in North Carolina that particular day. This Wlre transfer was a "Fed Wire" which would be sent at approximately 3:00 to 4:00 pm in the afternoon.

(telephonically) lnvc5t\gatlOnon

by

6{21(94

at

196A-SF-93255(SUB Cl-~7

San Francisco, CA

SA WILLARD L. HATCHER. JR. /WLH ~ ~b7C

W-

TIuI document cOnllllnS nellher Ncommcnd/lllOn5 nClrconclu~lons oflhe Fal illl.nd lis canlcntll lire nollo be dll.lnbulcd out'llde your ngem.. y

Dnllldll..lnh:d It \'llhe prl1ll... ny \11Ih.: FBlnnd 1\ ]nnnlld 10 your Ilgency.

.

.' - ..

FD-302u (Rev 11-15-83)

•

•

196A-SF-93255(SUB C)

ConhnUllllOn or FD-302 of

I

b7C 0" _ _6-,1,-2_1:...1_9_4__ , Page

~=2=_

______~~tated that a Federal Reserve Bank will separate checks drawn on CDA accounts from normal checks each day. Then the Federal Reserve Bank will not~fy NCNB the pending amounts of checks at the Federal Reserve Bank for each CDA. This allowed time for NCNB to notify the customer of the need to deposit funds into the CDA that day to cover these checks.

•

fD-302 (Rev 3-10-82)

- I -

•

FEDERAL BUREAU OF INVESTIGATION

D:lI~

of trnn""nptlon

6/21/94

I

lat Security Pacific Bank ("SECURITY PACIFIC"), currently employed with Wells Fargo Bank, telephone (510) 464-1834, was telephoned by the interviewing agent. The interview(ng pgeqt identified himself and the purpose of the interview. L Jgave the following information:

I

lwas asked by the interviewing agent about the SECURITY PACIFIC arrangement with Hamilton Taft & Company ("HAMILTON TAFT"). HOWARD stated that I Inegotiated the HAMILTON TAFT banking arrangement with SECURITY PACIFIC. She said that SECURITY PACIFIC paid only federal taxes for HAMILTON TAFT. SECURITY PACIFIC did not have the facilities to make state or local tax payments. Iwas not sure how exactly SECURITY PACIFIC paid the Intern~a~I~R~e~v-::"enue Service ("IRS") but she understood that HAMILTON TAFT sUbmitted checks drawn upon North Carolina National Bank ("NCNB") to SECURITY PACIFIC along with a corresponding "tax payment coupon". She understood that SECURITY PACIFIC then in turn deposited the HAMILTON TAFT checks in a SECURITY PACIFIC account. SECURITY PACIFIC then would notify the IRS electronically (by utilizing the information on the tax payment coupon) that the funds in the SECURITY PACIFIC account were available. The next business day the IRS then would withdraw these funds on deposit at SECURITY PACIFIC by electronically debiting the SECURITY PACIFIC tax deposit account.

b7C

I I stated that she recalled HAMILTON TAFT having about three bank accounts at SECURITY PACIFIC. One account was the payroll account. Another was the disbursement account. And the other was the negotiated control disbursement account ("CDA"). She explained that the CDA agreement consisted of three contracts: One between, SECURITY PACIFIC and HAMILTON TAFT, second between HAMILTON TAFT and NCNB, and the th~rd contract was between SECURITY PACIFIC and NCNB. HOWARD sa~d that SECURITY PACIFIC's contract with NCNB and HAMILTON TAFT did not cost SECURITY PACIFIC any float or funds, because the IRS was giving SECURITY PACIFIC one day float on it's tax deposits.

lnv""g."onon

by

6/21/94

(telephonically) " San Francisco, CA

SA WILLARD L. HATCHER, JR./WLH

t'ld=

TIlls documenl contains nClther recommcndnllons nor conclu"lOn~ of the FBI

It nnd Its conlenls are nOll0 be dlslnbUled OUlIliidc your Ilgency

ft'" Dot,d,,""d

1l." the propeT1 .... oflhe FBI nnd

196A-SF-93255(SUB c)-h~ -'6'-'/'-'.2..1=-'-/"-9.:>:4 ,0: 1011 ned

10 your ogeney,

_

•

-')-302, (Rev 1I-15-83l

•

196A-SF-93255-SUBC

Contmu,lIon 01FD-301 01 _-=========~

b7C

,

o.

6/22/94

, P,ge_-,,2:.-_

______~~Irepeated her previous statement that Hamilton Taft did mass mailings of sales promotional material and sent these mailings via the U.S. Mail. She advised that the normal practice at Hamilton Taft, with regard to the mailinT of sales packages, was again to send them via the U.S. Mail. L I did mention that on occasion these sales packages would be sent via Federal Express or personally delivered to a prospective customer by regional representation • !...

interview.

~!~tated that she was available for personal

-.

•

FD-302 (Re"o< 3.1<1-32)

.,

- .L:

•

FEDERAL BUREAU OF INVESTIGATION

Ollll: o(lnm"CnrIIOri

6/23/94

C;:;:::::::;=:;::;:;:;:;:;;:::::;::;:;:=:;:;:::::;;::::=:;:::I

The State Bar of California ("STATE BARn), 555 Franklin street, San Francisco, California, telephone number (415) 561-8389, was telephoned by the interviewing agent. The interviewing agent identified himself and the purpose of the interview. The interviewing agent sent, via facsimile, a copy of a Hamilton Taft and Company (nHAMILTON TAFT") letter addressed tal I dated June 26, 1990. This letter will be incorporated into this FD-302 as an attachment. I I gave the following information:

b7C

I

I

stated that he recalled meeting with HAMILTON TAFT representatives only twice during the time that STATE BAR did business with HAMILTON TAFT. These two meetings were once in the beginning and once at the end after the pUblicity of the HAMILTON TAFT fraud arose in March of 1991. i , said it was custom for HAMILTON TAFT to send documents to him via the United States Postal Service.

b7C

C:::::::Jw~eviewed the June 26, 1990 letter. He said that this letter was sent to him via the United States mail. He explained that he would not have kept such a letter because it would have not been needed to be referenced later.

II

f@

stated that he did keep a copy of a "denial b7C letter" re~g L and signed by CONNIE ARMSTRONG dated March 12, 1991. believes that this letter was also sent via th'jl United States Mal because it was not sent via facsimile. ( I stated he would try to locate the original of this letter so he could later turn it over to the interviewing agent.

I

!nvc5t1gahon on

by

~6~/~2~3~/~9~4~

(telephonically) " San Francisco, CA

SA WILLARD L. HATCHER, JR./WLH

f!t?14=

'Illl' dOl:umcnt COaillUl5 neither recommendo.tlons nor conelUllona oflhc FBt II II and It, conlenla arc nOilo be dl51nbuled outside your agency.

I~

J

f,l, #

Dnl~ dl.ltr.ll:d

196A-SF-93255 (SUB ck6:;1; -,6~1,-,2,,-3,,-,-1",9-,,4,--

the rmrCr1y of the FBI and I'" IOQllfld 10 your agency.

_

..

r FD-302. (R.v 11-15-83)

•

196A-SF-93255-SUBC

ContmuQhon

orFD~302 or

dL.... . . . . . . . . . . . . . .L b7C

=~=~=

. On _ _6.:../_2_3.:../_9_4__,. Pa••

_;:;.2

____

brochure, and she stated that on occasion this marketing package was sometimes sent via Federal Express to various clients, especially the larger ones like 3M corporation.

b7C

i lstated that there was a listing service that Hamilton Taft used in an effort to find the proper market niche for its services. She stated that Hamilton Taft would actually buy a list of prospective clients from this company whose business it was to provide vendors of all kinds of services, a list of prospective clients that would be most likely to purchase the services of a particular company like Hamilton Taft. She stated that generally speaking, mid-sized companies would receive marketing brochures and sales information via the U.S. Mail. She stated that the person in Hamilton Taft who would normally send these packages out to prospective clients was a person who she identified as the sales secretary namedl I (last name possibly arently reported to J She stated that (phonetic) was (secretary. was the national sales manager for Hamilton Taft.

?s

~

~A~s~a~n~a~s~ide,

she stated that the telephone number for Kphonetic) is 800-669-4342. She stated that ~t~h-'i-s--i~s~h~i-s--w-o-r~k--t~elephonenumber and that he, according to her latest information, is a sales representative for Sprint. At this point in time,1 Istated that she felt personally responsible for her customer's losses. She stated that! I had telephoned her after the demise of Hamilton Taft and as a result of his calling her, she went to work for Comp-U-Check. She mentioned that an unnamed New Jersey legislator was in the process of purchasing a check clearing service product from Comp-U-Check. A political consultant in New Jersey, according to! I was to be paid a monthly retainer by Comp-U-Check for this business. I Istated that she is involved in litigation with CHIP ARMSTRONG and that she has retained counsel for this suit. She advised that the unnamed political consultant sued CHIP ARMSTRONG in New Jersey State Court and in Texas State ~ The basis for this suit was not discussed. According to l----jMr. ARMSTRONG is attempting to take over a bank owned by some native Americans. She stated that Mr. ARMSTRONG has some connection with an entity known as Covia which I Idescribed as being the reservation arm of united Airlines. She remarked that her employment at Hamilton Taft

b7C

FD-302a (Rev

•

11~1.s-83)

•

196A-SF-93255-SUBC

Conlmtllluonof ~302of

_--,=====:::!...__b_-_'C

. On _ _6",-1_2_3",-1_9_4_ _• Png. _3 __

began in March of 1988 and continued on through December of 1988, and she was re-employed in June of 1989 through March of 1991. She stated that another individual who would have knowledge of b7C

b7C

the sales practices at Hamilton Taft is I I stated that Mr. ARMSTRONG has stolen money from her and he owes $12,000 to her. At this point in time, I lwas asked about the letter of November 27, 1989. She stated that she dropped handwritten notes in the mail to various clients with whom she was corresponding. She advised that it was her normal practice to call either I I the sales secretary, and ask them to send a form thank-you letter to various clients. She stated that the common method of sending these thank-you letters was via the U.S. Mail. She stated that with regard to November 27, 1989, she remembers where she was because she was staying with her sister and that correspondence arrived at her sister's house in! rlvia the U.S. Mail. I advised that I phonetic) was the person who produced the accompany~ng packets that went with the thank-you letter that was normally sent out by Hamilton Taft sales staff.

~ i,

'

,

.-

•

,

.. •

Flt:~C ~ Will

e, ,~p~

~1~~~~f~~~1~

No.___________

re AI:

UNITED STATES Ql-S_T1U.c:r COURT

...

. THE UNITED STATES OF AMERICA "S,

CONNIE C. APJ1STRONG, JR. and RICHARD A. FOWLES

INDICTMENT 18 U.S.C. § 2314 - STOLEN PROPERTY; 18 U.S.C. § 1343 _. WIRE FRAUD 18 U. S. C. § 2 _. AIDING AND ABETTING

A true bill. _

~U~_L

Fomnmt

Filed in open court thi5

of

dAy,

A..D. 19

_

f!-'Jv~

------------------------------------Clerk

B'"/. $

,__

7/l-·

t~ (7~'

D

/

q '1

7/ (9 .

'.

N

. [berehy ~ertify that the annexed

m5t:llme~t ,in a true and correct copy

of the ongmal on file in my office. Al'll:iST:

RICHARD W. WIEKING Clerk, U.S District Court Northe istrictof California By . '7 • !2e,,-uty Clerk

:2,.

PER \8 US.c.

'Mev. 01 fljj

.•_[

:t ,D-":FE.NDANT INFORllliA', ' , ' rlELATIVE TO A CRIMINAL

,·c,y.

OCOMp'LAIr-.rr

0lNFORMA110

f]lINDICTMENT

AC'~

IN U.S. DISTRICT COURT

Name 01 O"U.ct Court .• noIO'

--uFFENSECHARGED

JUdge'p-'I"tc'E'tj

NORTHERN DISTRICT OF CALIFORNIA

18 U.S.C. § 2314 - STOLEN PROPERTY; 18 U. S "C. § 1343 - WIRE FRAUD; L.-I Pmy 18 U. S .:C. § 2 - AIDING AND

~

__ DEFENDANT - U.S.•s.

ABETTING meanor JFelonv

PENALTY See Attachment

/"

PRDCEEOING

_

R94 ".-

OEFENOANT _ _..'

_

IS NOT IN CUSTODY

Name of Complainant Agency. or Person (& Title, if any)

1) Ii{] Has not been arrested, pending outcome this proceeding 1f not detained give date any prior summons ~

FBI

was served on above charges

o

oerson is awaitina rnal in another Federal or State COlJrt. give name of coun L--,-

o

this p~rson/Dror.eedingIS transferred from another district per (circle one) FRCrP 20. 21 or 40. Show District

0

0

On this charge

o

On another conviction

610 Awaiting trial on other charges

this is a reprosecutlon of charges previously dismissed which were U.S. Alt'y ODefense

Has detainer

this prosecution relates to a pending case involving this same defendant prior proceedings or appearance(s)

Fed'l

OSt

If answer to (6l is "Yes", show name of institution

SHOW DOCKET NO.

dismissed on motion of:

o o

.......

IS IN CUSTODY 5)

o

_

.---l

4)

..J

[

Is a Fugitive Is an Bailor Rpi-ease from (show District)

been filed?

MAGISTRATE CASE NO.

L...J

give date.

No

Mo.

DATE OF Ii. ARREST' LI_ _-C-

before U.S. Magistrate regarding ... this defendant were recorded under ~

If "Yes"

l..--l Yes

filed

Day

L!- - - - -

Year _

Or... if Arresting Agency &. Warrant were not Federal Naml! and Office at Perlon

Futml","g Informallon on THIS FORM !

MICHAEL J. YAMAGUCHI

~u S. AU'y Name 01 Aut. U.S. Alt"y (If aSSl9neoi

"---JOIMer

Eb F. Luckel

u.s.

DATE TRANSFERREDf) TO U,S. CUSTODY V,

----I

Mo.

Day

Agency

o

ThIS report amends AO 257 prevloully lubmltted

, . . - - - - - - - - - - - - - A D D I T I O N A L INFORMA TlON OR COMMENTS - - - - - - - - - - - -

PROCESS: SUMMONS

Connie C. Armstrong, Jr. c/o John Milano 507 Polk Street San Francisco, CA 94102

Request summons return date of 7/20/94

BAIL (AMT). NO PROCESS* *WHERE DEFENDANT PREVIOUSLY APPREHENDED ON COMPLAINT, NO NEW SUMMONS OR , WARRANT NEEDED, SINCE MAGISTRATE HAS SCHEDULED ARRAIGNMENT

_

•

"

;: ,

M~imun pena~ty

l8 U.S.C.

§

•

each count

2314 -

lO years imprisonment

'A1I"'-/

Supervised release of at least two years but not more than three years. c,~ $50 special assessment " l8 U.S.C.

§

l343 -

5 years imprisonment $250,000 fine

1) ('"'-' 7

At least two years~,t...not mo than three yea~1 \.1 $50 special as~ V '£.

I'

Cpmbined maximum penalty

Armstrong

130 years imprisonment

$5.25 million fine 63 years supervised release $1050 special assessments Fowles

60 years imprisonment $2.25 million fine

27 years supervised release $450 special assessment

6

~

F'\LEO

\1' _I~ -

ORIGINAL

1

2

MICHAEL J. YAMAGUCHI United states Attorney

3

Attorney for Plaintiff

F I LED

JUN 27 1994 nlCHARD

4

w,

WIEKING

tIERK;U,S;DlsTRlcrcoVRT NDI~lIi[liN DISTRICT OF CALIFORNIII

5 6

7

UNITED STATES DISTRICT COURT

6

NORTHERN DISTRICT OF CALIFORllIA

9

UNITED STATES OF AMERICA,

10

Plaintiff,

~GRt94: VIOLATION: \

v.

11

12

I

} }

CONNIE C. ARMSTRONG, JR. and nICHARD A. FOWLES,

13

.} } }

Defendants. 14

)

}

',CAL'

0276 Title lSi

un!t~·f

States Code, Section 2314 -' STOLEN PROPERTY; Title 18, United States Code, Section 1343 - .WIRE FRAUD Title 16, United States Code Section 2 - AIDING AND ABETTING

I N D I C T MEN T

15

•

•

16

INTRODUCTORY ALLEGAtIONS

•

17

The Grand Jury charges that: 16 1.

Hamilton Taft § Company, Inc.

("Hamilton Taft")

19

was incorporated in California in 1979.

Its business was to

20

provide payroll tax services to companies ("clients") with 2l

large payrolls.

Clients transferred funds to pay their payroll

22

taxes to Hamilton Taft, and Hamilton Taft was, in turn, 23 24

.

oblig~ted

.

to pay the 'taxes to the Internal Revenue Service and

·to-other taxing authorities when they were due. 25 2. 26

.Funds for federal income and social .security

taxes withheld from employees' wages accounted for mos~ of the

Exhibit "A"

000001

•

I '

-'

1

funds transferred to Hamilton

2

time its employees are paid, commonly twice a month.

4 ~ ..

A company with a large

payroll is required to pay these federal taxes to the IRS each

3

-i"

Taft~__

.

.'.

. 3•

"".5.

HamiltOriTaTt had· the use of funds it received

",'

fram clients for limited periods of time before the taxes were 6

due. 7

In the case of federal income and social security taxes,

Hamilton Taft had use of the funds for a day or less, except

8

for the "safe haven," an amount equal to five percent of the 9

tax, which was due as much as sixty days later.

Most of

10

Hamilton Taft's income was earned by investing the funds it 11

received to pay its clients' taxes in risk-free, short term, 12

liquid investments. 13

4.

In addition to paying taxes, Hamilton Taft often

14

provided other services, such as preparing and filing Quarterly 15

Employer Tax Returns, Forms 941.

These tax returns are due the

16

last day of the month following the end of each quarter. 17

5.

18 19

The IRS assesses penalties for payroll taxes

that are not paid when due, c£illed "failure to deposit" penalties.

Absent reasonable cause, when any tax payment is

20

missed, a failure to deposit penalty will be assessed, even'if 21

the tax has been paid by the time the quarterly tax return is 22

due.

The IRS usually bills a taxpayer for a failure to deposit

23

penalty several months after the tax return for the quarter is 24

filed.

If taxes remain unpaid after the quarterly tax return

25 26

I N DIe T MEN T (Armstrong & ,Fowles)

-. 2

000002

•

1 2 3 4 5 6

..-&

is filed, an additional penalty, called a "failure to pay" penalty, of one-half percent per month, is assessed and interest is charged on the unpaid balance.

The IRS usually

bills a taxpayer for a failure to pay penalty shortly after the quarterly tax return is filed.

Thus, failure to pay penalties

are typically due months earlier than failure to deposit .

7 8 9 10

penalties. 6.

Connie C. Armstrong, Jr. ("Armstrong") acquired

Hamilton Taft on or about March 31, 1989.

At that time,

Hamilton Taft had a working capital deficit of over $14 million 11

due to misappropriations by prior owners of funds received from. 12 13 14

clients.

The deficit-created a shortage of funds to

p~y

taxes,

but taxes could still be paid on time because some of the funds received, such as funds for the five percent safe-haven and for

15 16 17 18 19 20

various state and local taxes, were not due immediately. o

..

This

enabled Hamilton Taft to cover shortages from later collections of funds without falling behind in the payment of taxes and incurring penalties. 7.

From Armstrong's acquisltion of Hamilton Taft in

March 1989, to March 1991, when a trustee in bankruptcy was

.

21

22 23

.

24

appointed to run Hamilton Taft, Armstrong was Hamilton Taft's chief executive officer and its sole director and shareholder. During much of this time, Richard A. Fowles ("Fowles") was president of Hamilton Taft.

At other times, Fowles served".

25 26

I N DIe T MEN T (Armstrong & Fowles)

3

000003

1

Hamilton Taft or a related entity

2

~~_other

capacities.

PREAMBLE TO COUNTS ONE THROUGH TWENTY-ONE

3

The Grand Jury £urther charges that: 4

8; 5

Beginning around March 31,1989, ·andcontinuing

thereafter to around the end of March, 1991, in the City and

6

County of San Francisco, State and Northern District of 7

California, and elsewhere, 8

CONNIE C. ARMSTRONG, JR., 9

defendant herein, knowingly aided and abetted by 10 RICHARD A. FOWLES, 11

defendant herein, devised and intended to devise a scheme-and 12

artifice to defraud and to obtain money from companies that had 13

contracted with Hamilton Taft for payroll tax services by means 14

of false and fraudulent pretenses, representations, and 15

promises.

The. scheme is described in paragraphs 9-23.

16

17

The Diversions

" 9.

Armst~ong

caused funds received by Hamilton Taft

18

for the payment of taxes to

b~

diverted to companies he

19

controlled for investment purposes and

operati~g

costs, or to

20

himself for personal expenditures.

In less than two years,

21

approximately $55 million (net) was taken out of Hamilton Taft 22

23

for these purposes and replaced with various , notes and bonds. 10.

The investments made with the diverted funds

24

included the purchase of oil and

~as

leases, participation in a

25

26

I N D I C'~'M EN T (Armstrong & Fowles)

4

. ,

000004

,"

...

r

1

2 3 4

5

'.

shopping center joint venture, estate interests.

and_p~rchases

of various real

The operating costs paid with diverted funds

included skyboxes at Texas Stadium and a lavish Fourth of July party.

The personalexpendIEiiresofdTverfedfuridsTricTuded

the purchase of a ranch and political and charitable

6

contributions. 7

The Holding Back of Tax Payments

8 9

10

iQll.

As a result of the diversions, Hamilto~ Taft was

unable to pay all of its clients' taxes when they were due~ wnen tax

paYIl~nts

were not made

due, penalties: which

~hen '.

11

Hamilton Taft was responsible for paying, were incurred.

This

12 increased the need to hold back more taxes because more funds 13 14

were needed to pay the penalties. 12.

The non-payment of taxes began in the third

15 16 17

quarter of 1989 when approximately $25.• 3 million in tax payments were held back.

Beginning in the first quarter of

1990, Armstrong caused taxes to be held back each quarter.

The

18 holding back of taxes increas§d as follows: 19 First Quarter 1990

$19.4 million

20

---

$37.8 million

----

$45.0 million

---

$57.0 million

Second Quarter 1990 21 Third Quarter 1990 22

Fourth Quarter 1990 23

First Quarter 1991 ---- $68.2 million

24 13.

As time passed, Hamilton Taft became

25 26

I N .0 leT MEN T (Arms trong & Fowles').

5

-

000005

\i 1

2 3 4

~ncreaSing1Y dependent o~ the rece~p~ of additional funds from clients to pay the taxes of clients whose taxes had been held back earlier and to pay penaltiesl By the time the trustee in ~

bankruptcy was ·appofntedtotakeover····HamiltonTaft 'in 'March

5

1991, the cash shortage to pay taxes had increased to 6

approximately $85 million and the unpaid penalty liability was 7

approximately $8 million more. 8

The Penalties 9 10

14.

The holding back of taxes resulted in a penalty

liability to Hamilton Taft of approximately $15 million.

By

11

the time the trustee in bankruptcy was appointed, approximately 12

$7 million of this liability had been paid.

The penalty

13

liability alone. vastly' 'exceeded Hamilton Taft's income, even 14

without consideration o{ its othel:" operating expenses. ,15

The Fraud in the Inducement

16 15.

It was part of the scheme to fraudulently induce

17

companies to enter into tax service agreements ("contracts") 18

with Hamlltorr Taft:} 19 16.

Acting through regional sales representatives,

20

Armstrong attempted to sell Hamilton Taft's payroll tax 21

services to large companies throughout the United states. 22

During initial contacts and throughout the negotiations, 23

prospective clients were assured that Hamilton Taft was capable 24

of professionally and reliably providing all the payroll tax 25

26

I N DIe T MEN T (Armstrong & Fowles)

,.

1)

000006

tj

1 2

3

services it offered including, most_)mportantly, the timely payment of payroll taxes.

Potential clients were encouraged to

contact existing Hamilton Taft clients as references and were

4

led to believe thatHamlitonTaftwasfTnancTaIIy secure. 5

6 7

17.

As a result, between June 1969 and early 1991,

Hamilton Taft~ntered into new customer contracts with clients whose aggregate annual payroll tax liability exceeded $1

8

billionj

Each contract provided that Hamilton Taft would pay

9

the client's payroll taxes when they were due provided certain 10

conditions 11

~ere

116. ,

12

met.

As Armstrong and Fowles knew, these contracts

were f!audulently induced, because Armstrong had already begun 13

and~e:~ad

to divert funds needed for taxes

14

no intention of

paying all the clients' taxes when the; were due.l MoreJver, as 15

time passed and the capital deficit of Hamilton Taft 16 17 16 19 20

dramatically increased. Armstrong and Fowles knew that it would be impossible to pay all the taxes Hamilton Taft was responsible for paying.

By

t~e

time the trustee in bankruptcy

was appointed, the overdue payroll tax liability was approximately $91 million, of which over half was for clients

21

who signed contracts after Armstrong's acquisition of Hamilton 22

Taft.

Hamilton Taft had only approximately $6 million to pay

23

these taxes. 24

25

26

II I N 0 leT MEN T _ (Armstrong & Fowles)

7

000007

..

,

,

Li

\ 1

The Coyer-up

"inC' 2 3 4

5 lJ

6 7

19.

It was also part of the scheme to fraudulently

conceal the diversions, the systematic holding back of tax paymerits,themagriltudeofthe-res ultingpen alt leSt -and Hamilton Taft's ever-increasing dependence on recently received funds for taxes to pay the taxes of clients whose taxes had been held back earlier.

This concealment enabled Hamilton Taft

8

to continue to"receive funds from its clients, to avoid massive 9

10

cancellations of its contracts, and to preserve the opportunity for new business.

11

False"Tax 12 x'

20.

Retu~ns

are-Filed

In the third quarter of 1989, when approximately

13 ~

'same

14 15 16

'",

17

$25.3 million in

f~deral

payroll taxes were not paid, Armstrong

and Fowles approved the filing of approximately one hundred false Employer'S Quarterly Tax Returns, Forms 941, for the calendar quarter ending September 3D, 1989.

Each return

,

falsely stated that all the taxes for the quarteihad been 18 paid.

The- clients who

these returns were thereby

receiv~d

19 )"e

20 21

falsely led to believe that all their taxes had been paid. Later, when the IRS discovered the shortage and notified the clients and Hamilton Taft, the clients who inquired were again 22

:1

23 24 25 T

s

26

deceived when Hamilton Taft employees, at Armstrong and Fowles' direction, falsely stated that the reason for the non-payments was a temporary problem with Hamilton Taft's computer software I N-D I C % MEN T (Armstrong & Fowles)

8

000008

1

2 3 4

5

6

selected Clients' Taxes 22.

Not Held Back

~ere

Some of Hamilton Taft's clients had contracts

that required Hamilton Taft to verify each deposit of federal taxes during a quarter.

To

•

ensurethesuccessofth~cover"'up,

Armstrong and Fowles directed that the taxes 'of these clients . '.

not be held back.

.7

•

.'

..'>

The remaining clients would receive notice~'

of late payments (typically, about six months after they had 8

Ha~il-to9".Tatt:-J1ou~".' -

transferred funds to Hamilton Taft); but

9

.' 'r: . : .. pay the late penalties and. i t would appear to ·theGlIi!ft.t.!,til\~·tQ:':·./.: l>

10

'.

the late payment was an isolated, innocent 11

Moreover, as Armstrong and Fowles 12 13

':',

..

",

.' .": .-,:".

:'"

! :

...:'

··::

.

."..

I

:"....

.

,--

.

•

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Armstrong stonewalls'

19

t·· • ":l.'

.,:::.:. ;.f!', ~.: :.:F!~

•

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<),_

. 0 ·...

':'.[ j?!~.;;:~.. -... . ~" "'::. (':.~~. ~.t;

0'"'

falsely represented·tq many

~lients

that

th~ allega~ions

.

were

false and that taxes had been paid iate·:·ohly- ocqasioaalJ.y.· '"

.-

~"

o

21

24

•• 0

diversion o of funds and the non-payment of taxes, Armstrong . , '

Armstrong also attempted. to disseminate this false account·

23

•

D"

Taft employee notified some of the clients of the S'ys~em.,!,~i:o.:.~ : .",.. ~

20

22

;;.

Finally, in early March 1991 ,Wh,E!h .~:. Ham~.l tc?n·_··....... '.

23 •

18

-

,pc~l,IJ:'renca~~·•. ·

penalties and could only give misleading responses •.

17

•

~lJ. ~:.

who responded to inquires did not know the re~soTb~o~ t~ l~e

15

Q

,,7,' ... '., ,. ,,:;:, Hamiltori Taft.e~mpIOY~~·~

.. knew,

14

16

•

through the media. The language contained· ih' piuagraphs'..8 -: i~ is:

24.

incorporated by reference in Counts One through twenty-One ,

25 26 :. .. ": ,,"

-

.

,

•

'".

-

..

.

...

1 COUNTS RELATING TO THE PAYROL} TAX SERYICE PROPOSALS 2

COUNT ONE:

(18 U.S.C. §§ 2314, 2)

3

The Grand Jury charges that:

-----

4

6noraboi.ifsepEeiiiber11, 1989;· iii .... -_.- . _- .. '-.

5

the NOfEhefri

.--_.-.~ ~

District of California and elsewhere., 6

CONNIE C. ARMSTRONG, JR., and RICHARD A. FOWLES,

7 8

defendant herein, having devised and intending-to devise a

9

scheme and artifice to defraud and to obtain money by means of

10

false and fraudulent pretenses, representations and promises,

11

did knowingly and for the purpose of executing the scheme,

12

cause and induce representatives of Commercial Credit Group,

13

Inc. to travel in interstate commerce from Baltimore, MD, to

14

San Francisco, CA,·for a meeting with Hamilton Taft

15

representatives concerning Hamilton Taft's proposal to provide

16

payroll tax services to Commercial Credit.

17

QQUNT TWO:

18 19 20

(18 U.S.C. § 2314, 2)

The Grand Jury further charges that:

26, 1990, in the Northern District

On or about April

.

r---- - - --.----.... -.

of California and elsewhere, CONNIE C. ARMSTRONG, JR. and RICHARD A. FOWLES,

21

22

defendants herein, having devised and intending to devise a 23 24 ': - 25 o.

26

scheme and artifice to defraud and to obtain money by means of .false and fraudulent.. pretenses, representations and promises, • I N D I C T MEN T (Armstrong & Fowles) __ 11 ,.

..

..

.

...

. . ~.::,;-:-!~•. : ~. ~ . ...,-,,"' ......'''t>o '.."" •

'•• t/"tII"':_"'-~'.

~-;'"

,

•

'.J

.

,"

000011

.....

"

LI 1 2 3

did knowingly and for the purpose

~f-executing

the scheme,

---

cause and induce representatives of R. R. Donne1ley & Sons

---

..

_---'- ..-

.. -.

_.'

Company to travel in interstate commerce from Chicago, IL, to

4

San· Francisco,CA, fora·· meetlngwlthHamiltonTaft 5 6

7

representatives concerning Hamilton Taft's proposal to provide payroll tax services 'to R. R. DonnelleY., COUNT THREE:

(18 U.S.C.

§

-"-.,.'

2314)

8

The Grand Jury further charges that: 9

On or about June 6, 1990, in the Northern District of 10 California and elsewhere, 11

CONNIE C. ARMSTRONG, JR., 12 defendant herein, having devised and intending to devise a 13

scheme and artifice to defraud and to obtain money by means of 14

false and fraudulent

pretense~,

representations and promises,

15 did knowingly and for the purpose of executing the scheme, 16

-- ----_.-

cause and induce representatives of Scott Paeer Company to .

17

'-'-

travel in interstate commerce from Philadelphia, PA, to San 18 Francisco, CA, for a meeting yith Hamilton Taft representatives 19 concerning Hamilton Taft's proposal to provide payroll tax 20 services to Scott Paper Company. 21

25

26

'I:~~D I C T M E·N T (Armstrong & Fowles)

12

000012

,

Ll 1

2 3

COUNTS RELATING TO TAX COUNT FOUB:

(18 U.S.C.

§

~§BVICE

AGREEMENTS

1343, 2)

The Grand Jury further charges that: On or about December 5 r 1989, in the Northern

5

District of California, and elsewhere,

6

CONNIE C. ARMSTRONG, JR. and RICHARD A. FOWLES,

7 8

defendants herein: for the purpose of executing the scheme to

9

defraud and to obtain money by means of false and fraudulent

10

pretenses, representations, and promises, and attempting to do

11

so, did knowingly cause to be transmitted by means of wire

12

communication in interstate commerce a facsimile copy of a

13

signed Tax Service Agreement from Sunbelt Beverage in

14

Lutherville, MD, to Hamilton Taft in San Francisco, CA.

15

COUNT FIVE:

'°16, ~7

18.

19

(18 U.S.C.

§

1343, 2)

The Grand Jury further ,charges that: On or

~bout

December 15, 1989, in the Northern

District of California, and elsewhere, CONNIE C. ARMSTRONG, JR. and RICHARD A. FOWLES,

20

defendants herein, for the purpose of executing the scheme to 21

defraud and to obtain money by means of false and fraudulent 22

pretenses, representations, and promises, and attempting to do 23

so, did knowingly cause to be transmitted by means of wire 24

communication in interstate commerce a facsimile COpy of a 25 26

I N D I C T MEN T (Armstrong & Fowles)

13

OOOOIS:

...

'

r·

1 2 3

signed Tax Service Agreement from the Kendall company in Boston, MA, to Hamilton Taft in San Francisco, CA. COUNT SIX:

4

The Grand Jury charges that:

5 6

(18 U.S.C. § 1343)

On or about September 18, 1990, in the Northern District of California, and elsewhere,

7

CONNIE C. ARMSTRONG, JR.,

8

defendant herein, for the purpose of executing the scheme to 9

defraud and to obtain money by means of false and fraudulent

10

pretenses, representations, and promises, and

11

so, did knowingly cause to be transmitted by means of wire 12

communication in interstate commerce a facsimile copy of a 13

signed Tax Service Agreement from Jim Beam Brands Company and 14

JBB Spirits Inc. in Deerfield, IL, to Hamilton Taft in San 15

o

Francisco, CA.

• Q.

16

17

.• '

*,1

..

"

o'"

•

.

COUNTS RELATfN8TQ THE DIVERSION'OF FUNDS NEEDED FOR TAXES . . •

-. --

COUNT 'SEVEN:-

-.

•

C ' l I · .f

(18 U.S.C. §. 1343,. ~)

~.

•

18

The Grand Jury futtber charges that:

---

19

On or about September 1, 1989, in the Northern 20

'--'--

.-.---_.--

."-"

-.-

District of California and elsewhere, 21

CONNIE C. ARMSTRONG, JR., AND RICHARD A. FOWLES,

22 23

defendant herein, for the purpose of executing the scheme to

24

defraud

25

representations, and promises, and

26

~nd

to obtain money by false and

I N D I C T MEN T (Armstrong & Fowles)

14

fraudulen~

attemp~ing

..

pretenses,

to do so, did . .;.-

000014

1 2

3 4

5

knowingly cause to be transmitted

~y_means

of wire

communication in interstate commerce from a Hamilton Taft Smith Barney account in Newport Beach, CA, to State Street Bank & Trust Company, Boston, MA, flblo Dresdner Enterprises, Inc., a money wire transfer in the amount of $7 million.

6

-----

COUNT EIGHT: 7

(18 U.S.C.

§§

1343, 2)

The Grand Jury further charges that:

8

On or about November 14, 1989, in the Northern

9

10

District of California and elsewhere, CONNIE C. ARMSTRONG, JR. and RICHARD A. FOWLES,

11 12

defendants herein, for the purpose of executing the scheme to

13

defraud and to obtain money by false and fraudulent pretenses,

14

representations, and promises, and attempting to do so, did

15

knowingly cause to be transmitted by means of wire

16

communication in interstate commerce from a Hamilton Taft Bank

17

of America account in San Francisco, CA, to State Street Bank

18

and Trust Company, Boston, MA, f/b/o Dresdner Enterprises,

19

Inc., a money wire transfer in the amount of $1.1 million.

20

II

21

II

22

II

23

II

24

II

25

II

26

I N D i C T MEN T (Armstrong & Fowles)

15

000015

(j

1

COUNT NINE:

2

(18 U.S.C. §§ 1343, 2L_

The Grand Jury further charges that:

3

On or about February 8, 1990, in the Northern

4

District of California and elsewhere, 5

CONNIE C. ARMSTRONG, JR. and RICHARD A. FOWLES,

6 7

defendants herein, for the purpose of executing the scheme to

8

defraud and to obtain money by false and frauQylent pretenses,

9

representations, and promises, and attempting to do so, did

10

knowingly cause to be transmitted by means of wire

11

communication in interstate commerce from a Hamilton Taft Smith

12

Barney account in Newport Beach, CA, to State Street Bank &

13

Trust Company, Boston, MA, f/b/o Winthrop Realty Company, a

14

money wire transfer in the amount of $9.8 million. . ..

_ _-

-

-

- - - ' ,

••••

0

••••

-"_._-'_._~--

15

COUNT TEN:

(18 U.S.C.

§§

1343, 2)

16

The Grand Jury further charges that:

17

On or about May 2, 1990, in the Northern District of

18

Cal iforn.ia and elsewhere, CONNIE C. ARMSTRONG, JR. and RICHARD A. FOWLES,

19 20

defendants herein, for the purpose of executing the scheme to 21

defraud and to obtain money by false and fraudulent pretenses, 22

representations, and promises, and attempting to do so, did 23

. knowingly cause to be transmitted by means of wire ~5. ,.

-~

...

t1.

communfcat10n,in interstate commerce from a Hamilton Taft

25 26

~ank

i N D I C T MEN T

(Armstrong & Fowles)

16

OQOOIG

1 2

3

of America account in San FranciscQ1_CA, to a Dresdner Petroleum, Inc., Bank One account in Dallas, TX, a money wire transfer in the amount of $4 million.

4

COUNT ELEVEN: 5

The Grand Jury further charges that:

6 7

(18 U.S.C. § 1343)

On or about September 4, 1990, in the Northern District of California and elsewhere,

8

CONNIE C. ARMSTRONG, JR.,

9

defendant herein, for the purpose of executing the scheme to 10

defraud and to obtain money by false and fraudulent pretenses: 11

representations, and promises, and attempting to do so, did 12

knowingly cause to be transmitted by means of wire 13

communication in interstate commerce from a Hamilton Taft Bank 14

of America account in San Francisco, CA, to First National Bank 15

of Chicago, Chicago, Illinois, flblo Winthrop Realty

~ompany,

a

16

money wire transfer in the amount of $2 million. 17 18

COUNT TWELVE: •

(18 U.S.C. § 1343)

The Grand Jury furtper charges that: 19

On or about September 10, 1990, in the Northern 20

District of California and elsewhere, 21

CONNIE C. ARMSTRONG, JR., 22

defendant herein, for the purpose of executing the scheme to 23

defraud and to obtain money by false and fraudulent pretenses, 24

repre,sentations, and promises, ,and attempting to do so, dido':' 25 26

•

I N D I C T MEN T (Armstrong & Fowles)

-,ll

.

17

000017

.

.......- .

",;,.,,:'".

C.J 1

knowingly cause to be transmitted

2

~y_means

of wire

communication in interstate commerce from a Hamilton Taft

3

Security Pacific account in San Francisco, CA, to a Remington

4

Companies, Inc. Bank One account in Dallas, TX, a money wire

5

transfer in the amount of $1.7 million.

6

COUNT THIRTEEN: 7

(18 U.S.C.

§

1343)

The Grand Jury further charges that:

8

On or about September 12, 1990, in the Northern

9

District of california and elsewhere, 10 CONNIE C. ARMSTRONG, JR., 11

qefendant herein, for the purpose of executing the scheme to 12

;

13 14

defraud and to obtain money by false and fraudulent pretenses, representations, and promises, and attempting to do so, did knowingly cause to be transmitted by means of wire 15 communication in interstate commerce from a Hamilton Taft 16

Security PacifJc account in San Francisco, Ck, to a Remington 17 Companies Inc. Bank One account in Dallas, TX, a money wire 18 transfer ·in the amount of

$3.~

million.

19 COUNT FOURTEEN:

(18 U.S.C.

§

1343)

20 The Grand Jury further charges that: 21 On or about December 5, 1990, in the Northern 22

District of California and elsewhere, 23

..

CONNIE C. ARMSTRONG, JR., 24

._.

defendant hereiri, for the purpose of

exec~ting

the scheme to

25 26

.....

I N D.I C THE N T (Armstrong & Fowles)

18

00.0018

~-' 1 defraud and to obtain money by false and fraudulent pretenses, 2

representations, and promises, and attempting to do so, did 3

5

Security Pacific account in San Francisco, CA, to a 6

Knightsbridge Treasury Bank One account in Dallas, TX, a money 7

wire transfer in the amount of $1.1 million. 8

COUNTS RELATING TO THE PAYMENT OF LATE TAXES WITH FUNDS RECEIYED FOR CURRENTLY DUE TAXES

9

10

COUNT FIFTEEN

(18 U.S.C.

§

2314, 2)

JS-kJ',D6-"'J~

11

The Grand Jury further charges that:

12

On or about April 12, 1990, in the Northern District of

13

California, and elsewhere,

14

CONNIE C. ARMSTRONG, JR., and RICHARD A. FOWLES,

15

defendants herein, did cause to be transported in interstate 16 17

commerce ..- from

Hami~ton

Taft in San Francisco, CA, to the North

Carolina Natiotlal Bank in Ashville, NC, securities having an 18 aggregate value of

approximat~ly

$19.4 millon, knowing that the

19 securities were traceable to funds that were wrongfully 20 converted and taken by fraud. 21

26

I N D I C T M~ N T (Armstrong & Fowles)

.. . ~

19

..

,

000619

'"' 1

COUNT SIXTEEN:

2

7 8

2314)

On or about August 1, 1990, in the Northern District of California, and elsewhere,

5 6

§

The Grand Jury further charges that:

3 4

(18 U.S.C.

CONNIE C. ARMSTRONG, JR., defendant herein, did cause to be transported in interstate commerce from Hamilton Taft in San Francisco, CA, to the North Carolina National Bank in Ashville, NC, securities having an

9

aggregate value of approximately $37.8 million, knowing that 10 the securities were traceable to funds

... """ .......... "'~1C.'-

.'C~'C

•.• __ ... _1: •• '

, ...

W.LUlly.LU..L .... ~

11

converted and taken by_ fraud. 12 COUNT SEVENTEEN:

(18 U.S.C.

§

2314)

13

The Grand Jury further charges that: 14 15

On or about November 1, 1990, in the Northern District of California, and elsewhere,

16

CONNIE C. ARMSTRONG, JR.,

17 18 19 20 21

defendant herein, did cause to be transported in interstate commerce from Hamilton Taft in San Francisco, CA, to the North Carolina National Bank in Ashville, NC, securities having an aggregate value of approximately $45.0 million, knowing .that the securities were traceable to funds that were wrongfully

22

23 24

25· 26

converted and taken by fraud.

II II I N D I C T MEN T . (Armstrong & Fowles)

20

"

000020

.

'

1

2 3

COUNT EIGHTEEN:

(18 U.S.C. § 2314L_

The Grand Jury further charges that: On or about February 1, 1991, in the Northern District of

4

California, and elsewhere, 5

CONNIE C. ARMSTRONG,

6

defendant herein, did cause to be transported in interstate 7

commerce from Hamilton Taft in San Francisco, CA, to the North 8

Carolina National Bank in Ashville, NC, securities having an 9

aggregate value of approximately $57.0 million, knowing that 10

the securities were traceable to funds that were wrongfully 11

converted and taken by fraud. 12

COUNTS RELATING TO THE pENIAL OF SOLODQFF'S ALLEGATIONS 13

COUNT NINETEEN:

(18 U.S.C. § 1343)

14

The Grand Jury further charges that: 15 On or about March 12, 1991, in the Northern District 16

of California, 17

CONNIE C. ARMSTRONG, JR., 18 19

defendant here~n, for the purpose of executing the scheme to defraud and to obtain money by false and fraudulent pretenses,

20

representations, and promises, and attempting to do so, did 21

knowingly cause to be transmitted by means of wire 22

communication in interstate commerce from San Francisco, CA, to 23 24

-

Advo System Inc., Windsor, CT, a facsimile letter . . -' .

12, 1991, signed "Connie C. Armstrong, Jr."

dated'~arch

.- .

25 26

I N D I C T M:E N T (Armstrong &_Fowl~s)

21

000021

•

•

1

2 3

COUNT TWENTY:

(18 U.S.C.

§

1343)

__

The Grand Jury further charges that: On or about March 12, 1991, in the Northern District

4

of California, 5

CONNIE C. ARMSTRONG, JR.,

6

defendant herein, for the purpose of executing the scheme to 7

defraud and to obtain money by false and fraudulent pretenses, 8

representations, and promises, and attempting to do so, did 9

knowingly cause to be transmitted by means of wire 10

communication in interstate commerce from San Francisco, CA, to 11

Federal Express Corporation, Memphis, TN, a

facsimi~e

letter

12 dated March 12, 1991, signed "Connie C. Armstrong, Jr." 13 COUNT TWENTY-ONE:

(18 U.S.C.

§

1343)

14 The Grand Jury further charges that: 15

On or about March 12, 1991, in the Northern District 16 of California, 17

18

CONNIE C. ARMSTRONG, JR., defendant herein, for the purpose of executing the scheme to 19 defraud and to obtain money by false and fraudulent pretenses, 20

21

representations, and promises, and attempting to do so, did

25 26

I N D I C T MEN T (Armstrong & Fowles)

22

000022

1 1 1

1

AD 2458 (ReI{, alg~

1 2 3 -4 (

5

knowingly cause to be transmitted

Scott Paper Company, Philadelphia, PA, a facsimile letter

A TRUE BILL.

O

===,...-FOREPERSON

8

~

whic

c1 1 1

7

, pleat plea'

1

March 12, 1991, signed "Connie C. Armstrong, Jr."

6 ~. ,

of wire

communication in interstate commerce from San Francisco, C, 1

DATED: rHE DEf

~y_means

1 1

9

7, was

;6,J afte

10

Title &.

11

18 U.S.

12 13

18U.~

1

• Y I at,es ~orney

1

Approved as to Form: 4-1V AUSA: LUCKEL

•

1 1

14 1

15

to th'

16

1

17

1

18

1

19 1

20 1

21 22

1

23

1

24

1

25 26

......

1

I N D I C T MEN T (Armstrong & Fowles)

23

~

1

1

•

FD-302 (Rov 3-10-82)

•

-. :t .-

•

FEDERAL BUREAU OF INVESTIGATION

Date Orlrnnscnptlon

6/27/94

On the evening of June 23, 1994,[ ~s telephonically contacted at her residence, I ::J The official identity of the interviewing agent was made clear to I land she provided the following information:

I Iwas advised that the purpose of this telephone call was to obtain information regarding her former emplo~~e~n~t _ with Hamilton Taft Company in San Francisco, California. L~~ revealed that she had, in fact, been employed at Hamilton Taft in San Francisco as a sales representative and she stated that it was the custom and habit, that is the practice of Hamilton Taft company, to mail contracts and proposals to prospective clients. She was asked as to whether or not she recalls having mailed a contract to R. R. Donnelley and Son which was headquartered in Chicago, Illinois, and she was asked the same question for Sinai Hospital.

__

b7C

She stated that she had made a "cold call" to R. R. Donnelley while she was stationed in the chicago office of Hamilton Taft. She stated that this call was made in January of 1990, and she recalls that she personally went to R. R. Donnelley after calling them and delivered a sales brochure to I I I IWho was her contact with R. R. Donnelley. She advised that a big selling point in closing any deal with a client, especially with R. R. Donnelley, was the fact that Hamilton Taft had a $50 million fidelity bond in place. She stated that she recalls having hand-carried a contract to I land having him execute the contract between Hamilton Taft and his company, R. R. Donnelley and Sons. She stated that she was very delighted at having been able to land this contract with R. R. Donnelley and Sons and stated that she personally flew from Chicago to San Francisco with the signed contract in her possession. She volunteered that Hamilton Taft had a common practice of engaging in mass mailings of promotional sales packages to prospective clients. She stated that letters were commonly sent out to prospective clients and that various ads were placed in trade pUblications. She specifically mentioned a marketing package which basically was a burgundy colored

InvestigatiOn on

---"6'-"1.02"'3'-"1-"9:..::4'---_ _,,'

San Francisco, Califcrmnia

b~r-----------IL/~d~m:l::::..-7_C

D'" d"""d

TIlls document conllllnll neither recommendallons nor conclusIOns orlbe FBI IllS the property orlbe FlU ond

It and Its contents are not to be dlslnbuled oUlslde your og~ncy

I 7#/1

196A-SF-93255-SUBC6/24/94

IS

lonned to your agency.

I I , I

196A-SF-93255 \p1cm twenty spreadsheets. These were merged with approximately 5,000 lines of IRS data. Subsequently, federal grand jury exhibits were prepared by these analysts and contributed to the simplification of the data for the members of the grand jury in their deliberations. It should be noted that our financial analysts worked on the weekends and on their regular days off in order to meet the deadline for the presentation of this matter to the grand jury. All of this effort was done at the request of the United States Attorney's office.

I

It is anticipated that this case for trial, the talen,s an: e:ert~se fA 'S'-::'::"'"====""'l"==~ .....r:::"'-! b7:: I andL not to men on SpeCl.a gent Hatcher will once aga n ~ Wl. ness to the fact that success in the prosecution of major white collar crime cases is truly a team effort. landl II thank you for all your efforts.

I

2*