UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
__________________________________ UNITED STATES OF AMERICA,
Plaintiff,
v. File Nos. 1:08-CR-282 1:09-CR-150 MICHAEL BRUCE VORCE,
Defendant.
__________________________________/
Plea Before
THE HONORABLE ROBERT HOLMES BELL United States District Judge June 18, 2009
APPEARANCES
TIMOTHY P. VERHEY LARRY C. WILLEY Assistant U.S. Attorney 940 Trust Building P.O. Box 208 40 Pearl St., NW
Grand Rapids, MI 49501 Grand Rapids, MI 49503 Attorney for Plaintiff Attorney for Defendant
Kevin W. Gaugier, CSR-3065 U.S. District Court Reporter
Grand Rapids, Michigan June 18, 2009
4:17 p.m.
P R O C E E D I N G S
THE COURT: Good afternoon. We're ready for our next matter that's been set for the afternoon, the matter of United States v. Michael Bruce Vorce. In this matter Mr. Vorce is represented here by Mr. Willey as retained counsel. The government is here represented by Mr. VerHey.
This Court has been informed by virtue of a plea agreement that this matter involves three distinct issues. One coming from this court is the 1:08-CR-282 indictment
that's a many-count indictment. It was filed on November 6th of 2008. And then there's a case 1:09-CR-150 which comes to this Court on a felony information of which there has been a waiver had, and then this matter comes to the Court on -- I believe there's a Rule 20. I guess the Rule 20 is the CR-150, is it not?
MR. WILLEY: Yes.
MR. VERHEY: That's correct.
THE COURT: That's the matter that comes from Wisconsin, okay. 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
This plea agreement before this Court is a ten-page document. Mr. Willey, you've signed on the 4th of June to this plea agreement indicating that you represent Mr. Vorce, that you've carefully discussed this agreement with your
client, you've fully advised him of his rights, defenses, the sentence guidelines provisions, and the consequences of
entering into this agreement, and you believe your client's decision to enter this agreement is an informed and voluntary one. Is that correct?
MR. WILLEY: That is correct, Your Honor.
THE COURT: Okay. If you could come forward with your client, please.
Are you Michael Bruce Vorce?
DEFENDANT VORCE: I am, Your Honor.
THE COURT: If you'd raise your right hand, please. (Defendant Vorce was sworn by the Court.)
THE COURT: Are you under the care of a doctor or is there anything mentally or physically that would affect or in any way impair your ability to participate in these
proceedings?
DEFENDANT VORCE: No, Your Honor.
THE COURT: Is this your signature on the last page of this plea agreement about in the middle of the page?
DEFENDANT VORCE: Yes, it is, Your Honor.
THE COURT: And above your signature it says: "I 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
have read this agreement and carefully discussed every part of it with my attorney." Is that correct?
DEFENDANT VORCE: That's correct, Your Honor.
THE COURT: And in Paragraph 1 on the front page it indicates that you have been charged with a number of counts, and in Paragraph 2 it indicates that you've agreed to plead guilty to Count 6 and Count 13 of the indictment 1:08-CR-282 from this Court involving Macatawa Bank and that you have agreed to plead guilty to a criminal information charging you with willfully failing to file an income tax return in the year 2006, and you've agreed to waive indictment and plead guilty to a federal bank charge filed in the Eastern District of Wisconsin that relates to a bank fraud matter. Do you understand this plea agreement?
DEFENDANT VORCE: Yes, I do, Your Honor.
THE COURT: Do you understand and have you been advised of your defenses and your rights to this matter and the sentence guideline provisions and the consequences of entering into this agreement?
DEFENDANT VORCE: Yes, I have.
THE COURT: Has anyone made any promises to you to induce you to enter this agreement or any threats to you to get you to agree to this matter?
DEFENDANT VORCE: No, Your Honor.
THE COURT: Are you satisfied with the 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
representations provided here by Mr. Willey on your behalf? DEFENDANT VORCE: Yes, I am.
THE COURT: Have you had an ample opportunity to thoroughly discuss this matter with him?
DEFENDANT VORCE: Yes, I have.
THE COURT: Do you understand that you have the right to counsel throughout any proceedings that are had in this court?
DEFENDANT VORCE: I understand.
THE COURT: Do you understand that where this plea agreement in its completeness, and it's well drafted,
obviously, where it contains certain recommendations to this Court, those are recommendations; this Court is not bound by those recommendations, but must give serious consideration to them? Do you understand that?
DEFENDANT VORCE: I understand that.
THE COURT: Okay. Let's turn our attention in this matter to the indictment 1:09-CR-150, and I believe if you could read and/or summarize Counts 6 and 13, Mr. VerHey.
MR. VERHEY: Yes, Your Honor. Count 6 is just over one page in length, so perhaps I should just read it.
THE COURT: Okay.
MR. VERHEY: It states: From in or about October 2004 to December 6, 2006, in the Southern Division of the Western District of Michigan and elsewhere, Michael Bruce 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Vorce did knowingly execute a scheme and artifice to defraud a federally insured financial institution, specifically Macatawa Bank.
The defendant, operating under the business names West Michigan Yachts and Barrett Bruce Holdings, LLC,
accomplished this scheme by obtaining a series of loans totaling over $9,200,000 from Macatawa Bank. The bank made these loans after considering personal financial information and other documents supplied by the defendant. The
information supplied by the defendant was false and he knew it to be false. The defendant supplied the bank with false
income tax returns indicating falsely inflated income earned by the defendant in past years. The income tax returns
indicated that they had been prepared by a tax preparer when in fact the tax preparer had never prepared such documents. The defendant also supplied false financial documents as support for his loans.
The bank also relied upon false information,
supplied by the defendant, relating to collateral in making loans to the defendant. The defendant represented that many of the loans he requested were to buy boats. As part of the loan process, the bank requested information about the boats so that they could be listed as collateral. The defendant supplied the bank with information about 26 boats to be used as collateral for the loans. However, 22 of the boats
6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
identified did not exist, as the defendant well knew. The bank relied upon this false information to its detriment, in violation of 18 U.S.C. Subsection 1344.
Count 13 states: On or about February 11, 2005, in the Southern Division of the Western District of Michigan and elsewhere, Michael Bruce Vorce did knowingly engage in a
monetary transaction by, through or to a financial institution affecting interstate commerce, in criminally derived property, of a value greater than $10,000 derived from the proceeds of a specified unlawful activity. Specifically, the defendant
defrauded Macatawa Bank of $225,000 in the manner described in Count 6 of this indictment, incorporated here by reference. The defendant deposited the proceeds of this loan into
Macatawa Bank Account No. 415001401. Later that same day, the defendant wrote a check for $20,276.01 to A.K. Rikks Menswear to purchase clothing, in violation of 18 U.S.C., Subsection 1957.
THE COURT: Okay. What pleas would you wish to enter to these two counts on 1:08-CR-282?
DEFENDANT VORCE: Guilty, Your Honor.
THE COURT: Do you understand that by entering this guilty plea, you would be giving up your right to a trial or waiving your right to a trial and that right to a trial before a judge or a jury?
DEFENDANT VORCE: I do. 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: Do you understand that you are now
presumed innocent, but you would be giving up that presumption of innocence and requirement that the government go forward in an attempt to prove you guilty beyond a reasonable doubt?
DEFENDANT VORCE: I understand, Your Honor.
THE COURT: Do you understand that you would give up the rights you would have at a trial to cross-examine the
witnesses that might be called against you, to call witnesses on your own behalf, subpoena witnesses on your own behalf, and present evidence on your own behalf, including your own
testimony, that you'd be giving this up by entering these guilty pleas?
DEFENDANT VORCE: I understand, Your Honor. THE COURT: Do you understand that your own
testimony could not be compelled nor could anyone comment if you did not take the witness stand?
DEFENDANT VORCE: I understand, Your Honor.
THE COURT: Importantly, do you understand in this matter that you would be giving up your right to a trial in this matter?
DEFENDANT VORCE: Yes, I do.
THE COURT: And that your guilty plea, if accepted, would result in your conviction and eventually in your
sentence?
DEFENDANT VORCE: I understand, Your Honor. 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: Do you understand that as to this
financial institutional fraud matter that is alleged to have occurred in late 2006 involving Macatawa Bank and the
collateral that was alleged of a number of boats, that this matter carries a maximum penalty of not more than 30 years nor more than $1,000,000 as a fine with a supervised release
period of up to five years following the same? Do you understand that?
DEFENDANT VORCE: I understand, Your Honor.
THE COURT: As to the money laundering count that is alleged to have occurred in February of '05, that the maximum penalty is up to ten years in prison and/or up to a $250,000 fine with a period of supervised release of not more than three years. Do you understand that?
DEFENDANT VORCE: I understand, Your Honor. THE COURT: Relating back to the financial
institution fraud of late 2006, tell me in your own words what you did that you believe makes you guilty.
DEFENDANT VORCE: Your Honor, I misrepresented financial and collateral information to the bank to give the appearance that I was a creditworthy borrower, as well as to give the appearance that the collateral existed when in fact most of the collateral did not. I did this by providing falsified records and information forged at my own hand.
The bank trusted me. They trusted the information 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
that I provided them. This trust spanned over a lengthy period of time, and I continued to lie and deceive them in providing continuous information and continuous statements to them to support the appearance.
THE COURT: Which bank was this? DEFENDANT VORCE: Macatawa Bank.
THE COURT: Did you have a relationship there with a banker that you went back to every time or was this just
entire bank personnel?
DEFENDANT VORCE: No, Your Honor, there was a -- there was a banker that was assigned to me that I dealt with almost exclusively.
THE COURT: And you developed a rapport and a reputation with him, presumably, of your honesty and integrity?
DEFENDANT VORCE: I did, Your Honor. In fact, I THE COURT: Did you attempt to cultivate that?
DEFENDANT VORCE: I'm sorry?
THE COURT: Did you attempt to cultivate that by the representations that you made?
DEFENDANT VORCE: Absolutely I did, Your Honor. THE COURT: Were they made under oath?
(Defendant Vorce conferred with Mr. Willey.)
DEFENDANT VORCE: Yes, I signed sworn statements. THE COURT: At the time you made those sworn 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
statements under oath as collateral to secure the loan, did you know that you were lying?
DEFENDANT VORCE: Yes, I did, Your Honor.
THE COURT: Had this taken a period of time to assemble this loan?
DEFENDANT VORCE: There was a significant amount of work that went into creating the information and perpetuating the scheme, Your Honor.
THE COURT: Now, how did you create information? DEFENDANT VORCE: Through the use of a computer. THE COURT: Tell me how you did it.
DEFENDANT VORCE: Your Honor, I -- with regards to tax records, I acquired tax software and created my own false tax returns. With regards to the other information, I used various software programs from Adobe Photo Shop to Microsoft Word and Office Products to create false surveys and other information to support the claims that I was making.
THE COURT: Did anyone help you or were you just doing this on your own?
DEFENDANT VORCE: For Macatawa Bank I was acting alone, Your Honor.
THE COURT: So were you ultimately able to persuade, then, the bank that in fact you were worthy of the credit
which they gave to you?
DEFENDANT VORCE: I did so, Your Honor. 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: And how much was the credit that they gave to you or the consideration they gave to you?
DEFENDANT VORCE: Your Honor, the credit that they extended to me was on a loan-by-loan basis. However, they over a period of time granted me credit approval for certain dollar amounts. Initially that dollar amount was $1,000,000, and over time as the relationship progressed and they felt that I was a trustworthy client, they increased that credit limit ultimately to an amount of approximately four and a half million dollars.
THE COURT: Did you do that by paying off part of the loan that you had secured in order to build a
creditworthiness with them?
DEFENDANT VORCE: I did, Your Honor.
THE COURT: Where did you get the consideration to pay off the initial loans to create an appearance that you were worthy of credit later?
DEFENDANT VORCE: Your Honor, this bank fraud was part of a larger Ponzi scheme that involved another series of banks in the same type of -- in the same type of scheme. Oftentimes I would use proceeds from newly funded loans that Macatawa had just funded to pay down existing debt, pay off those loans. Other times I would pay down those loans with proceeds from other fraudulently derived loans from other institutions. 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: Were you representing to them that you had a business going on?
DEFENDANT VORCE: I was, Your Honor.
THE COURT: What was your representation?
DEFENDANT VORCE: I represented that I was operating West Michigan Yachts and that I was a full-time boat broker specializing in an area of buying distressed boats at a
wholesale cost and then I would turn around and sell them at a retail rate.
THE COURT: Did you do so by the use of hull numbers and surveys that you were representing was what you were
purchasing and what you were selling?
DEFENDANT VORCE: I did, Your Honor.
THE COURT: Was the giving of credit and loan, was it tied to a particular boat with a particular serial number and survey or was it tied to you and what you represented you were doing as you sold one and bought another?
DEFENDANT VORCE: The loans were made on a condition of both, Your Honor. On one aspect they were granting the loans based on my personal assets and my creditworthiness, but they were also making the loans based on a conservative
loan-to-value that I was able to essentially manipulate and control through the use of those surveys.
THE COURT: So in addition to your creditworthiness, you were making a representation at any one point in time that 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
you were the owner of X number of boats having a value of Y? DEFENDANT VORCE: That's correct, Your Honor.
THE COURT: And based upon X number of boats having a value of Y, monies were given to you -- or not given to you, they were loaned to you; is that correct?
DEFENDANT VORCE: That's correct. The loans were made individually according to individual boats, but they were, you know, considered on an aggregate as well.
THE COURT: The aggregate being that you represented you were doing more than one boat at a time?
DEFENDANT VORCE: That's right, Your Honor.
THE COURT: How many boats did you misrepresent you had at the largest points in time? How many were you
balancing at the largest point in time in this?
DEFENDANT VORCE: Over the course of the entire
relationship there were approximately 30 loans, so 30 separate boats. At any number of times during the climax, I maintained that I had held an inventory of approximately 10 to 12 boats financed by Macatawa.
THE COURT: But as a matter of fact you had none? DEFENDANT VORCE: Your Honor, there were I believe four real boats over the course of the entire relationship. THE COURT: Had you in fact acquired them, renovated them, cleaned them up, and sold those four boats in the course of this relationship? 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
DEFENDANT VORCE: No, Your Honor.
THE COURT: They were just four boats that you owned that were somewhere where you could show them that this was part of your inventory; is that right?
DEFENDANT VORCE: That's correct, Your Honor.
THE COURT: Okay. Okay. As pertains to Count 6 do you have any additional questions, Mr. VerHey, that you wish to ask to establish the factual basis for Count 6?
MR. VERHEY: Your Honor, I can represent to the Court that Macatawa Bank at the time was FDIC-insured. THE COURT: Yes.
MR. VERHEY: And they have told the investigators that had they known the true state of affairs, they wouldn't have made these loans, so it was material in their opinion in making these transactions.
THE COURT: Those two things, I think they're both easily gone through. You understand that Macatawa Bank is a Federal Deposit Insurance Corporation bank?
DEFENDANT VORCE: I do, Your Honor.
THE COURT: Okay. Would you agree for purposes of this plea that these were material loans for purposes of Macatawa?
DEFENDANT VORCE: No question, Your Honor. THE COURT: Okay. Anything else?
MR. VERHEY: No, thank you, Your Honor. 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: As to Count 6, Mr. Willey?
MR. WILLEY: I have nothing further to add, Your Honor.
THE COURT: Very well. Let's proceed on to Count 13, the money laundering. Would you wish to address the Court on -- yeah, I guess you already did. You already did tell me this.
Do you understand this charge of the monetary transaction on February 11 of '05 which is of criminally derived property of $225,000 into an account at Macatawa Bank? Do you understand that charge?
DEFENDANT VORCE: Yes, I do, Your Honor.
THE COURT: And what plea are you wishing to enter to that count?
DEFENDANT VORCE: Guilty.
THE COURT: Okay. Tell me in your own words what you did that you believe makes you guilty.
DEFENDANT VORCE: I obtained proceeds from a loan, from a fraudulent loan, and then I converted those proceeds into personal expenses, using the money for unintended
purposes, not the purpose that I represented to the bank when they made the loan to me, Your Honor. Specifically, I used proceeds immediately to pay on an account that I had at A.K. Rikks Menswear.
THE COURT: Which was not related to the boats or 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
the boat acquisitions or the boat sales? DEFENDANT VORCE: No, Your Honor. THE COURT: That was personal to you?
DEFENDANT VORCE: Yes, it was, Your Honor. THE COURT: Personal clothes?
DEFENDANT VORCE: Yes, it was.
THE COURT: How much money was involved in this conversion of criminally derived proceeds into your own personal gain in this matter?
DEFENDANT VORCE: The entire loan proceeds, Your Honor.
THE COURT: Which were? DEFENDANT VORCE: $225,000.
THE COURT: And that was on what date?
DEFENDANT VORCE: Your Honor, on February 11 of 2005.
THE COURT: Where was this taking place?
DEFENDANT VORCE: I personally deposited the funds derived from the loan and then I personally traveled to A.K. Rikks Menswear to issue a check drawn on that bank in that amount.
THE COURT: Here in Grand Rapids or in Kent County? DEFENDANT VORCE: Yes, Your Honor.
THE COURT: Was your relationship with Macatawa Bank one that was entered into and sustained here in the Western 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
District of Michigan?
DEFENDANT VORCE: Yes, it was, Your Honor.
THE COURT: Any additional questions as to this Count 13, Mr. VerHey?
MR. VERHEY: Your Honor, again a jurisdictional issue that the Court may want to address is I would have to show at trial that Macatawa Bank was engaged in interstate commerce, and we can represent to the Court that it is in fact engaged in interstate commerce and the money traveling through that account therefore constitutes a, quote, "financial
transaction" for purposes of the statute.
THE COURT: You understand here again the FDIC
representation of insurance company as it pertains to Macatawa Bank?
DEFENDANT VORCE: I do, Your Honor.
THE COURT: Do you understand the allegation here is that the posting of the proceeds into an account of yours in the bank and that transaction through by wire, however it might be, however it may go is part of the stream of commerce which the government is relying upon to establish the federal jurisdiction here? Do you understand that?
DEFENDANT VORCE: I understand that, Your Honor. THE COURT: Okay. Anything else?
MR. VERHEY: I perhaps missed this, Your Honor, but we would also have to show that the particular transaction was 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
over $10,000, and here it was in excess of $20,000. So to the extent that hasn't been stated, I'd like that on the record. THE COURT: The $225,000, you mean?
MR. VERHEY: It was a payment of $20,276 for this bill to A.K. Rikks, and I'd have to show it was at least $10,000 in a single transaction.
THE COURT: Okay. How much was that A.K. Rikks bill?
DEFENDANT VORCE: $20,276.01, Your Honor. THE COURT: Very well. Very well. Okay.
On behalf of the defense in this matter, Mr. Willey, any questions to establish Count 13?
MR. WILLEY: No, Your Honor.
THE COURT: Okay. Let's turn to our attention next to this criminal information, 1:08-CR-282. That is the matter that relates to failure to file an income tax return. I
believe there's been a waiver of the information that's
already in the file -- a waiver of indictment in this matter. No. Is there?
MR. VERHEY: Your Honor, this is a misdemeanor offense even though it's erroneously titled a felony, and so there was no need to do that.
THE COURT: Okay.
MR. VERHEY: He has been arraigned on this charge, however. 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: All right. All right. Do you understand this charge, Mr. Vorce?
DEFENDANT VORCE: I do, Your Honor.
THE COURT: You understand the charge is during the calendar year 2006 and on or before April 16 of 2007, that you did willfully fail to make an income tax return to the
Internal Revenue Service based upon your gross receipts of income of approximately $11,311,491.65?
DEFENDANT VORCE: I understand, Your Honor. THE COURT: And your plea to that is?
DEFENDANT VORCE: Guilty.
THE COURT: Do you understand the maximum penalty on this particular charge is up to one year and/or up to a
$100,000 fine with a following supervised release of not more than one year?
DEFENDANT VORCE: I understand, Your Honor.
THE COURT: Okay. Tell me what you did in this matter that you believe makes you guilty.
DEFENDANT VORCE: Your Honor, the false tax returns that I supplied to the banks were crucial to obtaining credit with those banks and to thereby deriving loan proceeds.
Because I had provided false tax returns, I feared that filing a truthful return would jeopardize the Ponzi scheme and not allow me to perpetuate it, so therefore, I willfully did not file tax returns for that year.
20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: And where were you residing during that time?
DEFENDANT VORCE: I was residing in Alpine Township in Kent County.
THE COURT: Okay. And you were a resident then of the Western District of Michigan at the time?
DEFENDANT VORCE: Yes, I was, Your Honor.
THE COURT: You knew you had a duty and you failed to perform that duty?
DEFENDANT VORCE: I did, Your Honor. THE COURT: For the calendar year 2006? DEFENDANT VORCE: Yes, Your Honor.
THE COURT: Okay. Any additional questions that should be asked in this matter, Mr. MacDonald -- or excuse me. I get you two mixed up here in this matter. I see you both here. In this matter on behalf of the government?
MR. VERHEY: No, Your Honor.
THE COURT: Okay. Thank you, Mr. VerHey. Mr. Willey?
MR. WILLEY: Your Honor, the only thing I would add is that while this count is limited to one year, Mr. Vorce's comments should not be taken that he'd filed tax returns in the other years. He also did not file tax returns from the period, my recollection, 2002 on. So there was no tax returns for the whole period, and I didn't want the Court to infer 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
that we were just saying we didn't file in '06, but we filed in the other years. We didn't file -- Mr. Vorce didn't file from 2002 on.
THE COURT: Is that correct, Mr. Vorce?
DEFENDANT VORCE: That's correct, Your Honor.
THE COURT: Now, I think you said something about because -- you started in your recitation, I'm trying to get this all down here for my records, because of the fraud that you had engaged in with the banks in this, as you called it, a giant Ponzi scheme, that was the reason that you'd failed to file an income tax return?
DEFENDANT VORCE: That's right, Your Honor. I felt it would -- I felt it would jeopardize the overall scheme. THE COURT: And it would have, yes. Okay. Okay. Let's turn our attention next to the matter of
CR-150 here. This is the matter that was transferred from the Eastern Division of the United States District Court for the Eastern District of Wisconsin, and this comes to the Court on a waiver of indictment entered -- the waiver of indictment entered June 4th, 2009, as to the -- yes, 4th, 2009, and comes to the Court on an information. This matter has an
information that charges in this matter a scheme to defraud a federally insured financial institution, otherwise called bank fraud, contrary to 18 United States Code 1344.
Have you had an opportunity to review this 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
particular information with your counsel and do you understand this particular allegation?
DEFENDANT VORCE: I have and I do, Your Honor. THE COURT: This allegation alleges that between October 30th, 2007, and August 26th, 2008, in the Eastern
District of Wisconsin, that you in participation with James C. Jett participated in a scheme to defraud the financial -- an insured financial federal institution to obtain money and credit and control over certain monies. Do you understand this charge?
DEFENDANT VORCE: I do, Your Honor.
THE COURT: Do you understand the maximum penalty for this particular statute violated is up to 30 years and/or up to a $1,000,000 fine in this matter followed by not more than five years of supervised release?
DEFENDANT VORCE: I understand, Your Honor.
THE COURT: Tell me what you did that you believe makes you guilty.
DEFENDANT VORCE: Your Honor, when my scheme and fraud was detected in West Michigan, I -- at that point in time I measured my life according to money and possessions, and when the fraud was detected and I lost everything, I tried to satisfy my selfish need to be significant by engaging in other bank fraud, and so I conspired with Mr. Jett to obtain funds through fraudulent loans through the course of Internet 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
loans through various banks. Those loans were, as I said, perpetuated through the Internet, and again the experience and activities that I had used in my West Michigan fraud in terms of providing forged documents and fraudulent information was used in this scheme as well.
THE COURT: Tell me how you did it.
DEFENDANT VORCE: Your Honor, Mr. Jett and I would submit an application for a loan online through one of the institutions. We would misrepresent who the borrower was. In fact, the borrower was typically a stolen identity, and we provided fictitious information to again give the appearance that this identity, this borrower identity was well-qualified for the loan.
We also created a fictitious identity for the seller, in this case the seller of a boat, so that we could control both the buyer and the seller, both sides of the loan from borrowing the money to receiving the funds. We through the course of the loan would provide the bank with various forms of information, again tax returns, surveys to provide the value and to ascertain the collateral. And we would also provide banking information for the seller so that when the loan was funded, the bank making the loan would fund those proceeds directly to the seller, which of course was
fictitious and through an account that we controlled on our own. 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: You created both ends of it, then. You created the buyer, you created the seller, and it was all done through the Internet?
DEFENDANT VORCE: Yes, Your Honor.
THE COURT: There was a real person who would be the denominated seller?
DEFENDANT VORCE: Yes, sir.
THE COURT: Real person's identity, and you would create a real person's identity who would be the buyer?
DEFENDANT VORCE: That's right, Your Honor.
THE COURT: And you would have through the Internet investigated their creditworthiness of both ends of this? DEFENDANT VORCE: That's correct, Your Honor. THE COURT: Unbeknownst to a real person who's driving their car down the street and living somewhere, they are the seller with a new address to you, I presume?
DEFENDANT VORCE: That's correct, Your Honor.
THE COURT: And the buyer who's minding their own business, mowing their lawn or whatever they're doing, they are suddenly buying a boat, but the address is coming to you? DEFENDANT VORCE: That's correct, Your Honor.
THE COURT: And you're doing this all over the Internet?
DEFENDANT VORCE: Yes, Your Honor.
THE COURT: No face-to-face with the bank? 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
DEFENDANT VORCE: No, Your Honor.
THE COURT: How much are you asking for for a loan on these matters?
DEFENDANT VORCE: When Mr. Jett and I began, we started out the loans were in the neighborhood of $200,000, the first one a little less. Then the following loan was a little more. Then after what we deemed was success by
receiving funded loans, we immediately increased value to $700,000 to $800,000 and in one case a $900,000 loan.
THE COURT: Without meeting anybody from the bank? DEFENDANT VORCE: Without meeting a single person, Your Honor.
THE COURT: Without any contact, done solely through the Internet?
DEFENDANT VORCE: That's correct, Your Honor. Excuse me. There was some communication over a phone, Your Honor.
THE COURT: No in-person? DEFENDANT VORCE: Pardon me?
THE COURT: No in-person contact with the bank? DEFENDANT VORCE: None whatsoever, Your Honor. THE COURT: And based upon that, the bank was
willing to loan four, five, six, seven, eight hundred thousand dollars?
DEFENDANT VORCE: They were, Your Honor. 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: And they did it?
DEFENDANT VORCE: They did, Your Honor.
THE COURT: Tell me who the banks were that did this.
DEFENDANT VORCE: The lenders were Key Bank, Bank of America --
THE COURT: Bank of America? DEFENDANT VORCE: Correct.
THE COURT: The one that's bailed out by the government, that one?
DEFENDANT VORCE: Correct. THE COURT: Okay.
DEFENDANT VORCE: Wachovia Bank.
THE COURT: Oh, there's another one, okay.
DEFENDANT VORCE: And Bank of the West, Your Honor, which has an online interface known as Essex Credit, which is essentially Bank of the West.
THE COURT: Did you have an inside track with any of these banks about knowing anybody before you started this that you could rely on to make representations for you?
DEFENDANT VORCE: No, Your Honor, I did not.
THE COURT: And where were you doing this from now? Physically where were you?
DEFENDANT VORCE: Most of the activity and
communication occurred from West Michigan, from -- not my 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
residence and not Mr. Jett's residence, but various areas where we could receive an Internet connection and get online, Your Honor.
THE COURT: From a car or a library or -- DEFENDANT VORCE: Significantly --
THE COURT: Panera's Bread, someplace like that? DEFENDANT VORCE: Yes, actually Panera Bread was a spot that we used frequently.
THE COURT: What would you use as a mailing address for these places?
DEFENDANT VORCE: To support the scheme, Mr. Jett and I would contract with a virtual office, and typically that virtual office was in the city of Chicago. And what that
virtual office did was for a monthly fee it gave us a mailbox and an address, and so we alleged or asserted to these banks that these addresses were actually the home addresses for both the borrower and the seller. Then we would, when necessary, we would travel to Chicago to those virtual offices to receive any important communication that might be necessary to
completing these fraudulent loans.
THE COURT: In order to do it you had two virtual offices, then, one of the buyer and one of the seller?
DEFENDANT VORCE: That's correct, Your Honor. THE COURT: Okay. What happened then with this? DEFENDANT VORCE: Mr. Jett and I were successful in 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
receiving a large amount of money in a short period of time, over $3,000,000. It's probably important to note to the Court, Your Honor, that once we received the loan proceeds there was another element, and that element involved
transferring the money out of that seller account because
there was a paper trail that led to that money, and that money was used to purchase gold coins which were expensive but
untraceable. They were not a -- they didn't have any serial numbers or identification numbers on them. Once we purchased the gold and we had the gold in our possession, we were then free to sell the gold to any number of dealers to then receive the final loan proceeds which were essentially free from that paper trail, free from the money trail.
THE COURT: And it was in cash, the selling of the gold? You got cash back?
DEFENDANT VORCE: We received cash, yes, Your Honor, via large amounts of cash wired to another bank account from the -- from the gold distributor that purchased the coins. THE COURT: Which you had set up; is that right? You had set it up to be wired in?
DEFENDANT VORCE: Yes, Your Honor.
THE COURT: To an account that you had created? DEFENDANT VORCE: Yes, Your Honor.
THE COURT: Okay. Sounds like you went a while, then. What happened? What happened? What was the string 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
that untied this?
DEFENDANT VORCE: Your Honor, to answer -- to add to that last question, the scheme came to an end when Mr. Jett and I were -- getting back again, you had asked about no
face-to-face contact. The risk in this scheme was when we had to go pick up loan documents. The banks before finalizing and funding the loans would obviously send a large packet that included the promissory note, security agreement, and various things, so those documents had to be signed. Fictitiously we did that on behalf of these alleged borrowers, and so that meant going to these virtual offices and actually taking possession of the documents, then to another location, sign them, and sending them back to the bank.
That process, that requirement of having to go pick up those loan documents was the exposure that we risked in terms of being caught. And the scheme came to an end when in our final attempt, we went to do exactly that, to pick up loan documents to yet fund another loan, and at that point the bank had detected the fraud and the FBI arrested us.
THE COURT: At your virtual office?
DEFENDANT VORCE: No, Your Honor. We were -- we actually had contracted with a messenger service, a courier service to go pick up the documents, and that wasn't
necessarily to avoid that face-to-face meeting. We were
simply running behind on our timeline and we thought it would 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
speed us up because that particular virtual office was located in Milwaukee and we were coming to Chicago. So we hired a Chicago courier to go pick them up and we could meet them in Chicago simply to avoid the drive time.
But again, I want to address the Court in terms of your question about this second scheme and falling back into this criminal activity. I was living according to a bankrupt set of priorities. My life was a duality, and I was trying to maintain one with the other. Again, when -- everything that I had known in terms of my life was money and possessions. When those things went away, I fell back into the selfish need to pursue money and the activity, and it was simply my attempt to again satisfy what I thought was important and that had just been -- that had just -- that the banks had just taken away from me, so to speak, Your Honor. I lost it, obviously, and it was never mine, but at the time I was so morally corrupt, so misguided, and trying to maintain this duality, this image of what I thought was important and what I thought was
meaningful in life.
THE COURT: So you've had, I take it, some time to think about this while you were waiting for today. How long have you been in custody wearing an orange suit?
DEFENDANT VORCE: Ten months next week.
THE COURT: Ten months next week, okay. Okay.
Has anyone threatened you or coerced you to get you 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
to plead guilty to these matters?
DEFENDANT VORCE: No, Your Honor.
THE COURT: Has anyone promised you any leniency or told you they know what Judge Bell's sentence is going to be? DEFENDANT VORCE: No, Your Honor.
THE COURT: You have been articulate through this entire matter. May I presume -- you have the representations of a very fine lawyer here. May I presume, then, that this matter is freely and voluntarily made at this time?
DEFENDANT VORCE: Absolutely, Your Honor.
THE COURT: Are there any matters that I've left out here that we should take up before making a final ruling on this case?
MR. VERHEY: I would ask the defense to the extent it hasn't been addressed that these banks from Wisconsin were FDIC-insured once again.
THE COURT: Yes. The Key Bank, Bank of America, Wachovia Bank, and Bank of the West, which was Essex Credit, you understand these were FDIC banks?
DEFENDANT VORCE: I understand, Your Honor.
THE COURT: You understand that the transactions both in application and the use of the Internet was obviously over the Internet, and by virtue of over the Internet, it was over interstate commerce?
DEFENDANT VORCE: I understand, Your Honor. 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
THE COURT: The free flow of commerce. Anything else, Mr. Willey, to establish the factual basis that we should --
MR. WILLEY: No, Your Honor.
THE COURT: Okay. You understand that this Court as part of its sentencing is permitted to enter restitution
orders and forfeiture orders as it may pertain to property and to losses as part of your sentence agreement or plea agreement in this matter?
DEFENDANT VORCE: Yes, Your Honor.
THE COURT: Okay. And you understand that as to the felony counts, it's $100 per felony for purposes of a special assessment, and $25 for a misdemeanor. I believe that makes it $325, I believe, as a final amount on the special
assessment.
The following, then, are the matters. The Court having conferred with counsel, having listened to a very straightforward recitation of these four matters from Mr. Vorce, is satisfied that these findings may be had: that these pleas are freely and voluntarily entered without
promises of leniency or coercion; that the indictments as it pertains to both the formal charges and Mr. Vorce's recitation of his activities in them makes them factually accurate
pertaining to this case; and the defendant therefore finds himself actually guilty, and the Court does so adjudicate, of 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
these three felonies and this misdemeanor, and therefore, Mr. Vorce at this time stands convicted.
A presentence report will be ordered to be prepared preparatory for sentencing in this matter. Mr. Willey, I have a sentence date of first thing in the morning on September 18th, which would be about almost exactly three months from now, if that's a good date for you.
MR. WILLEY: It is, Your Honor.
THE COURT: Okay. And there's a detention order in this matter entered by the magistrate judges, so those will be maintained until sentencing.
Mr. Vorce, you're a thoughtful person, I can tell. I can tell in the last ten months you've done a considerable amount of thought about who you are, what you became, and what happened on this matter.
I want you to as part of sentencing write that out. Write that out. Think that through. I want to find out what your thought process is now, what it was then, where we got off track, why we got off track, why we remained off track, why we went back the second time. There are some -- a lot of questions that I'm having and I think you have, and I want to see if I can get a handle on that.
We will have a very experienced presentence writer who is assigned to prepare a presentence report for me in this matter. That presentence report will be rather critical,
34 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
critical in the sense of giving me a picture, very important for you in giving me a picture of not only what he or she
finds from the evidence in this matter and your background and the accountability which has to be built into a sentence, and that sentence has to do a number of things, as your lawyer will talk about. It has to send a signal to the community as well as dealing with you and what's going to happen to you and how you can be restored through this process. So I think you have a very fine lawyer who will be talking with you over this, who will be working on this, and I will look forward to seeing you then on September 18th for purposes of sentencing. Anything else, Mr. Willey, we should take up?
MR. WILLEY: No, Your Honor, thank you. THE COURT: Anything else, Mr. VerHey? MR. VERHEY: No, thank you, Your Honor.
THE COURT: That's all for the record. Thank you, gentlemen. (Proceedings concluded at 5:05 p.m.) 35 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
CERTIFICATE OF REPORTER
I, Kevin W. Gaugier, Official Court Reporter for the United States District Court for the Western District of
Michigan, appointed pursuant to the provisions of Title 28, United States Code, Section 753, do hereby certify that the foregoing is a true and correct transcript of the proceedings had in the within-entitled and numbered cause on the date hereinbefore set forth.
I do further certify that the foregoing transcript was prepared by me.
/s/ Kevin W. Gaugier
Kevin W. Gaugier, CSR-3065 U.S. District Court Reporter 110 Michigan N.W.
622 Federal Building Grand Rapids, MI 49503
