Criminal Complaint — United States v. Dale Lawrence Hipes (No. 2:20-mj-09393, D. Ariz.)

Summary

A criminal complaint against Dale Lawrence Hipes, Case 2:20-mj-09393-ESW, filed December 11, 2020 as Document 3 in the U.S. District Court for the District of Arizona, sworn by telephone before United States Magistrate Judge Eileen S. Willett. Count 1 charges wire fraud under 18 U.S.C. § 1343 over a wire on or about May 26, 2020 of $15,670,000.00 to a BRI Supply, Inc. account, and Count 2 charges a monetary transaction under 18 U.S.C. § 1957 of approximately $1,986,338.04 on or about June 29, 2020. FBI Special Agent Troy Cofer's probable cause statement alleges that Hipes, CEO of BRI Supply, represented he was a 3M authorized distributor who could deliver nine million masks for the State of Texas, and that approximately $16.65 million was wired. It alleges no masks were delivered, approximately $4.65 million was not returned, and funds went toward a residence and a Winnebago trailer.

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Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 1 of 9

UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA
United States Of America Case No.: 9209-9393 MJ
v. CRIMINAL COMPLAINT

Dale Lawrence Hipes

I, the undersigned complainant, being duly sworn, state that the following is true and correct to
the best of my knowledge and belief:

On or about the date of May 26, 2020, in the County of Maricopa in the District of Arizona, the
defendant violated, 18 U.S.C. § 1343, and on or about June 29, 2020, the defendant violated, 18 U.S.C.
§ 1957, offenses described as follows:

See Attachment A Incorporated By Reference Herein

I further state that I am a Special Agent from the Federal Bureau of Investigation and that this
complaint is based on the following facts:

See Attached Statement of Probable Cause Incorporated By Reference Herein.

Continued on the attached sheet and made a part hereof: Yes 1 No

Digitally signed by ANDREW

AUTHORIZED BY: AUSA Andrew C, Stone ANDREW STO! stone soit 13:24:49 -07°

Special Agent, Troy Cofer

Name of Complainant Signature Of Complainant
telephonically
Sworn to before me

12/11/2020 @ 3:11 pm at Phoenix, Arizona

Date City and State
HONORABLE EILEEN S, WILLETT Ph With
United States Magistrate Judge

Name & Title of Judicial Officer Signature of Judicial Officer
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 2 of 9

ATTACHMENT A
Count 1

Beginning in or around April 2020, and continuing until in or around August 2020, in the District of
Arizona and elsewhere, DALE LAWRENCE HIPES, knowingly and willfully devised and intended to
devise a scheme and artifice to defraud and to obtain money and property by means of materially false and
fraudulent pretenses, representations and promises, and by intentional concealment and omission of material
facts.

On or about May 26, 2020, for the purpose of executing the scheme and artifice, DALE
LAWRENCE HIPES did knowingly cause to be transmitted by means of wire communication in interstate
commerce to the District of Arizona the following signals and sounds: a FED Wire sent from Hanmi Bank
Hanscom K, Inc. account #0488 to BRI Supply, Inc. Bank of America account #6623, in the amount of
$15,670,000.00, in violation of Title 18, United States Code, Section 1343.

Count 2

On or about June 29, 2020, in the District of Arizona and elsewhere, DALE LAWRENCE HIPES,
knowingly engaged and attempted to engage in the following monetary transaction by, through, or to a
financial institution, affecting interstate or foreign commerce, in criminally derived property of a value
greater than $10,000 as described below, such property having been derived from a specified unlawful
activity, that is, wire fraud in violation of 18 U.S.C. § 1343: wire transfer from BRI Supply, Inc. Bank
of America account #6623 to Western Alliance Bank Pioneer Title Agency, Inc. Escrow Trust account

#2772, for approximately $1,986,338.04, in violation of Title 18, United States Code, Section 1957.
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 3 of 9

STATEMENT OF PROBABLE CAUSE

I, Troy Cofer, being duly sworn, hereby depose and state as follows:

I. 1am a Special Agent with the Federal Bureau of Investigation (FBI) and have been employed with
the FBI since September 2019. I am authorized to investigative violations of laws of the United States. Iam a
law enforcement officer with authority to execute arrest, search, and seizure warrants under the authority of 18
U.S.C, § 3052, [have a bachelor’s degree in Operations Management and a master’s degree in Finance. I was
trained at the FBI Academy in Quantico, Virginia, and I am currently assigned to the Phoenix Division’s Complex
Financial Crimes Squad, specializing in a variety of financial investigations.

2, The Statement of Probable Cause is intended to show only that there is sufficient probable cause
for the requested Arrest Warrant and does not set forth all of my knowledge about this matter. The facts in this
Statement of Probable Cause come from my personal observations, my training and experience, and information
obtained from other agents and witnesses.

3, In August 2020, the Phoenix Division of the FBI initiated an investigation into DALE
LAWRENCE HIPES (HIPES), Chief Executive Officer (CEO) of BRI Supply, Inc. (BRI). The investigation
concerned whether HIPES knowingly and intentionally engaged in a scheme to defraud individuals through a
third-party Personal Protective Equipment (PPE) broker in or around June 2020, in which HIPES, as CEO of BRI
represented that he could procure 3M masks for the State of Texas. HIPES claimed to be a 3M authorized
distributor and could deliver nine million masks in three days. HIPES required upfront payment for an agreed
order of nine million masks, After agreeing to a price of approximately $1.85 per mask, the victim wired
approximately $16.65 million to HIPES’ bank account. After five weeks of non-delivery, HIPES agreed to return
the funds, but only returned approximately $12 million of the total $16.65 million. HIPES continued to promise
to return the remaining funds of approximately $4.65 million, then at the beginning of August 2020, ceased all

communication with the individuals with whom he agreed to supply 3M masks and has yet to return the balance.
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 4 of 9

HIPES never provided 3M masks for funds solicited from a third-party broker, but instead spent the remaining
funds for personal use.

The COVID-19 Pandemic

4, Around December 2019, a novel coronavirus, SARS-CoV-2 (the “coronavirus”), was first detected
in Wuhan, Hubei Province of the People’s Republic of China (“PRC”), causing outbreaks of the coronavirus
disease COVID-19 that have since spread globally. In January 2020, the Secretary of Health and Human
Services (“HHS”) declared a national public health emergency under 42 U.S.C. § 247d as a result of the spread
of COVID-19 to and within the United States, Around March 2020, the Director-General of the World Health
Organization (“WHO”) characterized COVID-19 as a pandemic. Around March 2020, the President of the
United States issued Proclamation 9994 declaring a national emergency beginning in March 2020, as a result of
the rapid spread of COVID-19 within the United States.

5. Guidance from the Centers for Disease Control and Prevention (“CDC”) suggests person-to-person
transmission most commonly happens during close exposure to a person infected with COVID-19, primarily via
respiratory droplets produced when the infected person coughs or sneezes. Droplets can land in the mouths,
noses, or eyes of people who are nearby or inhaled into the lungs of those within close proximity. Accordingly,
the CDC has issued guidance to health care providers recommending that they wear PPE, such has masks, to
prevent the coronavirus from being transmitted by infected patients to healthcare providers.

6. At the start of the COVID-19 pandemic, JD, a known philanthropist, offered to help the State of
Texas acquire PPE by providing the equivalent of a $20 million line of credit for the state’s use. Essentially, JD
made private money available for the immediate purchase of PPE with the understanding that Texas would
reimburse JD at some point in the future.

7. KS, a private citizen, enjoys a business relationship with JD, and acted as a point person for the
purchase of the PPE. KS routinely worked with the Texas task force to oversee those purchases for the state. CF,

a Texas state employee, often took the lead in these transactions for Texas.
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 5 of 9

8. With JD’s offer to provide personal funds to purchase PPE for the State of Texas, KS acted as the
point person to ensure the purchase of PPE for Texas. KS worked with a broker, JK, who owns and operates a
PPE brokerage business in Illinois, Hanscom K, Inc., and has been working with KS and JD in efforts to acquire
PPE for the State of Texas. According to the Illinois Secretary of State Corporations/LLC, Hanscom K., Inc., File
Number: 56761942, is a domestic corporation, incorporated March 18, 1992, with the State of Illinois. The
Agent is TO, 1250 S. Grove Ave., STE 300, Barrington, IL 60010. The officers are President, JK, 1250 S. Grove
Ave., STE 200, Barrington, IL 60010, and Secretary JK, same address previously listed.

9. In or around April 2020, JK met HIPES, the CEO of BRI, through two local contacts of JK’s in
Arizona, TJ, and CB. HIPES told JK and others that, as a 3M authorized distributor, he could acquire 3M
masks. CB vouched for HIPES as HIPES rents warehouse space from CB in Scottsdale, Arizona.

BRI Supply, Inc.

10. Per Arizona Corporation Commission (ACC) records, HIPES incorporated BRI, Entity ID:
23075463, as a domestic for-profit (Business) corporation, Entity Status: Active, Business Type: Wholesale
Trade, with a Formation Date of April 4, 2020. The Statutory Agent is Wendy Anderson, 8686 E. San Alberto
Drive, Suite 300, Scottsdale, AA 85258, as of August 10, 2020, formerly JD, 3832 N. 34" PL, Phoenix, AZ 85018,
The Principal Information is listed as follows: Director: DALE HIPES, 9332 N. 95% Way, Ste B109, Scottsdale,
AZ 85258; Officer: Nancy A. Countryman, 9332 N, 95" Way, Ste B109, Scottsdale, AZ 85258; and Chief
Financial Officer (CFO): DD, 6081 W. Linda Ln., Chandler, AZ 85226. The Place of Business is listed at 9332
N. 95" Way, Ste B109, Scottsdale, AZ 85258. Per articles of amendment, on or about October 1, 2020, the board
of directors of BRI accepted the resignation of DD as CFO from BRI.

11, In April 2020, HIPES opened a business checking account #6623, at Bank of America, held in the
name of BRI. HIPES, DD, and Nancy Anne Countryman are listed signers on the account.

12, In April 2020, HIPES opened a business checking account #6678, at Bank of America, held in the

name of BRI. HIPES, DD, and Nancy Anne Countryman are listed signers on the account.
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 6 of 9

13. In April 2020, HIPES opened a business checking account #6917, at Bank of America, held in the
name of BRI. HIPES, DD, and Nancy Anne Countryman are listed signers on the account.
Wire Fraud

14. Based on the representations by HIPES that he could acquire masks, KS ordered nine million
masks for a total purchase price of $16.65 million. HIPES claimed status as a 3M authorized distributor and
promised KS delivery of nine million masks in three days. The deal required payment up front, per HIPES.

15. KS informed JK to proceed forward with the transactions for nine million masks, for a purchase
price of $16.65 million. JK, as Hanscom K, Inc., acted as the broker, issuing a purchase order and wired money
to an account designated by HIPES. HIPES told JK that the account in question was an escrow account for the
holding of the funds. Once Texas received delivery of the masks, then the funds would be transferred to 3M
directly. Based on those facts, JK felt secure in wiring the funds.

16. Assuch, $16.65 million was transferred from the JD Trust to HIPES’ purported escrow account in
two separate wire transfers, through broker Hanscom K, Inc.

17, Onor about May 6, 2020, a FED Wire was sent from Hanmi Bank Hanscom K, Inc. account #0488,
to BRI Bank of America account #6623, in the amount of $980,000.00, beneficiary information: Invoice
#050520A for 3M Mask N95 1860.

18. On or about May 26, 2020, a FED Wire was sent from Hanmi Bank Hanscom K, Inc. account
#0488, to BRI Bank of America account #6623, in the amount of $15,670,000.00, beneficiary information:
Invoice #052120 for 3M mask N95 1860 Purchase.

19, On or about May 26, 2020, there were three online transfers from BRI Bank of America account
#6623 to BRI Bank of America account #6917, as follows:

a. $550,000.00
b. $2,500,000.00, and

c, $9,999,000.00, totaling $13,049,000.00.
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 7 of 9

20. On or about May 26, 2020, there was an online transfer from BRI Bank of America account #6623
to BRI Bank of America account #6678, in the amount of approximately $693,958.00.

21. HIPES did not deliver any masks, and it became clear to JK that he could not fulfill the mask
order. JK learned that HIPES did not hold a distributor agreement with 3M, although HIPES changed his status
to “qualified buyer” at that time. Given the non-delivery, KS demanded that HIPES return the full $16.65 million
to JK.

22. On or about June 18, 2020, HIPES returned part of the $16.65 million with a wire transfer from
BRI Bank of America account #6917 to Hanscom K, Inc. Hanmi Bank account #0488, in the amount of
$12,000,000.00.

23. JK pressed HIPES about the remaining funds. HIPES made multiple excuses why he couldn’t
return the funds, including that the nonexistent escrow account refused to release the funds, and that JK needed
to talk to the BRI CFO, DD. When JK asked for a copy of the escrow agreement, HIPES refused to provide it.
JK learned that HIPES incorporated BRI in or around April 2020, and that he previously operated a Cannabidiol
(CBD) business. JK last spoke with HIPES on or about July 22, 2020. To date, HIPES has not returned any of
the remaining $4.65 million.

24, Despite receiving full payment, via wire transfer, HIPES failed to deliver any masks as
promised. After approximately five weeks, KS continued to demand full repayment of the funds. At or around
this time, KS also learned that HIPES did not have any relationship with 3M and did not act as a distributor for
that company as he claimed. KS continued to attempt to collect the remaining funds, and HIPES promised to
repay the balance on or prior to August 1, 2020, However, HIPES did not return the funds on that date, and no
longer responds to any texts, phone calls or emails from KS.

25. On or about September 11, 2020, MF, 3M COVID-19 Fraud, Price Gouging and Counterfeit
Product Response Team, informed the FBI that HIPES, doing business as BRI, is not an authorized 3M

Distributor.
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 8 of 9

26. Based upon the aforementioned facts, I believed that probable cause exists that, starting around
April 1, 2020, through August 1, 2020, DALE LAWERENCE HIPES, doing business as BRI Supply, Inc.
cominitted Wire Fraud (18 U.S.C. § 1343) by obtaining money from KS and JK through Hanscom K, by false
pretenses, representations, and promises to deliver nine million masks, and causing funds to be transmitted by
wire.

Laundering of Monetary Instruments

27. JK learned that HIPES may have spent some of the missing funds on a new residence and vehicles,
A review of HIPES’ bank records by the FBI confirmed the purchase of a new residence and vehicle.

28. HIPES purchased the residential parcel real property address: 12006 N. Oakhurst Way, Scottsdale,
Arizona 85254, on or about June 29, 2020, from PL and KL, Trustees of the PL and KL Revocable Trust dated
on or about August 12, 2003, for approximately $2,050,000.00. The history of the purchase of property is as
follows:

a. On or about June 4, 2020, a wire transfer was conducted from BRI Bank of America account

#6678, to Western Alliance Bank Pioneer Title Agency, Inc. Escrow Trust account #2772 for

approximately $50,000.00, noted to credit the HIPES Escrow 77002217.June

b. On or about June 29, 2020, a wire transfer was conducted from BRI Bank of America account

#6623, to Western Alliance Bank Pioneer Title Agency, Inc. Escrow Trust account #2772 for

approximately $1,986,338.04, noted to credit the HIPES Escrow.

29. Per the Maricopa County Recorder’s Office regarding the purchase of property listed as 12006 N.
Oakhurst Way, Scottsdale, Arizona 85254, reflected the following information:

a. Name and Address of Buyer: HIPES and Kathryn L. Hipes, 12006 N. Oakhurst Way, Scottsdale,

AZ 85254.

b. Name of Seller: PL and KL Revocable Trust dated August 12, 2003.
c. Address of Property: 12006 N. Oakhurst Way, Scottsdale, Arizona 85254.
d, Settlement Agent: Pioneer Title Agency, Inc.

e. Place of Settlement: Pioneer Title Agency, Inc.
8
Case 2:20-mj-09393-ESW Document3 Filed 12/11/20 Page 9 of 9

f. Settlement Date: 06/29/2020
g. Sale Price: $2,050,000.00
h. Down Payment: $2,050,000.00
30. On or about August 12, 2020, HIPES made a withdrawal from BRI Bank of America account
#6678, in the amount of approximately $62,015.00, used to purchase a cashier’s check, payable to La Mesa RV
for the purchase of the Winnebago Spyder Trailer, on or about August 12, 2020.
31. Based upon the aforementioned facts, I believed that probable cause exists that, starting around
April 1, 2020, through August 12, 2020, DALE LAWERENCE HIPES, doing business as BRI Supply, Inc.
committed federal money laundering crimes (18 U.S.C. § 1957) by receiving proceeds based on unlawful activity,
purchasing real property for approximately $2,050,000.00, on or about June 29, 2020 and purchasing a
Winnebago trailer for approximately $62,015.00, on or about August 12, 2020.

32. Accordingly, the FBI seeks an Arrest Warrant for DALE LAWERENCE HIPES.

Respectfully, submitted,

Troy Cofe Special Agent
Federal Bureau of Investigation
Phoenix, Arizona

SUBSCRIBED AND SWORN by telephone to me this 11 day of December 2020,

HONORABLE EILEEN S. WILLETT
United States Magistrate Judge


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