CYBERNET FRAUD PROBE RESULTS IN FELONY CHARGES AGAINST KRISTA WATSON, GERALDINE WATSON AND PAUL WRIGHT

Grand Rapids, Michigan - December 20, 2006 - United States Attorney Margaret M. Chiara announced today that Krista Kotlarz Watson, Geraldine Watson and Paul Nathan Wright have been indicted for their role in a bank fraud and other crimes while associated with CyberNET. CyberNET was a company located in Grand Rapids, Michigan between 1992 and November, 2004. The company collapsed after federal investigators executed search warrants at CyberNET headquarters on November 16, 2004.

“CyberNet is a local example of a national problem. Prosecuting corporate officers for committing unconscionable acts against the public remains a top priority of my office and the Department of Justice,” stated United States Attorney Chiara.

Krista Kotlarz Watson, 39, Geraldine Watson, 77, and Paul Nathan Wright, 57, are charged in a criminal conspiracy to commit bank fraud, mail fraud and money laundering crimes with others at CyberNET. The conspiracy charge describes how these defendants and others executed a plan to deceive banks and other lending institutions, and successfully amassed approximately 100 million dollars from scores of lenders between 2002 and 2004. The conspiracy charge, 18 U.S.C. § 371, carries a maximum penalty of imprisonment for five years, a fine of $250,000, restitution and other penalties.

The three defendants are also charged with bank fraud involving Huntington National Bank and a 17 million dollar line of credit the bank extended to CyberNET. Bank fraud, 18 U.S.C. § 1344, carries a maximum penalty of imprisonment for 30 years, a fine of $1,000,000, restitution and other penalties.

The defendants are also charged with individual acts of money laundering in violation of 18 U.S.C. § 1956. Federal law prohibits any use of money derived from bank fraud to carry on illegal activity, or any concealment of those funds. The money laundering statute carries a maximum possible penalty of imprisonment for 20 years and a fine of up to $500,000, plus other penalties.

Other charges relating to Krista Kotlarz Watson include one count of illegally spending the fruits of bank fraud in violation of 18 U.S.C. §1957. Federal law prohibits anyone from spending the proceeds of bank fraud for any purpose. This statute carries a maximum possible penalty of imprisonment for ten years, plus other penalties. Krista Kotlarz Watson is also charged with three counts of income tax evasion in violation of 26 U.S.C. § 7201, for the tax years 2002, 2003 and 2004. This statute carries a maximum possible penalty of imprisonment for five years, a fine of up to $500,000, plus other penalties.

Paul Nathan Wright is charged with engaging in mail fraud in connection with his establishment of commercial mailbox accounts in connection with CyberNET’s fraudulent scheme. The mail fraud statute, 18 U.S.C. § 1341, prohibits any use of the mails to further a fraudulent scheme. This statute carries a maximum penalty of imprisonment for thirty years, a fine of $1,000,000, plus other penalties.

Geraldine Watson is charged with making a false statement to a firearms dealer in connection with the purchase of a gun on November 22, 2004. Federal law prohibits material false statements by a gun purchaser in connection with the purchase of a gun. This statute, 18 U.S.C. § 922(a)(6), carries a maximum penalty of imprisonment for ten years, plus other penalties.

The indictment also gives public notice that the contents of nine bank accounts, totaling $3,364,412.49, are subject to criminal forfeiture upon conviction of the defendants. This investigation was conducted by the Grand Rapids Offices of the Federal Bureau of Investigation, the Internal Revenue Service and the United States Postal Inspection Service.

“The allegations in this case represent one of the most egregious examples of corporate fraud ever seen in the Western District of Michigan. The FBI and its law enforcement partners are committed to aggressively pursuing these kinds of investigations wherever they may occur,” stated Daniel D. Roberts, Special Agent in Charge of the Detroit Field Division of the FBI.

Krista Kotlarz Watson was arrested today in Chicago. Paul Nathan Wright was arrested in Grand Rapids and will appear before Magistrate Judge Ellen S. Carmody at 2:30 today. The case has been assigned to Chief U.S. District Judge Robert Holmes Bell. The charges against these defendants are only allegations. They are presumed innocent until and unless proven guilty in a court of law.