Convictions obtained in scheme to divert two Department of Education grants totaling S1.9 million meant for school districts in South Dakota, which money was then used to buy expensive SUVs and other items. Washington, DC, February 3, 2004

Published by the Department of Education, Office of Inspector General on 2004-02-03.

Below is a raw (and likely hideous) rendition of the original report.

OIG Investigative Reports, Convictions Obtained in Scheme to Divert Two Department of Education Grants Totaling $1.9 Million
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Roscoe C. Howard, Jr.
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Tuesday, February 3, 2004
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Channing Phillips   (202) 514-6933
Convictions Obtained in Scheme to Divert Two Department of Education Grants Totaling $1.9 Million Meant for School Districts in South Dakota, Which Money Was Then Used to Buy Expensive SUVs and Other Items
Washington, D.C. - United States Attorney Roscoe C. Howard, Jr., Michael A. Mason, Assistant Director in Charge of the FBI's Washington Field Office, and Jack P. Higgins, Inspector General for the United States Department of Education, announced that yesterday a federal jury found John B. Holmes, 35, of Silver Spring, Maryland, guilty of conspiring to receive stolen government property, conspiracy to commit money laundering and false use of a social security number. The jury also found Daniel Dorcely, 30, also of Silver Spring, guilty of making a false statement to the FBI in this matter. At their respective sentencings, which are scheduled for later this year before the Honorable Reggie B. Walton, Holmes faces up to 30 years in prison and a million dollars in fines and Dorcely faces up to 5 years in prison and a $250,000 fine.
These convictions are the most recent ones in a series in this matter. Stateson C. Francois, 28, of Silver Spring, pled guilty, the day before the trial of the above-matter was to begin, to the same charges to which Holmes thereafter was found guilty. Dominique Germain, 27, also of Silver Spring, previously pled guilty to obstruction of justice in this matter and faces up to five years in prison and a $250,000 fine. Three other individuals have also pled guilty in this matter, Denise Cobham, 53, of Mitchellville, Maryland, and Roger Bowen, of Upper Marlboro, Maryland, pled guilty to conspiracy to receive stolen government property and conspiracy to commit money laundering, and Diallo Cobham, Denise Cobham's son, pled guilty to wire fraud. Denise Cobham and Bowen face up to 25 years in prison and $750,000 in fines when they are sentenced by Judge Walton, while Diallo Cobham faces up to 5 years in prison and a fine of $250,000 when he is sentenced by Judge Walton.
According to the government's evidence, Impact Aid grants are sent to school districts whose tax base is depleted by the presence of non-taxable sources such as military bases or Indian reservations. A school district designates the bank account into which the money is to be sent by submitting a Direct Deposit form. In this case, on March 27, 2000, someone submitted Direct Deposit forms for two school districts in South Dakota, changing the banking information for the school districts from the intended banks to NationsBank (now Bank of America) in Adelphi, Maryland. As a result, two grants of over $900,000 each were sent on March 31, 2000, to two bank accounts at that bank, in the names of Dany Enterprises, Inc., and Children's Cottage, Inc.
Shortly before the money came into the Dany Enterprises account, Daniel Dorcely, the owner of that account, placed his cousin, Stateson Francois, on the account under a false name of Tyrone Wallace. Dorcely and Francois told the bank branch manager that they were expecting a large contract from the government and that "Wallace, could conduct business from the account while Dorcely was out of the area for basic training with his National Guard unit. On the day the Education funds came into the Dany Enterprises account, Francois went into the bank and withdrew $60,600, including a cashier's check for $46,900, $4,700 in traveler's checks, and $9,000 in cash. Later that day, Holmes and Francois went to Capitol Cadillac in Greenbelt, Maryland, at which time Holmes bought a Cadillac Escalade with the cashier's check for $46,900. Holmes identified himself and put the vehicle in the name of Timothy Robbins, a name shown on a D.C. driver's license Holmes obtained using someone else's Social Security Number. On April 3, 2000, Francois obtained a D.C. driver's license under the name of Tyrone Wallace, also using someone else's Social Security Number.
On April 4, 2000, Francois and Dominique Germain, Dorcely's brother-in-law, went into the Bank of America in Adelphi, Maryland, and Francois got two cashier's checks, one for $50,000 and the second for $48,000. Later that day, Holmes and Francois went to Wilson Powell Lincoln Mercury in Marlow Heights, Maryland, and Francois bought a Lincoln Navigator in the name of Tyrone Wallace with the $50,000 cashier's check. The two then went to Lustine Chevrolet in Hyattsville, Maryland, and tried to purchase a Corvette with the $48,000 cashier's checks. A Vice President at that dealership became suspicious of the purchase and delayed the purchase, pointing out that there was a misspelling of the dealership's name on the check. Holmes and Francois left the dealership to obtain a check with the correct spelling. During this time, the dealership contacted the FBI, which determined that the money was not properly in the Dany Enterprises account and the FBI asked the bank to freeze the account.
During the course of the joint FBI and Department of Education OIG investigation, an FBI agent contacted Dorcely and asked him to identify "Tyrone Wallace." Dorcely falsely stated Wallace was not related to him, that he met Wallace 7 to 8 months before, and did not know where to find him. Francois was thereafter stopped driving the Navigator and identified by the bank branch manager as the person who Dorcely had introduced to him as Wallace. Holmes was also stopped driving the Escalade. Both vehicles were seized and the FBI seized about $800,000 from the Dany Enterprises account.
Regarding the Children's Cottage account, Denise Cobham had run a day-care center in that name in Riverdale, Maryland. She was attempting to acquire the property for the center, but could not get a loan for the property in her own name. Accordingly, she and Bowen submitted fraudulent paperwork in the name of a female employee of the day care center and then in the name of Cobham's son, Diallo Cobham. One day, Bowen received a call notifying him that the loan had been disapproved. When Bowen received that call, Holmes, with whom Bowen previously had done transactions, was present, Holmes told Bowen he knew someone in the government that could wire money to a business account in an amount that would be enough to purchase the property. Bowen arranged a meeting between Holmes and Denise Cobham and Cobham agreed to the plan where she would get the money needed for the school ($135,000) and Holmes and Bowen would get $40,000 each. Cobham gave Holmes a copy of her business account check which Holmes needed to arrange the transfer of the money. Thereafter, on March 31, 2000, over $900,000 was deposited into Cobham's account from the Department of Education. Cobham went to settlement on the Children's Cottage property on April 7, 2000, and gave Bowen $12,000 for his assistance in obtaining the money. Bowen, in turn, gave some of this money to Holmes. On April 12, 2000, the government, having had frozen the Children's Cottage bank account, seized $844,336.33 from it. The government has also now seized and forfeited $1,718,908.73 in cars and bank accounts.
At trial in this case, the jury found Holmes guilty of his actions relative to the money from the Dany Enterprises account, but could not reach a verdict as to his actions relative to the Children's Cottage account.
In announcing the convictions, U.S. Attorney Howard, Assistant Director Mason, and Inspector General Higgins commended the work of PBI Special Agents Thomas Chadwick and Debra Laprevotte, and Special Agents George Baxavaneos and Gary Mitchell of the Department of Education Office of the Inspector General. They also praised Paralegal Specialist Paula Pagano, litigation support specialist Debbie Dunn, and Legal Assistants Shavonne Jennings-Rush and Teesha Tobias. Finally, they acknowledged the good work of Assistant United States Attorneys (AUSAs) Patrick Rowan and Howard Sklamberg, who handled this matter initially, and AUSAS Jonathan Rosen and Daniel Butler, who prosecuted the case through trial and will handle the sentencings.
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Last Modified: 02/28/2005
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