A civil document filed in U.S. Southern District Court on Tuesday alleges that a Daniels pharmacy worker and her late husband used two government contractor businesses to scam investors of at least $2.8 million in a Ponzi scheme.
The court filing notifies the court that federal prosecutors have seized three properties owned by Natalie Cochran of Daniels.
U.S. Attorney Michael Stuart states in the document that the federal government will prove that forfeiture of Cochran's property was justified under federal law because she and her late husband had purchased the properties or improved them using money they had acquired illegally.
Cochran, who was a licensed pharmacist, and her late husband, Michael Cochran, who died on Feb. 11, were the owners of Tactical Solutions Group and Technology Management Systems (TMS). Stuart alleges that the companies were money-laundering operations using mail, wire and bank fraud.
"As a result of her fraud, Natalie Cochran obtained millions of dollars in fraud proceeds in her personal bank account as well as the Tactical Solutions and TMS business accounts," the complaint states. "Using these illicit proceeds, Natalie Cochran engaged in numerous transactions in violation of the money laundering laws, including transactions that resulted in the purchase of the two real properties identified for forfeiture."
Cochran was ordered to forfeit real estate holdings at 433 4-H Lake Road in Daniels, 219 N. Eisenhower Drive and 210 Parkwood Drive, along with any improvements and any rental income the properties generate.
The court document reports that the 219 N. Eisenhower and 210 Parkwood properties were purchased during the time of the alleged fraud. Cochran and her late husband lived at the 4-H Lake Road property, Stuart states, and used their home as the primary business location for Tactical Solutions and TMS.
The two businesses are active government contractors, and the Tactical Solutions website touted the business as a leading supplier to the U.S. Department of Defense and other national security agencies and nonprofits worldwide. The website also showed Tactical Solutions as a certified "woman-owned" business that is also a West Virginia certified wholesale pharmaceuticals distributor.
"Natalie and/or Michael Cochran solicited investments from a number of individuals for (Tactical Solutions) and/or TMS's government contracts, including a number of contracts supposedly for the Department of Defense," Stuart said in the court filing.
Stuart said investors gave the Cochrans money to purchase or invest in government contracts, with Tactical Solutions and TMS acting as brokers for the contracts.
The problem, Stuart said, is there were never any government contracts. Instead, he alleged, the Cochrans used investors' funds to make partial returns on investment payments.
"The Cochrans also used the illicit investment proceeds to support their outwardly lavish lifestyle by making luxurious purchases, dining out frequently, taking vacations and making payments towards the defendants' properties," Stuart stated.
He said federal agents had extensively looked at Tactical Solutions and TMS operations to find a legitimate source of income and were unable to do so. Tactical Solutions and TMS did not have any contracts with the federal government, as listed in any government database, he added.
TMS had apparently entered into two state contracts with the State of West Virginia for eight Microsoft Surface Books and 27-inch computer monitors. The state canceled both contracts because they did not receive the goods. State officials told federal prosecutors the Cochrans were never paid for the contract, according to Stuart.
Stuart said an ongoing investigation has shown the Cochrans scammed at least $2.8 million from private individuals in the alleged scheme, using mail, wire and bank fraud.
One unidentified investor invested more than $407,000 with TMS in June 2017 for government. To date, the investor has seen less than $60,000 in returns on the investment.
Another investor, also not named in the document, invested around $467,000 in January 2018 for government contracts. The investor saw a return of about $340,533, Stuart reported.
One investor sank $612,907 into Tactical Solutions, starting in September 2018. Federal investigators said that individual has seen no return on investment.
The report alleges that Cochran committed bank fraud in December 2018 when she, as Tactical Solutions, stated on a loan application to Premier Bank that she wanted the $100,000 loan for business and personal needs. On the loan application, she allegedly stated her company was involved in government wholesale supply contracting and that her annual business income was about $21.7 million.
In a personal financial statement submitted with the application, the Cochrans listed their total assets as $523.3 million, with Tactical Solutions making up $522 million and the net worth of the business being $934.5 million. Total assets for TMS were listed as $2 million, with the net worth being $2.5 million.
Michael Cochran, 38, died on Feb. 11. Cochran received the loan in mid-April. A couple of weeks later, also in April, she applied for a second loan at Premier for $250,000 for a line of credit for personal and business expenses.
On the loan application to Premier, she submitted her and her late husband's 2017 personal tax return that showed she had earned wages of about $93,000 from her pharmacy job. Business returns she had submitted to Premier from her 2017 IRS Form 1040 showed that TMS had gross sales in 2017 of $37,637, with a cost of goods sold of $23,620, leaving a gross profit of $14,017. She had claimed expenses of $78,783, leaving a net loss of $64,766.
Documents submitted to Premier by Cochran listed Tactical Solutions as losing $7,396 with gross sales of $0 and expenses of $7,396.
Stuart said that the Cochrans' 2018 IRS Form 1040s showed Cochran had no income from her pharmacy job and no taxable pension. Documents also showed that TMS had listed a profit of $174,485 in 2018, with a net profit of $90,807.
Tax filings in 2018 showed Tactical Solutions had a gross profit of about $12.4 million and a net profit of $12.1 million. IRS documents show Cochran had sought an installment agreement for payment of federal taxes in 2018. She advised the IRS she owed a tax of about $4.8 million for 2018 and that she was making a $500,000 down payment and would pay $500,000 installments until the debt was settled.
Premier approved the loan.
Stuart said that federal documents showed that Michael Cochran made "some legitimate" income from TMS and other sources in 2017 and that Cochran had worked as a licensed pharmacist at several locations until November 2017. After November 2017, Stuart said, she did not have readily identifiable sources of income outside of TMS and Tactical Solutions.
Stuart reported the Cochrans spent $22,366 of investors' money to pay the mortgage on the 4-H Lake Road property and spent $69,472 on property improvements.
They allegedly purchased the Eisenhower property in January 2018 for $66,000 in cash and spent about $39,175 improving the property.
In November 2018, the Cochrans paid $138,000 cash for the Parkwood Drive property, Stuart alleged, and then spent about $73,719 on improvements.
"Neither the Cochrans, nor (Tactical Solutions), had any legitimate income during the time period," the filing states, adding the purchases were made with "illicit proceeds."