District of Colorado
Press releases recorded for this federal judicial district.
Eagle County Colorado Businessman Indicted for Tax EvasionRead the Press Release
WASHINGTON – A federal grand jury sitting in the District of Colorado returned an indictment, unsealed today, charging a Colorado resident with tax evasion, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Bob Troyer for the District of Colorado.
According to the indictment, Sergio Murillo owned and operated Mountain High Window Cleaning, which provided window cleaning and snow removal services. The indictment alleges that from 2007 through 2010, Murillo concealed hundreds of thousands of dollars in income earned through his business by instructing Mountain High’s clients to write checks payable to him and depositing the funds into his personal bank account instead of his business bank account. He then allegedly filed false tax returns that did not report this income. The indictment also charges that Murillo falsely told Internal Revenue Service (IRS) employees that his clients decided whether to make checks payable to him or Mountain High, and that he had only a business bank account into which he deposited all of Mountain High’s income.
An indictment is not a finding of guilt. It merely alleges that crimes have been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.
If convicted, Murillo faces a statutory maximum sentence of five years in prison for each of the four counts in which he is charged, as well as a period of supervised release, restitution and monetary penalties.
Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Troyer commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney Peter Hautzinger of the District of Colorado and Trial Attorney Benjamin Weir of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Colorado Businessman Indicted for Tax EvasionRead the Press Release
A federal grand jury sitting in the District of Colorado returned an indictment, unsealed today, charging a Colorado resident with tax evasion, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Acting U.S. Attorney Bob Troyer for the District of Colorado.
According to the indictment, Sergio Murillo owned and operated Mountain High Window Cleaning, which provided window cleaning and snow removal services. The indictment alleges that from 2007 through 2010, Murillo concealed hundreds of thousands of dollars in income earned through his business by instructing Mountain High’s clients to write checks payable to him and depositing the funds into his personal bank account instead of his business bank account. He then allegedly filed false tax returns that did not report this income. The indictment also charges that Murillo falsely told Internal Revenue Service (IRS) employees that his clients decided whether to make checks payable to him or Mountain High, and that he had only a business bank account into which he deposited all of Mountain High’s income.
An indictment is not a finding of guilt. It merely alleges that crimes have been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.
If convicted, Murillo faces a statutory maximum sentence of five years in prison for each of the four counts in which he is charged, as well as a period of supervised release, restitution and monetary penalties.
Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Troyer commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Assistant U.S. Attorney Peter Hautzinger of the District of Colorado and Trial Attorney Benjamin Weir of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Colorado Man Pleads Guilty to Conspiracy to File Fraudulent Tax Refund ClaimsRead the Press Release
WASHINGTON – A Loveland, Colorado businessman, who owned a delicatessen franchise in Fort Collins, pleaded guilty today to conspiring to file fraudulent claims for tax refunds, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Bob Troyer, Acting U.S. Attorney for the District of Colorado.
According to documents filed with the court, Daryl Brent Giesking, conspired with his return preparer, Teresa Marty, the owner of Advanced Financial Services (AFS), a Placerville, California tax return preparation business, to claim fraudulent refunds. With Marty’s help, Giesking filed three individual tax returns claiming more than $1 million in refunds based on falsely reported income tax withholdings. As a result, the Internal Revenue Service (IRS) paid out a $350,765 fraudulent refund to Giesking. Within months of receiving the refund, Giesking spent the funds on precious metals and coins, a truck, jewelry, luxury travel and sporting equipment. After discovering the refund should not have been paid, the IRS levied Giesking’s bank accounts and recovered approximately $40,503. Following the IRS’s levies, Giesking took steps to liquidate a number of his assets to include selling the truck he bought with the fraudulent proceeds and withdrawing all of the funds in his retirement account. He then relocated to Ecuador, where he was arrested in June 2016, on a warrant issued in this case.
Sentencing is scheduled for July 13. Giesking faces a statutory maximum sentence of 10 years in prison, a period of supervised release, restitution and monetary penalties.
Other AFS clients and employees have been prosecuted in Arizona, California, Colorado, Florida, Georgia, Missouri, Oregon and Washington for filing false claims for refunds. Marty was indicted in June 2013 and is scheduled to be sentenced in the Eastern District of California on April 26.
Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Troyer commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Trial Attorney Erin S. Mellen and Assistant U.S. Attorney Kenneth M. Harmon, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Colorado Man Pleads Guilty to Conspiracy to File Fraudulent Tax Refund ClaimsRead the Press Release
A Loveland, Colorado businessman, who owned a delicatessen franchise in Fort Collins, pleaded guilty today to conspiring to file fraudulent claims for tax refunds, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and Bob Troyer, Acting U.S. Attorney for the District of Colorado.
According to documents filed with the court, Daryl Brent Giesking, conspired with his return preparer, Teresa Marty, the owner of Advanced Financial Services (AFS), a Placerville, California tax return preparation business, to claim fraudulent refunds. With Marty’s help, Giesking filed three individual tax returns claiming more than $1 million in refunds based on falsely reported income tax withholdings. As a result, the Internal Revenue Service (IRS) paid out a $350,765 fraudulent refund to Giesking. Within months of receiving the refund, Giesking spent the funds on precious metals and coins, a truck, jewelry, luxury travel and sporting equipment. After discovering the refund should not have been paid, the IRS levied Giesking’s bank accounts and recovered approximately $40,503. Following the IRS’s levies, Giesking took steps to liquidate a number of his assets to include selling the truck he bought with the fraudulent proceeds and withdrawing all of the funds in his retirement account. He then relocated to Ecuador, where he was arrested in June 2016, on a warrant issued in this case.
Sentencing is scheduled for July 13. Giesking faces a statutory maximum sentence of 10 years in prison, a period of supervised release, restitution and monetary penalties.
Other AFS clients and employees have been prosecuted in Arizona, California, Colorado, Florida, Georgia, Missouri, Oregon and Washington for filing false claims for refunds. Marty was indicted in June 2013 and is scheduled to be sentenced in the Eastern District of California on April 26.
Acting Deputy Assistant Attorney General Goldberg and Acting U.S. Attorney Troyer commended special agents of IRS–Criminal Investigation, who conducted the investigation, and Trial Attorney Erin S. Mellen and Assistant U.S. Attorney Kenneth M. Harmon, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Sterling Mail Carrier Tayson Hidalgo Sentenced for Delay and Destruction of MailRead the Press Release
DENVER – Tayson Adam Hidalgo, age 23, of Sterling, Colorado, was sentenced today by U.S. District Court Judge R. Brooke Jackson to serve 2 years’ probation during which he is to spend 200 hours doing community service for delay or destruction of the mail. Hidalgo was also ordered to pay restitution of $1,506.76 to the victims of his crime. The sentence was handed down today, Tuesday, April 11, 2017.
According to court records, between October 3, 2014 and April 21, 2016, the defendant, a U.S. Postal Service officer and employee did unlawfully secret, destroy, detain, delay and open letters, post cards, packages, bags and mail entrusted to him and which came into his possession with the intention that he or any carrier deliver the mail to intended recipients.
During the course of this case, the United States Attorney’s Office, working closely with the U.S. Postal Service and the U.S. Postal Inspector, returned over 26,000 pieces of undelivered mail that was located during this investigation. The recovered mail was addressed to residents within the city limits of Sterling, Colorado and several local postal routes in Fort Morgan, Colorado.
This case was investigated by the U.S. Postal Service Office of the Inspector General and the Sterling Police Department. The defendant was prosecuted by Assistant U.S. Attorney Jason St. Julien.
FBI Rocky Mountain Safe Streets Task Force and Douglas County Sheriff's Office Arrest Man for Bank RobberyRead the Press Release
DENVER – Clayton Emery Catlin, age 44, was arrested yesterday in Highlands Ranch without incident for bank robbery, Acting U.S. Attorney Bob Troyer and FBI Denver Division Special Agent in Charge Calvin Shivers announced. Catlin made his initial appearance before a Magistrate in U.S. District Court in Denver this afternoon where he was advised of his rights and the charges pending against him. Catlin is due back in court on April 11, 2017 at 10:00 a.m. for a detention hearing and preliminary hearing.
According to the facts outlined in the Criminal Complaint affidavit, on March 24, 2017, the defendant robbed the TCF Bank located at 7206 Federal Blvd in Westminster. Clayton was on federal probation for a bank robbery approximately one decade ago.
If convicted, the defendant faces not more than 20 years in federal prison, and up to a $250,000 fine.
The arrest was made by the FBI Rocky Mountain Safe Streets Task Force and the Douglas County Regional SWAT Team. The investigation was conducted by the FBI Rocky Mountain Safe Streets Task Force. The defendant is being prosecuted by Assistant U.S. Attorney Kurt Bohn.
A Criminal Complaint is a probable cause charging document. Anyone accused of committing a felony violation of federal law has a Constitutional right to be indicted by a grand jury. The charges in the Complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.
Castle Rock Breast Cancer Charity Promoter Pleads Guilty to Failure to File a Tax ReturnRead the Press Release
DENVER – Adam C. Shryock, age 37, of Castle Rock, Colorado, pled guilty before U.S. District Court Magistrate Judge Michael J. Watanabe to willful failure to file a tax return, announced acting United States Attorney Bob Troyer and IRS-Criminal Investigation Denver Field Office Special Agent in Charge Steven Osborne. Shryock was charged by Information in Denver, Colorado on October 6, 2016. Shryock is scheduled to be sentenced by Magistrate Judge Watanabe on June 27, 2017.
According to the facts in the information and plea agreement, Shryock created a promotional campaign “Boobies Rock Awareness for Breast Cancer” in February, 2011 and subsequently incorporated “Boobies Rock” in California in April, 2011 as its sole owner and operator. Between April, 2011 and June 2013, Boobies Rock!, operating as a for-profit business, held between 3,600 and 4,500 promotional events selling breast cancer awareness merchandise and accepting donations at bars and sporting events throughout the country.
The Boobies Rock merchandise consisted of t-shirts, hoodies, koozies and bracelets. Hiring managers and/or sales representatives accepted cash, checks, and credit card payments at the events. Shryock instructed the money received be deposited into bank accounts controlled by Shryock at two different banks. Proceeds were also mailed or hand delivered to Shryock’s Castle Rock residence.
During the years under investigation over 2,200 cash deposits totaling over $1.8 million were made into Shryock’s accounts. Shryock used some of these funds to support his lifestyle. Based on the income Shryock earned operating Boobies Rock between 2011 and 2013, along with income Shryock did not report in 2010 while residing in California, the amount of restitution owed to the IRS is $430,970.
Willful failure to file a federal income tax return carries a penalty of not more than one year in federal prison, and a fine of up to $100,000 per count.
This case was investigated by Internal Revenue Service – Criminal Investigation. The case is being prosecuted by Assistant United States Attorney Martha Paluch.
Postal Service Employee Indicted After Faking Cancer in Order to Work from Home and Claim Hundreds of Hours of Sick LeaveRead the Press Release
DENVER – Caroline Zarate Boyle, age 59, of Highlands Ranch, Colorado, was indicted last week for using a forged writing to defraud the United States, Acting U.S. Attorney Bob Troyer and U.S. Postal Service Office of Inspector General Special Agent in Charge (USPS OIG) Scott Pierce announced. Boyle was indicted by a federal grand jury on March 16, 2017, and appeared before a federal magistrate judge last Friday morning (March 24, 2017) for arraignment. Earlier she was advised of her rights and the charges pending against her. She was then released on bond.
Boyle, a U.S. Postal Service employee, appeared before a Magistrate Judge in U.S. District Court earlier this month in response to a summons on a complaint alleging that she faked having cancer in order to claim over 100 days of sick leave and be allowed to work from home. She effectuated this fraud by forging several doctor notes regarding her alleged treatment and e-mailing them to her supervisor. However, employees from the offices of the doctors involved told special agents from the United States Postal Service, Office of Inspector General that the notes were fake and Boyle had never received treatment there. Some of the notes had inaccurate information, including misspellings of the name of the doctor she was allegedly seeing.
“The U.S. Postal Service Office of Inspector General is excellent at rooting out fraud and conducting thorough, righteous investigations,” said Acting U.S. Attorney Bob Troyer. “Thanks to them, Americans don’t have to tolerate this kind of cheating.”
Scott Pierce, USPS OIG Special Agent in Charge, Contract Fraud Investigations Division, said, “The American public expects employees of the U.S. Postal Service to be honest and forthright in their professional endeavors. For employees who choose otherwise, OIG special agents aggressively investigate allegations of criminal misconduct. In this instance, an employee fabricated medical documentation and other reports indicating she was being treated for a devastating disease, all of which were untrue. Fortunately, the actions of this employee are not indicative of the vast majority of U.S. Postal Service personnel who are dedicated, hard-working public servants.”
Boyle has been charged with a one count of presenting a forged writing to the United States with the intent to defraud. This charge carries a penalty of up to ten years in federal prison and up to a $250,000 fine.
This case is being investigated by the U.S. Postal Service’s Office of the Inspector General and is being prosecuted by Special Assistant U.S. Attorney Dan Burrows.
The charges contained in the complaint and indictment are allegations, and the defendant is presumed innocent until proven guilty.
Adam Hayat to Appear in Federal CourtRead the Press Release
UPDATE: March 20, 2017 at 3:15 p.m. Adam Hayat appeared in U.S. District Court in Denver. He was advised by U.S. Magistrate Judge Michael E. Hegarty of the charge contained in the recently returned indictment, as well as the penalty associated with that charge. During the hearing Hayat was represented by a member of the Federal Public Defender's Office. He is due next in court on Thursday, March 23, 2017 at 10:00 a.m., also before Magistrate Judge Hegarty. The purpose of the Thursday hearing is to determine the status of his detention. He will also be arraigned, where he will enter a plea.
Hayat currently faces one count of Possession of Firearms Not Registered With the National Firearms Registration and Transfer Record (aka pipe bombs). If convicted the defendant faces not more than 10 years in federal prison, and up to a $250,000 fine.
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DENVER – Adam Hayat is scheduled to have his first court appearance in Colorado this afternoon at 2:00 p.m. before U.S. Magistrate Judge Michael E. Hegarty at the Arraj U.S. Courthouse, 901 19th Street, Courtroom 501. He will be advised of the charges contained in a recently obtained indictment.
A federal grand jury in Denver late last week returned a one count indictment charging Adam Nauveed Hayat, age 35, of Denver, with one count of possession of a firearm (a destructive device) not registered to him in the National Firearms Registration and Transfer Record. If convicted, he faces not more than 10 years in federal prison, and up to a $250,000 fine. The announcement was made by the U.S. Attorney’s Office, the ATF, FBI, and the Denver Police Department.
He was arrested in Los Angeles after making and leaving the destructive devices at the downtown Denver Sheraton Hotel before fleeing. The Denver Police Department’s Bomb Squad carefully removed the devices, ultimately rendering them safe.
This investigation was conducted by the FBI, ATF and the Denver Police Department. The Los Angeles Police Department, as well as the Los Angeles FBI and ATF were involved with the arrest.
The defendant is being prosecuted by Assistant U.S. Attorney Judith Smith, Chief of the Cybercrime and National Security Section and Assistant U.S. Attorney Julia Martinez both with the Colorado’s U.S. Attorney’s Office.
The charge contained in the indictment is an allegation, and the defendant is presumed innocent unless and until proven guilty.
District Court Enters Permanent Injunction Against Colorado Companies to Stop Distribution of Adulterated and Misbranded Dietary Supplements and Unapproved and Misbranded DrugsRead the Press Release
WASHINGTON – The U.S. District Court for the District of Colorado has entered a permanent injunction against EonNutra LLC, two related companies, CDSM LLC and HABW LLC, and their owner, Michael Floren, to prevent the sale and distribution of adulterated and misbranded dietary supplements and unapproved and misbranded drugs, the Justice Department announced today.
The Department filed a complaint on March 10 in the U.S. District Court for the District of Colorado, alleging that the defendants, who sell some 150 dietary supplement products, violated the Federal Food, Drug, and Cosmetic Act (FDCA). Although labelled as dietary supplements, several of the defendants’ products were, according to the complaint, marketed as drugs, with claims that the products could help treat or prevent a host of serious conditions or diseases, including heart disease, diabetes, depression, hypertension, osteoporosis, and liver and kidney disorders. But, according to the complaint, the defendants offered these claims to the consuming public, notwithstanding the absence of FDA approval. Some of the specific products identified in the complaint as unapproved drugs were 4NOx2, HGH Night Time, rHGH Drops Black Label, Primal Rage Levo 5 GH Mass and Deer Antler Velvet Extract. Additionally, as the complaint alleges, the defendants sold these supplements without implementing the requisite procedures to validate the supplements’ composition.
“The Department of Justice will continue to work cooperatively with FDA so that consumers can be confident in the claims of sellers of drugs and dietary supplements,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Manufacturers need to ensure the quality and identity of the ingredients that go into their products, so that such products are safe for consumers and the public can rely on the integrity of those products.”
“Lying to the public so you can make money is a bad idea,” said Acting U.S. Attorney for the District of Colorado Bob Troyer. “Doing it in a way that jeopardizes their health and safety is a REALLY bad idea. We have a long history in the West of not tolerating snake-oil salesmen.”
The complaint alleged that the defendants marketed several of their products as drugs through a series of disease-related treatment claims even though these same products had not received FDA approvals. The complaint further alleges that, despite repeated warnings from FDA, the defendants continued to post statements on their websites claiming that their products cured, mitigated, treated, or prevented a number of serious diseases. According to the complaint, these claims were unsupported by any well-controlled clinical studies or other credible scientific substantiation. In addition, the complaint alleges that the defendants’ products did not contain adequate directions for such uses. The complaint continued that directions for use, including dosages, warnings, and side effects, must be premised on clinical data derived from scientifically controlled investigation, and since the defendants persisted in making disease-related treatment claims about their products in the absence of any well-controlled scientific test data, the products were misbranded.
In addition to claims related to sales of unapproved drugs, the complaint further alleges that the defendants’ products were adulterated dietary supplements because they were not manufactured in compliance with federal good manufacturing practice regulations. Under the FDCA, dietary supplement manufacturers are required to have systems in place to ensure that their products meet specifications for identity, purity, strength and composition. According to the complaint, a 2016 FDA inspection of the defendants’ manufacturing facility revealed, among other things, that the defendants failed to establish specifications for the identity, purity, strength, and composition of their finished products or the components in their products, or prepare and follow their manufacturing plans. The complaint also alleges that many of the labels on the defendants’ supplements were deficient, and caused the products to be misbranded under the FDCA. The complaint alleges, for example, that some of the defendants’ supplement labels did not list all of the products’ ingredients, indicate the correct serving size, or indicate the number of servings in a bottle.
The defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction. The consent decree requires that if the defendants wish to resume manufacturing drugs or dietary supplements in the future, they must implement the remedial measures set forth in the consent decree, notify the FDA of the measures they have taken, and obtain written approval from the FDA that they appear to be in compliance with both the terms of the consent decree and the provisions of the FDCA.
This matter was handled by Trial Attorney Christopher O’Connell of the Civil Division’s Consumer Protection Branch, with the assistance of Assistant U.S. Attorney Jacob Licht-Steenfat of the U.S. Attorney’s Office for the District of Colorado and Senior Counsel Michele Svonkin of the U.S. Department of Health and Human Services’ Office of General Counsel.
For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at https://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the District of Colorado, visit its website at https://www.justice.gov/usao-co.
Jury Finds Gunsmoke Gun Shop Owner Richard Wyatt Guilty of Most ChargesRead the Press Release
Acting United States Attorney Bob Troyer, IRS Criminal Investigation (IRS-CI) Special Agent in Charge Steven Osborne, and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Denver Field Division Special Agent in Charge Debora Livingston announced that today a jury found Richard Wyatt, age 53, of Evergreen, Colorado guilty of conspiracy to deal in firearms without a license and tax charges (counts 1, 5, and 6 through 13). The jury hung on counts 2 through 4. The guilty verdicts were the result of a 6-day trial before U.S. District Court Chief Judge Marcia S. Krieger. The jury deliberated for approximately 5 days before reaching their verdict. Wyatt, who was indicted by a federal grand jury in Denver on February 9, 2016, first appeared at the trial free on bond. Wyatt was taken immediately into custody after the jury’s guilty verdict. He is scheduled to be sentenced by Chief Judge Krieger on July 19, 2017.
According to the indictment and evidence presented at trial, Wyatt operated Gunsmoke, a store in Wheat Ridge, Colorado, that displayed firearms and firearm accessories for sale. Wyatt was the principal decision maker for the store and controlled the store’s bank account. In addition to holding itself out as a business that bought and sold firearms, Gunsmoke provided gunsmithing services. Wyatt aggressively publicized his business by posting videos on YouTube and by appearing in a reality television series that appeared on the Discovery Channel. The reality TV show aired from 2011 through 2012, showing a total of 26 episodes.
On Feb. 17, 2012, Wyatt conspired with others to deal in firearms without a license. In April 2012, the defendant surrendered his Federal Firearms License (FFL) due to his violations of federal laws and regulations. After Gunsmoke surrendered its FFL, Gunsmoke changed the address of a store known as Triggers Firearms LLC’s (Triggers) federal firearms license, to the Gunsmoke address, although they did not play any role in managing the store or receive any profits. Thereafter, Wyatt continued to operate Gunsmoke as a retail firearms store that also offered gunsmithing services, but never held an ownership interest in Triggers or assumed management of Triggers. Wyatt and other conspirators submitted false paperwork to the ATF to hide that Triggers was acting as a straw licensee for Gunsmoke.
After losing his FFL, the defendant did not apply for or obtain a license to sell firearms from the Gunsmoke premises. Wyatt held a meeting the day before losing his license with his employees to describe how he wanted the business to continue to run. Between April 1, 2013 and March 31, 2015, no other person was licensed to engage in the business of dealing in firearms at Gunsmoke. Wyatt directed Gunsmoke employees to enter firearm sales in Gunsmoke’s computer point of sales software system as “miscellaneous” sales rather than firearm sales. Customers who shopped at Gunsmoke were able to look at numerous firearms that were displayed throughout the store. Customers were able to speak with Gunsmoke employees, including Wyatt, about the features of particular firearms. Finally, customers selected and purchased firearms from Gunsmoke and were able to have gunsmithing services performed on firearms at the Gunsmoke premises. After receiving payment for any firearms, Gunsmoke employees directed the customers to another firearm store which had a valid federal firearms license, where the customer filled out the background check paperwork and the customers took possession of the firearm(s) they had purchased at Gunsmoke. Customers who wanted gunsmithing services left their firearms with Gunsmoke. After the gunsmiths at Gunsmoke completed their work, they returned the firearms to the customers. The customers paid Gunsmoke directly for this service. Wyatt, without the FFL license, continued to order new guns for sale to keep the business going.
In addition to the alleged firearms violations, Wyatt failed to pay personal income tax in years 2009, when he made approximately $290,000, in 2010, when he made approximately $123,000, and in 2012, when he made approximately $689,000. Further, in 2010, 2011 and 2012, Wyatt failed to pay corporate taxes. In 2012, Wyatt willfully filed a tax return he knew to be false, stating that he lost money, when in fact he made at least $350,000 that he failed to disclose.
“The defendant decided the rules about guns and paying taxes didn’t apply to him,” said Acting U.S. Attorney Bob Troyer. “He now faces well deserved time for that decision.”
"The law is clear on the issue of taxable income and who is required to file and pay taxes: there is no gray area on the subject,” said Steven Osborne, Special Agent in Charge, IRS – Criminal Investigation Denver Field Office. “This conviction sends a message that IRS-CI is working to make sure all taxpayers file and pay their fair share of taxes.”
“The laws and regulations surrounding the sale of firearms exist for a reason, and no one is above the law,” said ATF Denver Field Division Special Agent in Charge Debora Livingston. “ATF is committed to ensuring every gun dealer is appropriately licensed, educated and inspected, and we will investigate those who believe the rules do not apply to them.”
This case was investigated by the ATF and IRS-CI. The defendant faces up to 5 years in prison per count for each of the two counts of conspiracy. He faces not more than 1 year per count for each tax count.
The case was prosecuted by Assistant United States Attorneys Suneeta Hazra, Peter McNeilly and Anna Edgar, with Assistant United States Attorney Tonya Andrews assisting on the asset forfeiture.
Denver Man Sentenced to Prison for Illegally Possessing Firearms Stolen from Colorado Gun StoreRead the Press Release
DENVER – Eric Michael Perez, age 20, of Denver, Colorado, was sentenced late last week by U.S. District Court Judge Philip A. Brimmer to serve 70 months (nearly 6 years) in federal prison for being a felon in possession of a firearm, Acting U.S. Attorney Bob Troyer and ATF Special Agent in Charge Debora Livingston announced. Following his prison sentence, Judge Brimmer ordered the defendant to serve 3 years on supervised release. The defendant, who appeared at the sentencing hearing in custody, was remanded at the conclusion.
Defendant Perez was indicted by a federal grand jury on July 27, 2016. He pled guilty to the charge in the indictment on November 23, 2016. He was sentenced by Judge Brimmer on February 23, 2017.
According to court documents, including the stipulated facts contained in the defendant’s plea agreement, on June 21, 2016, 35 guns were stolen from Colorado Gun Broker in Jefferson County during an after-hours burglary. While processing the scene, investigators discovered fresh blood on the price tag of a shotgun used to break glass display cases containing the stolen weapons. The blood sample and DNA profile were analyzed and matched the defendant.
On June 29, 2016, ATF agents and Aurora Police Department Officers, through investigative leads and databases, located the defendant a residence in Aurora, Colorado. He was taken into custody on outstanding state and federal warrants. Law enforcement received consent to search the residence and recovered two firearms in the defendant’s bedroom that were stolen in the Colorado Gun Broker burglary.
“Investigating the gun store burglaries and recovering the stolen firearms is a top priority for ATF in Denver,” said ATF Denver Field Division Special Agent in Charge Debora Livingston. “ATF is collaborating closely with all the affected police departments and neighboring jurisdictions to pool our intelligence and investigative resources. This is our first success, and it will not be the last.”
Perez was prohibited from possessing firearms after having been convicted of crimes punishable by more than one year in prison. He was also serving a 15-month consecutive sentence in the Colorado Department of Corrections for a probation violation related to an auto theft conviction out of Jefferson County.
The case was investigated by ATF, Aurora Police Department and Jefferson County Sheriff’s Office.
The defendant was prosecuted by Assistant United States Attorney Caroline Friedman.
Woodland Park Woman Sentenced to 27 Years in Federal Prison for Producing Child Pornography While Sexually Abusing Minor Child to Whom She Had AccessRead the Press Release
DENVER – Rhiannon Carnahan, age 30, of Woodland Park, Colorado, was sentenced earlier this week to serve 324 months (27 years) in federal prison by U.S. District Court Judge R. Brooke Jackson, Acting U.S. Attorney Bob Troyer, Internet Crimes Against Children (ICAC) Commander for Colorado Lieutenant Christina Sheppard of the Colorado Springs Police Department, and U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) Acting Special Agent in Charge John Eisert announced. Following her prison sentence, Carnahan was ordered to serve 10 years of supervised release. The defendant, who appeared at the hearing in custody, was remanded at its conclusion.
Carnahan and a co-defendant were first charged by criminal complaints on April 23, 2015. They were then indicted by a federal grand jury in Denver on May 6, 2015. On March 31, 2016, Carnahan pled guilty before Judge Jackson. She was sentenced on February 21, 2017. Co-defendant Brandon Tyler Hill had pled guilty and was sentenced by Judge Jackson to serve 360 months (30 years) in federal prison for his role in the production of child pornography. Hill will spend his entire life on supervised release.
According to court documents, the Colorado Springs Police Department initiated an investigation after a civilian witness contacted law enforcement to report that Hill had sent her unwanted child pornography images via email and was being extorted to produce more child pornography images. As part of the investigation, it was determined that the defendant utilized numerous identities, including that of an ICAC police officer, to attempt to make the civilian witness to produce child pornography. The investigation revealed that Hill was also communicating online with co-defendant Rhiannon Carnahan, who he learned had access to Minor #1, a child who was 3 years old when the offense conduct began. Hill used various pseudonyms to communicate with Carnahan. Hill made numerous and repeated requests for images and videos depicting Minor #1 engaged in sexually explicit conduct. During the course of the communications and in response to Hill’s requests for child pornography depicting Minor #1, Carnahan sexually abused Minor #1 over a three-month time frame, used her cell phone to take images and videos of that abuse, and sent those images and videos to Hill. Minor #1 was a child in Carnahan’s care when Carnahan sexually exploited Minor #1. Carnahan is one of a growing number of women charged with child pornography crimes in the District of Colorado.
The Carnahan case was investigated by the Colorado Springs Police Department and U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), with support provided by the Woodland Park Police Department.
Carnahan is being prosecuted by Assistant U.S. Attorney Alecia Riewerts, Project Safe Childhood Coordinator, assigned to the Cybercrime and National Security Section of the Colorado U.S. Attorney’s Criminal Division.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
Former Nurse Rocky Allen Sentenced to Additional 12 Months in Federal Prison for Felony Criminal Contempt of CourtRead the Press Release
DENVER – U.S. District Court Judge Raymond P. Moore sentenced former nurse Rocky Allen to serve 12 months in federal prison for felony criminal contempt of court, to run consecutive to his 78 month previous sentence, Acting U.S. Attorney Bob Troyer announced. Allen drove to Idaho prior to reporting to prison to visit family despite an order from Judge Moore prohibiting him from traveling there. In total, Allen will now serve 90 months in federal prison. Allen, who appeared at today’s hearing in custody, was remanded at the conclusion of the hearing.
Assistant U.S. Attorney Anna Edgar handled the hearing for the U.S. Attorney’s Office, District of Colorado.
Arvada Man Sent to Federal Prison for Mailing Marijuana and Marijuana ConcentrateRead the Press Release
DENVER – Stephen Paul Anderson, age 27, of Arvada, Colorado, was sentenced yesterday by U.S. District Court Judge Christine M. Arguello to serve one year in federal prison, followed by three years of supervised release for the manufacture of a schedule I controlled substance and the unlawful use of a communications facility, Acting U.S. Attorney Bob Troyer and U.S. Postal Inspector in Charge Craig Goldberg announced. Anderson, who appeared at the sentencing hearing free on bond, was ordered to report to a facility designated by the U.S. Bureau of Prisons.
Anderson was indicted by a federal grand jury in Denver on August 25, 2016. He pled guilty before Judge Arguello on November 30, 2016. The defendant was sentenced on February 22, 2017.
According to court records, beginning in June 2015 through December 2015, Postal Inspectors identified at least 30 parcels that were sent by Anderson via U.S. Mail that were destined for Texas, New York and Maryland. Anderson often used the name, “The Healthnut” along with his Arvada return address in the mailings. During the course of the investigation, federal search warrants were obtained and revealed the parcels contained marijuana, marijuana edibles or other marijuana concentrate products.
In December 2015, Postal Inspectors, with the assistance of the West Metro Drug Task Force, executed another federal search warrant on Anderson’s residence and vehicle. That search revealed that Anderson had a marijuana grow and commercial grade propane and butane and manufacturing equipment used for THC extraction. Seized during the search were numerous marijuana plants in varying states of growth, numerous pounds of processed marijuana, edibles and concentrate as well as U.S. Postal Service mailing products.
Craig Goldberg, Inspector in Charge of the Denver Division of the U.S. Postal Inspection Service, said, “This case highlighted the dangerous methods used by those who attempt to extract oils from marijuana. When Inspectors searched Anderson’s workshop inside a private residence, they discovered multiple tanks of butane and propane, the highly-flammable fuels needed for extraction. These extraction methods create a significant risk for an explosion, potentially causing extensive property damage or injuries to nearby residents. Additionally, we want the public to know that Postal Inspectors will aggressively pursue anyone who attempts to use the Postal Service to facilitate drug trafficking. We do not want the U.S. Mail to be used to commit crimes, and we aim to keep illegal drugs out of the mail for the safety of our employees. The public should also be aware that although it may be legal to possess small amounts of marijuana in Colorado and certain other states, it is still a violation of federal law to ship marijuana via the U.S. Mail.”
This case was investigated by the U.S. Postal Inspection Service with assistance from the West Metro Drug Task Force.
The defendant was prosecuted by Assistant U.S. Attorney James Boma.
Man Who Had Pipe Bombs in Downtown Denver Hotel Charged Federally in Colorado and ArrestedRead the Press Release
DENVER – Adam Nauveed Hayat, age 35, Denver, Colorado, was arrested without incident yesterday in a Los Angeles, California hotel, after being charged in U.S. District Court in Denver for possession of pipe bombs not registered with the ATF, Acting U.S. Attorney Bob Troyer, FBI Denver Division Special Agent in Charge Calvin Shivers, ATF Denver Field Division Special Agent in Charge Debora Livingston and Denver Police Department Chief Robert White announced.
Hayat made his initial appearance in U.S. District Court for the Central District of California this afternoon where he was read his rights and advised of the charge pending against him. He was ordered held without bond and ordered removed to Colorado. He will eventually be transferred by the U.S. Marshals Service for further court proceedings.
According to the affidavit in support of the Criminal Complaint, on February 15, 2017, personnel from the Sheraton Hotel located at 1550 Court Place contacted the Denver Police Department to report a suspicious incident. Upon arriving, the Denver Police Department (DPD) went to room 1902 -- and found the word “explosives” written on the closet door mirror. The officer then opened the closet, opened the safe, and found a closed ammunition case. Also found in the hotel room were several metal pipes and empty rifle shell casings. The DPD officer immediately contacted their bomb squad. The DPD Bomb Squad carefully examined the ammunition case – and found pipe bombs. They safely removed the ammunition case from the hotel room and transported it to their bomb range, where they rendered it safe.
It was determined during the course of the investigation that Adam Nauveed Hayat rented room 1902 at the downtown Denver Sheraton Hotel. An arrest warrant was issued first by the Denver Police Department and then later by federal authorities. He was located and arrested at a hotel near the Los Angeles International Airport.
The defendant is charged with one count of possession of firearms not registered with the National Firearms and Registration Transfer Record. The penalty on that charge is not more than 10 years in federal prison, and up to a $250,000 fine.
This case was investigated by the FBI, ATF, and the Denver Police Department. The Los Angeles Police Department, as well as the Los Angeles FBI and ATF were involved in the arrest. His court appearance was handled by the U.S. Attorney’s Office for the Central District of California.
“Cases like this demonstrate the reason that law enforcement advises citizens, ‘if you see something, say something,’” said Denver Police Chief Robert White.
The defendant is being prosecuted by Assistant U.S. Attorney Judith Smith, Chief of the Cybercrime and National Security Section and Assistant U.S. Attorney Julia Martinez both with the Colorado’s U.S. Attorney’s Office.
A Criminal Complaint is a preliminary probable cause charging document. Anyone accused of committing a felony violation of federal law has a Constitutional right to be indicted by a grand jury. The charges in the Complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.
Castle Rock Man Convicted of Making False Claims in Attempt to Defraud Department of Argiculture's Finance OfficeRead the Press Release
DENVER – Gunther Glaub, age 56, of Castle Rock, Colorado, was recently convicted of five counts of making false claims against the government following a three-day trial before U.S. District Court Judge Raymond P. Moore, Acting U.S. Attorney Bob Troyer, FBI Denver Division Special Agent in Charge Calvin Shivers and U.S. Department of Education Office of the Inspector General Special Agent in Charge of Western Regional Office Natalie Forbort announced. A sixth count, mailing a fictitious money order, was dismissed before trial. Glaub, who is free on bond, will be sentenced by Judge Moore on May 12, 2017. He was originally indicted by a federal grand jury on June 6, 2016. His guilty verdict came on January 25, 2017.
According to court documents, as well as information and evidence produced to court during hearings and at trial, Glaub tried to defraud the Department of Agriculture’s finance office into paying nearly $1.7 million worth of debts on his behalf. The five false claims he was convicted of submitting included attempts to get the government to buy him three new vehicles (including a $73,000 Corvette and a $65,000 Camaro) and pay off two other debts (including student loans he owed to the Department of Education).
During pretrial proceedings, information indicated that Glaub was involved with the anti-government “sovereign citizen” movement, whose adherents refuse to recognize the authority of the federal government and often use those purported beliefs as a gateway to illegal activity. Testimony at trial confirmed Glaub’s sovereign affiliation, and his actions were consistent with known fraud schemes that are prevalent in sovereign citizen circles.
Glaub faces not more than 5 years in federal prison, and up to a $250,000 fine, per count, for each of the five counts of conviction.
This case was investigated by the FBI and the U.S. Department of Education Office of the Inspector General. The defendant was prosecuted by Special Assistant U.S. Attorney Daniel Burrows and Assistant U.S. Attorney Peter McNeilly.
United States Recovers $300,000 Resolving Allegations That Federal Oil Lesse Violated the False Claims ActRead the Press Release
DENVER -- The Acting United States Attorney for the District of Colorado, Bob Troyer, today announced the recovery of $300,000 as settlement of allegations that General Production Service of California, Inc. (“GPS”) violated the federal False Claims Act by failing to pay money owed on oil produced from a federal lease.
The Settlement Agreement resolves contentions by the United States that GPS chronically failed to timely report oil production from its federal lease, and, from October 2010 through July 2016, failed to report and pay its royalty obligation to the United States. These failures occurred despite periodic contact from the Department of the Interior.
“Stealing from taxpayers is what this is. We don’t tolerate that,” said Acting U.S. Attorney Bob Troyer.
Special Agent in Charge Ron Gonzales, Office of Inspector General - Energy Investigations Unit commented that “this is an excellent example of federal agencies working together, collaboratively and effectively, to ensure that oil and gas companies operating in areas within the Department's jurisdiction meet their professional and legal responsibilities. The OIG is committed to work with our partners within the Department of Justice and Department of Interior to ensure accountability within the Department’s revenue collection programs."
"The Bureau of Land Management takes its oversight responsibilities seriously, and will work diligently with its partners to hold liable those companies that fail to meet their legal and regulatory commitments," said Shannon Tokos, Chief, Special Investigations Group of the Bureau of Land Management.
The United States Attorney’s Office acknowledges the cooperation and teamwork demonstrated by governmental entities involved in today’s recovery. Special thanks are extended to the Office of Natural Resources Revenue, the Department of the Interior’s Office of the Solicitor, the Energy Investigations Unit of the Department of the Interior’s Office of Inspector General, and the Special Investigations Group of the Bureau of Land Management. The United States Attorney’s Office in Denver, Colorado works closely with these offices in the pursuit of unpaid or underpaid oil and natural gas revenue, claims for which are processed at the Office of Natural Resources Revenue at the Federal Center in Lakewood.
The United States was represented in this matter by Assistant United States Attorney Andrea Wang of United States Attorney’s Office in Denver, Colorado.
The Settlement Agreement is neither an admission of liability by GPS, nor a concession by the United States that its claims are not well founded.
Thornton Bank Robber Sentenced to over 14 Years in Federal PrisonRead the Press Release
DENVER -- Edward Dean McCraine, age 60, of Fort Collins, was sentenced yesterday by Senior U.S. District Court Judge Lewis T. Babcock to serve 175 months (14.5 years) in federal prison for armed bank robbery, Acting United States Attorney Bob Troyer and FBI Denver Division Special Agent in Charge Calvin Shivers announced. Following his sentence, McCraines was ordered to serve 3 years on supervised release. At the time of the crime, the defendant was on Supervised Release for a 2001 bank robbery.
McCraine was first charged by Criminal Complaint on May 26, 2016. He was indicted by a federal grand jury on June 8, 2016. The indictment was dismissed and the defendant was charged and pled guilty to an Information on November 9, 2016. He was sentenced on February 8, 2017.
According to the stipulated facts contained in the defendant’s plea agreement, on May 26, 2016, McCraine walked into a TCF Bank located at 9660 Washington Street in Thornton, Colorado. He immediately pulled out what appeared to be a black handgun from his waistband and pointed it at two different bank tellers. He demanded money from both tellers, stating that he didn’t want dye packs or GPS devices. Both tellers provided money as they were in fear for their lives. The defendant then noticed that one of the tellers provided a GPS tracking device. McCraine removed it, stating “I should just shoot you for giving me that.” He then placed the money in a shopping bag and fled the bank. The defendant was later apprehended after his probation officer reviewed photos of recent bank robbers, immediately recognizing McCraine.
“Robbing a bank with a gun is volunteering for federal prison. There are cameras and security everywhere, and you are guaranteed to get a long sentence,” said Acting U.S. Attorney Bob Troyer.
“Today’s sentencing illustrates the FBI’s continued commitment to work closely with our state and local law enforcement partners to address violent crime,” said FBI Special Agent in Charge Calvin Shivers. “This investigation was truly a collaborative effort with our local partners, and we are confident that today’s sentencing sends a message to those contemplating committing criminal acts in our community that they will be aggressively investigated and prosecuted to the fullest extent of the law.”
This case was investigated by the Thornton Police Department and the FBI’s Rocky Mountain Safe Streets Task Force.
The defendant was prosecuted by Assistant U.S. Attorney Brad Giles, Chief of the Major Crimes Section of the U.S. Attorney’s Criminal Division.
Colorado U.S. Attorney's Office Closed Friday for MoveRead the Press Release
DENVER – To all news organizations. Tomorrow, Friday, February 3, 2017, the Colorado U.S. Attorney’s Office will be closed in order to move from our current address to 1801 California Street, Denver, Colorado 80202. The office will reopen on Monday, February 6, 2017 at that address. Phone numbers and email addresses will remain the same.
While the office is closed Friday, attorneys and staff will still be working on court and duty matters. An official announcement with the new address and contact information will be released on Monday morning.
Colorado U.S. Attorney Creates New Cybercrime and National Security UnitRead the Press Release
DENVER – Acting U.S. Attorney Bob Troyer announced today the creation of a new unit in the Colorado U.S. Attorney’s Office’s Criminal Division: The Cybercrime and National Security Section. This section will be staffed with six Assistant United States Attorneys who are experts in investigating and prosecuting cyber-enabled crimes and national security cases.
In addition to already having several cyber specialists, a national security cyber coordinator, and an anti-terrorism coordinator, the office created a Digital Currency Crimes Coordinator to address the emerging threat of criminals using digital currency and dark-net forums to commit serious crime that is difficult to track using traditional investigative techniques. Because of the ground-breaking work that the office has done in that area as well as other areas of cybercrime, it was recently awarded a cyber-dedicated Assistant U.S. Attorney. With that new position and because of the creation of this specialized section, this office will be in an even better position to respond to new, and ever more serious threats in the areas of cybercrime and national security.
The creation of this section will allow the office to build on the excellent work it has already been doing in cybercrime and national security cases. It will continue to investigate and prosecute cases targeting hacking, ransomware, network intrusions, denial of service attacks, economic espionage and trade secret theft, dark-net crime, national security cybercrime, counter-proliferation and export-control offenses, digital currency enabled crime, and child exploitation crimes. The office has investigated and prosecuted several such high-profile cybercrime cases including U.S. v. Rezendez, a prosecution involving a large-scale distributed denial of service attack; U.S. v. Bourret, et al., a computer intrusion case involving almost two million online accounts; U.S. v. Snowden, a prosecution involving economic espionage and trade secrets theft; U.S. v. Hugo, a production of child pornography case involving several children; U.S. v. Salias, a production of child pornography case involving an infant; and U.S. v. Holt et al., a prosecution involving a man and woman who sexually exploited three children. The section will also continue to expand its investigations and prosecutions of national security and terrorism matters as reflected in the good work it has already done in cases such as U.S. v. Conley, which involved a Colorado woman who met an ISIS fighter online and attempted to travel to Syria and provide support to the terrorist group; U.S. v. Ansberry, in which the defendant is charged for attempting to use an explosive device to destroy the Nederland Police Department; and U.S. v. Worku, which involved the investigation, prosecution, and trial of a convicted war criminal for visa fraud.
Statistics demonstrate the critical need for this new section. This District has increased its investigations and prosecutions into hacking and other cybercrimes by 20 percent over the last two years. Since 2014, there has been a 40 percent increase in child exploitation cases prosecuted. The largest increase was seen in cases involving the production of child pornography, Since 2012 there has been a 500 percent increase in child pornography production cases prosecuted in the District, many involving children who are toddlers and infants. In addition, nationally, since 1998 the National Center for Missing and Exploited Children (NCMEC) Cyber Tipline received 12.7 million reports, with 4.4 million coming in to the center in 2015 alone. NCMEC has reviewed 172 million images, and has identified more than 10,900 child victims.
Also, the office have prosecuted 16 individuals since 2014 for Bitcoin/Digital Currency crimes. Investigations aided by this section has also led to 9 individuals being prosecuted by foreign governments, and 6 to 10 individuals being prosecuted by state authorities.
“Cybercrime and national security crimes are increasingly urgent threats in the District of Colorado,” said Acting U.S. Attorney Bob Troyer. “This is what we do: identify emerging threats that we can effectively address, and fluidly deploy an elite team to meet the threat.”
The unit will also continue to build on the good working relationships it enjoys not only with our law enforcement partners, but with private industry. It will continue to conduct outreach and training to both law enforcement and private industry to solicit collaboration on cybercrime prevention and reporting. Cyber prosecutors in the office already regularly participate in numerous speaking engagements each year, and will continue to do so.
Pueblo Man Sentenced to Federal Prison for Illegally Possessing FirearmsRead the Press Release
DENVER – Daniel Anthony Garcia, age 28, of Pueblo, Colorado, was sentenced today by U.S. District Judge Christine M. Arguello to serve 37 months in federal prison for felon in possession of a firearm, Acting U.S. Attorney Bob Troyer and ATF Acting Special Agent in Charge Ron Humphries announced. Following his prison sentence, Judge Arguello ordered the defendant to serve 3 years on supervised release. The defendant, in custody since his arrest on January 25, 2016, was remanded into the custody of the U.S. Marshals Service.
Garcia pled guilty to the charge on October 13, 2016.
According to court documents, including the stipulated facts contained in the defendant’s plea agreement, the defendant illegally entered an occupied home on December 6, 2015 and fired a gun to threaten the occupants after pistol whipping a man. One of the victims knew the assailant and identified him to the Pueblo Police Department. The shell casing from the gun was collected and sent to the National Integrated Ballistic Information Network for testing.
On January 25, 2016, Pueblo Police Department Officers sought the defendant at a residence in Pueblo. While at the location, officers outside the home observed the defendant bend over and appear to conceal an item under a bed inside the residence. A consent search allowed the officers to retrieve a .45-caliber pistol from under the bed, which NIBIN confirmed was used in the December 2015 home invasion using shell casings collected at a test fire.
Garcia was prohibited from possessing a firearm after having been convicted of a felony offense with a prison term of more than one year.
“There is an elite state and federal task force in Southern Colorado targeting gun violence,” said Acting U.S. Attorney Bob Troyer. “You use guns when you shouldn’t, and hell will be coming to breakfast.”
“Garcia would not have been under federal investigation if not for NIBIN,” said ATF Acting Special Agent in Charge Ron Humphries. “Thanks to the ballistics information from NIBIN and the stellar detective work by Pueblo PD and ATF, Garcia will not be able to terrorize the community for many years to come.”
The case was investigated by the ATF and Pueblo Police Department as part of the Southern Colorado Crime Gun Intelligence Center. The Southern Colorado Crime Gun Intelligence Center uses cutting-edge technology, such as NIBIN, and a dedicated investigative team to stop shooters and identify their sources of guns before they can commit further violent crimes. It is a partnership between ATF, Colorado Springs Police Department, El Paso Sheriff's Office, Fountain Police Department, Pueblo Police Department, Department of Corrections Division of Adult Probation, the U.S. Attorney's Office and the District Attorney's Office for the 4th and 10th Judicial Districts.
The defendant is being prosecuted by Assistant United States Attorney Kurt J. Bohn.
Littleton Woman Pleads Guilty for Oil Investment SchemeRead the Press Release
DENVER – Jill M. Evans, age 51, of Littleton, Colorado, recently pled guilty before U.S. District Court Judge John L. Kane to wire fraud and money laundering charges announced the United States Attorney’s Office, IRS – Criminal Investigation (IRS-CI) and the Federal Bureau of Investigation (FBI). Evans was indicted by a federal grand jury on May 21, 2015.
According to the indictment and plea agreement, in September 2011 and continuing through May 2015, Evans devised a scheme to defraud at least eight individuals whom she solicited to invest in alleged oil transactions. Evans informed or caused others to inform potential investors that she or one of her companies, Paramount Mortgage or Evcom, had rights or agreements related to the purchase and resale of petroleum products, including diesel oil or jet fuel. She claimed that the oil deals could not be completed until certain fees or other expenses related to the deals could be paid.
Evans falsely told investors they would receive a return on their investment ranging from fifty percent to fifty times their original investment within a matter of days or weeks. She told investors that their funds would be held in an escrow account and would be fully refundable if the oil deal did not close. Evans instructed investors to transfer funds to bank accounts. Some investors’ funds were not used as represented and were also sent to personal bank accounts that Evans controlled. Of those funds transferred to personal accounts she controlled, she used those funds for her own personal expenses.
She would tell investors that oil deals were nearing successful completion and that disbursements of profits were imminent. She sent e-mails attaching fabricated court documents regarding the status of civil litigation purporting to award Evans or related parties substantial sums of money. When the oil deals failed to close, she told investors that she would be able to pay investors from these proceeds.
Furthermore, Evans concealed from investors her December 2011 criminal indictment by a State of Colorado grand jury and her subsequent March 2013 criminal conviction for theft and forgery. Evans’s bond conditions prohibited her from entering into any financial transactions in excess of $1,000, and the terms of her subsequent state sentence prohibited her from investing money, entering into any financial contracts or arrangements, and having access to or control of any funds of any individual.
Evans pled guilty to one count of wire fraud and one count of money laundering. Wire fraud carries a penalty of not more than 20 years in federal prison, and a fine of up to $250,000. Money laundering carries a penalty of not more than 10 years in federal prison, and a fine of up to $250,000. Evans plea agreement stipulates restitution for this case is $2,094,500. Evans is scheduled to be sentenced by Judge Kane on April 21, 2017.
This case was investigated by IRS – Criminal Investigation and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Anna K. Edgar.
Parker Business Woman Sentenced for Employee Benefit Plan EmbezzlementRead the Press Release
DENVER – Emily R. Strunk, age 45, of Parker, Colorado was recently sentenced by U.S. District Court Judge William J. Martinez to serve 78 months in federal prison for wire fraud, money laundering, and embezzlement from an employee benefit plan, federal law enforcement authorities announced. Following her prison sentence, Strunk was ordered to spend three years on supervised release. Judge Martinez also ordered her to pay $2,590,608.35 in restitution to the victims of her crime. Strunk was indicted on April 7, 2016, and pled guilty on September 29, 2016.
According to the facts in the indictment and plea agreement, Strunk was a third-party administrator for employee pension and retirement plans, operating through various businesses including North American Employer Solutions, LLC; BAC Human Resources, LLC; Colorado Benefits Outsourcing, LLC; Benefits Team Administration, LLC; Benefits Administrators & Consultants LLC; and Columbine Employee Benefits Inc. Starting in 2005, and continuing through September 2015, Strunk devised a scheme to fraudulently obtain money from her clients’ employee pension or retirement funds. As the third party administrator, Strunk would gain access to her clients’ plan assets and either directly transfer those assets to her personal and business checking accounts or direct her clients to transfer funds to those bank accounts, which she falsely identified as “trust” accounts. She also directed her clients to send employee retirement contributions directly to her checking accounts, which again were falsely identified as “trust” accounts. Strunk comingled her clients’ funds in her checking accounts, failed to keep accurate records of her clients’ and their plan participants’ assets, and used her clients money for her own personal and business expenses. Most of Strunk’s clients were small businesses.
Strunk concealed her fraud by falsifying plan participants’ online account statements, making it appear that their money was invested in certain assets when, in fact, the funds were in Strunk’s checking account or she had spent them. Strunk also filed or caused to be filed false Forms 5500 with the Department of Labor (DOL) for client plans subject to the Employee Retirement Income Security Act (ERISA). On those forms, she falsely stated the total amount of plan assets and omitted that her fraud and dishonesty caused a loss to the plan, thereby lying to the DOL and her clients to conceal her fraud.
Ms. Strunk deliberately and systematically stole the hard-earned money of small business employees. We don’t do that,” said Acting U.S. Attorney Bob Troyer. “The Department of Labor’s Employee Benefits Security Administration and the IRS Criminal Investigations did an outstanding job investigating this matter, as did the Assistant U.S. Attorneys who ensured the defendant would receive the sentence she deserves.”
“This criminal action demonstrates the U.S. Department of Labor's resolve to vigorously enforce the law to ensure that those who defraud employee benefit plans are brought to justice. This case also exemplifies our commitment to protect employee benefits in coordination with fellow federal agencies,” said Mark Underwood, Acting Regional Director of the Employee Benefits Security Administration’s Kansas City Regional Office.”
"The role of IRS Criminal Investigation becomes even more important in embezzlement and fraud cases due to the complex financial transactions that can take time to investigate," said Steven Osborne, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office. "We will continue to work with our law enforcement partners to investigate this and other money laundering schemes in order to bring justice to the victims.”
This case was investigated by the Department of Labor Employee Benefits Security Administration (DOL-EBSA) and the Internal Revenue Service – Criminal Investigation (IRS-CI). The case was prosecuted by Assistant U.S. Attorney Anna Edgar.
Energy Scientest Settles Allegations That He Improperly Double-Billed Government for His TimeRead the Press Release
DENVER – Dr. Miguel A. Contreras, a senior scientist at the National Renewable Energy Lab located in Golden, Colorado, has paid the United States $80,000 to settle allegations that he violated the False Claims Act by knowingly double-billing his work-time and submitting false timesheets and false travel reimbursement forms to his employer while he privately consulted for three energy companies.
The National Renewable Energy Lab (“NREL”) is a Department of Energy-owned facility and is managed and operated by The Alliance for Sustainable Energy under contract to the Department of Energy.
According to the Government, Dr. Contreras improperly used his NREL work-time, the work-time of other NREL employees, NREL-owned equipment, and NREL-owned resources for his own personal financial gain while consulting with three private energy companies. The United States found that Dr. Contreras knowingly submitted false timesheets and travel reimbursement claims to fraudulently “double-bill” his time without seeking the proper approvals from his NREL supervisors. This conduct occurred on numerous occasions during 2008 through 2009.
In the settlement agreement, Dr. Contreras acknowledges that had this matter gone to trial, the United States would be able to prove these facts by a preponderance of the evidence.
The government further asserted that Dr. Contreras also misled his supervisors and investigators about the nature of his private consulting work. As a result of these acts, the United States claimed that Dr. Contreras committed up to thirty-seven separate violations of the False Claims Act.
This matter was investigated by the Department of Energy’s Office of the Inspector General, in conjunction with the United States Attorney’s Office, District of Colorado.
Assistant U.S. Attorneys Jacob Licht-Steenfat and Chris Larson handled this matter on behalf of the government.
Man Who Used Play Station 3 to Hide Child Pornography Trading Sentenced to 17 Years in Federal PrisonRead the Press Release
DENVER – Allen LeRoy Simons, III, age 36, of El Paso County was sentenced on January 25, 2017 by U.S. District Court Judge William J. Martinez to serve 204 months (17 years) in federal prison for possession of child pornography, followed by 30 years on supervised release, Acting U.S. Attorney Bob Troyer, U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) Denver Division Acting Special Agent in Charge John Eisert, and Internet Crimes Against Children (ICAC) Commander for Colorado Lieutenant Christina Sheppard of the Colorado Springs Police Department announced.
Because Simons served three years in the Colorado Department of Corrections, Judge Martinez gave the defendant credit for 36 months (3 years), reducing the federal sentence to 168 months (14 years) in federal prison. In addition, the judge ordered the defendant to pay $27,000 in restitution payable to victims whose pictures was actively traded by the defendant with other like-minded individuals.
Simons was indicted by a federal grand jury on May 3, 2016. He pled guilty on August 1, 2016, and was sentenced on January 25, 2017. At the time he was indicted by the federal grand jury, the defendant was on state probation for the sexual exploitation of a child.
According to court documents, including the stipulated facts in the defendant’s plea agreement, the defendant traded thousands of child pornography images via email. He also graphically discussed the sexual abuse of children in these emails. Law enforcement determined that Simons had over well over 10,000 images and videos of child pornography.
During sentencing, Judge Martinez noted the lengthy prison sentence was due to Simons large collection of child pornography, the fact that he had collected these images for a number of years, and that he took steps to hide his involvement. The defendant used a Play Station 3 to access the internet and trade child pornography, hiding his illegal conduct from state probation and other authorities.
This case was investigated by the Colorado Springs Police Department and U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI).
Simons was prosecuted by Assistant U.S. Attorney Valeria Spencer.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
Colorado Springs Man Who Used Identity of Internet Crimes Against Children Officer Sentenced to 30 Years in Federal Prison for Transportation of Child PornographyRead the Press Release
DENVER – Brandon Tyler Hill, age 31, of Colorado Springs, Colorado, was sentenced on January 19, 2017 by U.S. District Court Judge R. Brooke Jackson to serve 360 months (30 years) in federal prison, followed by a lifetime of supervision for transportation of child pornography, Acting U.S. Attorney Bob Troyer, Internet Crimes Against Children (ICAC) Commander for Colorado Lieutenant Christina Sheppard of the Colorado Springs Police Department, and U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) Denver Division Acting Special Agent in Charge John Eisert announced.
On May 6, 2015, a federal grand jury returned an Indictment charging Brandon Tyler Hill, of Colorado Springs, and Rhiannon Carnahan, of Woodland Park, Colorado, with child pornography related charges. Prior to the indictment, Hill and Carnahan were charged via Criminal Complaints. Hill pled guilty to an Information charging three counts of transportation of child pornography on March 31, 2016. Carnahan has pled guilty to child pornography charges and is scheduled to be sentenced on February 21, 2017.
According to court documents, the Colorado Springs Police Department initiated an investigation after a civilian witness reached out to law enforcement to report that Hill had sent unwanted child pornography images via email and was being extorted to produce more child pornography images. As part of the investigation, it was determined that the defendant utilized numerous identities, including that of an ICAC police officer, to extort the civilian witness to produce child pornography. The investigation revealed that Hill was also communicating online with co-defendant Rhiannon Carnahan, who he learned had access to a child who was 3 years old when the offense conduct began. Hill made numerous and repeated requests for images and videos depicting the 3 year old engaged in sexually explicit conduct. Hill also used various pseudonyms, including the identity of an ICAC police officer, to communicate with Carnahan. During the course of the communications and in response to Hill’s requests for child pornography depicting the 3 year old, Carnahan took sexually explicit images and videos of the child with her cell phone and sent them to Hill. Hill has a prior conviction for Criminal Attempt to Commit Sexual Exploitation of a Child in El Paso County, Colorado.
“This defendant earned his way to a 30-year sentence: he preyed on our most innocent and most vulnerable, and he pretended to be a cop at times while doing it,” said Acting U.S. Attorney Bob Troyer.
“This is a serious crime, and thanks to our officers and resources, the Colorado Internet Crimes Against Children (ICAC), working with law enforcement partners, were able to investigate and apprehend this individual,” ICAC Commander and Colorado Springs Police Department Lieutenant Christina Sheppard said. “This defendant is going to prison for a long time thanks to the work of law enforcement and civilians, and in partnership with the U.S. Attorney’s Office. This is an important fight to protect our children.”
“Our HSI special agents work closely with other law enforcement agencies to identify, investigate, and present for prosecution anyone who engages in producing, distributing or possessing child pornography,” said John Eisert, special agent in charge of HSI Denver. “The federal penalties for these heinous crimes against children are appropriately severe, as this 30-year prison sentence demonstrates.”
This case was investigated by the Colorado Springs Police Department and U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), with support provided by the Woodland Park Police Department.
Hill was prosecuted by Assistant U.S. Attorney Alecia Riewerts, Project Safe Childhood Coordinator.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
Passenger Aboard United Flight Arrested for Writing Note Regarding Bomb on PlaneRead the Press Release
DENVER – Cameron E. Korth, age 20, was arrested by the FBI on January 17, 2017, for Maliciously Conveying False Information after a note was found on a United flight from San Diego, California to Denver, Colorado, Acting U.S. Attorney Bob Troyer and FBI Special Agent in Charge Calvin Shivers announced. Korth is scheduled to make his initial appearance this afternoon at 2:00 p.m. before U.S. Magistrate Judge Scott T. Varholak, where he will be advised of his rights and the charges pending against him.
According to the affidavit in support of the Criminal Complaint, on January 16, 2017, Korth claimed to have found a note in the bathroom aboard United Flight 231 from San Diego to Denver. The note stated that there was a bomb on the plane, and that the flight crew should not attempt to land the aircraft. Korth shared the note with the flight crew, who notified authorities at Denver International Airport, including the FBI. When the plane landed, it was parked on an isolated taxiway. Passengers were evacuated onto waiting buses and the aircraft was swept by Denver Police Department explosive detection canine assets. No explosives were found.
Korth was asked to write an accounting of what happened aboard the flight. There were similarities between his handwriting and the note in question. Eventually agents and officers determined that Korth wrote the note in his seat on paper he found jammed in the seat; he took the note to one of the bathrooms on the aircraft; he placed the note in the toilet seat cover dispenser; and he pointed the note out to one of the flight attendants. He was later arrested.
Korth is currently charged with Maliciously Conveying False Information, which carries a penalty of not more than 10 years in federal prison, and up to a $250,000 fine.
This matter was investigated by the Denver Police Department and the Denver Division of the FBI.
The defendant is being prosecuted by Assistant U.S. Attorneys Kurt Bohn and Jason St. Julien.
A Criminal Complaint is a probable cause charging document. Anyone accused of committing a felony violation of federal law has a Constitutional right to be indicted by a federal grand jury. The charges contained in the Complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.
Credit Suisse Agrees to Pay $5.28 Billion in Connection with its Sale of Residential Mortgage-Backed SecuritiesRead the Press Release
The Justice Department announced today a $5.28 billion settlement with Credit Suisse related to Credit Suisse’s conduct in the packaging, securitization, issuance, marketing and sale of residential mortgage-backed securities (RMBS) between 2005 and 2007. The resolution announced today requires Credit Suisse to pay $2.48 billion as a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). It also requires the bank to provide $2.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing. Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Credit Suisse between 2005 and 2007.
“Today’s settlement underscores that the Department of Justice will hold accountable the institutions responsible for the financial crisis of 2008,” said Attorney General Loretta E. Lynch. “Credit Suisse made false and irresponsible representations about residential mortgage-backed securities, which resulted in the loss of billions of dollars of wealth and took a painful toll on the lives of ordinary Americans. Under the terms of this settlement, Credit Suisse will pay $2.48 billion as a fine for its conduct. And Credit Suisse has pledged $2.8 billion in relief to struggling homeowners, borrowers, and communities affected by the bank’s lending practices. These sums reflect the huge breach of public trust committed by financial institutions like Credit Suisse.”
“Credit Suisse claimed its mortgage backed securities were sound, but in the settlement announced today the bank concedes that it knew it was peddling investments containing loans that were likely to fail,” said Principal Deputy Associate Attorney General Bill Baer. “That behavior is unacceptable. Today's $5.3 billion resolution is another step towards holding financial institutions accountable for misleading investors and the American public.”
“Resolutions like the one announced today confirm that the financial institutions that engaged in conduct that jeopardized the nation’s fiscal security will be held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This is another step in the Department’s continuing effort to redress behavior that contributed to the Great Recession.”
“Credit Suisse’s mortgage misconduct hurt people, including in Colorado,” said Acting United States Attorney for the District of Colorado Bob Troyer. “Unscrupulous lenders knew they could get away with shoddy underwriting when making mortgage loans, because they knew Credit Suisse would buy those defective mortgage loans and put them into securities. When those mortgages went into foreclosure, many people got hurt: families lost their homes, communities were blighted by empty houses, and investors who had put their trust in Credit Suisse’s supposedly safe securities suffered huge losses. Our office led this investigation into Credit Suisse to protect homeowners, communities, and investors across the country, including here in Colorado. Credit Suisse is paying a hefty penalty and acknowledging its misconduct, but that is not all. Years after the Great Recession, many families still struggle to afford a home, so we also crafted an agreement to bring needed housing relief to such families, including specifically in Colorado.”
This settlement includes a statement of facts to which Credit Suisse has agreed. That statement of facts describes how Credit Suisse made false and misleading representations to prospective investors about the characteristics of the mortgage loans it securitized. (The quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted.):
- Credit Suisse told investors in offering documents that the mortgage loans it securitized into RMBS “were originated generally in accordance with applicable underwriting guidelines,” except where “sufficient compensating factors were demonstrated by a prospective borrower.” It also told investors that the loans “had been originated in compliance with all federal, state, and local laws and regulations, including all predatory and abusive lending laws.”
- Credit Suisse has now acknowledged that “Credit Suisse repeatedly received information indicating that many of the loans reviewed did not conform to the representations that would be made by Credit Suisse to investors about the loans to be securitized.” It has acknowledged that in many cases, it purchased and securitized loans into its RMBS that “did not comply with applicable underwriting guidelines and lacked sufficient factors” and/or “w[ere] not originated in compliance with applicable laws and regulations.” Credit Suisse employees even referred to some loans they securitized as “bad loans,” “‘complete crap’ and ‘[u]tter complete garbage.’”
- Credit Suisse acquired some of the mortgage loans it securitized by buying, from other loan originators, “Bulk” packages containing numerous loans. For example, in December 2006, Credit Suisse purchased a “Bulk” pool of approximately 10,000 loans originated by Countrywide Home Loans. Credit Suisse selected fewer than 10 percent of these loans for due diligence review. “Reports from Credit Suisse’s due diligence vendors showed that approximately 85 percent of the loans in this sample violated Countrywide’s underwriting guidelines and/or applicable law,” but “Credit Suisse securitized over half of the loans into various RMBS it then sold to investors.” Credit Suisse did not review the remaining unsampled 90 percent of the pool to determine whether those loans had similar problems. Instead, it “securitized an additional $1.5 billion worth of unsampled—and therefore unreviewed—loans from this pool into various RMBS it then sold to investors.” A Credit Suisse manager wrote to another manager who was reviewing these loans, “Thanks for working thru this mess. If it helps, it looks like we will make a killing on this trade.”
- Credit Suisse acquired other mortgage loans for securitization through its “Conduit” channel. Through this channel, Credit Suisse bought loans from other lenders one-by-one or in small packages, and also itself extended loans to borrowers as “Wholesale” loans. Approximately 25-35 percent of the loans Credit Suisse acquired from 2005 to 2007 were acquired through its mortgage “Conduit.”
- Credit Suisse employees discussed in internal emails that for Conduit loans, the loan review and approval process was “‘virtually unmonitored.’” For loans Credit Suisse purchased through its Conduit, Credit Suisse told investors, ratings agencies and others, “‘Credit Suisse senior underwriters make final loan decisions, not contracted due diligence firms.’” Credit Suisse has now acknowledged, “For Conduit loans, these representations were false.”
- Credit Suisse has acknowledged that “[a] September 2004 audit by Credit Suisse’s audit department gave the Conduit a C rating on an A-D scale (the second worst possible rating) and a level 4 materiality score on a 1-4 scale (the highest possible score),” and that a March 2006 evaluation by Credit Suisse of one of the third-party vendors it used to review Conduit loans “similarly reported that ‘There are serious concerns as to compliance[.]’”
- Between 2005 and 2007, Credit Suisse managers made comments in emails about the quality of Conduit loans and its process for reviewing those loans. For example, a top Credit Suisse manager wrote to senior traders, “‘Of course we would like higher quality loans. That’s never been the identity of our [mortgage] conduit, and we’re becoming less and less competitive in that space.’” A senior Credit Suisse trader, discussing the “fulfillment centers” Credit Suisse used to review Conduit loans, stated in an email: ‘we make these underwriting exceptions and then we have liability down the road when the loans go bad and people point out that we violated our own guidelines. . . . The fulfillment process is a joke.’”
- For example, in one instance Credit Suisse approved, through its Conduit, a purchase of over $700 million worth of loans originated by Resource Bank. Credit Suisse senior traders “referr[ed] to Resource Bank loans as ‘complete crap’ and ‘[u]tter complete garbage.’” Despite this, “Credit Suisse provided Resource Bank with financial ‘incentives’ in exchange for loan volume [and] securitized Resource Bank loans into various RMBS it then sold to investors.”
- Credit Suisse has acknowledged that it also “received reports from vendors that it might have been acquiring and securitizing loans with inflated appraisals” and that its approach for reviewing the property values associated with the mortgage loans “could lead to the acceptance of inflated appraisals.” In August 2006, a Credit Suisse manager wrote to two senior traders, “How would investors react if we say that 20 percent of the pool have values off by 15 percent? If we are comfortable buying these loans, we should be comfortable telling investors.”
- Credit Suisse used vendors to conduct quality control on a small subset of loans it acquired. Credit Suisse has now acknowledged that its quality control review vendors reported that “more than 25 percent of the loans that they reviewed for quality control were designated ‘ineligible’ because of credit, compliance, and/or property defects.”
- Credit Suisse has now acknowledged that its “Co-Head of Transaction Management expressed concern that the quality control results could serve as a written record of defects, and sought to avoid documented confirmation of these defects.” In May 2007, a top Credit Suisse manager met with others “to discuss implementing this reduction of quality control review.” Credit Suisse’s Co-Head of Transaction Management wrote that “this change was to ‘avoid the previous approach by which a lot of loans were QC’d . . . creating a record of possible rep/warrant breaches in deals . . . .’”
- In another example, in May 2007, a Credit Suisse employee identified two wholesale loans Credit Suisse itself had originated and wrote, “‘I would think that we would want to see loans like these that seem to represent confirmed problems, especially on our own originations. Why do we have an appraisal watch list and broker oversight group if we aren’t going to review the bad ones and take action appropriately? . . . I just see so many of these cross my desk, fraud, value, etc., it’s hard to just let them go by and not do something.’” Credit Suisse’s Co-Head of Transaction Management responded, “‘I think the idea is that we don’t want to spend a lot of $ to generate a lot of QC results that give us no recourse anyway but generate a lot of negative data, so no need to order QC on each of these loans.’” The employee then stated, “‘I think the lack of interest in bad loans is scary.’”
- As another example, in June 2007, a Credit Suisse employee identified 44 Wholesale loans Credit Suisse had itself originated that had gone 60 days delinquent. Credit Suisse’s Co-Head of Transaction Management wrote in response, “‘if we already know: that the loans aren’t performing . . . the only thing QC will tell us is that there were compliance errors, occupancy misreps etc. I think we already know we have systemic problems in FC/UW [fulfillment centers/underwriting] re both compliance and credit. The downside of QC’ing these 44 loans is, after we get the QC results, we will be obligated to repurchase a fair chunk of the loans from deals, assuming the loans are securitized and the QC results look like the QC we’ve done in the past. So based on a wholesale QC historical fail rate of over 35 percent (major rep defects), the avg bal of wholesale loans and the loss severities, it is reasonable to expect this QC may cost us a few million dollars.’” Credit Suisse has now acknowledged that it “did not inform investors or ratings agencies that its Wholesale loan channel had a ‘QC historical fail rate of over 35 percent (major rep defects).’”
- Credit Suisse commented about the mortgage loans that accumulated in its inventory. For example, Credit Suisse’s Co-Head of Transaction Management wrote to another Credit Suisse manager that “loans with potential defects ‘pile up in inventory . . . . So my theory is: we own the risk 1 way or another. . . . I am inclined to securitize loans that are close calls or marginally non-compliant, and take the risk that we’ll have to repurchase, if we can’t put them back, rather than adding to sludge in inventory. . . .’ One of the senior traders responded, ‘Agree.’” In another instance, a Credit Suisse senior trader commented in 2007 that “‘we have almost $2.5B of conduit garbage to still distribute.’” In another instance, a Credit Suisse trader wrote to a top manager, discussing another bank to which Credit Suisse was seeking to sell loans from its inventory, and stated, “‘[The other bank] again came back with an embarrassing number of diligence kicks this month. . . . If their results are in any way representative of our compliance with our reps and warrants, we have major problems.’ But rather than holding these loans in its own inventory, Credit Suisse securitized certain of these loans into its RMBS.”
Assistant U.S. Attorneys Kevin Traskos, Hetal J. Doshi, Shiwon Choe, Ian J. Kellogg, Lila M. Bateman, and J. Chris Larson of the District of Colorado investigated Credit Suisse’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG).
“Credit Suisse knowingly put investors at risk, and the losses caused by its irresponsible behavior deeply affected not only financial institutions such as the Federal Home Loan Banks, but also taxpayers, and contributed significantly to the financial crisis,” said Special Agent in Charge Catherine Huber of the Federal Housing Finance Agency-Office of Inspector General’s (FHFA-OIG) Midwest Region. “This settlement illustrates the tireless efforts put forth toward bringing a resolution to this chapter of the financial crisis. FHFA-OIG will continue to work with our law enforcement partners to hold those who have engaged in misconduct accountable for their actions.”
The $2.48 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Credit Suisse or any of its employees. The settlement does not release any individuals from potential criminal or civil liability. As part of the settlement, Credit Suisse has agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.
Credit Suisse will pay out the remaining $2.8 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Credit Suisse agrees to provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It also agrees to provide financing for affordable rental and for-sale housing throughout the country. This agreement represents the most substantial commitment in any RMBS agreement to date to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.
The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and four co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, and New York Attorney General Eric Schneiderman. This settlement is the latest in a series of major RMBS settlements announced by the Working Group.
To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.
Credit Suisse Agrees to Pay $5.28 Billion in Connection with Its Sale of Residential Mortgage-Backed SecuritiesRead the Press Release
NOTE: Settlement agreement and other document links at bottom of release
DENVER – The Justice Department announced today a $5.28 billion settlement with Credit Suisse related to Credit Suisse’s conduct in the packaging, securitization, issuance, marketing and sale of residential mortgage-backed securities (RMBS) between 2005 and 2007. The resolution announced today requires Credit Suisse to pay $2.48 billion as a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). It also requires the bank to provide $2.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing. Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Credit Suisse between 2005 and 2007.
“Today’s settlement underscores that the Department of Justice will hold accountable the institutions responsible for the financial crisis of 2008,” said Attorney General Loretta E. Lynch. “Credit Suisse made false and irresponsible representations about residential mortgage-backed securities, which resulted in the loss of billions of dollars of wealth and took a painful toll on the lives of ordinary Americans. Under the terms of this settlement, Credit Suisse will pay $2.48 billion as a fine for its conduct. And Credit Suisse has pledged $2.8 billion in relief to struggling homeowners, borrowers, and communities affected by the bank’s lending practices. These sums reflect the huge breach of public trust committed by financial institutions like Credit Suisse.”
“Credit Suisse claimed its mortgage backed securities were sound, but in the settlement announced today the bank concedes that it knew it was peddling investments containing loans that were likely to fail,” said Principal Deputy Associate Attorney General Bill Baer. “That behavior is unacceptable. Today's $5.3 billion resolution is another step towards holding financial institutions accountable for misleading investors and the American public.”
“Resolutions like the one announced today confirm that the financial institutions that engaged in conduct that jeopardized the nation’s fiscal security will be held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This is another step in the Department’s continuing effort to redress behavior that contributed to the Great Recession.”
“Credit Suisse’s mortgage misconduct hurt people, including in Colorado,” said Acting United States Attorney for the District of Colorado Bob Troyer. “Unscrupulous lenders knew they could get away with shoddy underwriting when making mortgage loans, because they knew Credit Suisse would buy those defective mortgage loans and put them into securities. When those mortgages went into foreclosure, many people got hurt: families lost their homes, communities were blighted by empty houses, and investors who had put their trust in Credit Suisse’s supposedly safe securities suffered huge losses. Our office led this investigation into Credit Suisse to protect homeowners, communities, and investors across the country, including here in Colorado. Credit Suisse is paying a hefty penalty and acknowledging its misconduct, but that is not all. Years after the Great Recession, many families still struggle to afford a home, so we also crafted an agreement to bring needed housing relief to such families, including specifically in Colorado.”
This settlement includes a statement of facts to which Credit Suisse has agreed. That statement of facts describes how Credit Suisse made false and misleading representations to prospective investors about the characteristics of the mortgage loans it securitized. (The quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted.):
-
Credit Suisse told investors in offering documents that the mortgage loans it securitized into RMBS “were originated generally in accordance with applicable underwriting guidelines,” except where “sufficient compensating factors were demonstrated by a prospective borrower.” It also told investors that the loans “had been originated in compliance with all federal, state, and local laws and regulations, including all predatory and abusive lending laws.”
-
Credit Suisse has now acknowledged that “Credit Suisse repeatedly received information indicating that many of the loans reviewed did not conform to the representations that would be made by Credit Suisse to investors about the loans to be securitized.” It has acknowledged that in many cases, it purchased and securitized loans into its RMBS that “did not comply with applicable underwriting guidelines and lacked sufficient factors” and/or “w[ere] not originated in compliance with applicable laws and regulations.” Credit Suisse employees even referred to some loans they securitized as “bad loans,” “‘complete crap’ and ‘[u]tter complete garbage.’”
-
Credit Suisse acquired some of the mortgage loans it securitized by buying, from other loan originators, “Bulk” packages containing numerous loans. For example, in December 2006, Credit Suisse purchased a “Bulk” pool of approximately 10,000 loans originated by Countrywide Home Loans. Credit Suisse selected fewer than 10 percent of these loans for due diligence review. “Reports from Credit Suisse’s due diligence vendors showed that approximately 85 percent of the loans in this sample violated Countrywide’s underwriting guidelines and/or applicable law,” but “Credit Suisse securitized over half of the loans into various RMBS it then sold to investors.” Credit Suisse did not review the remaining unsampled 90 percent of the pool to determine whether those loans had similar problems. Instead, it “securitized an additional $1.5 billion worth of unsampled—and therefore unreviewed—loans from this pool into various RMBS it then sold to investors.” A Credit Suisse manager wrote to another manager who was reviewing these loans, “Thanks for working thru this mess. If it helps, it looks like we will make a killing on this trade.”
-
Credit Suisse acquired other mortgage loans for securitization through its “Conduit” channel. Through this channel, Credit Suisse bought loans from other lenders one-by-one or in small packages, and also itself extended loans to borrowers as “Wholesale” loans. Approximately 25-35 percent of the loans Credit Suisse acquired from 2005 to 2007 were acquired through its mortgage “Conduit.”
-
Credit Suisse employees discussed in internal emails that for Conduit loans, the loan review and approval process was “‘virtually unmonitored.’” For loans Credit Suisse purchased through its Conduit, Credit Suisse told investors, ratings agencies and others, “‘Credit Suisse senior underwriters make final loan decisions, not contracted due diligence firms.’” Credit Suisse has now acknowledged, “For Conduit loans, these representations were false.”
-
Credit Suisse has acknowledged that “[a] September 2004 audit by Credit Suisse’s audit department gave the Conduit a C rating on an A-D scale (the second worst possible rating) and a level 4 materiality score on a 1-4 scale (the highest possible score),” and that a March 2006 evaluation by Credit Suisse of one of the third-party vendors it used to review Conduit loans “similarly reported that ‘There are serious concerns as to compliance[.]’”
-
Between 2005 and 2007, Credit Suisse managers made comments in emails about the quality of Conduit loans and its process for reviewing those loans. For example, a top Credit Suisse manager wrote to senior traders, “‘Of course we would like higher quality loans. That’s never been the identity of our [mortgage] conduit, and we’re becoming less and less competitive in that space.’” A senior Credit Suisse trader, discussing the “fulfillment centers” Credit Suisse used to review Conduit loans, stated in an email: ‘we make these underwriting exceptions and then we have liability down the road when the loans go bad and people point out that we violated our own guidelines. . . . The fulfillment process is a joke.’”
-
For example, in one instance Credit Suisse approved, through its Conduit, a purchase of over $700 million worth of loans originated by Resource Bank. Credit Suisse senior traders “referr[ed] to Resource Bank loans as ‘complete crap’ and ‘[u]tter complete garbage.’” Despite this, “Credit Suisse provided Resource Bank with financial ‘incentives’ in exchange for loan volume [and] securitized Resource Bank loans into various RMBS it then sold to investors.”
-
Credit Suisse has acknowledged that it also “received reports from vendors that it might have been acquiring and securitizing loans with inflated appraisals” and that its approach for reviewing the property values associated with the mortgage loans “could lead to the acceptance of inflated appraisals.” In August 2006, a Credit Suisse manager wrote to two senior traders, “How would investors react if we say that 20 percent of the pool have values off by 15 percent? If we are comfortable buying these loans, we should be comfortable telling investors.”
-
Credit Suisse used vendors to conduct quality control on a small subset of loans it acquired. Credit Suisse has now acknowledged that its quality control review vendors reported that “more than 25 percent of the loans that they reviewed for quality control were designated ‘ineligible’ because of credit, compliance, and/or property defects.”
-
Credit Suisse has now acknowledged that its “Co-Head of Transaction Management expressed concern that the quality control results could serve as a written record of defects, and sought to avoid documented confirmation of these defects.” In May 2007, a top Credit Suisse manager met with others “to discuss implementing this reduction of quality control review.” Credit Suisse’s Co-Head of Transaction Management wrote that “this change was to ‘avoid the previous approach by which a lot of loans were QC’d . . . creating a record of possible rep/warrant breaches in deals . . . .’”
-
In another example, in May 2007, a Credit Suisse employee identified two wholesale loans Credit Suisse itself had originated and wrote, “‘I would think that we would want to see loans like these that seem to represent confirmed problems, especially on our own originations. Why do we have an appraisal watch list and broker oversight group if we aren’t going to review the bad ones and take action appropriately? . . . I just see so many of these cross my desk, fraud, value, etc., it’s hard to just let them go by and not do something.’” Credit Suisse’s Co-Head of Transaction Management responded, “‘I think the idea is that we don’t want to spend a lot of $ to generate a lot of QC results that give us no recourse anyway but generate a lot of negative data, so no need to order QC on each of these loans.’” The employee then stated, “‘I think the lack of interest in bad loans is scary.’”
-
As another example, in June 2007, a Credit Suisse employee identified 44 Wholesale loans Credit Suisse had itself originated that had gone 60 days delinquent. Credit Suisse’s Co-Head of Transaction Management wrote in response, “‘if we already know: that the loans aren’t performing . . . the only thing QC will tell us is that there were compliance errors, occupancy misreps etc. I think we already know we have systemic problems in FC/UW [fulfillment centers/underwriting] re both compliance and credit. The downside of QC’ing these 44 loans is, after we get the QC results, we will be obligated to repurchase a fair chunk of the loans from deals, assuming the loans are securitized and the QC results look like the QC we’ve done in the past. So based on a wholesale QC historical fail rate of over 35 percent (major rep defects), the avg bal of wholesale loans and the loss severities, it is reasonable to expect this QC may cost us a few million dollars.’” Credit Suisse has now acknowledged that it “did not inform investors or ratings agencies that its Wholesale loan channel had a ‘QC historical fail rate of over 35 percent (major rep defects).’”
-
Credit Suisse commented about the mortgage loans that accumulated in its inventory. For example, Credit Suisse’s Co-Head of Transaction Management wrote to another Credit Suisse manager that “loans with potential defects ‘pile up in inventory . . . . So my theory is: we own the risk 1 way or another. . . . I am inclined to securitize loans that are close calls or marginally non-compliant, and take the risk that we’ll have to repurchase, if we can’t put them back, rather than adding to sludge in inventory. . . .’ One of the senior traders responded, ‘Agree.’” In another instance, a Credit Suisse senior trader commented in 2007 that “‘we have almost $2.5B of conduit garbage to still distribute.’” In another instance, a Credit Suisse trader wrote to a top manager, discussing another bank to which Credit Suisse was seeking to sell loans from its inventory, and stated, “‘[The other bank] again came back with an embarrassing number of diligence kicks this month. . . . If their results are in any way representative of our compliance with our reps and warrants, we have major problems.’ But rather than holding these loans in its own inventory, Credit Suisse securitized certain of these loans into its RMBS.”
Assistant U.S. Attorneys Kevin Traskos, Hetal J. Doshi, Shiwon Choe, Ian J. Kellogg, Lila M. Bateman, and J. Chris Larson of the District of Colorado investigated Credit Suisse’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG).
“Credit Suisse knowingly put investors at risk, and the losses caused by its irresponsible behavior deeply affected not only financial institutions such as the Federal Home Loan Banks, but also taxpayers, and contributed significantly to the financial crisis,” said Special Agent in Charge Catherine Huber of the Federal Housing Finance Agency-Office of Inspector General’s (FHFA-OIG) Midwest Region. “This settlement illustrates the tireless efforts put forth toward bringing a resolution to this chapter of the financial crisis. FHFA-OIG will continue to work with our law enforcement partners to hold those who have engaged in misconduct accountable for their actions.”
The $2.48 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Credit Suisse or any of its employees. The settlement does not release any individuals from potential criminal or civil liability. As part of the settlement, Credit Suisse has agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.
Credit Suisse will pay out the remaining $2.8 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Credit Suisse agrees to provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It also agrees to provide financing for affordable rental and for-sale housing throughout the country. This agreement represents the most substantial commitment in any RMBS agreement to date to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.
The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and four co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, and New York Attorney General Eric Schneiderman. This settlement is the latest in a series of major RMBS settlements announced by the Working Group.
To report RMBS fraud, go to: http://www.stopfraud.gov/rmbs.html.
Click HERE for Credit Suisse Settlement Agreement.
Click HERE for Credit Suisse Annex 1
Click HERE for Credit Suisse Annex 2
Click HERE for Credit Suisse Annex 3
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McKesson Argrees to Pay Record $150 Million Settlement for Failure to Report Suspicious Orders of Pharmaceutical DrugsRead the Press Release
DENVER – McKesson Corporation (McKesson), one of the nation’s largest distributors of pharmaceutical drugs, agreed to pay a record $150 million civil penalty for alleged violations of the Controlled Substances Act (CSA), Acting U.S. Attorney Bob Troyer and DEA Denver Division Special Agent in Charge Barbra Roach announced.
“When drug distributors like McKesson fail to alert the DEA of suspicious orders of prescription drugs by pharmacies, the end result can be fatal,” said Acting U.S. Attorney Bob Troyer. “This settlement requires McKesson to comply with the law and holds the company accountable for its past conduct. Avoiding that legal obligation increases the narcotics street trade.”
“This agreement demonstrates that DEA will continue to hold all those accountable – corporations and individuals – who would disregard the public’s safety for their own profit,” said DEA Denver Division Special Agent in Charge Barbra Roach.
The nationwide settlement, led by attorneys from the U.S. Attorney’s Offices in Colorado and the Northern District of West Virginia, with substantial support from the DEA in those districts and nationally, requires McKesson to suspend sales of controlled substances from distribution centers in Colorado, Ohio, Michigan and Florida for multiple years. The staged suspensions are among the most severe sanctions ever agreed to by a DEA registered distributor. The settlement also imposes new and enhanced compliance obligations on McKesson’s distribution system.
In 2008, McKesson agreed to a $13.25 million civil penalty and administrative agreement for similar violations. In this case, the government alleged again that McKesson failed to design and implement an effective system to detect and report “suspicious orders” for controlled substances distributed to its independent and small chain pharmacy customers– i.e., orders that are unusual in their frequency, size, or other patterns. From 2008 until 2013, McKesson supplied various U.S. pharmacies an increasing amount of oxycodone and hydrocodone pills, frequently misused products that are part of the current opioid epidemic.
The government’s investigation developed evidence that even after designing a compliance program after the 2008 settlement, McKesson did not fully implement or adhere to its own program. In Colorado, for example, McKesson processed more than 1.6 million orders for controlled substances from June 2008 through May 2013, but reported just 16 orders as suspicious, all connected to one instance related to a recently terminated customer.
According to the United States, McKesson’s distribution center in Aurora, Colorado, circumvented its own compliance system in order to avoid reporting suspicious orders to the DEA. Although the company was supposed to set thresholds on the amount of certain kinds of prescription drugs that each pharmacy could purchase every month and report any sales over that threshold to the DEA, the United States alleges that McKesson-Aurora repeatedly raised thresholds to avoid having to report orders to the DEA. Sometimes these threshold increases were done at the request of a pharmacy customer; other times, the United States claims that McKesson-Aurora would preemptively raise the threshold when it saw that a pharmacy customer was approaching the maximum amount of drugs it could purchase that month. The United States also alleges that McKesson set some thresholds so high at the outset that the pharmacy customer would never exceed it, and thus, would never trigger any internal review as to whether an order was indeed suspicious. As a result of these practices, the United States contends that orders of unusual size, orders of unusual frequency, and orders deviating from the normal pattern of the pharmacy customer’s orders did not get reported to the DEA.
In addition to the monetary penalties and suspensions, the government and McKesson agreed to enhanced compliance terms for the next five years. Among other things, McKesson has agreed to specific, rigorous staffing and organizational improvements; periodic auditing; and stipulated financial penalties for failing to adhere to the compliance terms. Critically, the settlement will require McKesson to engage an independent monitor to assess compliance – the first independent monitor of its kind in a CSA civil penalty settlement.
This was a multi-district investigation that involved the following DEA Field Divisions: Boston Field Division, Chicago Field Division, Denver Field Division, Detroit Field Division, Miami Field Division, Newark Field Division, San Francisco Field Division, St. Louis Field Division, and Washington District Office. The following U.S. Attorney’s Offices participated in the case: Central District of California, Eastern District of California, District of Colorado, Middle District of Florida, Eastern District of Kentucky, Northern District of Illinois, District of Massachusetts, Eastern District of Michigan, District of Nebraska, District of New Jersey, Northern District of West Virginia, and Western District of Wisconsin.
U.S. Attorneys’ Offices for the District of Colorado and the Northern District of West Virginia, along with DEA Office of Chief Counsel and Diversion Control Division, led the civil settlement negotiations. DEA’s Denver, Detroit and Miami Field Divisions, and its Washington Division Office, led the administrative and civil investigation. The Criminal Division’s Narcotic and Dangerous Drug Section (NDDS) also coordinated and assisted in negotiating certain portions of the settlement. Assistant United States Attorneys Amanda Rocque (Colorado) and Alan McGonigal (NDWV) represented the United States in the civil penalty investigations and negotiations. Associate Chief Counsel Lee Reeves and Senior Attorneys Dedra Curteman, Dana Hill and Krista Tongring represented DEA in the investigations and negotiations. Trial Attorneys Harry Matz and Kirtland Marsh were involved for NDDS.
Denver Woman Sentenced to Federal Prison for Conspiracy to Defraud the IRSRead the Press Release
DENVER – Sherry Charleston, age 41, of Denver, Colorado was recently sentenced by Chief U.S. District Court Judge Marcia S. Krieger to serve 18 months in prison followed by 3 years of supervised release for conspiracy to defraud the Internal Revenue Service, announced the United States Attorney’s Office, IRS Criminal Investigation and Social Security Administration Office of Inspection General. Charleston was also ordered to pay $16,541 in restitution to the IRS.
Jaquon Mucsarney and co-conspirator, Sherry Charleston were indicted by a Federal Grand Jury in Denver on January 7, 2016 for mail fraud, conspiring to defraud the government, false claims, aggravated identity theft and obstruction of justice. Jaquon's mother, Schosche Mucsarney, who was indicted on similar charges, pled guilty and was sentendced on November 22, 2016. Charges against Jaquon Mucsarney are still pending.
According to the indictment and plea agreement, from January 14, 2015 and continuing through October 27, 2015, Charleston assisted Jaquon in a scheme to defraud the Internal Revenue Service by attempting to cause tax refund checks to be issued from the United States Treasury based on false information provided in tax returns filed with the IRS. Charleston aided Jaquon in a variety of ways during the scheme including helping in the creation of fictitious companies and the issuance of Employment Identification Numbers (“EINs”), assisting in the filing of false corporate income tax returns, and assisting in the receipt, collection and disbursement of impermissibly obtained IRS refunds.
As part of the scheme, Charleston opened a business bank account in the name of one of the shell companies she created and deposited IRS refund checks into the account. She typically directed some of the refund money to Jaquon’s inmate account at the prison where he was incarcerated on state charges. Jaquon, with Charleston’s assistance, caused approximately 13 tax returns to be filed with the IRS containing false information in order to claim refunds totaling $119,934.
To further obstruct and impede the IRS, on February 12, 2015, Charleston provided false and misleading information to an IRS Special Agent investigating Jaquon’s activities. Additionally on June 22, 2015, Charleston, on Jaquon’s advice and counsel, intentionally failed to appear for testimony before a Federal Grand Jury.
This case was investigated by the Internal Revenue Service – Criminal Investigation and Social Security Administration – Office of Inspection General. This case was prosecuted by Assistant United States Attorney Tim Neff.
Denver Man Sentenced to Ten Years Imprisonment for Firing Gun in Parking Lot During Attempted CarjackingRead the Press Release
DENVER – Jeremy Lee Cabral, age 22, of Denver, Colorado, was sentenced today by U.S. District Judge R. Brooke Jackson to serve 120 months (10 years) in federal prison for discharging a firearm during a crime of violence, announced Acting U.S. Attorney Bob Troyer and FBI Special Agent in Charge Calvin Shivers announced. Following his prison sentence, Judge Jackson ordered the defendant to serve five years on supervised release. The defendant, in custody since his arrest on February 3, 2016, was remanded.
Cabral was initially charged in a criminal complaint on February 26, 2016 with one count of carjacking and one count of using a firearm. A federal grand jury charged him with two counts of carjacking and one count of using a firearm in an indictment returned on June 21, 2016.
According to court documents, including the stipulated facts contained in the defendant’s plea agreement, the defendant’s day of crime began when he crashed the car he was driving in Westminster on the morning of February 3, 2016. After fleeing from the scene of that accident, the defendant stole a car at gunpoint from a victim in the parking lot of a bookstore. The defendant used the stolen car until he got it got it stuck in a snowbank while trying to drive the wrong way into a carwash. He then strolled into a nearby video game store, retrieved his gun from an accomplice, and walked into the parking lot of a nearby grocery store. There, he showed his gun to a victim standing next to a car and demanded the keys. When the victim refused, explaining that a dog was in the car, the defendant repeated his demand and, when the victim ran away, fired his gun. The defendant and his accomplice fled into a residential neighborhood and were arrested while ringing the doorbell of a residence.
The accomplice, who pleaded guilty to aiding and abetting a carjacking, was sentenced in November 2016 to 40 months’ imprisonment and a term of supervised release.
The case was investigated by the FBI, the Rocky Mountain Safe Streets Task Force, and the City of Westminster Police Department.
The defendant is being prosecuted by Assistant United States Attorney Bryan D. Fields.
Defense Contractor Settles Allegations Relating to Kickbacks Paid to Its Employees by SubcontractorRead the Press Release
DENVER – United Launch Alliance (“ULA”), a defense contractor, has paid the United States $100,000 to settle allegations that its employees were paid kickbacks by a subcontractor in order to induce ULA to award contracts to the subcontractor.
ULA is an aerospace company providing spacecraft launch services to primarily governmental clients. The United States alleged that between July 2011 and July 2015, the owner of a ULA subcontractor, Apriori Technologies, Inc. (“Apriori”), paid gratuities to certain ULA employees in order to induce ULA to award technology, compliance and project management related contracts to Apriori. The United States alleged that certain Apriori-awarded subcontracts resulted in higher costs being billed by ULA to the U.S. Air Force. ULA voluntarily disclosed the allegations of misconduct to the United States.
The investigation leading to the settlement was conducted in conjunction with the Air Force’s Office of Special Investigations, the National Reconnaissance Office’s Office of the Inspector General, and the Defense Criminal Investigative Service.
Assistant U.S. Attorneys Amanda Rocque and Shiwon Choe handled this matter on behalf of the government.
The settlement agreement is neither an admission of liability by ULA, nor a concession by the United States that its claims are not well founded.
Colorado U.S. Attorney's Office, Working with Other Offices, Collects $50,860,097.41 in Civil and Criminal Actions for the United States Taxpayers in Fiscal Year 2016Read the Press Release
DENVER – Acting U.S. Attorney Bob Troyer announced today that the District of Colorado collected $50,860.097.41 for U.S. taxpayers. The office made these collections state-wide, both in cases it handled exclusively as well as while working with other U.S. Attorney’s Offices and components of the Department of Justice. Of this amount, $8,325,491.68 was collected in criminal actions and $42,534,605.73 was collected in civil actions. In cases handled exclusively by the U.S. Attorney’s Office, it collected $30,301,946.70; $8,289,601.25 in criminal actions and $22,012,345.45 in civil actions.
Attorney General Loretta E. Lynch announced on December 14, 2016, that the Justice Department collected nearly $15.4 billion in civil and criminal actions in the fiscal year ending Sept. 30, 2016. The $15,380,130,434 in collections in FY 2016 represents more than five times the appropriated $2.93 billion budget for the 94 U.S. Attorneys’ offices and the main litigating divisions of the Justice Department combined in that same period.
“Every day, the men and women of the Department of Justice work tirelessly to enforce our laws, ensuring that taxpayer dollars are used properly and that the American people are protected from exploitation and abuse,” said Attorney General Lynch. “Today’s announcement is a testament to that work, and it makes clear that our actions deliver a significant return on public investment. I want to thank the prosecutors and trial attorneys who made this year's collections possible, and I want to emphasize that the department remains committed to the well-being of our people and our nation.”
“We have a whole Division of elite professionals (our Asset Recovery Division) that is hard at work recovering money due to the United States taxpayers and victims of crime,” said Acting U.S. Attorney Bob Troyer. “Thanks to their efforts, and in partnership with other U.S. Attorney’s Office and law enforcement agencies, this office routinely collects three times more than our annual budget through these efforts. These recoveries also confirm our deep commitment to getting justice for crime victims.”
This part year, the U.S. Attorney’s Office collected $18,000,000 in a settlement with Evercare Hospice. The settlement resolved a lawsuit brought by the government alleging that Evercare knowingly submitted or caused to be submitted false claims to Medicare for hospice care from Jan. 1, 2007, through Dec. 31, 2013, for Medicare patients who were not eligible for the Medicare hospice benefit because Evercare’s medical records did not support that they were terminally ill. The government’s complaint alleged that Evercare’s business practices were designed to maximize the number of patients for whom it could bill Medicare without regard to whether the patients were eligible for and needed hospice. These business practices allegedly included discouraging doctors from recommending that ineligible patients be discharged from hospice and failing to ensure that nurses accurately and completely documented patients’ conditions in the medical records.
The office also collected money from a criminal matter against Richard Armstrong and his co-defendants. Armstrong and his associates were involved in perpetrating and benefiting from the tax refunds received from an illegal scheme. Armstrong received approximately $1,600,000.00 in refunds by filing fraudulent tax returns along with fraudulent Forms 1099-OID. Armstrong argues that the IRS is not a valid institution as it is not included in the Constitution, but he was convicted in the criminal case, and the government forfeited the airplane, one real property, and one-half interest in the other real property. Upon sale of these assets, the U.S. Attorney’s Office was able to recover and return $589,979.98 to the Department of Treasury. This is one of multiple collections from defendants who attempted to defraud or obstruct the IRS.
In addition, the Colorado U.S. Attorney’s Office has continued its work in the Department’s ongoing effort to hold mortgage lenders accountable for fraudulent conduct, achieving significant recoveries. In separate settlements, Franklin American Mortgage Company and Primary Residential Mortgage Inc. each agreed to multi-million dollar payments to resolve separate allegations that the respective companies violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements. Franklin American Mortgage Company agreed to pay $70 million over time, more than $14 million of which the company paid in fiscal year 2016. Primary Residential Mortgage Inc. paid $5 million.
The U.S. Attorneys’ Offices, along with the department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the U.S. and criminal debts owed to federal crime victims. The law requires defendants to pay restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. While restitution is paid to the victim, criminal fines and felony assessments are paid to the department’s Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs.
The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights or environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration and Department of Education.
Additionally, the U.S. Attorney’s office in Colorado working with partner agencies and divisions, collected $7,317,124 in asset forfeiture actions in FY 2016. Forfeited assets deposited into the Department of Justice Assets Forfeiture Fund are used to restore funds to crime victims and for a variety of law enforcement purposes.
Pueblo Woman Indicted for Wire and Tax FraudRead the Press Release
DENVER – Kimberly Pitts, age 46, of Pueblo, Colorado was arrested last week on charges of wire fraud and filing a false tax return, Acting United States Attorney Bob Troyer, IRS Criminal Investigation Special Agent in Charge Steven Osborne, and FBI Special Agent in Charge Calvin A. Shivers announced. Pitts was indicted by a federal grand jury on November 30, 2016, which remained sealed until her arrest. Pitts appeared before a U.S. Magistrate Judge this afternoon where she was advised of her rights and the charges pending against her.
According to the indictment, Pitts was hired as the office manager for Associates of Gastroenterology, Professional Corporation (AG) in February 2011. Her duties included being entrusted with AG’s bank accounts, credit cards, and maintaining AG’s accounting ledgers. Pitts was authorized to use AG’s credit cards and funds for business purposes.
Beginning in February 2011 and continuing through May 2015, Pitts devised a scheme in which she used AG funds for her own personal use. This included using AG credit cards to make personal purchases, writing checks from AG’s bank accounts for personal use and wiring funds from AG bank accounts to various financial institutions where Pitts held personal bank accounts.
Pitts disguised many of the fraudulent transactions in AG’s accounting ledgers. On several occasions, Pitts wrote fraudulent business expenses into the accounting ledgers to conceal her use of AG funds. In January 2015, Pitts listed in the accounting ledgers that AG paid $10,000 to Colorado Springs Utilities when in fact she had wired the $10,000 to her TD Ameritrade account. In total, Pitts converted approximately $792,474 of AG’s money for her own personal use.
Additionally, in April 2015, Pitts filed a U.S. Individual Income Tax Return for the 2014 tax year with a written declaration that the return was made under the penalties of perjury, that her total income for 2014 was $88,473. When filed, Pitts knew her total income was greater than the amount she listed on the tax return.
Pitts is charged with eight counts of wire fraud and one count of false tax statement. Wire fraud carries a penalty of not more than 20 years in federal prison, and a fine of up to $250,000 per count. False tax statement carries a penalty of not more than 3 years in prison and a fine of up to $100,000.
This case is being investigated by Internal Revenue Service – Criminal Investigation (IRS CI) and the Federal Bureau of Investigation (FBI). This case is being prosecuted by Assistant U.S. Attorney Jeremy Sibert.
The charges contained in the indictment are allegations, and the defendant is presumed innocent until proven guilty.
Federal Inmate Who is a Member of Mexican Mafia Sentenced to Life in Prison for First Degree Murder of Fellow Mexican Mafia Inmate at ADXRead the Press Release
DENVER – Richard Santiago, age 56, who was an inmate at the U.S. Administrative Maximum Prison (ADX) in Florence, Colorado, pled guilty yesterday to the first degree murder and murder by a life prisoner of a fellow ADX inmate before U.S. District Court Judge Robert E. Blackburn. Immediately after the guilty plea, Judge Blackburn sentenced Santiago to serve life in federal prison without the possibility of release. The guilty plea and sentencing were announced by Acting U.S. Attorney Bob Troyer and Federal Bureau of Investigation (FBI) Denver Division Special Agent in Charge Calvin A. Shivers. Santiago and co-defendant Silvestre Mayorqui Rivera were responsible for the murder of Manuel Torrez in 2005.
According to court documents, and evidence presented at Rivera’s trial, the three inmates, Rivera, Santiago and Torrez were all part of the Mexican Mafia. Torrez and Santiago arrived at ADX in 2000. Shortly after Rivera’s arrival, he, and Santiago murdered Torrez while the three were exercising in the recreation area that is part of the ADX’s general population unit. Specifically, on April 21, 2005, Rivera and Santiago stomped, kicked and punched Torrez until he was dead. Rivera was convicted of first degree murder following a jury trial, and was also sentenced to serve life in federal prison without the possibility of release.
This case was investigated by the FBI. The defendant was prosecuted by Assistant U.S. Attorneys Valeria Spencer, Susan "Zeke" Knox, M.J. Menendez and Capital Case Section Trial Attorney Jeffrey Kahan.
Federal Inmate Pleads Guilty and Sentenced to Life in Prison for First Degree Murder of Fellow Mexican Mafia Inmate at Federal PrisonRead the Press Release
An inmate at the U.S. Administrative Maximum Prison (ADX) in Florence, Colorado, pleaded guilty to first degree murder and murder by a life prisoner of a fellow ADX inmate.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Bob Troyer of the District of Colorado and Special Agent in Charge Calvin A. Shivers of the FBI’s Denver Division made the announcement.
Richard Santiago, 56, pleaded guilty yesterday before U.S. District Court Judge Robert E. Blackburn of the District of Colorado. Immediately after the guilty plea, Judge Blackburn sentenced Santiago to serve life in federal prison without the possibility of release.
According to Santiago’s plea agreement and evidence presented at the trial of co-defendant Silvestre Mayorqui Rivera, Santiago and Manuel Torrez were members and Rivera was an associate of the Mexican Mafia. Torrez and Santiago arrived at ADX in 2000. On April 21, 2005, shortly after Rivera’s arrival, he and Santiago murdered Torrez while the three were exercising in one of the ADX’s general population unit recreation areas by stomping, kicking and punching Torrez until he was dead.
Rivera was convicted of first degree murder following a jury trial and was also sentenced to serve life in federal prison without the possibility of release.
The FBI investigated the case. Trial Attorney Jeffrey Kahan of the Criminal Division’s Capital Case Section and Assistant U.S. Attorneys Valeria Spencer, Susan Knox and M.J. Menendez of the District of Colorado prosecuted the case.
Denver Man, Michael Yellowhorse, Sentenced to Federal Prison for Production of Child PornographyRead the Press Release
DENVER – Michael Yellowhorse, age 29, of Denver, Colorado, was sentenced yesterday by U.S. District Court Judge R. Brooke Jackson to serve 252 months (21 years) in federal prison for the production of child pornography using a minor in his care, Acting U.S. Attorney Bob Troyer and U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Denver Division Acting Special Agent in Charge John Eisert announced. Following his prison sentence, Judge Jackson ordered the defendant to serve 10 years on supervised release. He is also required to register as a sex offender. The defendant, who appeared at the sentencing hearing in custody, was remanded at its conclusion.
Yellowhorse was charged by Criminal Complaint on December 23, 2014. He was indicted by a federal grand jury in Denver on January 7, 2015. He pled guilty before Judge Jackson on March 3, 2016. He was sentenced on December 7, 2016. The day Yellowhorse was originally scheduled to be sentenced he cut off his court-ordered ankle monitor and fled. He was ultimately caught and arrested in Texas following a high speed pursuit after he crashed into a civilian vehicle. Judge Jackson then ordered him held without bond pending a new sentencing date.
According to court documents, including the stipulated facts contained in the defendant’s plea agreement, due to investigative work of international law enforcement, including Queensland Police Service (QPS) in Australia, and HSI’s Cyber Crimes Center (C3), Child Exploitation Investigations Unit (CEIU), Victim Identification Program (VIP), sophisticated investigators identified a photo sharing website that was being used to facilitate the exchange of child pornography. After observing a user profile offering to exchange child pornography, a QPS investigator operating in an undercover capacity contacted Yellowhorse by email. After exchanging emails, Yellowhorse sent the investigator an image of child pornography. Information from the website obtained by a foreign law enforcement agency was able to be used to identify Yellowhorse. A search warrant executed at the home where Yellowhorse resided resulted in the seizure of laptops, cellphones, and an item that was observed in the background of the child pornography picture.
Yellowhorse’s laptop contained images of child pornography, as did the cellphone found on his person. During the course of the investigation, it was determined that the defendant had produced the image of child pornography that was sent to the QPS investigator. A forensic review of the child pornography images included images with an adult male hand, later determined to be Yellowhorse’s. Yellowhorse had access to the minor child depicted in the images, who was in his care when the child pornography was created. Forensic examination showed that Yellowhorse produced child pornography depicting the minor child on two separate dates. The minor child depicted in the images was eight years old and appeared to be sleeping while the pictures were taken. Examination of the defendant’s cellphone and laptop also reflected the fact that he was in possession of more than 250 child pornography images depicting children other than the minor child under his care. Forensic evidence also showed that he visited the website in question that started this investigation thousands of times.
“Thanks to the outstanding cooperation between international law enforcement and HSI, and their extraordinarily complex computer forensics work, HSI was able to identify this child pornographer who made numerous efforts to remain anonymous,” said Acting U.S. Attorney Bob Troyer. “Where ever you are, if you’re involved in exploiting children, we will find you, you will be prosecuted, and you will face the same consequence as Yellowhorse.”
HSI’s active Operation Predator program has removed another predator from the streets for a long time,” said John Eisert, acting special agent in charge of HSI Denver. “Just as importantly, we rescued at least one innocent victim from this predator’s clutches — and an untold number of potential future victims if he were not caught.”
This case was investigated HSI. The defendant was prosecuted by Assistant U.S. Attorney Alecia L. Riewerts.
New York City Man Sentenced to Federal Prison for Stock Trading SchemeRead the Press Release
DENVER – Michael Todd Osborn, age 46, of New York, was sentenced by U.S. District Court Judge Christine M. Arguello on last week to serve 77 months in prison followed by 3 years of supervised release for wire fraud and money laundering, announced Acting U.S. Attorney Robert C. Troyer and IRS Criminal Investigation Special Agent in Charge Steven Osborne. He was taken into custody at the end of the sentencing hearing.
Osborn and his co-defendant Corey Earl Engelen were indicted by a federal grand jury in Denver on February 11, 2015. Osborn pled guilty on February 9, 2016 and was sentenced on December 1, 2016. Osborn was ordered to pay a fine of $100,000 and restitution of $695,000 to the investors of this his fraudulent scheme.
According to the indictment and plea agreement, beginning in October 2009 and continuing until July 2010, Osborn devised a scheme to defraud investors. He told them that he would use their funds to trade stocks on their behalf. In fact, he did no trading, and he and his Colorado associate used the investors’ money for their own personal benefit and purposes other than trading. Osborn held himself out to investors as an experienced trader of stocks and other securities and a veteran in the equity/swing trading business. He sold investors units in the CU Equity Swing Fund I, LLC and the 10x Leveraged Oscillator Fund, through which he represented he would conduct short-term trading. Investors typically learned of the investment opportunity through a friend or trusted associate.
Osborn falsely represented that he had a prime trading account through which he would be able to leverage the funds invested and thereby reap greater profits than from unleveraged trading and falsely represented that the investors’ funds were protected from fraud, larceny, and embezzlement by a fidelity bond with Lloyds of London.
Osborn instructed investors to wire their funds to accounts held in the name of Infinite One, LLC, which he represented to be the trading accounts he would use for the trades. In fact, the accounts were not trading accounts and were never used for trading. They were merely checking accounts held by Osborn’s associate in Colorado. Once the investors had wired funds, Osborn provided them “blotters,” which contained detailed records of trades he had purportedly made.
The information provided to the investors was false, as Osborn had never made the trades, and certainly no profits had been realized. Instead, Osborn used the funds for his own personal benefit, including purchasing a Mercedes-Benz, paying for family vacations, paying his attorney and a victim in an unrelated criminal case, and paying his ordinary living expenses and debts.
“These are the worst kind of thieves. They carefully and deliberately go to great lengths to lie and steal the savings of innocent people,” said Acting U.S. Attorney Bob Troyer. “IRS Criminal Investigators are excellent at tracking down thieves like this. It is their work, with our Assistant U.S. Attorney, that sends these folks where they belong.”
“This sentencing demonstrates the excellent partnership between IRS-CI and the U.S. Attorney’s Office in working together to stop the criminal behavior of those who prey on investors for their own personal financial gain,” said Steven Osborne, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office. “IRS Criminal Investigators will continue to use their financial expertise to identify and trace laundered funds in these types of investor fraud schemes.”
Engelen pled guilty on October 13, 2016 to one count of money laundering and is scheduled to be sentenced by Judge Arguello on January 31, 2017.
This case was investigated by Internal Revenue Service – Criminal Investigation with assistance from the Special Enforcement Program of the Internal Revenue Service. This case was prosecuted by Assistant U.S. Attorneys Linda Kaufman and Bishop Grewell.
Ouray Resident Arrested by Federal and State Law Enforcement on Federal Firearm ChargesRead the Press Release
DENVER – Jerome Andre Kimble, age 32, of Ouray, Colorado, was arrested late last week on charges of being a felon in possession of a firearm and ammunition, Acting U.S. Attorney Bob Troyer and ATF Denver Division Acting Special Agent in Charge Ron Humphries announced. The defendant, who is considered a serious threat to law enforcement, was arrested at a Montrose fast food restaurant during the middle of the day.
Kimble was charged by Criminal Complaint on December 1, 2016. He was arrested by federal agents and state and local officers on December 2, 2016. He appeared in U.S. District Court in Grand Junction today, where he was advised of his rights and the charges pending against him. He is scheduled to appear for a detention hearing, also in Grand Junction, on December 8, 2016 at 2:00 p.m.
According to the Affidavit in support of the Criminal Complaint, on July 29, 2016, an Ouray Police Officer received information that Jerome Kimble had taken a firearm to his place of employment. Kimble was showing the firearm to other employees while at work. He also offered it for sale. The officer also learned that Kimble carries the firearm to his second job. During that same time period, Kimble was terminated from his first job. He then made threatening comments toward the businesses’ customers, as well as toward an employee.
On August 1, 2016, the Ouray officer learned Kimble sold the firearm to a male juvenile. On October 31, 2016, the juvenile and his father brought the weapon to the Ouray Police Department and provided written and verbal statements regarding from whom the minor obtained the firearm. Kimble told the minor that he needed money. The firearm was ultimately sold for $180 in cash. The officer also learned that Kimble walked around town wearing an open carry holster with a large black handle pistol.
During the course of the investigation it was determined that Kimble was convicted of two counts of Felony Second Degree Burglary in Santa Clara County, California Superior Court, thus making him a felon in possession of a firearm. Kimble had a previous confrontation with Ouray Police Officers when he was arrested for a motor vehicle charge on October 18, 2016. He then made multiple threats against the investigating officer and other Ouray officers, to include statements that Kimble knew where their spouses work. He then said he would come back as an enemy of the State and would get even with every one of them for putting him in jail again. Kimble was released on a $750 bond.
Due to the multiple serious threats to law enforcement, and the fact the defendant had access to firearms, law enforcement treated his arrest as high risk, utilizing agents and officers from multiple jurisdictions throughout the area. The arrest was executed without incident.
If convicted, Kimble faces not more than 10 years in federal prison, and up to a $250,000 fine.
This case is being investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). Assisting ATF with the arrest of Kimble included the FBI, U.S. Marshals Service, Colorado Bureau of Investigation, the Ouray Police Department and the Montrose Police Department.
The defendant is being prosecuted by Assistant U.S. Attorney and Grand Junction Branch Office Chief Peter Hautzinger.
The charges contained in the Criminal Complaint are allegations, and the defendant is presumed innocent unless and until proven guilty. A Criminal Complaint is a probable cause charging document. Anyone accused of committing a felony violation of federal law has a Constitutional right to be indicted by a federal grand jury.
Third and Final Defendant Involved in Theft of Firearms from Pueblo Gun Store Sentenced to Federal PrisonRead the Press Release
DENVER – Damion Shata Morgan, age 23, of Pueblo, was sentenced this week by U.S. District Court Judge R. Brooke Jackson to serve 28 months for his role as a lookout during the robbery of RJC Firearms in Pueblo, Acting U.S. Attorney Bob Troyer and ATF Denver Division Acting Special Agent in Charge Ron Humphries announced. Two other defendants were prosecuted, pled guilty and were sentenced for the planning and implementation of the gun store robbery.
The other two defendants involved in the robbery were Benjamin Miguel Acosta, age 25, who was sentenced to serve 60 months in federal prison, followed by 3 years on supervised release for conspiracy to commit theft of a firearm from a Federal Firearms Licensee (FFL) and being a felon in possession of a firearm; and David Anthony Lizarraga, age 37, who was sentenced to 64 months in prison, followed by 3 years of supervised release also for conspiracy to commit theft of a firearm from a FFL as well as possession of two sawed of shotguns. Morgan pled guilty to the conspiracy to commit theft from a FFL as well.
According to court records, including the stipulated facts from the defendants’ changes of plea documents, on the evening of September 20, 2015, Acosta and Lizarraga, and a person unknown to law enforcement, cased RJC Firearms, which is a business licensed to and engaged in the sale of firearms imported or manufactured in other states, thus in interstate commerce. After casing the business, the three drove to Lizarraga’s residence, where they obtained bolt cutters, a sledge hammer, and a pry bar. They then returned to the area of the business, where they met and picked up Morgan. Morgan was then dropped off near the business to serve as a lookout. The defendants all knew and agreed to the plan to burglarize the business with the intent to steal the firearms inside.
Acosta, Lizarraga and the third unknown individual, went to the back of the business where they used the bolt cutters to get through the wire outer door, and the sledge hammer to gain access to the interior of the business. Once inside they smashed the glass on the cases and stole 12 firearms that were in the inventory of RJC Firearms. As they fled, they picked up Morgan and returned to Lizarraga’s residence, where they divided up the firearms amongst themselves. Morgan was paid for his part of the conspiracy with heroin. A search warrant was later obtained for Lizarraga’s residence. Officers during the search found the bolt cutters, sledge hammer and the pry bar, along with two sawed off shotguns.
“Stealing guns from gun stores is a very serious threat to the safety of Colorado communities,” said Acting U.S. Attorney Bob Troyer. “Do that, and we will make sure you spend a good piece of your life in federal prison.”
“The surge in gun store burglaries is a concerning trend—one that ATF takes very seriously. These stolen guns end up at future crime scenes, including murders, and pose a risk to innocent civilians and law enforcement alike,” said ATF Acting Special Agent in Charge Ron Humphries. “We are fully committed to investigating gun store burglaries with our local partners to arrest those responsible, recover the firearms and prevent future thefts.”
This case was investigated by the ATF and the Pueblo Police Department.
The defendants were prosecuted by Assistant U.S. Attorney Kurt Bohn.
Judge Issues Civil Penalty Against Colorado Company That Sold Recalled MagnetsRead the Press Release
A federal judge yesterday issued a $5.5 million civil penalty against Zen Magnets LLC, a Colorado company, which illegally sold powerful small magnets that already had been recalled by another company, the Justice Department announced. Because of the company’s inability to pay the penalty, most of it was suspended.
U.S. District Court Judge Christine M. Arguello of the District of Colorado had previously ruled that Zen Magnets LLC and its owner, Shihan Qu, had violated the Consumer Product Safety Act by selling hundreds of thousands of magnets that another company had recalled. In the earlier ruling, the court found that Zen Magnets had purchased large amounts of the magnets – estimated to be in quantities of hundreds of thousands -- at a substantial discount from another company. That other company agreed, one week later, to recall the magnets as part of an agreement with the U.S. Consumer Product Safety Commission (CPSC).
“Selling potentially dangerous products that another company had recalled put consumers at risk,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The civil penalty imposed by the district court indicates that violations like this will not be taken lightly. The Department of Justice will continue to work with the CPSC to protect consumers by keeping recalled products out of the stream of commerce.”
In recognition that Zen Magnets is a small company and has a limited ability to pay, all but $10,000 of the civil penalty was suspended.
“Protecting consumers, especially children, from a product that can cause harm and even death is what the Colorado U.S. Attorney’s Office, and the Department of Justice as a whole is all about,” said Acting U.S. Attorney Bob Troyer for the District of Colorado. “The civil penalty leveled by Judge Arguello provides a more than appropriate deterrence to companies to ensure their products are safe.”
The magnets at issue are typically sold in sets of hundreds and are commonly marketed and sold as “sculptural” desk toys. According to the CPSC, when a person ingests more than one of the powerful small magnets, the magnets are attracted to each other in the digestive system, creating the potential for serious damage to the intestinal tissue trapped in between or even death.
The hundreds of thousands of recalled magnets that Zen Magnets unlawfully sold were obtained prior to and thus were not covered by a rule issued by the CPSC that went into effect in April 2015. In a separate legal proceeding, Zen Magnets challenged that rule, which prohibited the sale of magnets or magnet sets that are small enough to be swallowed and that have a high degree of magnetic attraction. On Nov. 22, the U.S. Court of Appeals for the Tenth Circuit issued an opinion holding that the rule should be vacated and remanded to the CPSC for further proceedings.
The case in which the district court issued the civil penalty was handled by Senior Litigation Counsel Patrick Jasperse of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorneys Jacob Licht-Steenfat and Jamie Mendelson of the District of Colorado.
For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at https://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the District of Colorado, visit its website at https://www.justice.gov/usao-co.
Zen Magnets OrderColorado U.S. Attorney's Office Launches Web Page for Victims of FusionPharmRead the Press Release
DENVER – Acting U.S. Attorney Bob Troyer announced that his office has launched a website for victims of the FusionPharm fraud. The website, www.justice.gov/usao-co/fusionpharm-us-v-sears-and-dittman, is for anyone interested in the prosecution of FusionPharm, specifically, defendants, William Sears, age 50 of Thornton, Colorado, and Scott Dittman, age 47, now of Boyertown, Pennsylvania, and formerly of Elizabeth, Colorado. Both were charged by Information on September 16, 2016, and were charged with Conspiracy to Defraud the U.S. as part of a scheme to defraud the U.S. Securities Exchange Commission. Sears has pled guilty to the crimes and is scheduled to be sentenced on April 25, 2017. Dittman has filed a notice of disposition, and a change of plea hearing, originally set for early November and now reset due to change in defense counsel is pending.
FusionPharm’s principal business was the development, manufacture and sale of steel shipping containers retrofitted and refurbished for use as hydroponic growing pods, branded as “PharmPods,” for indoor plant cultivation, primarily cannabis. As set forth in court documents, the United States has alleged that, beginning as early as in or about March 25, 2011 and continuing at least through in or about May 15, 2014, the defendants knowingly and willfully conspired to commit securities fraud and wire fraud through FusionPharm, Inc. Specifically, defendants Sears and Dittman reported to the public that certain sales transactions and revenues for FusionPharm had occurred when, in fact, they had not.
The United States has further alleged that Sears and Dittman would falsely represent to FusionPharm’s transfer agent and to broker-dealers that neither Sears nor companies related to him was an affiliate or control person of FusionPharm, thereby allowing Sears’ and the related companies’ FusionPharm shares to be treated as unrestricted securities that could be immediately sold in the public securities markets under the ticker symbol FSPM.
Statement by Acting U.S. Attorney Bob Troyer Condeming Hate Crimes -- Promising Vigorous Prosecution When AppropriateRead the Press Release
DENVER – Acting U.S. Attorney Bob Troyer released the following statement condemning hate crimes today, promising vigorous prosecution when appropriate:
“Hate crimes are not just crimes perpetrated against an individual victim. They attack our entire community by spreading fear and intimidation. Hate crimes can take many forms: violence, intimidation, harassment, or vandalism of property. These are acts of cowardice, and they are serious federal crimes that we will prosecute to the fullest. The U.S. Attorney’s Office will work closely and constantly with community leaders and local, state and federal law enforcement to protect the civil rights of all individuals, regardless of their citizenship status, actual or perceived race, color, religion, national origin, sex and gender, gender identity, sexual orientation or disability. If an individual’s civil rights are attacked, this office will act.”
Former Parker and Denver Massage Parlor Owner Sentenced for Obstructing the IRSRead the Press Release
DENVER – Jung Yoon Choi, age 56, formerly of Aurora, Colorado was recently sentenced by U.S. District Court Judge Robert E. Blackburn to serve 19 months in federal prison followed by one year of supervised release for obstructing and impairing the laws of the Internal Revenue Service, announced Acting United States Attorney Bob Troyer and IRS Criminal Investigation Special Agent in Charge Steven Osborne.
Choi waived her right to indictment by a federal grand jury and was charged by information on October 2, 2015 for obstructing and impairing the laws of the Internal Revenue Service and pled guilty to this charge on January 14, 2016. As part of the plea agreement, Choi has agreed to forfeit $118,575.00 seized on December 17, 2010. She was also ordered to pay $67,560 in restitution to the IRS.
According to the information and plea agreement, from January 1, 2009, through December 31, 2010, Choi owned and operated three massage parlors in the Denver Metropolitan area, specifically; Ivy Spa located at 2260 S. Quebec Way, Denver, CO (during 2009); New Image Spa located at 17783 Cottonwood Drive, Parker, CO (during 2010); and Blue Pine Spa located at 6212 East Pine Lane, Douglas County, CO (during 2010).
Choi typically staffed each of her spas with an on-site manager and a number of workers who provided services to customers. The primary service provided by her workers was giving massages. Each of the spas typically had a fee schedule according to which customers paid a door fee ordinarily ranging from $40 to $50, depending on the amount of time requested (30 to 60 minutes were the norm). In addition, customers at the various spas often paid an additional fee which was characterized as a “tip” in many instances for “extra services” provided by Choi’s workers. At times, the “extra services” consisted of prostitution services in violation of Colorado Revised Statute, 18-7-201. Specifically, the workers would engage in sexual acts with customers in exchange for money. Choi was aware that prostitution was occurring at times in each of her spas and that business income was being generated from such activity. Choi regularly advertised for her spas using Westword newspaper and Sowet.com. Choi paid the owner of Sowet.com, David Warmack, a monthly fee to post favorable reviews on his website touting her various businesses and the women who worked there. Warmack was previously prosecuted by the U.S. Attorney’s Office and was sentenced to serve 15 months in federal prison by U.S. District Court Judge Christine M. Arguello for related criminal activity.
Choi generated substantial income from each of her spas for tax years 2009 to 2010. However, she failed to file personal income tax returns for 2009 and 2010, and thus she did not report her business income for either year and she did not pay any taxes to the IRS. In addition to not filing tax returns and not paying taxes, Choi further impeded the IRS’s collection of taxes by several means, including: using nominees on bank accounts so as to conceal her business income; conducting cash and business transactions using nominees; conducting financial transactions in amounts that were less than $10,000 so as not to trigger the filing of currency transaction reports; and hiding and storing income in the form of cash hoards at various locations.
IRS Special Agents conducted a financial analysis of the Ivy Spa bank account for 2009 and the account showed deposits totaling $118,418. The vast majority of such deposits, $106,322, came from credit card payments from customers at Ivy Spa. The $118,418 in funds deposited into this account represented gross income generated by Choi for tax year 2009.
Choi also utilized nominees to conduct financial transactions in bank accounts for New Image Spa and Blue Pine Spa in 2010. Choi received substantial business income from New Image and Blue Pine Spa throughout 2010 in the form of cash and credit card deposits which she concealed. She regularly took a portion of her cash earnings and secreted the funds in cash hoards at various locations. Particularly, on December 17, 2010, pursuant to a federal search warrant, IRS Special Agents seized approximately $118,575, in cash from a locker at the U-Store-It. In total, Special Agents seized $219,388 in cash from Choi or her associates in late 2010. Such funds represented gross, business income which Choi generated during 2010.
“You have to pay taxes, regardless of your profession,” said Acting U.S. Attorney Bob Troyer. “Thanks to the exceptional work by our prosecutors and IRS CI and FBI agents, Ms. Choi will suffer a righteous consequence for evading that duty.”
“The privilege of living in the United States carries certain responsibilities, one of which is the voluntary payment of taxes,” said Kareem Carter, Acting Special Agent in Charge, Denver Field Office, Internal Revenue Service – Criminal Investigation. “The prosecution of individuals, such as Choi, who intentionally conceal income and evade taxes, is a vital element of IRS-CI’s enforcement strategy of holding people accountable for their criminal actions.”
This case was investigated by Internal Revenue Service – Criminal Investigation, the Federal Bureau of Investigation, the Los Angeles Police Department and the Arapahoe County Sheriff’s Office. The case was prosecuted by Assistant United States Attorney Tim R. Neff.
Former Swedish Hospital Surgical Tech Sentenced for Tampering with a Consumer Product, Fentanyl, and Obtaining a Controlled Substance by DeceptionRead the Press Release
DENVER – Rocky Allen, age 29, who resided in Denver, Colorado before his arrest, was sentenced today by U.S. District Court Judge Raymond P. Moore to serve 78-months in federal prison, followed by 3 years on supervised release for tampering with a consumer product and obtaining a controlled substance by deception, the U.S. Attorney’s Office, the Food and Drug Administration Office of Criminal Investigations, the Drug Enforcement Administration (DEA) and the Englewood Police Department announced. Allen, who is free on bond and living at a halfway house, was released at the conclusion of the hearing, and ordered to report to a Bureau of Prisons facility within 15 days of designation.
Allen was first charged by Indictment on February 10, 2016. He pled guilty before Judge Moore on July 12, 2016. He was sentenced today, November 7, 2016.
According to court documents, including the stipulated facts contained in the plea agreement, from August 2015 to January 22, 2016, Allen was employed at Swedish Medical Center as a Surgical Technologist. He was not authorized to possess fentanyl, an opioid and a Schedule II narcotic. On January 22, 2016 at Swedish Hospital, numerous members of a surgical team were present in an operating room with a patient on the operating table. Allen entered the operating room although he was not assigned to staff that particular case. On that date and at that time, without permission and/or authority and acting with deception, Allen took a syringe originally loaded with 5 mL of 50 mcg/mL fentanyl and replaced it with another syringe containing saline solution. Allen had falsely labeled the replacement syringe with a sticker identifying the contents of the syringe as fentanyl. By switching the syringes, Allen introduced a syringe falsely purporting to contain fentanyl for use on a patient of the hospital. The replacement syringe was not used on the patient because a Neuro Spine Coordinator assigned to the operating room witnessed Allen switch the syringes and alerted the anesthesiologist not to use it.
As part of the hospital’s internal investigation, on January 22, 2016, Allen voluntarily submitted to a urine screen. Testing determined the presence of fentanyl, norfentanyl, and marijuana. The contents of the replacement syringe were tested and were consistent with saline solution. It was determined by investigators on that day that Allen acted with reckless disregard for and extreme indifference to the risk that another person would be placed in danger of bodily injury. Allen also obtained the controlled substance by means of deceit. In June of this year it was announced that Allen carries HIV (subtype B) and that he is negative for Hepatitis B and C.
“Allen put hundreds of innocent people at risk and caused them enormous fear and anxiety,” said Acting U.S. Attorney Bob Troyer. “His prosecution and sentence should send a chilling message to any medical professional who abuses his or her position of trust: You will go to federal prison for a long time.”
“Americans must be confident that they are getting safe, effective, pure and potent prescription drugs,” said Spencer E. Morrison, Acting Special Agent in Charge, FDA Office of Criminal Investigations’ Kansas City Field Office. “Our office will continue to pursue and bring to justice those who present a risk to the public’s health by tampering with drug products.”
“This case is an example of the scope of the prescription drug and opioid abuse epidemic, and specifically how it can affect our Colorado community” stated Barbra Roach, Special Agent in Charge of the Drug Enforcement Administration’s Denver Field Division. “This is an especially serious incident in that a medical professional, in a position of trust, abused that trust and in so doing put the community at large at risk. Holding this individual responsible is essential, but we must also continue our efforts to educate the community and address the prescription drug problem in our nation.”
This case was investigated by the FDA OCI, the DEA, and the Englewood Police Department. The defendant was prosecuted by Assistant U.S. Attorney Jaime Pena.
David Michael Ansberry, Who Allegedly Left Destructive Device at Nederland Police Deparment, to Appear in Federal Court This AfternoonRead the Press Release
DENVER – David Michael Ansberry, age 64, will appear in court at 2:00 p.m. this afternoon before U.S. Magistrate Judge Nina Y. Wang to be read his rights and advised of the charges pending against him. Magistrate Judge Wang’s courtroom is located at the Byron G. Rogers U.S. Courthouse, 1929 Stout Street, Courtroom 204.
Ansberry was previously indicted by a federal grand jury in Denver, charging him in a one count indictment with Use and Attempted Use of Weapon of Mass Destruction, the U.S. Attorney’s Office and the FBI announced.
The charges contained in the Indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.
University Hospital Nurse Arrested Following Grand Jury Indictment for Illegally Obtaining and Tampering with Fentanyl and HydomorphoneRead the Press Release
DENVER – Kacye Unruh, age 30, of Aurora, Colorado, a former nurse at University of Colorado Hospital, was arrested yesterday following the return of a federal grand jury indictment charging her with crimes related to taking vials containing controlled substances, and then replacing said vials with tampered material, the U.S. Attorney’s Office and the Food and Drug Administration’s Office of Criminal Investigations (FDA OCI) announced. Unruh made her initial appearance before a U.S. Magistrate Judge this afternoon, where she was advised of her rights and the charges pending against her. She is due back in court on November 9, 2016 at 10:00 a.m. for arraignment and detention hearing. Pending that hearing, Unruh will remain in federal custody.
According to the indictment, from June 29, 2016 through July 12, 2016, Unruh, with reckless disregard for the risk to others of placing others in danger of bodily injury, tampered with and attempted to tamper with vials containing Schedule II Controlled Substances. She also allegedly knowingly and intentionally obtained and attempted to obtain those same controlled substances by deception. Specifically, the defendant allegedly removed vials containing Fentanyl or Hydromorphone from the hospital’s dialysis area. She then replaced the vials with other substances to conceal her conduct.
In addition to illegally obtaining the controlled substances and tampering with their containers, Unruh allegedly made four false statements to a special agent with FDA OCI. Two of the false statements involved her work at a medical facility in Oklahoma. She was asked if she diverted drugs at the medical facility where she worked in Oklahoma. She said “no” when in fact she had diverted drugs there. She also was asked if she failed a drug test in Oklahoma. She said no when in fact she had failed a drug test there. Finally, she allegedly lied twice about the vials that contained the controlled substances. She said she replaced the narcotics with sterile saline, when in fact she replaced the contents with material other than sterile saline. She also said she had not cross-contaminated material when in fact she had.
If convicted of Tampering with a Consumer Product, the defendant faces not more than 10 years in federal prison, and up to a $250,000 fine per count, for each of the 14 counts. If convicted of Obtaining a Controlled Substance by Deceit or Subterfuge, the defendant faces not more than 4 years in federal prison, and up to a $250,000 fine per count, for each of those 14 counts. And if convicted of making a False Statement, the defendant faces not more than 5 years in federal prison, and up to a $250,000 fine.
This case was investigated by the FDA OCI. The defendant is being prosecuted by Assistant U.S. Attorney Jaime Pena.
The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.
Denver Man Who Offered to Buy Guns for Strangers on YouTube Sentenced to Federal PrisonRead the Press Release
DENVER – Kenneth Allen Francis, age 29, of Denver Colorado, was sentenced today by U.S. District Court Judge William J. Martinez to serve 60 months in federal prison for crimes related to the criminal acquisition or disposal of firearms, Acting United States Attorney Bob Troyer and Special Agent in Charge Ken Croke, of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), Denver Division announced today. The defendant, who was present at the sentencing hearing in custody, was remanded at the conclusion of the hearing.
A grand jury returned an indictment on February 10, 2016 charging the defendant with three counts: making a false statement to a federally licensed firearms dealer on January 12, 2016; making a false statement to a different federally licensed firearms dealer on January 22, 2016; and unlawful disposition of a firearm on January 22, 2016. The jury trial before Judge Martinez began on July 11, 2016. The jury returned a verdict of guilty on each of the three counts of the indictment on July 13, 2016. He was sentenced today, November 4, 2016.
According to facts presented during the jury trial, Francis posted a YouTube video in which he stated “I’m here to help you get your guns.” He went on to say that he did not care whether the person he was buying guns for had a history of violent crime or sex crime. Special Agents with the ATF, after watching the video, designed an undercover operation to determine whether the defendant was serious about his offer to buy guns for people. After an undercover agent made contact, the defendant agreed to carry through with his offer, purchasing an AR-15 style rifle for the undercover agent on January 12, 2016. On January 22, 2016 the defendant again carried through on his offer by purchasing two semi-automatic handguns, this time for an ATF confidential informant who the defendant had reasonable cause to believe was a convicted felon and therefore prohibited from purchasing guns. After that purchase, the defendant gave both pistols to the confidential informant.
“We can’t have safe communities if people like this are allowed to put AR-15s and semi-auto pistols into the hands of dangerous people,” said Acting U.S. Attorney Bob Troyer. “And we can’t have safe communities without citizens who care alerting law enforcement when they see this kind of behavior. So we thank those citizens, and we thank the ATF for their methodical work to put Francis out of business.” c
“Francis knew he was breaking the law. He didn’t care. And he didn’t care about the lives he would have put at risk by circumventing the law and providing guns to known violent felons, sex offenders and criminals guilty of domestic abuse,” said ATF Special Agent in Charge Ken Croke. “Now he is a convicted felon also, prohibited from purchasing firearms, thanks to the engaged citizens who alerted us to his activities, a thorough investigation by ATF agents and diligent prosecution in the U.S. Attorney’s Office.”
The case was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). The defendant was prosecuted by Assistant United States Attorneys Jason St. Julien and Bryan D. Fields.