Washington, DC - A Glendale, California lawyer pleaded guilty Wednesday in connection with a conspiracy to defraud a bank into processing more than $5 million in credit and debit card payments for a student loan debit relief merchant that had previously been terminated by the bank’s risk department and his attempt to obstruct a federal grand jury proceeding and a civil investigation conducted by the Consumer Financial Protection Bureau, both of which were investigating this scheme.
Acting Assistant Attorney General Brian C. Rabbit of the Justice Department’s Criminal Division and U.S. Attorney Andrew E. Lelling of the District of Massachusetts made the announcement.
Rudy Dekermenjian, 42, pleaded guilty before U.S. District Judge Randolph D. Moss of the District of Columbia to an information filed in the District of Massachusetts charging one count of conspiracy to commit wire fraud affecting a financial institution and bank fraud and one count of alteration and falsification of records. A sentencing date has not yet been scheduled.
Dekermenjian admitted at the plea hearing that, from 2017 to 2018, while working as the General Counsel at a payment processing company based in Los Angeles, California (Company A), he conspired to fraudulently obtain payment processing services on behalf of a merchant providing student loan debt relief services. As alleged in the information, Company A had obtained payment card processing for the merchant from Fifth Third Bank beginning in 2016, but the bank’s risk department terminated the merchant in May 2017. Following the termination, executives at Company A counseled the merchant to re-apply for processing in the names of “sham merchants.”
The sham merchants’ applications, backstopped by fake websites that purported to sell housewares, jewelry, leather goods and other retail items made it appear to Fifth Third Bank that there was significanlty less risk associated with the business. In fact, the “sham merchants” were fronts for transactions that involved student-loan debt-relief and not retail goods. Dekermenjian learned of the scheme shortly after it commenced, joined the conspiracy, and subsequently earned commission payments of approximately $20,292 on the fraudulently obtained processing.
This scheme was the subject of two separate federal investigations. As described in the Information, in approximately November 2018, a federal grand jury sitting in the District of Massachusetts issued a subpoena to Company A for records relating to processing for merchants involved in loans and debt collection and records relating to the creation of merchant websites. In approximately May 2019, the Consumer Financial Protection Bureau (CFPB) separately issued a civil investigative demand to Company A seeking documents relating to the “sham merchants” that Company A used to obtain payment processing for the student loan debt relief merchant. Dekermenjian admitted in the plea hearing held today to falsifying and altering the sham merchant applications in June 2019 with the intent to obstruct these investigations. Company A subsequently produced Dekermenjian’s altered and falsified documents to the CFPB.
The Food and Drug Administration – Office of Criminal Investigations, Rhode Island Task Force, U.S. Postal Inspection Service, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations are investigating the case. Trial Attorney Randall Warden of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS), Bank Integrity Unit, and Assistant U.S. Attorneys Seth B. Kosto and David J. D’Addio of the District of Massachusetts’s Securities, Financial and Cyber Fraud Unit are prosecuting the case.
MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.