Northern District of Illinois
Press releases recorded for this federal judicial district.
Chicago Man Sentenced to More Than 17 Years in Prison for Plotting to Kill Two Potential Witnesses in His Son's Murder TrialRead the Press Release
CHICAGO — A Chicago father who offered to hire a hit man to execute two potential witnesses in his son’s murder trial was sentenced today to 17 and a half years in federal prison.
EURIPIDES CAGUANA, 61, sought the killings of two men he believed would testify against his son in his upcoming murder trial. Caguana paid $500 to an undercover individual to purchase a gun, and he offered the individual up to $7,500 to have the two witnesses killed.
A jury in May convicted Caguana on four counts of murder for hire. U.S. District Judge Thomas M. Durkin imposed the 210-month sentence in federal court in Chicago.
“The defendant’s conduct strikes at the heart of the criminal justice system,” Assistant U.S. Attorney Peter S. Salib argued in the government’s sentencing memorandum. “Without witnesses, criminal cases can never be judged on the merits of the evidence.”
Caguana’s son, Travis Caguana, is charged with murder in the Circuit Court of Cook County in connection with a fatal drive-by shooting of a man on June 8, 2011. In October 2013, a cooperating individual notified law enforcement that Euripides Caguana had called him seeking to have two men killed to prevent them from testifying against Travis Caguana. Over the course of a few days, the cooperating individual and an undercover police officer – posing as a hit man – engaged in a series of secretly recorded meetings and conversations with Euripides Caguana.
During one of the meetings, Euripides Caguana provided the cooperating individual with $500 to purchase a gun, and he offered to pay up to $7,500 to have the two potential witnesses killed. He is heard on a recording telling the individual, “I want both of them, both of them.”
Caguana was arrested on Oct. 17, 2013, and the murders for hire were never carried out.
A trial date in the state murder case against Travis Caguana has not yet been set.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Chicago Police Superintendent Garry F. McCarthy.
The government is represented by Mr. Salib and Assistant U.S. Attorney Derek Owens.
CEO of Chicago Healthcare Company Pleads Guilty to Fraudulently Billing Medicare in $1.8 Million SchemeRead the Press Release
CHICAGO — The chief executive of Chicago-based Mobile Doctors pleaded guilty today to charges that he fraudulently increased Medicare bills for in-home treatment that was shorter and less complicated than the claims indicated.
DIKE AJIRI, 44, of Wilmette, admitted in a plea agreement that he personally altered patient files so that the now-defunct company could fraudulently bill several patient visits to Medicare at the highest possible level. The improper billing – known as “upcoding” – defrauded Medicare and the Railroad Retirement Board of approximately $1,854,000, according to the plea agreement.
Ajiri pleaded guilty to one count of health care fraud. He faces a maximum sentence of ten years in prison when U.S. District Judge John J. Tharp Jr. sentences him on April 19, 2016, at 2:00 p.m.
Mobile Doctors, which closed in 2013 after Ajiri was arrested, had been located at 3319 N. Elston Ave., in Chicago. The company contracted with physicians to arrange in-home visits for patients in Illinois, Michigan, Indiana and other states. For an in-home visit with an established patient to be billed properly at the highest level, the visit must involve at least two of the following components as defined by the American Medical Association: a comprehensive interval history, a comprehensive examination, and/or medical decision-making process of moderate to high complexity. According to the AMA, such a visit usually involves problems of moderate to high severity, with the physician typically spending 60 minutes face-to-face with the patient and/or the patient’s family.
According to the plea agreement, Ajiri personally altered Mobile Doctors’ billing forms – and instructed Mobile Doctors’ personnel to do the same – so that many of the in-home visits were fraudulently billed to Medicare and the Railroad Retirement Board at the highest level. Ajiri knew that these visits did not qualify for the maximum payment, and that it was unlawful for him to submit the false claims.
The investigation was carried out by the Medicare Fraud Strike Force, which consists of agents from the Federal Bureau of Investigation and the U.S. Department of Health and Human Services, and prosecutors from the U.S. Attorney’s Office and the Justice Department’s Fraud Section. The strike force is part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative between the Department of Justice and HHS to prevent fraud and to enforce anti-fraud laws around the country.
The investigation also resulted in charges against BANIO KOROMA, a Mobile Doctors physician. The indictment against Koroma charges that he falsely certified patients as confined to their homes when they were not actually home-bound and did not require specialized care. Koroma, of Tinley Park, is scheduled to proceed to trial on Dec. 7, 2015, before Judge Tharp.
Ajiri’s guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Lamont Pugh III, Special Agent-in-Charge of the Chicago Region of the U.S. Department of Health and Human Services Office of Inspector General. The Railroad Retirement Board Office of Inspector General is also participating in the case.
The government is represented by Assistant United States Attorneys Stephen Chahn Lee and Eric Pruitt.
To report health care fraud or to learn more about the Health Care Fraud Prevention & Enforcement Action Team (HEAT), logon to: StopMedicareFraud.gov.
Plea Agreement
Polo Woman Indicted for Embezzling More Than $59,000 from First State BankRead the Press Release
ROCKFORD — A Polo, Ill. woman was charged yesterday by a federal grand jury for embezzling funds. KAYLA BERGSTROM, 46, of Polo, Ill., was First Vice-President of First State Bank, with branches located in Polo and Shannon, Ill. As alleged in the indictment, as Vice-President, Bergstrom had the highest security level assigned in the bank’s software program which controlled all customer bank accounts, the bank’s general ledger accounts, adding new accounts, and the maintenance of all bank accounts. Bergstrom’s responsibilities included reconciling all of the bank’s correspondent accounts including the bank’s correspondent account with US Bank. The indictment alleges that between Feb. 23, 2010 and Feb. 3, 2014, Bergstrom embezzled money from First State Bank by creating cash advance tickets for the bank’s correspondent account at US Bank and crediting the amounts of cash advance tickets to her personal account and the business account for her husband’s automobile repair business. According to the indictment, Bergstrom concealed her embezzlement by changing the balances on the bank’s US Bank account statements by manually cutting and pasting false account balances on the statements.
Embezzlement carries a maximum potential penalty of up to 30 years in prison, up to 5 years of supervised release following imprisonment, and a fine of up to $1,000,000. Bergstrom has since repaid the funds to First State Bank. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines. Bergstrom will be arraigned before United States Magistrate Judge Iain D. Johnston on Oct. 22, 2015, at 11:00 a.m. in U.S. District Court in Rockford.
The public is reminded that an indictment is only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Joseph Moriarty, Special Agent in Charge for the Chicago Regional Office, Federal Deposit Insurance Corporation - Office of Inspector General.
The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.
Indictment
Kenilworth Businessman Indicted for Failing to Report $3 Million in Personal Income from Downtown Real Estate DealRead the Press Release
CHICAGO — A Kenilworth businessman has been indicted on charges he evaded federal income taxes by concealing $3 million he earned in connection with a high-rise real estate deal in downtown Chicago, federal authorities announced today.
SALVATORE GALIOTO earned $3 million in personal income as part of the acquisition of nine floors in a high-rise building at 55 E. Washington St. in Chicago in 2007, according to the indictment. The seller, Pittsfield Development LLC, paid the money as a consulting fee for closing the deal. Instead of reporting the money on his personal income taxes, Galioto caused false partnership tax returns to be prepared and filed, misstating that the $3 million was earned in 2008 by his company, 55 E. Washington Development LLC, according to the indictment.
The indictment was returned Thursday afternoon in U.S. District Court in Chicago. It charges Galioto with one count of corrupt interference with the administration of Internal Revenue Service laws, and three counts of willfully making false and fraudulent statements to the IRS.
Galioto, 54, also known as “Sam Galioto” and “Sammy Galioto,” will be arraigned on a future date to be set by the Court.
According to the charges, Galioto entered into a consulting agreement with Pittsfield on or about March 28, 2007. The agreement called for Pittsfield to pay $3 million to Galioto when the sale was completed. On or about Dec. 28, 2007, Galioto’s company purchased floors 13-21 from Pittsfield for $22,652,876.82, the indictment states.
Galioto concealed receipt of Pittsfield’s payment by having it paid to his relative as a nominee. The relative is identified in the indictment only as “Individual C.” On or about Dec. 31, 2007, Pittsfield sent a portion of Galioto’s consulting fee to Individual C in the form of a check for $962,121.75. Shortly thereafter, Galioto caused Individual C to sign and endorse the check over to Galioto, who took possession of it, endorsed it, and deposited it for his own use, according to the indictment. Galioto failed to report that money in his individual federal income tax returns for the years 2007 and 2008, the indictment alleges.
Instead, the false partnership returns were filed, misstating that Galioto’s company had earned the $3 million in 2008, the indictment alleges.
The corrupt interference charge carries a maximum sentence of three years in federal prison and a $5,000 fine. Each count of making false and fraudulent statements to the IRS is punishable by up to three years in prison and a fine of $100,000.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Stephen Boyd, Special Agent in Charge of the Internal Revenue Service Criminal Investigation in Chicago; and John A. Brown, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of investigation.
The public is reminded that an indictment is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is represented by Assistant U.S. Attorney Patrick Otlewski.
Indictment
Bolingbrook Man Sentenced to 47 Years in Federal Prison for Running a Sex Trafficking RingRead the Press Release
CHICAGO ― A Bolingbrook man has been sentenced to 47 years in federal prison for running a brutal sex trafficking ring that forced four victims into prostitution.
McKENZIE CARSON used violence and coercion to force his victims into working as prostitutes in Chicago and nearby suburbs. Carson frequently provided the victims with heroin, and he controlled how much of the drug each victim was allowed to use. One of the victims was 17 years old at the time Carson ran his pimping operation in 2010.
A federal jury in 2013 convicted Carson, 43, on four counts of sex trafficking. All four victims testified about their ordeals during the trial.
U.S. District Judge Elaine E. Bucklo sentenced Carson on Thursday to 47 years in prison for each of the four counts. The sentences are to run concurrently.
“The defendant’s conduct here was particularly brutal and sadistic, and has caused irreparable harm to his victims,” Assistant U.S. Attorney Jennie Levin argued in the government’s sentencing memorandum. “He instilled into them fear, intimidation and humiliation.”
Evidence at trial showed that Carson recruited and groomed his victims. In addition to supplying his victims with heroin, Carson used threats and physical beatings to assert control over them. When the victims broke his rules or disobeyed him, Carson often raped them. He also required his victims to commit commercial sex acts, and to give him the money they earned.
Carson, who worked off and on as a taxi driver in Chicago and the suburbs, has been in federal custody without bond since his arrest in 2012.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and John A. Brown, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of investigation. The investigation was conducted by a multi-agency task force that was led by the FBI and included the Cook County Sheriff’s Office, the Cook County State’s Attorney’s Office, the Kendall County State’s Attorney’s Office, the Will County Sheriff’s Office, and the police departments from Alsip, Bolingbrook, Channahon, Downers Grove, Joliet, Naperville, Oswego, Romeoville, Shorewood, and Westmont.
The government was represented by Ms. Levin and Assistant U.S. Attorney Bethany Biesenthal.
Grundy County Gun Dealer Sentenced to 4 Years in Prison for Illegally Selling Handguns and RiflesRead the Press Release
CHICAGO ― A Grundy County gun dealer was sentenced today to 4 years in federal prison for selling nearly a dozen firearms to buyers he believed were not legally allowed to purchase the weapons.
PATRICK SEAN KEIRAN, 41, used his federal firearms license to sell eleven weapons to two buyers, one of whom was an undercover law enforcement officer who told Keiran he couldn’t pass the required background check. The other buyer was a convicted felon whose criminal history prevented him from legally purchasing the weapons. In both instances, Keiran doctored the bill of sale and the federal firearms paperwork by using the names of other customers as the purported buyers.
Keiran, who operated American’s Choice Firearms and Ammo in Gardner, pleaded guilty in April to one count of selling a firearm to a prohibited person. In addition to the 48-month prison term, U.S. District Judge Matthew F. Kennelly also imposed three years of supervised release.
“The defendant let these individuals walk out of his store with brand new firearms and no possible paper trail for law enforcement to follow if those guns were ever used for criminal purposes,” Assistant U.S. Attorney Christopher V. Parente argued in the government’s sentencing memorandum. The defendant “put his own greed above the safety of the community.”
Keiran has been a federally licensed firearms dealer since April 2013. On May 29, 2014, Keiran sold three 9mm handguns for $960 to the undercover agent from the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The following month, Keiran sold the undercover agent a .38-caliber revolver for $398.43, and two .22-caliber rifles for approximately $1,390. The rifle transaction was completed at Keiran’s home in Elwood because Keiran wanted to avoid the surveillance cameras in his gun shop.
On June 20, 2014, Keiran sold five 9mm handguns for $1,600 to the convicted felon, who was cooperating with law enforcement. This deal was also conducted inside Keiran’s home.
Keiran was arrested in July 2014, and his gun store was closed.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Jeffery Magee, Special Agent in Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Will County Sheriff’s Police Department, the Will County Metropolitan Area Narcotics Squad (MANS), and the Grundy County Sheriff’s Department assisted in the investigation.
The government was represented by Mr. Parente.
Former Owner of Edgewater Medical Center Sentenced to 21 Months for Willfully Impeding Efforts to Collect $188 Million in Civil JudgmentsRead the Press Release
CHICAGO — The former owner of Edgewater Medical Center on Chicago’s North Side was sentenced today to 21 months in federal prison for his efforts to thwart collection of more than $188 million in civil judgments.
PETER G. ROGAN lied in a federal affidavit when he denied controlling millions of dollars in a trust account in the Bahamas. He also willfully violated multiple court orders as part of a decades-long effort to protect his offshore assets from judgment creditors who had obtained more than $188 million in combined civil judgments arising from fraud during Rogan’s tenure as CEO of the now-shuttered medical center.
Rogan, 69, formerly of Valparaiso, Ind., pleaded guilty last month to one count of perjury. In addition to the 21-month prison term, U.S. District Judge Harry D. Leinenweber ordered Rogan to comply with all outstanding court orders, including orders relating to discovery and financial obligations.
“The defendant’s conduct was abundantly contemptuous and lucrative, as well as exceedingly difficult to detect, investigate, and prosecute,” Assistant U.S. Attorney Andrew S. Boutros argued in the government’s sentencing memorandum. The defendant “substantially interfered with the administration of justice.”
Rogan once owned Edgewater Medical Center and later sold it, but he continued to manage the facility through various companies he owned. The hospital, located at 5700 N. Ashland Ave., closed in 2001 amid a criminal investigation that resulted in the healthcare fraud convictions of a Rogan-owned management company, a hospital administrator and several doctors, the latter of whom performed medically unnecessary surgical procedures and treatments on unsuspecting patients.
In 2006, the United States obtained a civil judgment of $64,259,032 against Rogan for his role in Edgewater’s submission of false claims for reimbursement under the Medicare program. The following year, Dexia Crédit Local, a bank that extended credit financing to the hospital, was awarded a $124 million default judgment in a separate civil fraud suit against Rogan and his companies.
In the course of their respective proceedings against Rogan, the United States and Dexia discovered that Rogan’s Bahamian trust account was being used to hold millions of dollars in secret offshore assets. Rogan had created the trust with the help of FREDERICK M. CUPPY, an Indiana attorney, as well as another attorney described in the indictment as “Florida Lawyer.” Cuppy, formerly of Valparaiso, Ind., and now of Fort Lauderdale, Fla., pleaded guilty to a perjury charge before Judge Leinenweber. He was sentenced in 2013 to one year and a day in prison.
On Dec. 21, 2006, Rogan responded to the government’s collection efforts by filing an affidavit with the Court in which he denied that he exercised control over assets in the trust account. Rogan admitted in a plea agreement that this statement was false and misleading. Rogan also admitted that he willfully and wrongfully violated several court orders in the Dexia litigation, including lying and causing his attorneys to lie to the Court about his control over his offshore trust.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Mr. Boutros and Assistant United States Attorneys Daniel W. Gillogly, Eric S. Pruitt and Joseph A. Stewart.
Former Chief Executive of Chicago Public Schools Pleads Guilty to Accepting Bribes and Kickbacks to Steer No-Bid ContractsRead the Press Release
CHICAGO — BARBARA BYRD-BENNETT pleaded guilty in federal court today to using her position as chief executive officer of the Chicago Public Schools to guide lucrative no-bid contracts to her former employer in exchange for bribes and kickbacks.
In a written plea agreement, Byrd-Bennett admitted that she steered no-bid contracts worth more than $23 million to two education-consulting firms, THE SUPES ACADEMY LLC and SYNESI ASSOCIATES LLC. In exchange, Byrd-Bennett expected to receive cash kickbacks from the companies, as well as a consulting job at SUPES upon her retirement from CPS. The kickbacks were to be paid to Byrd-Bennett in the form of a “signing bonus” on the first day of her new employment, according to the plea agreement.
Byrd-Bennett previously worked as a consultant for SUPES and Synesi before moving to CPS in May 2012. She served as CEO at CPS from Oct. 12, 2012, to June 1, 2015.
Byrd-Bennett, 66, of Solon, Ohio, pleaded guilty to one count of wire fraud. She faces a maximum sentence of 20 years in prison, mandatory restitution, and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greater. The Court will impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The Court will schedule a sentencing date at a later time. U.S. District Judge Edmond E. Chang scheduled a status hearing for Jan. 27, 2016, at 9:00 a.m.
In addition to the expected kickback from the contracts, Byrd-Bennett admitted in the plea agreement that the companies provided her with numerous other benefits, including meals and tickets to sporting events.
The Wilmette-based SUPES and the Evanston-based Synesi are also charged in the indictment, along with their respective former owners, GARY SOLOMON, 47, of Wilmette, and THOMAS VRANAS, 34, of Glenview. The four co-defendants are scheduled for an arraignment on Oct. 14, 2015, at 2:00 p.m., before Judge Chang.
Byrd-Bennett’s guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Nicholas J. Schuler, Inspector General for the Chicago Public Schools.
The government is represented by Assistant United States Attorneys Megan Cunniff Church and Lindsay Jenkins.
Plea Agreement
Former Chief Executive of Chicago Public Schools Indicted for Accepting Bribes and Kickbacks to Steer No-Bid ContractsRead the Press Release
CHICAGO — A federal indictment returned today charges BARBARA BYRD-BENNETT with using her position atop the Chicago Public Schools to award lucrative no-bid contracts to her former employer in exchange for bribes and kickbacks.
The 23-count indictment alleges that Byrd-Bennett steered no-bid contracts worth more than $23 million to THE SUPES ACADEMY LLC, and SYNESI ASSOCIATES LLC, in exchange for an expectation of hundreds of thousands of dollars in bribes and kickbacks. The companies agreed to conceal the kickback money by funneling it into accounts set up in the names of two of Byrd-Bennett’s relatives, according to the indictment. A later agreement called for the funds to be paid to Byrd-Bennett in the form of a “signing bonus” after her employment with CPS ended and the companies re-hired her as a consultant, according to the indictment.
The companies, which specialize in training principals and school administrators, provided Byrd-Bennett with numerous other benefits, including meals, an airplane ticket, and seats at basketball and baseball games, the indictment states. Byrd-Bennett also expected to receive reimbursement from the companies for costs associated with a holiday party she hosted for CPS personnel, according to the charges.
The Wilmette-based SUPES and the Evanston-based Synesi are also charged in the indictment, along with their respective former owners, GARY SOLOMON and THOMAS VRANAS. Byrd-Bennett had worked as a consultant for SUPES and Synesi before moving to CPS in May 2012. She was appointed chief executive officer at CPS on Oct. 12, 2012.
The indictment charges Byrd-Bennett, 66, of Solon, Ohio, with 15 counts of mail fraud and five counts of wire fraud. Solomon, 47, of Wilmette, is charged with 15 counts of mail fraud, five counts of wire fraud, two counts of bribery of a government official, and one count of conspiracy to defraud the United States. Vranas, 34, of Glenview, is charged with 15 counts of mail fraud, four counts of wire fraud, two counts of bribery of a government official, and one count of conspiracy to defraud the United States. SUPES and Synesi are charged as corporate defendants with 15 counts of mail fraud and five counts of wire fraud apiece.
The indictment seeks forfeiture from defendants Solomon, Vranas, SUPES and Synesi of all money and property traceable to the violations, estimated at approximately $2 million.
An arraignment date in U.S. District Court in Chicago has not yet been set.
“Graft and corruption in our city’s public school system tears at the fabric of a vital resource for the children of Chicago,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “School officials and city vendors who abuse the public trust will be held accountable.”
Mr. Fardon announced the indictment along with John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Nicholas J. Schuler, Inspector General for the Chicago Public Schools.
“The American people expect honest services from their government leaders, particularly those responsible for leading our teachers and caring for our children,” said Special Agent Brown. “The FBI, in conjunction with our local, state and federal law enforcement partners, remains steadfast in its pursuit of those willing to trade the education of our children for their own prosperity.”
“The public education system is harmed when a high-level insider chooses to line their pockets with public funds," CPS Inspector General Schuler said. "My office is committed to rooting out corruption at any level through joint investigations such as this one.”
The contracts referenced in the indictment were awarded by the Chicago Board of Education, which governs CPS, as part of a CBOE training program called the Chicago Executive Leadership Academy (CELA). One such contract – worth $2.09 million for leadership training of school administrators – was awarded to SUPES within two weeks of Byrd-Bennett’s appointment as CEO, and then extended with an additional $225,000 allocation in 2013. A larger no-bid contract – worth $20.5 million – was awarded to SUPES on June 26, 2013.
The indictment alleges that Byrd-Bennett used her position as CEO to lobby CBOE officials on behalf of SUPES and Synesi, and to actively seek funds from the CPS budget to expand the CELA program for the companies’ benefit. Byrd-Bennett directed CPS employees to obtain the necessary approvals to eliminate competitive bidding from the procurement process, and to ensure that the contracts were awarded to SUPES, according to the indictment.
All the while, Byrd-Bennett falsely represented to CBOE officials that she received no financial compensation from the companies, the indictment contends. In reality, Byrd-Bennett maintained an interest in SUPES and Synesi through a secret consulting agreement, which promised to pay her a percentage of the gross proceeds from the contracts she helped to procure, according to the indictment.
The indictment cites an email between Solomon and Vranas on or about Dec. 6, 2012, which contained a prior email discussion between Byrd-Bennett, Solomon and Vranas. In that email, Solomon informed Byrd-Bennett, in part: “It is our assumption that the distribution will serve as a signing bonus upon your return to SUPES/Synesi. If you only join for the day, you will be the highest paid person on the planet for that day.”
In the late summer or early fall of 2013, according to the indictment, Solomon informed Byrd-Bennett that the CBOE Inspector General wanted to review Solomon’s and Vranas’s emails. Solomon said Vranas planned to use a computer program to delete the emails, and he told Byrd-Bennett to delete her emails as well, the indictment states.
Each count of mail and wire fraud is punishable by a maximum sentence of 20 years in prison, mandatory restitution, and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greater. Each count of bribery of a government official carries a maximum sentence of ten years in prison and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greater. The charge of conspiracy to defraud the United States is punishable by a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greater.
If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines. The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is represented by Assistant United States Attorneys Megan Cunniff Church and Lindsay Jenkins.
Indictment (175.45 KB)
Three More Individuals Charged with Conspiring to Manufacture Marijuana in Rockford Warehouse on 11th StreetRead the Press Release
ROCKFORD — A federal grand jury in Rockford returned a superseding indictment today charging seven individuals, six men and a woman, with conspiring to manufacture, possess and distribute 1,000 or more marijuana plants. The superseding indictment charges four individuals, JEREMIAH N. CLEMENT, 37, of Des Plaines, Ill., GEORGE H. BACUS, 51, of Niles, Ill., YOUSIF Y. PIRA, 62, of Chicago, Ill., and JUSTIN T. PAGLUSCH, 33, of Ingleside, Ill., who had previously been indicted on April 21, 2015, and three additional individuals, SHLIMON SHIMON, 47, of Chicago, Ill., CASEY WILLIAMS, 28, of Great Falls, Mont., and DESTINY FREEMAN, of Palmer, Alaska. The indictment alleges that between Jan. 2, 2013, and Jan. 6, 2015, the defendants conspired to illegally grow and store marijuana in a warehouse located at 1916 11th Street in Rockford. The warehouse was destroyed by a fire on Jan. 6, 2015.
Arrest warrants were issued for Shimon, Williams and Freeman and they are still at large. Clement, Bacus and Pira were arrested in April 2015. Clement is in federal custody and Bacus and Pira were released pending trial. An arrest warrant for Paglusch was issued on April 21, 2015, and he is still at large. The ATF has offered a $5,000 reward for information leading to Paglusch’s arrest. Call ATF Tip Line – 1-888-ATF-TIPS or 1-888-283-8477.
The charge carries a mandatory minimum sentence of 10 years in prison and a maximum of life in prison and a maximum fine of $10 million. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment is only a charge and is not evidence of guilt. Each defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jeffery A. Magee, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; and Derek Bergsten, Chief of the Rockford Fire Department. The Winnebago County Sheriff’s Department Narcotics Unit and Rockford Police Department Narcotics Unit assisted in the investigation.
The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.
Superseding Indictment
United States Obtains $255,000 Settlement of Disability Discrimination Lawsuit Against Continuing Care Retirement Community in Lincolnshire, IllinoisRead the Press Release
The Justice Department announced today that it has reached a settlement that resolves allegations that the owners and managers of a continuing care retirement community known as Sedgebrook violated the Fair Housing Act by instituting policies and maintaining practices that discriminated against residents with disabilities at the facility, which is located in Lincolnshire, Illinois.
The proposed settlement, which still must be approved by the court, was filed today, along with a complaint, in the United States District Court for the Northern District of Illinois. The complaint alleges that since 2011, Sedgebrook has instituted a series of policies that prohibited, and then limited, residents’ ability to dine in the communal dining rooms of the independent living wing of the facility if they required assistance eating due to a disability. Additionally, the complaint alleges that Sedgebrook maintained a policy prohibiting residents of the independent living wing from hiring live-in caregivers and refused to grant reasonable accommodations to that policy that would have allowed Sedgebrook residents with disabilities to use and enjoy their apartments.
Under the settlement, Sedgebrook will pay $210,000 into a settlement fund to compensate residents and family members who were harmed by these policies. Sedgebrook will also pay a $45,000 civil penalty to the United States. In addition, Sedgebrook will appoint a Fair Housing Act compliance officer and will implement a new dining and events policy, a new policy applicable to residents’ private employment of caregivers, and a new reasonable accommodation policy. Additionally, Life Care Services LLC, the company that manages Sedgebrook and is a named defendant in the lawsuit, will take steps to implement similar policies at the over 100 independent living and continuing care retirement communities it owns or manages across the country.
“This consent order will ensure that all residents with disabilities at Sedgebrook are treated equally and that residents are able to get the assistance they need in the dining room and in the other central areas of their lives,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “We are very pleased with the steps Life Care Services and Sedgebrook are taking to embrace new, non-discriminatory policies and help make them the standard, industry-wide.”
“Equal opportunities must be afforded to individuals who require assistance due to a disability,” said U.S. Attorney Zachary T. Fardon of the Northern District of Illinois. “The proposed settlement represents a significant step towards ensuring all members of the Sedgebrook community are treated justly.”
Individuals who are entitled to share in the settlement fund will be identified through a process established in the consent order. Persons who believe they were subjected to unlawful discrimination at Sedgebrook should contact the Justice Department toll-free at 1-800-896-7743 mailbox #995, or e-mail the Justice Department at [email protected].
The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability, and familial status. More information about the Civil Rights Division and the laws it enforces is available at www.justice.gov/crt. Individuals who believe that they may have been victims of housing discrimination can call the Justice Department at 1-800-896-7743 and leave a message at mailbox #995, e-mail the Justice Department at [email protected], or contact the Department of Housing and Urban Development at 1-800-669-9777 or through its website at http://portal.hud.gov/hudportal/HUD?src=/program_offices/fair_housing_equal_opp.
California Trucking Executive and Alleged Computer Hacker Arrested for Extorting $40,000 from Chicago-Area Software CompanyRead the Press Release
CHICAGO — The president of a southern California trucking company plotted with a Serbian man to extort $40,000 from a Chicago-area software company by hacking into the company’s computer system and threatening to disclose the data, federal authorities announced today.
STEFAN STOJANOVIC, 20, of Zemun, Serbia, hacked into the company’s servers in May and threatened to expose sensitive information, including employee usernames and passwords, unless the company paid him $40,000, according to a criminal complaint and affidavit filed in U.S. District Court in Chicago. Per instructions from Stojanovic, an employee of the company deposited the funds into a bank account in California, the complaint states.
A check for $25,000 – made payable to “cash” – was subsequently drawn on the California account and deposited into a bank account controlled by Love Freightways, a transportation logistics company in Anaheim, Calif., according to the complaint. The signatory for the Love Freightways account is its president, NEMANJA LOVRE, 32, of Seal Beach, Calif.
Lovre was arrested in California Wednesday morning. The complaint, which was unsealed following the arrest, charges him with intentionally extorting money by threat to cause damage to a protected computer. He is scheduled to appear for a bond hearing today at 2:00 p.m. PDT in U.S. District Court in Santa Ana, Calif. The U.S. Attorney’s Office for the Northern District of Illinois will seek to remove Lovre to Chicago for prosecution.
Serbian officials arrested Stojanovic early Wednesday morning local time in Serbia. He is expected to face charges in Serbia and be prosecuted in that country.
The Chicago-area software company is identified in the complaint only as “Company A.” The employee who paid the money is identified only as “Individual A.”
According to the affidavit, Stojanovic first contacted the company via email and stated that he worked for Love Freightways, which recently had become a customer of Company A. Stojanovic said in the email that he had hacked into Company A’s servers and obtained the personal identifying information of its employees. He also provided a sample of the stolen data. Individual A ultimately agreed to pay Stojanovic $40,000 in an attempt to protect the hacked data from being released, the complaint states.
Stojanovic instructed Individual A to have a cashier’s check deposited in the bank account in California, the complaint states. On May 21, the $40,000 was received in the California account. In early June, a $25,000 check was drawn on the account and made payable to “cash,” according to the complaint. It was deposited into the Love Freightways account controlled by Lovre, the affidavit states.
The arrest and charge against Lovre were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The charge against Lovre carries a maximum sentence of 10 years in prison. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is represented by Assistant U.S. Attorney Peter Salib of the U.S. Attorney’s Office for the Northern District of Illinois.
Complaint
Chicago Man Sentenced to 37 Months in Federal Prison for Trafficking Dozens of Guns from Indiana to the Streets of ChicagoRead the Press Release
CHICAGO — A Chicago man who helped purchase 43 firearms in Indiana and transport them to Illinois for sale on the streets of Chicago was sentenced today to 37 months in prison.
After purchasing the weapons at gun shows and from individual vendors in Crown Point and Indianapolis, WINSTON GERALDS helped bring the firearms into Illinois and sell them on the South Side of Chicago. Unbeknownst to Geralds, the Chicago buyer was cooperating with law enforcement officers from the Bureau of Alcohol, Tobacco, Firearms and Explosives.
Geralds, 25, pleaded guilty in May to one count of illegally transporting firearms across state lines. U.S. District Judge John Z. Lee imposed the 37-month sentence in federal court in Chicago.
“The defendant arranged for the sale of unregistered and untraceable firearms on the side streets and back alleys of Chicago’s neighborhoods,” Assistant U.S. Attorneys Bethany K. Biesenthal and Christopher V. Parente argued in the government’s sentencing memorandum. “By directly assisting in the supply of firearms to this city, the defendant very directly contributed to the cycle of gun violence.”
Geralds used middlemen to facilitate selling the guns to the cooperating source. In four separate meetings on April 22, 2012, the middlemen sold 20 weapons to the cooperating source at locations in the Greater Grand Crossing and Chinatown neighborhoods of Chicago. The following day, the middlemen sold 23 more guns to the cooperating source in a Chinatown parking lot.
Five other defendants, including one middleman, were charged in connection with this investigation:
- Levaine Tanksley, of Chicago, served as a middleman in the transactions with the cooperating source. Tanksley pleaded guilty to unlawfully transporting a firearm and was sentenced to more than 11 years in prison.
- Charles Lemle, of Chicago, acted as security for at least one of the firearm deals with the cooperating source. Lemle pleaded guilty to unlawfully transporting a firearm and was sentenced to 10 years in prison. Prior to the guilty plea, Lemle violated the terms of his pretrial release by possessing a gun on New Year’s Eve 2013. An additional indictment was filed, and Lemle pleaded guilty to being a felon in possession of a firearm. He is set to be sentenced by Judge Lee on Oct. 7, 2015.
- Michael Hall, of Chicago, acted as security for at least one of the firearm deals. Hall pleaded guilty to unlawfully transporting a firearm and is scheduled to be sentenced by U.S. District Judge Ronald A. Guzman on Nov. 18, 2015.
- David Lewisbey, of South Holland, served as the leader of the Indiana-to-Illinois gun trafficking ring. He was convicted at trial of dealing and transporting firearms. Lewisbey was sentenced to more than 16 years in prison.
- Maurice Strickland, of Chicago, lived in a residence in the Greater Grand Crossing neighborhood where the guns were sold to the cooperating source. He pleaded guilty to unlawfully transporting a firearm and was sentenced to 42 months in prison.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Jeffery Magee, Special Agent in Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Federal Bureau of Investigation, the Chicago Police Department and the Illinois State Police assisted in the investigation, which was conducted with the Chicago High Intensity Drug Trafficking Task Force (HIDTA).
The government is represented by Ms. Biesenthal and Mr. Parente.
Rockford Resident Convicted on Gun Charge as A Convicted FelonRead the Press Release
ROCKFORD — A Rockford resident was convicted yesterday after a two-day jury trial on a federal gun charge. The defendant, MARTEZ DICKSON, 29, was found guilty by a federal jury following a trial before U.S. District Judge Philip G. Reinhard for illegally possessing a firearm as a convicted felon.
According to the indictment and evidence at trial, on May 31, 2014, Rockford Police Officers were called to the McDonald’s on 11th Street after Dickson was discovered asleep in the driver’s seat of a car parked in the drive-thru lane. When officers arrived on the scene, Dickson was found in possession of a loaded 9 mm handgun. Dickson previously had been convicted of a felony. As a result, he was prohibited from possessing a firearm.
Dickson was originally charged in state court and was transferred to federal court where he was charged under tough federal firearms laws as part of the Project Safe Neighborhoods program. Project Safe Neighborhoods is an intensive, cooperative effort between local, state, and federal law enforcement to attack gun crimes. The cornerstone of the program is that every defendant committing an offense involving a gun will be reviewed for possible federal prosecution in order to obtain the harshest penalties for the worst offenders. Additional information about Project Safe Neighborhoods may be found at: www.psn.gov.
Dickson faces a maximum sentence of life imprisonment. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines. Dickson’s sentencing is set for December 28, 2015, at 9:00 a.m.
The conviction was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jeffery Magee, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; Joseph Bruscato, Winnebago County State’s Attorney; and Chet Epperson, Rockford Police Chief. The government is represented by Assistants U.S. Attorney Talia Bucci and Margaret J. Schneider.
Justice Department Files Suit Against City of Des Plaines, Illinois, for Refusing to Allow Islamic Center to OperateRead the Press Release
The Justice Department announced today that it had filed a lawsuit against the city of Des Plaines, Illinois, alleging that the city violated the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA) when it refused to allow the American Islamic Center (AIC) to operate a place of worship in a vacant office building it had contracted to purchase.
The complaint, filed in the United States District Court for the Northern District of Illinois in Chicago, alleges that the city of Des Plaines imposed a substantial burden on the AIC’s exercise of religion and otherwise discriminated against AIC based on religion when it refused to grant its request for rezoning that would allow it to operate an Islamic place of worship in a vacant office building it had contracted to purchase. The complaint alleges that the city imposed parking standards and other zoning criteria that were not supported under its zoning ordinance and that it had never imposed on non-Muslim places of worship.
“The ability to establish a place for collective worship is a fundamental protection of the First Amendment and our civil rights laws,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “The Justice Department will remain vigilant in its mission to ensure that all religious groups enjoy the right to practice their faiths freely.”
“The freedom to practice the religion of one’s choosing is a precious right in our country,” said U.S. Attorney Zachary T. Fardon of the Northern District of Illinois. “We will continue to enforce the laws that protect this important right.”
RLUIPA, enacted in 2000, contains multiple provisions prohibiting religious discrimination and protecting against unjustified burdens on religion exercise. Persons who believe that they been subjected to religious discrimination in land use or zoning may contact the Housing and Civil Enforcement Section of the Justice Department’s Civil Rights Division at 1-800-896-7743. More information about RLUIPA, including a report on the first ten years of its enforcement, may be found at http://www.justice.gov/crt/about/hce/rluipaexplain.php.
Justice Department Files Suit Against City of Des Plaines for Refusing to Allow Islamic Center to Operate in Vacant Office BuildingRead the Press Release
CHICAGO — The Justice Department today filed a lawsuit against the City of Des Plaines, alleging that the northwest suburb violated federal law when it refused to allow an Islamic group to operate a place of worship in a vacant office building.
The suit contends that Des Plaines discriminated against the American Islamic Center when it refused to grant a rezoning request to allow AIC to set up a place of worship in a vacant office building it had contracted to purchase. The city imposed parking standards and other zoning criteria that were not supported under its zoning ordinance and that had never been imposed on non-Islamic places of worship, according to the suit.
The lawsuit was filed in U.S. District Court in Chicago. It alleges that Des Plaines violated the Religious Land Use and Institutionalized Persons Act (RLUIPA).
“The ability to establish a place for collective worship is a fundamental protection of the First Amendment and our civil rights laws,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Justice Department’s Civil Rights Division. “The Justice Department will remain vigilant in its mission to ensure that all religious groups enjoy the right to practice their faiths freely.”
“The freedom to practice the religion of one’s choosing is a precious right in our country,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “We will continue to enforce the laws that protect this important right.”
AIC is a non-profit religious organization of Bosnian Muslims. Most of its 180 members came to the United States in the 1990s as refugees from war-torn Yugoslavia. In February 2013, AIC entered into a contract to purchase property at 1645 Birchwood Avenue in Des Plaines. The contract to purchase the property was contingent upon rezoning it to allow its use as an institutional place of worship.
The Des Plaines City Council denied the rezoning request in July 2013. As a result, AIC has been without a place of worship for more than two years, the suit contends.
RLUIPA, enacted in 2000, contains multiple provisions prohibiting religious discrimination and protecting against unjustified burdens on the exercise of religion. More information about RLUIPA, including a report on the first ten years of its enforcement, may be found at http://www.justice.gov/crt/about/hce/rluipaexplain.php.
The government is represented by Ms. Gupta, Steven H. Rosenbaum, Timothy J. Moran, Eric W. Treene and Ryan G. Lee of the U.S. Department of Justice’s Civil Rights Division, Housing and Civil Enforcement Section; and Assistant U.S. Attorneys Michael J. Kelly and Patrick W. Johnson of the U.S. Attorney’s Office for the Northern District of Illinois.
Complaint
Remarks by U.S. Attorney Zachary T. Fardon at City Club of ChicagoRead the Press Release
The following are remarks by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, delivered at the City Club of Chicago on September 28, 2015:
In April of last year, I had the chance to come here for the first time. I was about 6 months into my job, and I had the option of talking about whatever I wanted. I chose to talk about violent crime in Chicago. Well, it’s been 17 months. I’m honored to be back. And I again have something I want to say about violent crime in Chicago.
Our murder rate so far this year is up about 20% from last year. And 20% is a troubling number. But let me give you two points of context that lend perspective: First, last year - 2014 - was our lowest homicide rate in Chicago since 1965. That’s 5 decades. So the watermark against which we’re measuring our 20% increase this year is a historically low one.
And second, we are not alone. Major cities across the country are seeing even more significant surges in homicide rates this year: in Milwaukee, they’ve seen a 76% increase; in St Louis, a 60% increase; in Baltimore, 56%; in Washington, DC, a 44% increase. So viewed in that light, our 20% increase in Chicago is not as alarming as many.
So I could leave it at that. I could make those contextual points in response to the inevitable audience question about violence, and I could choose to focus my opening remarks instead on ISIL, or public corruption, or cybercrime, or any of the other mission-critical areas we serve at the U.S. Attorney’s Office.
I’m not going to do that. Why not?
[Refer to PowerPoint]
Every face you see here is a child shot and killed this year in the city of Chicago. Let’s focus in on a few:
- In February, 13-year-old Anthony Diaz was observing an altercation between his 17-year-old sister and another girl in Belmont Cragin - a fight, by the way, arranged through social media. As Anthony was walking away from the fight, he was shot 4 times and died.
- In May, Raheem Dameron, a 15-year-old, was standing with a friend on a Bronzeville street when shots were fired from a passing car. Raheem’s friend was hit in the ankle and survived. Raheem was hit in the back and died on the scene.
- On a June afternoon, 15-year-old Martese Gentry came upon an altercation on Millard Avenue in Lawndale. A person in the fight opened fire and bullets struck Martese in the abdomen and chest, killing him.
- Amari Brown was 7 years old and spending the Fourth of July this year at his grandmother’s house in Humboldt Park, when somebody sprayed gunshots onto the porch of grandma’s house, injuring a woman and killing Amari.
- 17-year-old Kimythe Hubbard was one of 6 siblings in his Woodlawn family, 3 boys and 3 girls. On July 9, Kimythe was walking behind the Mount Pleasant Missionary Baptist Church when he was shot in the back and died.
Those are five. Every face you see here has a story; every one a child shot and killed this year in Chicago.
No place in Chicago is completely safe but there are neighborhoods on the West and South sides that are unfairly, disproportionately impacted by the gun violence. By police district, so far this year the most violent parts of Chicago include the 4th, 6th, 7th, and 11th districts. Those districts are home to some of Chicago’s beautiful neighborhoods and public places.
So what do these neighborhoods otherwise have in common?
[Refer to PowerPoint]
Gangs and gang factions. Gangster Disciple factions, Latin King factions. Dozens of gang factions across these neighborhoods. Gang factions that are constantly recruiting new members, and recruiting them young. In our most violence-afflicted neighborhoods, we now see kids affiliating with gang factions as early as the 1st or 2d grade.
And we are seeing not only more homicides in these neighborhoods but more shootings, and particularly more indiscriminate shootings – shootings over petty things – disrespect, trash talk, just walking across gang turf lines.
Let’s look at a random weekend this year.
[Refer to PowerPoint]
This July 4th weekend, over 50 people were shot in Chicago. This slide shows just a few examples of the shootings. A bullet in the armpit, a bullet in the finger, a bullet in the butt, a bullet in the foot. Random shots, drive-by shots, sprayed shots.
And more and more often, shots fueled by social media. Twitter, Instagram, Facebook. Petty disputes and trash talk that escalate over social media with sometimes fatal consequences.
Let me give you a quick case example.
[Refer to PowerPoint]
In February 2014 there was a gang-related shooting of a 19-year-old named Shaquon Thomas, also known as Young Pappy. Young Pappy was hit but not killed in the shooting. A 17-year-old boy named Markeyo Carr was caught by a stray bullet and killed. The next day Young Pappy tweeted “I’m Still Here.” A few months later, in July of 2014, there was another attempt to shoot and kill Young Pappy. This time a stray bullet struck a 28-year-old photographer named Wil Lewis who was waiting for a bus in Rogers Park. Wrong place, wrong time.
In April 2015, Young Pappy posted a video called “Homicide” on YouTube in which he taunted his rival gang members. Then in May he posted another video, this one called “Shooters”, in which he pretended to be holding a gun and taunted “you don’t even know how to shoot.” One week later he was gunned down and killed about a block from where he recorded that video in Uptown.
A 22-year-old named Clifton Frye posted comments about Young Pappy’s shooting on his Facebook. 3 days after Young Pappy was killed, Frye was shot and killed by a 17 year old boy.
That’s 4 dead – a 17-year-old, a 19-year-old, a 22-year-old, a 28-year-old, and at least one 17-year-old trigger puller. Why? No real reason; taunting, disrespect, loathing fueled by social media.
Here’s the point: our violent crime problem in Chicago has become more unwieldy; we’re seeing more and more indiscriminant shootings, social media spats leading to spraying bullets. And often with kids on either or both sides of the gun.
Whatever the statistics, this year versus last, and regardless that our surge this year reflects a national trend, here’s my bottom line: in Chicago, our violent crime problem is a social justice problem. For too long, gun crime has been tearing at the fabric of our social contract in this city. These are our kids. These are our neighborhoods. This problem hits the heart of who we are, and who we want to be, as a city. We cannot abide our Chicago being one where it’s okay for kids to die and entire neighborhoods to cocoon in fear.
Let me be honest if obvious: these issues are tough. Our violence problems are rooted in social injustices like poverty, and joblessness, and educational and economic inequality. Kids need parents, and mentors, and education, and work opportunities. And when instead what they see, in some parts of our city, starting in the first or second grade, is gangs and gang factions as a social network and ostensible path to self-identity and success, then we have lost the war before the battle has begun.
I’m not here to offer sound-bite solutions. I am here to speak honestly and to address some of the important moving parts I see from the perspective of the U.S. Attorney’s Office.
And I’m here to ask you to think about what you can do from your perspective, and to carry forward this discussion into your community, your work place, your church, your family.
We have to keep a long view. These are generational challenges. But to borrow a phrase from Dr. King we also have to feel the fierce urgency of now. I want us to wake up every day and recommit to ending this cycle of kids dying and neighborhoods set apart.
For the remainder of my remarks, I’m going to touch upon three things that are important from my perspective: first, prosecutions; second, juvenile justice; and third, the issue of community trust.
Prosecutions
At the United States Attorney’s Office our primary job is enforcement. We prosecute criminals. And federally, with our limited resources here, we have to be especially careful to focus on the worst of the worst – to pick the right individuals, and then to use the appropriate federal tools to help take those individuals off the street.
We are doing just that. Our prosecutors at the U.S. Attorney’s Office are right now bringing big cases against violent gangs and offenders. A few quick examples:
[Refer to PowerPoint]
- United States v. Levaughn Collins et al. James Triplett controlled the heroin market in a North Lawndale neighborhood west of Douglas Park. This year, we charged Triplett, his supplier Levaughn Collins, and a number of other defendants with a variety of federal crimes. This is a photograph showing the line of people waiting to purchase heroin as part of this market before we took it down. And this shows the weapons that we recovered when we executed that takedown.
- United States v. Nate Hoskins (“Operation Double Is”). “Double Is” stands for Imperial Insane Vice Lords. We recently charged 24 Double Is with RICO and other offenses related to drug trafficking and violence on Chicago’s West Side. Among other things, the indictment alleged the gang-related murder of a man named Marcus Hurley. This photo shows Hurley’s killer running from the crime scene after he shot Hurley at defendant Nate Hoskins’ direction. The shooter himself was also later shot and killed.
- United States v. Andrew Shelton et al.; United States v. Dimitri Woods et al.; United States v. Terrance Griggs. These are all gun cases. In the Shelton case we charged 11 defendants with the theft and distribution of 111 handguns. In the Woods case, 2 ATF informants were robbed at gunpoint while purchasing guns and a bulletproof vest from the defendants. And in Griggs, the defendant was convicted this year of selling 11 guns and a bulletproof vest to an informant. This photo shows an SKS automatic weapon and bulletproof vest seized as part of that case.
Those are a few examples. We’ve got many others, and our investigations pipeline is robust. On nearly all of the cases, we continue to work closely and collaboratively with our local and state partners, including especially the Chicago Police Department and the Cook County State’s Attorney’s Office. We are a likeminded group. Our collective noses are down on the enforcement front, and we don’t plan to let up.
Now, at the tail end of any prosecution is the question of sentencing - who gets locked up, and for how long. Over the past couple years, there has been a lot of focus on the issue of over-imprisonment in our country. And that’s for good reason; the issue is real.
Since 1980, our national prison population has exploded. The total detention population in this country has more than tripled, to where as of last year, the United States had 5 percent of the world’s total population, yet 25 percent of its prisoners.
Guess what? That costs money. Taxpayer money. Lots of it. Last year, over 26% of the Justice Department’s 20-plus-billion-dollar budget went toward housing prisoners. To give you a reference point, about 7.6% went toward funding all U.S. Attorney’s offices. We now spend way more money housing prisoners than hiring prosecutors to go after the bad guys in the first instance.
In light of that stark truth, about 2 years ago, the Justice Department launched an initiative called Smart on Crime under which the Department drew a circle around lower-level non-violent drug defendants and said as to those defendants, let’s stop the historic practice of seeking the highest mandatory prison terms, and instead let’s return sentencing discretion to the courts.
Smart on Crime is basically a policy decision–in light of fiscal realities–to return sentencing discretion to the bench for certain non-violent offenders.
Here is what Smart on Crime is not. Smart on Crime is not “Soft on Violent Crime.” It is not, in any way, an abandonment of the Justice Department’s commitment to fight violent crime. In fact, our U.S. Attorney’s office here remains as aggressive as ever in using our most powerful tools to take violent offenders off the street.
As I’ve said before, prosecutions alone will not fix our problem; we can’t arrest our way out of the realities reflected in those slides.
But I want to be clear about this: we have to be aggressive and prosecute the trigger pullers; we have do everything we can to take murderers off the streets, including asking our judges to impose significant prison terms for violent offenders—locally and federally. That is being Smart on Crime, and that’s a critical piece of long-term success.
Juvenile Justice
Our federal court system, at least for now, is an adult system. It’s not suited to address juvenile violence issues. And yet, you know that a significant part of our problem in Chicago is a youth violence problem. We have child shooters; we have child victims. And not surprisingly, in predicting adult violent behavior, a key inflection point is 14, 15, 16 years of age. Kids carrying guns or committing acts of violence at that age are much more likely to later repeat those acts of violence and to end up incarcerated as adults.
Last year, my Office launched a new initiative – our “Youth Outreach Forums”. In partnership with the Chicago Police Department, Chicago Public Schools, and the Cook County Juvenile Probation Department, we designed forums to talk to at-risk kids 13-17 years old. We began hosting the forums in Englewood, and Garfield Park, and Humboldt Park, and we’ve now moved inside the Cook County Juvenile Detention Center and are conducting forums there.
Our forums are structured to educate these kids about the dangers of gang affiliation and recidivism, including especially picking up a gun. The forums are also designed to encourage education and help introduce these kids to community services and organizations that give them alternatives to the gang route -- a pathway, a network that is good instead of bad.
We’ve made the forums evidence-based. The University of Chicago Crime Lab is tracking the kids who complete the forums against placebo groups to assess results. That will take time, but if we can move the needle on even some of these kids’ fates, we will have done something important.
Just a few weeks ago, I was at one of our Youth Forums in the Cook County Juvenile Detention Center. The kids I met that day may have done something wrong to land them in detention, but it could not have been more clear to me that these kids were not hardened criminals; they were kids; they were curious; they were hopeful, they were struggling and looking for help.
I’m proud that our office is leading the way forward and holding these forums. I don’t believe these forums are a panacea. What they are is a start, a catalyst, a way for us to shine our flashlight on a place that dearly needs attention for us to succeed, as a city, long term in the fight against violence.
So that’s another piece of our puzzle at the U.S. Attorney’s Office. We have the hammer of prosecution and prison for truly violent people. And we’re working to extend the rope, the lifeline for kids who’ve wandered down the wrong path and need our help before it’s too late.
Community Trust
Another critical piece of our puzzle, and the last broad topic I’ll hit on during my limited time today -- community trust. The issues that became front-and-center after Ferguson, and then Staten Island, and Ohio, and Baltimore, and on down that list – those issues are directly relevant to our fight against violent crime here in Chicago.
Distrust between communities and cops breeds violence. Distrust causes kids to make bad decisions, it causes cops to make bad decisions, and it makes it harder to solve violent crimes when they occur. So this issue of trust between cops and communities is huge.
Last December, shortly after the “no prosecution” announcement in Ferguson, my office hosted a Community Round Table, and we had there Attorney General Eric Holder, Mayor Emanuel, Anita Alvarez, Garry McCarthy, other law enforcement leaders, community and religious leaders, and a select group of kids from some of these most violence-afflicted neighborhoods in Chicago.
To be frank, I wasn’t sure what to expect going into the roundtable. This is another thing that is not exactly in the traditional wheelhouse of a U.S. Attorney’s Office. That said, I found it valuable. It brought together some passionate leaders from across different parts of the city, and we had a candid and thought-provoking discussion about policing and trust issues.
So we did it again in March of this year. We had another roundtable. And we’re doing another one in November. As long as there’s work to be done, my Office will keep making the time and sending the invitations.
The most remarkable aspect of these roundtable discussions, to me, has been the kids. We’ve had a great group of young men and women who came to us from the most violence-afflicted neighborhoods. And we also had CPD commanders from those same neighborhoods. And the back-and-forth during the roundtables between the kids and the commanders has been enlightening. Here’s the nub of what I’ve taken away from it:
From the kids’ perspective, what they want from the police is respect. They don’t want to feel judged by the color of their skin, or by whether they’re wearing sagging pants, or because they’re hanging on the block with gang members. What they want is to be judged on their own merits, and when officers don’t know them personally and lump them in with other kids in the neighborhood who dress the same way, or look or talk the same way they do, that breeds resentment and distrust.
From the officers’ perspective, they want to succeed. They want to make the neighborhood safer and be good at their jobs. But what also became clear through the dialogue is that they too want to feel judged on their own merits. They don’t want to feel embattled or vilified just because they wear the badge; they want to feel respected by the people they are risking their lives to protect.
And from both sides, the common ground for improvement? Connectivity. Knowing each other. Making an investment of time and good will outside the context of bad things happening. Whether it’s law enforcement hosting a neighborhood barbeque, or a park clean up, or participating in a local basketball tournament -- whatever the vehicle, whatever the context, finding ways for officers to get to know the kids, and kids to get to know the officers, so that when the officers come across the kids at a crime scene or in an investigation, that prior relationship, however deep, exists. When you have that, things won’t always go perfect but they tend to go a whole lot better.
I’m grateful that we are seeing more and more of that these days from our city and community leaders and the great women and men of our Chicago Police Department.
I want to ask you to think for a minute about what it means to serve as a Chicago Police Officer. Police officers by and large are the most noble of our public servants; they are citizens who’ve decided to take a job, with modest pay, where every day they wake up not knowing if they may get hurt or even killed. And why do they do that and wear that risk every day? I will tell you my view, based on many years of first-hand experience working with cops -- most do it because they care. They want the same things nearly all of us want: to be happy, to love, to have a family, to enjoy a safe community, and live an impactful life.
Police officers are not separate and apart from our communities; they are our communities, no different than you and me. And they fundamentally deserve a presumption of our respect and trust.
For our system of justice to work, people need to believe in that system. With no trust, there is no belief.
These trust issues, of course, are not unique to Chicago. There is a national discussion happening now, and an important watermark in that national discussion, in my opinion, occurred earlier this year when FBI Director Jim Comey gave a speech at Georgetown University. If you haven’t read it, I’d encourage you to jump on line and find it. Comey talked about the relationship between law enforcement and the diverse communities law enforcement serves. And in reflecting upon that relationship, he identified what he called his “own hard truths.”
I share Jim Comey’s hard truths. Here they are:
First, we in law enforcement have to be honest and acknowledge that much of our history is ugly when it comes to issues of race. At many points in history, law enforcement has enforced a status quo that was brutally unfair to disfavored groups. That is an ugly part of our national inheritance, and we need to accept that.
Second, we all – inside and outside of law enforcement - have to be honest about the widespread existence of unconscious bias. By understanding latent bias, and talking about it, even if we can’t completely eliminate those reactive instincts, we can help our behavior in response to them.
And third, there is a cynicism that can happen to people in law enforcement over time based on experience and observation. And that cynicism can lead to mental short-cuts that result in unfair treatment. And in addressing that problem, we have to be honest and recognize that it’s not as simple as just changing who we hire and how we train law enforcement. The truth is significantly harder than that.
We have to address the tragic reality that because of our nation’s past sins, young men of color, particularly in urban neighborhoods, too often inherit a legacy of crime and prison. So yes, we have to talk about cops, but we also have to talk about how we change that legacy and create a better world and better options for those young men.
Those are Jim Comey’s “hard truths”. And mine. And really, they belong to us all. Those hard truths go to the heart of everything that I have been talking about today.
Our violent crime issues in Chicago are hard. Our history with regard to race is hard. Poverty is hard. Inequality is hard. Childhood is hard. Policing is hard. Trust is hard.
One thing about hard things in life, it seems to me, is that usually they require balance, and measured circumspection, and patience and bravery to figure them out and to fix them. Hard things don’t come with easy or quick solutions.
[Refer to PowerPoint]
This is Tyjuan Poindexter, a 14-year-old. Eight days ago Tyjuan was walking with some friends to play basketball in his North Kenwood neighborhood on the South Side. As a car drove by, someone yelled “is that them?” and started shooting. One of Tyjuan’s friends he was going to play ball with, a 15-year-old boy, was hit in the ankle and the shin. He survived. Tyjuan was hit once, in the head. He died that night, in a driveway on the corner of 44th and South Greenwood.
The things I’ve talked about today -- prosecutions, youth outreach, community trust -- these are all important ingredients, from the perspective of my office, for helping to get us to a better place. But there’s a lot work to be done. Work in our courts. Work in our government. Work in our schools. Work in our churches. Work in our homes. Work on our streets.
Each of us has to stop waiting for someone else to solve this problem and realize that the problem belongs to us all.
Let me close with a point of pride. The events of Ferguson were about a year ago. And in the wake of those events, and then again following the many other national crises over the last year, we have seen dozens and dozens of protests and rallies across Chicago. Unlike many other places, our protests have been almost entirely peaceful, thoughtful and impactful. A number of civic and religious leaders in Chicago have played - and continue to play - an important part in that process. And at the same time, our law enforcement, and particularly the Chicago Police Department, have respected the protest process, and have repeatedly allowed our communities to be heard while ensuring the public safety.
That is called democracy. And I’ve come to believe that we’re pretty damn good at it here in Chicago. And that’s a reflection of the goodness of this place -- the strength and love citizens here hold for our city and each other.
That same strength and love is the key to our long-term success in fighting violent crime. We as a community have to muster and leverage our best: our best leadership, our best philanthropy, our best resources, our best creativity, our best good will, and our best intentions.
We have to recognize that this fight is a law enforcement fight. And it is an economic fight. And it is an educational fight. And it is fundamentally a fight to overcome tragic aspects of our national inheritance.
The stakes are high. The place we love hangs in the balance. I believe we can succeed, and we will succeed because of who we are in Chicago.
Every one of us has to see the long horizon, while every day waking up with the fierce urgency of now.
Remarks by U.S. Attorney Zachary T. Fardon
Former Downtown Nightclub Bouncer Arrested on Charges of Operating Illegal Steroid Lab out of His Oak Lawn HomeRead the Press Release
CHICAGO — An Oak Lawn man was arrested today on federal charges that he imported anabolic steroids from China and distributed them to large-scale suppliers in the Chicago area.
JOSEPH T. PALERMO, 33, imported anabolic steroids, human growth hormone and pharmaceuticals from outside the United States for approximately five years, according to a federal criminal complaint and affidavit. The shipments from China arrived in the form of raw liquid or powder, which Palermo manufactured into usable steroids and distributed to large-scale dealers in the Chicago area, according to the charges.
Earlier this month, federal agents executing a search warrant at Palermo’s Oak Lawn residence discovered a makeshift steroid laboratory in the walk-in closet of a locked bedroom, the affidavit states. Inside the closet were approximately 600 empty glass vials, approximately 250 vials filled or partially-filled with suspected liquid steroids, more than 6,000 tablets labeled as anabolic steroids, glass beakers, a hot plate and a digital scale, according to the affidavit. Agents also discovered more than $9,000 in cash and several firearms, including a 9mm Glock handgun that was concealed under a pad in a sofa, the affidavit states.
Palermo, who is employed by the Argonne National Laboratory, was taken into custody this morning. He was charged with possession of a controlled substance with the intent to distribute. He appeared this afternoon before U.S. Magistrate Judge Maria Valdez and was released on a personal recognizance bond.
The arrest and charge against Palermo were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; James Gibbons, Acting Special Agent-in-Charge of the Chicago Office of the U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI); Antonio Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and the U.S. Department of Energy’s Office of Inspector General.
The arrest is part of an ongoing investigation that has resulted in the issuance of numerous federal and state search warrants, as well as the initiation of other federal criminal cases, according to the affidavit.
According to the charges, Palermo purchased the steroids online and often wired the money through Western Union. The shipments were sometimes sent to P.O. Boxes that Palermo opened in his name or the names of people whose identities he had found on driver’s licenses mistakenly left behind at a downtown Chicago nightclub where Palermo formerly worked as a bouncer, according to the charges. Palermo estimated that he grossed approximately $2,000 per month through the scheme, the affidavit states.
In June, U.S. Customs and Border Protection officers in San Francisco intercepted a Chinese parcel addressed to a residence Palermo controlled in Northlake, the affidavit states. Although the parcel was declared as “Titanium Dioxide,” it contained 359.2 grams of an oily anabolic steroid, the affidavit states. In July, CBP officers intercepted a second Chinese shipment, this time containing a powdery anabolic steroid concealed in a tinfoil baggie, according to the charges. It was addressed to a Palermo-controlled P.O. Box in Elmhurst, the affidavit states.
The charge against Palermo carries a maximum sentence of 10 years in prison and a $500,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant U.S. Attorney Kartik K. Raman.
Complaint
Chicago Man Charged with Aiding His Cousin and Heather Mack in the Murder of Sheila Von Wiese in Bali, IndonesiaRead the Press Release
CHICAGO — The cousin of a man convicted with Heather Mack of murdering Mack’s mother at an Indonesian resort was charged with conspiring with the couple to commit the killing, according to a criminal complaint unsealed in federal court in Chicago today.
ROBERT RYAN JUSTIN BIBBS, 24, of Chicago, advised his cousin, Tommy Schaefer, and Schaefer’s girlfriend, Heather Mack, about how to kill Mack’s mother, Sheila Von Wiese, according to the federal complaint and FBI affidavit. Bibbs was aware of the couple’s plot to kill Von Wiese at an Indonesian resort on Aug. 12, 2014, and he counseled Schaefer on how to get away with it, the affidavit states. Bibbs believed Schaefer would gain access to Von Wiese’s estate through Mack, and that Schaefer would share the inheritance with family members, according to the charges.
Federal authorities arrested Bibbs earlier today. The complaint charges him with conspiracy to commit the foreign murder of a U.S. national. He is scheduled to make an initial court appearance at 3:00 p.m. today before U.S. Magistrate Judge Maria Valdez.
“Our commitment to fighting violent crime extends beyond the border,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “We will use whatever tools are necessary to pursue justice both here and abroad.”
Mr. Fardon announced the arrest and complaint along with John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.
“Our pursuit of individuals involved in violent crimes carried out overseas could not occur without the assistance of our worldwide network of Legal Attaches and their relationships with our international partners,” said Mr. Brown.
An Indonesian court convicted Schaefer and Mack of charges related to Von Wiese’s murder. Schaefer was sentenced to 18 years in an Indonesian prison, while Mack was sentenced to ten years.
U.S. authorities executed multiple search warrants to acquire information stored in the cellular telephones of Schaefer and Bibbs, and in the Facebook accounts of Bibbs, Schaefer and Mack. The affidavit cites several discussions via text message between Bibbs and Schaefer both before and during Schaefer’s and Mack’s trip to Bali. During a text conversation on July 25, 2014, Schaefer told Bibbs that Von Wiese’s murder would occur in a month, and that it would result in financial gain for both of them, according to the complaint.
Soon after Schaefer checked into the St. Regis Bali resort on the morning of Aug. 12, 2014, he sent a text message to Bibbs, who was in the U.S. The message stated that an attempt to kill Von Wiese by causing an overdose of medicine had failed, according to the complaint. Schaefer’s text messages to Bibbs stated: “Wasn’t enough bro smh” [shaking my head]…“Definitely need that ” [emoji of a handgun]. Bibbs replied, “Damn I told you”; to which Schaefer responded, “I know I already thought about that”…“U was right.”
Later in the morning, Schaefer exchanged text messages with Mack, who was sharing a room with her mother on a different floor of the same hotel. According to the complaint, Mack encouraged Schaefer to come to her room and carry out the murder. This exchange prompted Schaefer to send a series of text messages to Bibbs, stating, “She wants me to right now”… “while she snoozing”… “Go in.” Bibbs replied, “Go sit on her face wit a pillow then.”
Schaefer and Mack then exchanged several text messages in which they referred to each other as the film characters Bonnie and Clyde, according to the affidavit. The affidavit states that Schaefer asked Mack, “Can u wack her in the head with a big ass pole”; to which Mack responded, “Can you”; and Schaefer replied, “Yes.”
Schaefer then traveled to the third floor where Mack and her mother were staying, according to the complaint. He is seen on the hotel’s surveillance camera standing in an elevator with what appears to be an item stuffed under his shirt. At that point, the affidavit states that Schaefer sent a series of text messages to Mack, saying, “Let me just creep up and wak her”… “Once I do it”…”She was drunk slipped and fell”; to which Mack responded, “Okay g”…“Okay just knock her out”…“Itll be so much easier.”
A short time later, Von Wiese was bludgeoned to death. The affidavit states that later in the morning, Schaefer sent a series of text messages to Bibbs, saying, “Need yo help bro”…“I’m gucci but for some reason I don’t feel bad.” Bibbs responded, “She wasn’t a good person”…“There wasn’t any positive energy released from her body.” The pair then exchanged text messages for the next ten minutes, during which time they discussed the U.S. Men’s Basketball team, according to the complaint.
Schaefer and Mack were arrested the following day in another hotel in Bali.
The charge of conspiracy to commit the foreign murder of a U.S. national carries a maximum sentence of life in prison. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The government is represented by Assistant U.S. Attorneys Bolling Haxall and Julie B. Porter; and Hope Olds and Christine Duey, trial attorneys from the U.S. Department of Justice’s Human Rights and Special Prosecutions Section.
The public is reminded that a complaint contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint
Former Owner of Edgewater Medical Center Pleads Guilty to Perjury for Willfully Impeding Efforts to Collect $188 Million in Civil JudgmentsRead the Press Release
CHICAGO — The former owner of Edgewater Medical Center on Chicago’s North Side pleaded guilty today to a federal perjury charge stemming from his efforts to thwart attempts by the U.S. and a creditor to collect more than $188 million in civil judgments.
PETER G. ROGAN admitted that he lied in a federal affidavit when he denied controlling millions of dollars in a trust account in the Bahamas, according to a written plea agreement. Rogan acknowledged that he had control over the money and its distribution to beneficiaries, and that he had established the trust to protect his assets from judgment creditors. Rogan also admitted that he willfully violated several court orders in a bank creditor lawsuit, when he made – and caused his legal counsel to make – false representations to the Court about his control over the offshore trust.
Rogan’s false statements in the affidavit and his willful disobedience of Court orders were intended to prevent the U.S. government and the bank creditor from collecting more than $188 million in combined civil judgments arising from fraud during Rogan’s tenure as CEO of the now-shuttered hospital, according to the plea agreement.
Rogan, 69, formerly of Valparaiso, Ind., pleaded guilty to one count of perjury. Under the terms of the plea agreement, Rogan faces a sentence of 12 to 21 months in prison. U.S. District Judge Harry D. Leinenweber scheduled a sentencing hearing for Oct. 14, 2015, at 9:45 a.m.
Rogan once owned Edgewater Medical Center and later sold it, but he continued to manage the facility through various companies he owned. The hospital, located at 5700 N. Ashland Ave., closed in 2001 amidst a federal criminal investigation that resulted in the healthcare fraud convictions of a Rogan-owned management company, a hospital administrator and several doctors, the latter of whom performed medically unnecessary surgical procedures and treatments on unsuspecting patients.
After a civil trial in 2006, the United States obtained a judgment of $64,259,032 against Rogan for his role in Edgewater’s submission of false claims for reimbursement under the Medicare program. The following year, Dexia Crédit Local, a bank that extended credit financing to the hospital, was awarded a $124 million default judgment in a separate civil fraud suit against Rogan and his companies.
In the course of their respective proceedings against Rogan, the United States and Dexia discovered that Rogan’s Bahamian trust account was being used to hold millions of dollars in secret offshore assets. Rogan had created the trust with the help of FREDERICK M. CUPPY, an Indiana attorney, as well as another attorney described in the indictment and plea agreement as “Florida Lawyer.” Cuppy, formerly of Valparaiso, Ind., and now of Fort Lauderdale, Fla., pleaded guilty to a perjury charge before Judge Leinenweber. He was sentenced in 2013 to one year and a day in prison.
On Dec. 21, 2006, Rogan responded to the government’s collection efforts by filing an affidavit with the Court in which he denied that he exercised control over assets in the trust account. Rogan admitted in the plea agreement that this statement was false and misleading. Rogan also admitted that he willfully and wrongfully violated several court orders in the Dexia litigation, including lying and causing his attorneys to lie to the Court about his control over his offshore trust.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is represented by Assistant United States Attorneys Andrew S. Boutros, Daniel W. Gillogly, Eric S. Pruitt and Joseph A. Stewart.
Plea Agreement
Former Employee of Social Security Administration Sentenced to 21 Months in Federal Prison for Cashing Her Deceased Mother's Social Security ChecksRead the Press Release
CHICAGO —A former employee of the Social Security Administration has been sentenced to 21 months in federal prison for cashing her deceased mother’s Social Security checks for nearly 30 years after her death.
GEORGIA THOMPSON, 68, of Chicago, received $419,644 in fraudulent benefits from 1986 to 2014. Thompson’s mother died on Aug. 3, 1986, but Thompson failed to notify the Social Security Administration, even though Thompson herself was employed by the agency.
Thompson pleaded guilty in June to one count of theft of government funds. On Monday, U.S. District Judge Andrea R. Wood imposed a sentence of 21 months in federal prison. Judge Wood also ordered Thompson to pay $419,644 in restitution.
For the first 21 years after the death of Thompson’s mother, the U.S. Treasury mailed checks to a Post Office Box in Chicago that was controlled by Thompson. Thompson converted the funds to her own use by forging her mother’s signature on the checks.
In approximately October 2007, Thompson used her deceased mother’s personal identifying information to instruct the Social Security Administration to directly deposit the funds into a bank account controlled by Thompson. The U.S. Treasury complied with the instruction and continued to pay the Social Security benefits. It also sent Thompson a one-time stimulus payment of $250 in May 2009.
The Social Security Administration discovered the fraud in 2014 after noticing that Thompson’s deceased mother had not used her Medicare benefits in several years.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Tracey Thanos, Special Agent-in-Charge of the Chicago Field Division of the Social Security Administration’s Office of the Inspector General.
The government was represented by Special Assistant U.S. Attorney Jared C. Jodrey.
Medical Biller Sentenced to 45 Months in Prison for Role in $4 Million Health Care Fraud SchemeRead the Press Release
The medical biller of a Chicago-area visiting physician practice was sentenced today to 45 months in prison for her role in a $4 million health care fraud scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Zachary T. Fardon of the Northern District of Illinois, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) in Chicago and Acting Special Agent in Charge John A. Brown of the FBI’s Chicago Division made the announcement.
Mary Talaga, 54, of Elmwood Park, Illinois, was convicted in May 2015 following a jury trial of one count of conspiracy to commit health care fraud, six counts of health care fraud and three counts of false statements relating to a health care matter. In addition to imposing the prison term, U.S. District Judge Gary Feinerman of the Northern District of Illinois ordered Talaga to pay approximately $1 million in restitution.
From 2007 to 2011, Talaga was the primary medical biller at Medicall Physicians Group Ltd., a physician practice that visited patients in their homes and prescribed home health care. The evidence at trial showed that Talaga and her co-conspirators routinely billed Medicare for overseeing patient care plans (a service known as “care plan oversight” or CPO) when, in fact, the doctors at Medicall rarely provided the service. The evidence at trial also showed that Talaga and her co-conspirators billed Medicare for other services that were never provided, including services rendered to patients who were deceased, services purportedly provided by medical professionals no longer employed by Medicall, and services purportedly provided by medical professionals who, based on billing records, worked over 24 hours per day.
According to the evidence presented at trial, during the five-year conspiracy, Medicall submitted bills to Medicare for more than $4 million in services that were never provided. Medicare paid more than $1 million on those claims.
Rick Brown, 58, of Rockford, Illinois, and Roger A. Lucero, 64, of Elmhurst, Illinois, were also convicted of offenses based on their roles in the scheme. Brown was convicted along with Talaga at trial and was previously sentenced to serve more than seven years in prison. Lucero, Medicall’s Medical Director, pleaded guilty and will be sentenced at a later date.
The case was investigated jointly by HHS-OIG and the FBI, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Northern District of Illinois. This case was prosecuted by Trial Attorney Brooke Harper and Senior Trial Attorney Jon Juenger of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
Founder of West Suburban Investment Firm Indicted for Embezzling Client Funds in $3.9 Million Fraud SchemeRead the Press Release
CHICAGO — The founding member of a Geneva investment firm used client funds to trade his own stocks and to purchase a yacht and luxury vehicle for himself, according to a federal indictment announced today.
STEPHEN C. BROWERE, the founder and principal of Geneva-based Stephens Capital Management Inc., used the promise of lucrative and guaranteed returns to persuade his clients to purchase $1.66 million in promissory notes in Douglas Capital Corp., located in Lisle. What Browere didn’t reveal was that a relative was the president of Douglas Capital, and that Browere himself had access to Douglas Capital’s lines of credit and ran its day-to-day operations, according to the eight-count indictment returned Wednesday in U.S. District Court in Chicago. Instead of investing the funds as promised to clients in the promissory notes, Browere used the money to perform trades in his own investment portfolio and to cover personal expenses, including the purchase of a yacht and luxury vehicle, the indictment states.
Browere, 56, of Geneva, also obtained the power of attorney on behalf of an elderly client who was infirm and suffering from dementia, according to the indictment. The power of attorney gave Browere access to the client’s cash and property, which were valued at $2.1 million. Browere misappropriated some of this money to purchase four vacant lots in Lisle and to make interest payments to other clients, the indictment states. After the client died, Browere maintained control over the estate and continued to misuse the estate’s assets, according to the indictment.
The indictment charges Browere with eight counts of mail fraud. It seeks forfeiture of the four vacant lots in Lisle, as well as properties in Geneva and elsewhere in Lisle.
An arraignment hearing will be scheduled by the Court at a later date.
The indictment alleges that Browere’s scheme began no later than 2007 and continued until approximately February 2014. Browere initially promised an annual interest return of 8.5% from the promissory notes in Douglas Capital, plus full repayment of the principal at the end of a year or upon expiration of the notes, the indictment states. Browere concealed the scheme by using principal payments from some investors to make interest payments to others, and by mailing phony account statements that inflated the market performance of their portfolios, according to the indictment. Many of the investors pledged their life savings or funds from their qualified retirement plans or individual retirement accounts, the indictment states.
When the elderly client’s money began to diminish, and some clients began requesting reimbursement of their principal investments in Douglas Capital, Browere announced that interest on the notes would be reduced to 2.5% and payment of principal amounts would be delayed until further notice, according to the indictment. In a letter to investors on Aug. 25, 2010, Browere blamed Douglas Capital’s financial problems on the “economic melt down” and the “current banking system and new government rules and regulations that continue to create havoc in this area of the economy,” according to the indictment.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jeffrey A. Monhart, Director for the Chicago Region of the U.S. Department of Labor - Employee Benefits Security Administration; Antonio Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and Illinois Secretary of State Jesse White, whose Securities Department participated in the investigation.
Each count of mail fraud carries a maximum sentence of 20 years in prison, a $250,000.00 fine and mandatory restitution. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is represented by Assistant United States Attorney Patrick Otlewski.
Indictment
Former Clerk at Cook County Recorder of Deeds Indicted for Accepting Cash Bribe in Exchange for Preparing Fraudulent Real Estate DeedRead the Press Release
CHICAGO — A former clerk for the Cook County Recorder of Deeds accepted a $200 cash bribe in exchange for preparing and agreeing to record a back-dated deed on an Oak Park home, according to a federal indictment announced today.
REGINA TAYLOR accepted the bribe from an individual who purportedly wanted to add a relative’s name to the deed of a residence in Oak Park, according to the indictment. Unbeknownst to Taylor, the individual was actually an undercover law enforcement agent, the indictment states.
The indictment was returned Thursday in U.S. District Court in Chicago. It charges Taylor, 59, of Chicago, with one count of mail fraud and two counts of wire fraud. Taylor will be arraigned before U.S. District Judge Sara L. Ellis on Sept. 24, 2015, at 10:00 a.m.
According to the indictment, Taylor offered and agreed to prepare a false quit claim deed that added the purported relative to the deed of the Oak Park property, which was allegedly owned by three deceased individuals. Taylor told the undercover agent that she usually charges $500 to prepare and record the fraudulent documents, but that in this instance she was willing to charge only $200, the indictment states.
Taylor directed the undercover agent not to tell anyone that the other individuals on the deed were deceased, according to the indictment. She then prepared a fraudulent quit claim deed and back-dated it by 18 months, confirming the purported relative as a grantee. After giving the fraudulent quit claim deed to the undercover agent to get stamped at the Village of Oak Park, the undercover agent gave Taylor $200 in cash, according to the indictment. Taylor further directed the undercover agent to bring back the stamped copy of the fraudulent deed so that Taylor could file it at the Office of the Cook County Recorder of Deeds, according to the indictment.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The mail fraud charge carries a maximum sentence of 20 years in prison, a $250,000.00 fine and mandatory restitution. Each count of wire fraud is punishable by a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greater. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is represented by Assistant United States Attorney Megan Church.
Indictment
Former Bull Valley Man Pleads Guilty to Concealment of Assets from A Bankruptcy TrusteeRead the Press Release
ROCKFORD — A former Bull Valley, Ill. man pleaded guilty today before U.S. District Judge Frederick J. Kapala to the concealment of assets from a Bankruptcy Trustee. JOSEPH MICHAEL PHELAN, 51, now of Augusta, Ga, the former President of Phezer Enterprises, Incorporated, located in Crystal Lake, Ill., caused to be filed a Chapter 7 Bankruptcy Petition for Phezer Enterprises on August 18, 2008. According to the written plea agreement, after Phelan closed Phezer Enterprises on August 13, 2008, Phelan had three Phezer employees start cutting up and scrapping unused and used Phezer assets, including stainless steel sheets and various metals. On August 18, 2008, the day Phezer filed for bankruptcy, Phelan sold 21,182 pounds of stainless steel to Company C. Phelan personally received $15,251.04 for the steel.
Between August 18, 2008 and August 29, 2008, two Phezer employees sold $13,399.24 worth of Phezer metals to Company B. The two employees received cash for the sales and provided the cash to Phelan.
On September 17, 2008, Phelan received a check for $47,552.59 issued to him from Company A for Phezer metals sold to Company A. On October 15, 2008, Phelan received a check for $4,415.91 issued to him from Company A for Phezer metals sold to Company A. Phelan deposited both checks in his personal bank account. Phelan did not advise the trustee or secured creditor of the sale of the assets to Companies A, B, or C, or account and deliver to the trustee or the secured creditor the proceeds from the sale of Phezer assets to Companies A, B, and C.
Phelan faces a maximum penalty of 5 years’ imprisonment, and a fine of up to $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater. The judge may also impose a sentence of probation of one to five years, and a term of supervised release of up to three years. The actual sentence will be determined by the United States District Court, guided by the Sentencing Guidelines. Sentencing for Phelan is set for January 5, 2016, at 2:30 p.m.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and John A. Brown, Acting Special Agent-In-Charge of the Chicago Office of Federal Bureau of Investigation
The government is being represented by Assistant U.S. Attorney Scott R. Paccagnini.
Plea Agreement
Naperville Engineer Sentenced to 12 1/2 Years in Prison for Cutting Communication Cables and Setting Fire to Air Traffic Control Center in AuroraRead the Press Release
CHICAGO — A Naperville engineer who severed critical communication cables at an air-traffic control center in Aurora – causing thousands of flight cancellations and delays throughout the country – was sentenced today to 12 ½ years in federal prison.
BRIAN HOWARD used wire cutters to sever multiple telecommunication cables at the Chicago Air Route Traffic Control Center in Aurora on Sept. 26, 2014, disabling the Control Center’s communication with critical data centers and in-flight aircraft. He then set fire to the equipment to inflict further damage. The result was the immediate grounding of planes flying over the Midwest, and several days of flight cancellations and delays across the country.
Howard, 37, pleaded guilty in May to one count of willfully damaging, destroying or disabling an air navigation facility, and one count of using fire to commit a federal felony. In addition to the 150-month prison term, U.S. District Judge Gary Feinerman ordered Howard to pay $4,502,361 in restitution to the Federal Aviation Administration.
“Brian Howard attacked a critical piece of infrastructure in our nation’s airspace, causing one of the most severe disruptions to air travel in recent memory,” said Assistant U.S. Attorney Andrew Polovin. “He committed a violent crime that put thousands of lives at risk, and his crime warranted the sentence he received.”
At the time of the incident, Howard worked as an engineer for Harris Corp., a telecommunications contractor for the Federal Aviation Administration. This position enabled Howard to gain access to an area of the Control Center’s basement that housed key components of the Control Center’s telecommunication infrastructure.
Howard admitted in his plea agreement that by severing the cables and setting fire to the Control Center’s telecommunication equipment, he increased the risk to aircraft traveling through the Control Center’s airspace. He further acknowledged in the plea agreement that his actions were intended to disrupt air travel and to effectively shut down the Control Center.
Paramedics arrived at the Control Center shortly after the incident and found Howard attempting to slice his own throat with a knife, according to a criminal complaint and affidavit. Howard told the paramedics to leave him alone, but the paramedics took the knife out of his hand and administered treatment, the affidavit states.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Jeffery Magee, Special Agent in Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives.
The government is represented by Mr. Polovin.
Individuals impacted by this incident who wish to receive notice about case developments are encouraged to contact the U.S. Attorney’s Office’s Victim Hotline: (866) 364-2621; or log on to the U.S. Attorney’s Office’s Victim Resources Website: http://www.justice.gov/usao-ndil/information-victims-large-cases.
Two Foreign Nationals Indicted on Federal Fraud Charges for Swindling Senior Citizens in $10 Million Telemarketing ScamRead the Press Release
CHICAGO — Two foreign nationals have been indicted on federal fraud charges for running a $10 million telemarketing scam that targeted elderly investors in the United States.
JONATHAN PAPA and METHSIRI “LAL” PALLIYAGURU sold phony investments in certificates of deposit and real estate to nearly 200 investors, primarily American senior citizens, according to an eight-count indictment returned Wednesday afternoon in U.S. District Court in Chicago. The unsuspecting investors had been identified through online research of American retirement communities, and then contacted by call centers operated by Papa and Palliyaguru in the Philippines, according to the indictment. In some of the calls and promotional materials, Papa and Palliyaguru knowingly misrepresented that Warren Buffett and Berkshire Hathaway were involved with the purported real estate investments, according to the indictment.
From August 2008 to August 2013, the investors paid approximately $10 million to a series of companies operated by Papa and Palliyaguru, the indictment states. The defendants sent fraudulent account statements to investors that falsely stated the investments were increasing in value, when, in fact, their money had never been invested into any securities, according to the indictment.
Papa, 43, and Palliyaguru, 57, were each charged with eight counts of mail fraud that victimized ten or more persons over the age of 55. Each count carries a maximum sentence of 30 years in prison.
Both defendants are considered fugitives. Papa is believed to be residing in the Philippines, while Palliyaguru, formerly of the Philippines, is now believed to be in Canada. U.S. authorities will seek the arrests and extradition of both defendants. An arraignment date has not been scheduled.
A third defendant, AUSTIN ETCHES, previously pleaded guilty to mail fraud and cooperated with the investigation against Papa and Palliyaguru. Etches, of Toronto, Canada, was sentenced last year to 84 months in prison.
According to the indictment, the defendants managed various companies, including one called Bradley Cooper Financial Services, which purported to be in the business of offering and selling investments. They set up “virtual offices” in or near major American cities, including one at 500 N. Michigan Ave. in Chicago, to make it appear that the companies were legitimately operating inside the United States, the indictment states. The defendants also used voice-over-Internet-protocol technology to make it appear that calls from the Philippines had originated from telephone numbers in the U.S., the indictment charges.
In reality, employees of the companies were not physically present in the virtual offices, but instead worked for Papa and Palliyaguru in the Manila area of the Philippines, according to the indictment. Once the duped investors deposited funds into U.S. bank accounts controlled by Papa and Palliyaguru, the money was transferred overseas to accounts in China, Hong Kong and the Philippines, the indictment states.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Antonio Gómez, Inspector in Charge of the U.S. Postal Inspection Service in Chicago.
The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant United States Attorney Rachel Cannon.
Indictment
Former Cook County Sheriff's Police Officer Pleads Guilty to Robbing Drug Dealers While on DutyRead the Press Release
CHICAGO — A former police officer in the Cook County Sheriff’s Department pleaded guilty in federal court today to robbing drug dealers of cocaine, marijuana and contraband cigarettes during home invasions and while on duty.
In a written plea agreement, ROBERT VAUGHAN admitted that he robbed eight drug dealers from 2011 to 2013, earning a total profit of $300,000. Vaughan said he conducted the robberies with two other law enforcement officers, and the trio shared in the profits, according to the plea agreement. The robberies were carried out in Chicago, Cicero, Plainfield, Lyons, Melrose Park and Forest Park.
Vaughan, 44, of Frankfort, pleaded guilty to one count of robbery. He faces a maximum sentence of 20 years in prison, plus a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greater. U.S. District Judge Samuel Der-Yeghiayan scheduled a sentencing hearing for February 3, 2016, at 10:00 a.m.
According to the plea agreement, Vaughan was assigned to the High Intensity Drug Trafficking Area (HIDTA) team, a joint federal, state, and local initiative to combat the trafficking of illegal narcotics. Vaughan admitted using his position as a police officer to orchestrate deals with drug traffickers for marijuana, cocaine and contraband cigarettes. Immediately after the transactions, Vaughan would arrest and handcuff the individuals – but then keep the narcotics for himself and release the dealers without charges. Vaughan later sold the narcotics to other dealers in exchange for cash.
Vaughan also admitted robbing individuals and homes of marijuana based on information he had learned from confidential informants. He was arrested on Nov. 3, 2014, after he and another law enforcement officer robbed 70 pounds of marijuana from an individual whom they believed was a drug courier. In reality, the individual was an undercover federal agent, according to the plea agreement.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is represented by Assistant United States Attorney Sunil Harjani.
Plea Agreement
West Suburban Doctor Pleads Guilty to Causing $4 Million Loss to Medicare by Falsely Approving Unnecessary TreatmentRead the Press Release
CHICAGO — A west suburban physician pleaded guilty in federal court today to a charge that he fraudulently certified Medicare patients as confined to the home, allowing healthcare agencies to bill Medicare for unnecessary in-home treatment.
As an employee and part-owner of Bloomingdale-based Home Care Physicians Inc., DR. ARTHUR DAVIDA received referrals from home-health agencies asking him to certify the patients as confined to the home. Although he knew that at least 20 percent of the patients were not confined to the home, Davida nonetheless provided the certification – allowing the agencies to bill Medicare for treatment that Davida knew was not medically necessary, according to a written plea agreement. Davida provided the certifications because he feared that, if he didn’t, the home-health agencies would stop sending him the referrals, the plea agreement states.
Davida, 62, of Bloomingdale, pleaded guilty to a health care fraud charge contained in a criminal information. He faces a maximum sentence of ten years in prison when U.S. District Judge John J. Tharp Jr. sentences him on December 16, 2015, at 1:30 p.m.
Per Medicare’s rules, patients need to be certified as confined to the home before Medicare will pay for the specialized nursing care available to such individuals. A physician’s certification is provided on a patient’s plan of care, which is typically prepared by the home-health agencies that perform the service. According to the plea agreement, Davida began working at Home Care Physicians in 2009, and started conducting in-home visits in 2010. From 2010 and continuing through August 2013, Davida certified numerous patients as confined to the home and needing skilled nursing services, when, in fact, they were able to leave their homes and did not need such services, according to the plea agreement.
The certifications caused the home-health agencies to submit claims to Medicare for payment of bills pertaining to medically unnecessary services, the plea agreement states. Home-health agencies were paid more than $20 million by Medicare based on orders signed by Davida. Given his admission that 20 percent of these patients were not confined to the home, Davida acknowledged in the plea agreement that he caused losses of at least $4 million to the Medicare program.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Lamont Pugh III, Special Agent-in-Charge of the Chicago Region of the U.S. Department of Health and Human Services Office of Inspector General.
The investigation was carried out by the Medicare Fraud Strike Force, which consists of agents from the Federal Bureau of Investigation and the U.S. Department of Health and Human Services, and prosecutors from the U.S. Attorney’s Office and the Justice Department’s Fraud Section. The strike force is part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative between the Department of Justice and HHS to prevent fraud and to enforce anti-fraud laws around the country.
The government is represented by Assistant United States Attorney Stephen Chahn Lee.
To report health care fraud or to learn more about the Health Care Fraud Prevention & Enforcement Action Team (HEAT), logon to: StopMedicareFraud.gov.
Plea Agreement
Administrator of Chicago-Area Home Visiting Physician Practice Sentenced to More Than Seven Years in Prison for Role in $4 Million Health Care Fraud SchemeRead the Press Release
The lead administrator of a Chicago-area visiting physician practice was sentenced to 87 months in prison for his role in a $4 million health care fraud scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Zachary T. Fardon of the Northern District of Illinois, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) in Chicago and Acting Special Agent in Charge John A. Brown of the FBI’s Chicago Division made the announcement.
Rick Brown, 58, of Rockford, Illinois, was convicted in May 2015 following a jury trial of one count of conspiracy to commit health care fraud, six counts of health care fraud and three counts of false statements relating to a health care matter. In addition to imposing the prison term, U.S. District Judge Gary Feinerman of the Northern District of Illinois ordered Brown to pay $1.3 million in restitution.
From 2007 to 2011, Brown was the President of Home Care America Inc., which managed the daily business operations of Medicall Physicians Group Ltd. (Medicall), a physician practice that visited patients in their homes and prescribed home health care. The evidence at trial showed that Brown and his co-conspirators routinely billed Medicare for overseeing patient care plans (a service known as “care plan oversight” or CPO) when in fact the doctors at Medicall rarely did so. The evidence at trial also showed that Brown and his co-conspirators billed Medicare for services that were never provided, including services rendered to patients who were deceased, services purportedly provided by medical professionals no longer employed by Medicall, and services purportedly provided by medical professionals who, based on billing records, worked over 24 hours per day.
According to the evidence presented at trial, during the five-year conspiracy, Medicall submitted bills to Medicare for more than $4 million in services that were never provided. Medicare paid more than $1 million on those claims.
Mary Talaga, 54, of Elmwood Park, Illinois, and Roger A. Lucero, 64, of Elmhurst, Illinois, also have been convicted of offenses based on their roles in the scheme. Talaga, Home Care America’s biller, was convicted along with Brown at trial and is scheduled to be sentenced Sept. 18, 2015. Lucero, Medicall’s Medical Director, pleaded guilty and will be sentenced at a later date.
The case was investigated by HHS-OIG and the FBI, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Northern District of Illinois. This case was prosecuted by Trial Attorney Brooke Harper and Senior Trial Attorney Jon Juenger of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
West Suburban Dermatologist Sentenced to 7 Years in Federal Prison for Defrauding Medicare and Private Insurers of $3.7 MillionRead the Press Release
CHICAGO — A Lombard dermatologist was sentenced today to 7 years in federal prison for submitting hundreds of false insurance claims for alleged skin cancer treatment that was unnecessary or never performed.
From 2003 to 2010, DR. ROBERT KOLBUSZ submitted thousands of false claims to Medicare and private insurers, causing them to pay out more than $3.7 million for what Kolbusz said were treatments to destroy pre-cancerous lesions. In reality, his patients did not have pre-cancerous lesions, and many of the treatments billed by Kolbusz were cosmetic procedures, such as Erbium “lunchtime laser peels,” performed by non-medical professionals from his office.
A jury convicted Kolbusz last year of three counts of wire fraud and three counts of mail fraud. In addition to the 84-month prison sentence, U.S. District Judge John Z. Lee ordered restitution in the amount of $3,764,381.69. During today’s sentencing hearing, Judge Lee said the offense was “serious for a number of reasons,” and that it “warranted a significant term of imprisonment.”
Kolbusz, 58, was ordered to begin serving his sentence on Nov. 6, 2015.
Evidence at the four-week trial revealed that Kolbusz had aestheticians in his office perform cosmetic laser treatments on benign skin conditions that normally would not have qualified for insurance coverage. In bills submitted to Medicare and private carriers, however, Kolbusz fraudulently diagnosed the conditions as being large numbers of pre-cancerous actinic keratosis lesions, and claimed the procedures were needed to destroy them – at a cost of up to $352.40 per treatment.
Eight patients and several of Kolbusz’s employees testified during the trial. One patient, who was a teenager at the time, testified that Kolbusz’s staff performed routine laser procedures that she was told were to lighten her freckles. In the patient’s medical records, however, Kolbusz stated that he had destroyed approximately 491 pre-cancerous lesions on her skin – causing Blue Cross Blue Shield of Illinois to pay $4,597 for the treatments.
Kolbusz continued his fraud scheme even after a representative of the American Academy of Dermatology told him in 2007 that he was likely committing fraud, according to evidence at trial.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Lamont Pugh III, Special Agent-in-Charge of the U.S. Department of Health and Human Services Office of Inspector General in Chicago; and James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago.
The government was represented by Assistant U.S. Attorneys Stephen Chahn Lee, Abigail Peluso, and Jessica Romero.
Three Convicted Felons from Chicago Area Indicted on Federal Firearm OffensesRead the Press Release
CHICAGO — Three Chicago-area men with prior felony convictions have been indicted on federal gun charges for illegally possessing semiautomatic weapons.
THADDEUS JIMENEZ, 36, of Des Plaines, was arrested in Chicago last week while in possession of a loaded Kimber, Sapphire-model, .380-caliber semiautomatic pistol. He was charged with one count of being a felon-in-possession of a firearm, according to the indictment. Jimenez was previously convicted of a felony.
JOSE ROMAN, 22, of Chicago, was also arrested in Chicago last week while in possession of a firearm. The indictment charges Roman with being a felon-in-possession of a firearm for possessing a loaded Mossberg International, 715T-model, .22-caliber semiautomatic rifle. Roman was previously convicted of a felony.
The indictment against Jimenez and Roman was returned Wednesday afternoon in U.S. District Court in Chicago. Jimenez and Roman will be arraigned on a date to be set by the Court.
A third defendant, DANTRELL WILLIAMS, 19, was charged in a separate indictment with being a felon-in-possession of a firearm. Williams, of Chicago, was arrested while in possession of a loaded Romarm, GP WASR-series, semiautomatic rifle, according to the indictment, which was also returned Wednesday. He was previously convicted of a felony. Williams is currently scheduled to appear for a detention hearing on Friday at 11:00 a.m. before U.S. Magistrate Judge Jeffrey T. Gilbert.
The charge of being a felon-in-possession of a firearm carries a maximum sentence of ten years in federal prison and a $250,000 fine.
“The United States Attorney’s Office is committed to aggressively using federal gun laws to fight violent crime,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “We will prosecute violent offenders with vigor, using whatever federal tools are appropriate, as part of our ongoing partnership with the city and state to protect Chicago’s neighborhoods against violence.”
Mr. Fardon announced the indictments along with Jeffrey A. Magee, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Garry F. McCarthy, Superintendent of the Chicago Police Department.
The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant U.S. Attorneys Kathryn Malizia and Michelle Petersen.
Jimenez & Roman Indictment
Williams Indictment
Owners and Nurses of Chicago Home-Healthcare Company Among Seven Indicted in Medicare Fraud and Kickback SchemeRead the Press Release
CHICAGO — The husband-and-wife owners of a Chicago home-healthcare business paid kickbacks to employees and marketers in exchange for referring elderly and disabled patients to the company for unnecessary or non-existent treatment that was funded by Medicare, according to a 23-count federal indictment unsealed today.
HCN Home Healthcare Inc., through its owners, ESTRELLITA DUQUILLA and MIGUEL DUQUILLA, paid kickbacks to employees and marketers to induce the referral of Medicare beneficiaries to HCN, according to the indictment. The indictment further contends that HCN employees altered nursing reports and patient files to falsely create the appearance that its patients qualified for in-home treatment. As a result of the kickback and fraudulent billing scheme, Medicare made overpayments to HCN in excess of $6 million, according to the indictment.
The Duquillas, of Des Plaines, were each charged with conspiracy to pay and receive healthcare kickbacks. Also charged in the conspiracy were four employees of HCN and an outside marketer who is married to an HCN nurse.
The indictment comes amid a lengthy federal investigation that included the execution of a search warrant at HCN’s office. The investigation was carried out by the Medicare Fraud Strike Force, which consists of agents from the Federal Bureau of Investigation and the U.S. Department of Health and Human Services, and prosecutors from the U.S. Attorney’s Office and the Justice Department’s Fraud Section. The strike force is part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative between the Department of Justice and HHS to prevent fraud and to enforce anti-fraud laws around the country.
In addition to the kickback conspiracy charge, Estrellita Duquilla, 58, was charged with five counts of paying kickbacks to induce referrals of Medicare beneficiaries. Miguel Duquilla, 60, was charged with two counts of paying kickbacks to induce referrals of Medicare beneficiaries. The indictment also charges the Duqillas with one count of conspiracy to commit healthcare fraud, and ten counts of Medicare fraud. The Duquillas are the owners and operators of HCN, which is located at 6288 N. Cicero Ave. in Chicago. The indictment states that the fraud scheme spanned from 2008 to 2012.
According to the indictment, many of the beneficiaries were not qualified for home-health services, and in several instances never needed or received the care. In some cases, the employees and marketers paid cash to the patients in exchange for allowing the patients’ information to be used in paperwork submitted to Medicare, the indictment states.
One of HCN’s registered nurses, ZENAIDA DIMAILIG, 78, of Bensenville, solicited and received kickbacks from the Duquillas, in exchange for steering Medicare beneficiaries to HCN, according to the indictment. Dimailig is charged with one count of conspiracy to pay and receive healthcare kickbacks, and one count of conspiracy to commit Medicare fraud.
HCN’s Quality Assurance Nurse, GRACE MENDEZ, 59, of Des Plaines, put false information in patient files, such as the dates of non-existent nursing visits, knowing this information would be submitted to Medicare as a basis for seeking payments to HCN, according to the indictment. She is charged with one count of conspiracy to pay and receive healthcare kickbacks, two counts of knowingly and willfully soliciting and receiving a Medicare kickback, one count of conspiracy to commit healthcare fraud, and one count of Medicare fraud.
HCN’s Director of Nursing, DANIEL FAJARDO, 45, of Chicago, is charged with one count of conspiracy to pay and receive healthcare kickbacks, and one count of conspiracy to commit healthcare fraud. HCN’s nursing assistant, SHERROD HARRIS, 49, of Chicago, is charged with one count of conspiracy to pay and receive healthcare kickbacks, and two counts of knowingly and willfully soliciting and receiving a healthcare kickback.
In addition to the HCN employees, an outside marketer was also charged in the scheme. ROBERTO JONSON, 58, of Bensenville, was the owner of Berzen Home Care Services Inc., a now-defunct company that was based out of his home. The charges allege that Jonson, who is Dimailig’s husband, received payments from the Duquillas in exchange for referring non-homebound Medicare beneficiaries to HCN. Jonson is charged with one count of conspiracy to pay and receive healthcare kickbacks, and one count of conspiracy to commit healthcare fraud.
The indictment was returned last week and unsealed today in advance of the arraignments of Harris and Mendez, which were scheduled for 11:00 a.m. today before U.S. Magistrate Judge Michael T. Mason. The arraignments of the other defendants will be scheduled by the Court at a later date.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Lamont Pugh III, Special Agent-in- Charge of the Chicago Regional Office of the U.S. Department of Health and Human Services Office of Inspector General.
The investigation is ongoing, the officials said.
The healthcare fraud conspiracy and the Medicare fraud counts carry a maximum penalty of ten years in prison and a $250,000 fine. The kickback and kickback conspiracy counts are punishable by up to five years in prison and a $250,000 fine. If convicted, restitution is mandatory and the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant U.S. Attorney Renai S. Rodney and Justice Department Senior Trial Attorney Jon M. Juenger.
To report health care fraud or to learn more about the Health Care Fraud Prevention & Enforcement Action Team (HEAT), logon to: StopMedicareFraud.gov.
Indictment
Father and Son Among Four People Indicted in $2.9 Million Ponzi Scheme Involving Bogus Mortgage Sales in North SuburbsRead the Press Release
CHICAGO — A father and son schemed with a Chicago attorney and a Lincolnwood businessman to sell $2.9 million in phony mortgages to more than a dozen duped investors, according to a federal indictment unsealed Tuesday.
ALBERT ROSSINI, 67, the owner of Devon Street Investments Ltd., in Lincolnwood, plotted with BABAJAN KHOSHABE, 74, and Khoshabe’s son, ANTHONY KHOSHABE, 33, to fraudulently induce at least 15 victims into purchasing purported mortgage notes on apartment buildings in foreclosure, according to the indictment. The trio promised that investors would receive rental income from occupants of the buildings, followed by title to the properties at the conclusion of the foreclosure process, the indictment states. In reality, the trio did not own the mortgage notes, and instead used the victims’ funds to make Ponzi-type payments to other investors and pocket the rest, according to the indictment.
A fourth defendant, THOMAS MURPHY, 61, was a licensed Illinois attorney who claimed to validate the sale of the mortgage notes through a phony “Guaranty Agreement” that he prepared and gave to Rossini to present to the victims, according to the indictment.
The 14-count indictment was filed Thursday and unsealed this morning. The four defendants are scheduled to appear for an arraignment at 3:00 p.m. today before U.S. Magistrate Judge Mary M. Rowland.
Rossini, of Skokie, was charged with eleven counts of wire fraud and three counts of mail fraud. Babajan Khoshabe, of Chicago, was charged with eight counts of wire fraud and three counts of mail fraud. Anthony Khoshabe, of Skokie, was charged with five counts of wire fraud and three counts of mail fraud. Murphy, of Chicago, was charged with eleven counts of wire fraud and three counts of mail fraud.
According to the charges, the scheme has been ongoing since approximately September 2011. Rossini and Babajan Khoshabe allegedly told prospective investors that Anthony Khoshabe managed the mortgaged properties through his position at Reliant Management, which shared office space with Devon Street Investments. Anthony Khoshabe would purportedly collect monthly rents from the buildings’ occupants and turn them over to investors. What the defendants failed to reveal is that Reliant Management did not manage the properties, and Anthony Khoshabe had no legal ability to collect the rents, the indictment states. The periodic payments made to investors were actually derived from funds that other investors had pledged into the scheme.
The indictment seeks forfeiture of $2,922,564 in cash, three certificates of deposit totaling $700,000, two properties in Skokie and one property on the North Side of Chicago.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Antonio Gómez, Inspector in Charge of the U.S. Postal Inspection Service in Chicago; Brad Geary, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General in Chicago; and Cook County Sheriff Thomas J. Dart.
The wire and mail fraud counts carry a maximum penalty of 20 years in prison and a $250,000 fine, plus mandatory restitution. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant U.S. Attorney Erik A. Hogstrom and Special Assistant U.S. Attorney William Novak.
Individuals or corporate entities who believe they could be a victim of the scheme charged in the indictment are encouraged to contact the FBI’s Chicago office at (312) 421-6700.
Indictment
Chicago Woman Indicted for Stealing Identities of Nursing-Home Residents and Using Their Names to Claim Refunds from Fraudulent Tax ReturnsRead the Press Release
CHICAGO —A Chicago woman sought federal tax refunds through a series of fraudulent returns she filed in the names of other people, including a number of nursing-home residents who had no knowledge that their personal information was being used, according to a federal indictment announced today.
SHANTELL WINTERS, 28, prepared and electronically filed a dozen individual federal income tax returns that were made out in the names of actual persons whose identities she had acquired, according to the 16-count indictment. The returns claimed false amounts of income, deductions and losses, including phony wages, withholdings and education credits, the indictment states.
The scam lasted from late 2009 or early 2010 until the middle of 2012, according to the indictment, which was returned Thursday in federal court in Chicago.
Winters was charged with 12 counts of wire fraud, one count of filing a false claim against the United States, and three counts of identity fraud. An arraignment has been scheduled for Aug. 27, 2015, at 1:30 p.m. before U.S. District Judge Matthew F. Kennelly.
According to the indictment, some of the individuals knowingly allowed Winters to use their information to file returns and claim refunds in their names. However, several others - including certain residents of a nursing home facility - had no knowledge that their identities had been used in the scheme, according to the indictment. In addition to the personal information of the individuals, the indictment states that Winters also used the electronic identification numbers of corporate entities to create fraudulent W-2 Forms that purportedly had been issued by those businesses.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Stephen Boyd, Special Agent in Charge of the Internal Revenue Service Criminal Investigation in Chicago.
Each wire fraud count carries a maximum sentence of 20 years in prison. The count of filing a false claim carries a maximum sentence of five years in prison, a $250,000 fine, and mandatory restitution. Each count of identity fraud is punishable by 5 years in prison. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant U.S. Attorney Daniel W. Gillogly.
Indictment
Three Family Members in A Wheeling Chiropractic Group Indicted for Phony Billing and Unnecessary Treatment in $10.8 Million Fraud SchemeRead the Press Release
CHICAGO — A Wheeling chiropractor and his brother and father have been charged in a federal indictment with scheming to bill insurance carriers for treatment that was medically unnecessary or never performed.
DR. VLADIMIR GORDIN JR., along with his father, VLADIMIR GORDIN SR., and his brother, ALEXSANDER GORDIN, operated Gordin Medical Center S.C., a chiropractic group located at 350 E. Dundee Road in Wheeling. The trio used the company to falsely bill for medical services that weren’t provided, and fabricated their patients’ medical records to cover up the scam, according to the 21-count indictment returned yesterday in federal court in Chicago.
In some cases, patients knew of the overbilling and were incentivized to participate by having their deductibles met at no cost to them or by sharing in a portion of the overbilling proceeds via checks provided to them by the Gordins, according to the indictment. Over a six-year period, the Gordins’ scheme bilked insurance carriers out of more than $10.8 million, the indictment states.
Vladimir Gordin Jr., 45, of Northbrook, and Vladimir Gordin Sr., 68, of Riverwoods, are each charged with 18 counts of health care fraud and three counts of aggravated identity theft. Alexsander Gordin, 32, of Northbrook, is charged with 14 counts of health care fraud.
Two other defendants are also charged in the indictment: ALINA LEVIT, also known as “Alona” or “Aloyna,” who worked for Gordin Medical Center as the office manager; and MICHELLE KOBRAN, who owned and operated Ultrasound Mobile Service Ltd., in Vernon Hills.
Levit, 45, of Vernon Hills, assisted the Gordins with falsifying medical records and creating phony “sign in” sheets, which falsely represented that patients were physically present and received certain health-care services on a given day, when, in fact, no such treatment was rendered, according to the indictment. Levit is charged with 14 counts of health care fraud.
Kobran, 67, of Vernon Hills, billed insurance companies for medically unnecessary ultrasounds that were performed on patients referred to her company by the Gordins, according to the indictment. Kobran then kicked back a portion of the insurance proceeds to the Gordins, the indictment states. Kobran is charged with four counts of health care fraud.
From 2006 through approximately November 2012, Gordin Medical Center and Ultrasound Mobile Service submitted bills totaling $28,775,000, causing the carriers to pay $10,847,000, the indictment states.
All five defendants will be arraigned on future dates to be set in U.S. District Court in Chicago.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor’s Office of Inspector General in Chicago; and Antonio Gómez, Inspector in Charge of the U.S. Postal Inspection Service in Chicago.
The health care fraud counts carry a maximum penalty of ten years in prison and a $250,000 fine, while the aggravated identity theft counts are punishable by a maximum sentence of 20 years’ imprisonment and a statutory mandatory minimum sentence of two years, plus a $250,000 fine. If convicted, restitution is mandatory and the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant U.S. Attorney Heather McShain.
To report health care fraud, logon to: StopMedicareFraud.gov.
Indictment
Former Owner of Mastro Auctions Sentenced to 20 Months in Federal Prison in Shill-Bidding ScamRead the Press Release
CHICAGO — The former owner and CEO of a sports memorabilia auction house was sentenced Thursday to 20 months in federal prison for using phony bids to fraudulently inflate the price of his company’s listings at auction.
As the owner and chief executive officer of Mastro Auctions, WILLIAM MASTRO and several colleagues placed fake bids to drive up the prices of various listings, a process known as “shill bidding.” Mastro also sold phony and altered memorabilia, including a Honus Wagner baseball card whose sides Mastro had cut with a paper-slicing machine, and a purported 1869 Cincinnati Red Stockings trophy ball that Mastro knew contained paint manufactured after World War II.
Mastro, 62, of Palos Park, pleaded guilty in 2013 to one count of mail fraud. In addition to the 20-month prison term, U.S. District Judge Ronald A. Guzman noted that Mastro had already satisfied the court-imposed fine of $250,000. Judge Guzman ordered Mastro to begin serving his sentence no later than Nov. 30, 2015.
“The long-running and systematic nature of the scheme undermines confidence in the auction house and sports-memorabilia industries, and calls into question the true value of merchandise,” said Assistant U.S. Attorney Steven J. Dollear. “The defendant’s ultimate goal was to beat the competition and garner more business for his auction house, and, in the end, more money for himself.”
Mastro is one of four former Mastro Auctions employees, including three executives, who have pleaded guilty in connection with the fraud scheme. Prior to closing in 2009 amidst the federal investigation, Mastro Auctions had maintained offices at different times in Oak Brook, Willowbrook and Burr Ridge.
The T206-series Wagner card is considered one of the world’s most expensive trading cards. Mastro admitted in the plea agreement that he cut the card’s side borders, and then concealed this information when he sold the card in 1987. Mastro again failed to disclose his alteration even after participating in subsequent auctions of the card in 1991 and 2000. The sale in 2000 produced a purchase price of more than $1 million, according to the plea agreement. Mastro also failed to disclose that he cut the Wagner card again in 1992, even though he was aware that the card had been submitted to become the first baseball card assigned a grade based on the condition of the card.
Mastro sold the alleged 1869 Cincinnati Red Stockings trophy ball to a collector in 2006 for $62,000, even though Mastro was aware that the trophy ball had previously been returned to the auction house by a prior buyer who had conducted laboratory testing on it. The testing had shown that the trophy ball contained paint that was manufactured after World War II, casting doubt on the ball’s authenticity. Mastro did not inform the 2006 collector of the laboratory testing.
Mastro Auctions, which also operated under the names Mastro Fine Sports and Mastro Net, specialized in sports memorabilia but also featured coins, art, and Americana collectibles. Most items were consigned to Mastro Auctions by their owners, but the house also owned some of the items it sold. Mastro had sold the company in 2004 but stayed on as its chairman and chief executive officer until its closure.
Mastro admitted in a plea agreement that the shill-bidding scheme spanned from 2002 to 2009. The scam involved submitting phony bids to artificially drive up the price of online and live auctions. Mastro admitted that he or one of several colleagues would place the shill bids as needed to inflate the price and to protect the interests of consignors and sellers – at the expense of unwitting bidders. If the shill bids ever won the item being auctioned, Mastro or his colleagues would cancel the sale.
Three other former employees of Mastro Auctions have admitted their roles in the scheme. Doug Allen, 52, of Crete, served as president and chief operating officer from 2001 to 2009. He pleaded guilty to one count of wire fraud. Mark Theotikos, 54, of Addison, worked for Mastro Auctions from 1996 to 2009 as vice president of auction operations and acquisitions. He pleaded guilty to one count of mail fraud. Allen and Theotikos are scheduled to be sentenced by Judge Guzman on Oct. 14, 2015. William Boehm, 66, of Ballwin, Missouri, worked for Mastro Auctions in information technology. He pleaded guilty to one count of making false statements to agents of the Federal Bureau of Investigation who were probing the company’s practices. Boehm was given two years of probation.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and António Gomez, Inspector in Charge of the U.S. Postal Inspection Service in Chicago.
The government is being represented by Mr. Dollear and Assistant U.S. Attorney Derek R. Owens.
Former Redflex CEO Pleads Guilty to Corruption in Awarding of City of Chicago’s Red-Light Camera ContractsRead the Press Release
CHICAGO — The former chief executive officer of Chicago’s first red-light camera vendor pleaded guilty to a federal bribery charge Thursday.
As the CEO of Redflex Traffic Systems Inc., KAREN FINLEY funneled cash and other personal financial benefits to a City of Chicago official and his friend, knowing that the payments would help persuade the city to award red-light camera contracts to Redflex, according to a plea agreement. The benefits included golf trips, hotels and meals, as well as hiring the city official’s friend as a highly compensated contractor for Redflex, according to the plea agreement.
The benefits flowed over a nine-year period, from 2003 to 2011, during which time the city expanded the Digital Automated Red Light Enforcement Program by awarding millions of dollars in contracts to Phoenix-based Redflex, the plea agreement states.
Finley, 55, of Cave Creek, Ariz., pleaded guilty to one count of conspiracy to commit bribery in a federal program. U.S. District Judge Virginia Kendall scheduled a sentencing hearing for Feb. 18, 2016. Finley faces a maximum sentence of 5 years in prison, a maximum fine of $250,000 or twice the gross gain or gross loss from the offense, and mandatory restitution.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John A. Brown, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Joseph M. Ferguson, Inspector General for the City of Chicago; and Stephen Boyd, Acting Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
According to the plea agreement, Redflex first began competing for the Chicago contract in early 2003, while Finley was then Redflex’s vice president of operations. In the course of the competition, Finley learned that John Bills, who was then an assistant Chicago transportation commissioner in charge of the city’s red-light camera program, was championing Redflex by providing pointers and inside information to Redflex, the plea agreement states.
After Redflex was awarded its first Chicago contract in approximately late May 2003, Finley hired Bills’ friend Martin O’Malley as a contractor for Redflex, in an effort to ensure that Bills would continue to provide assistance to Redflex in future contract negotiations with the city. Finley admitted in the plea agreement that she knew O’Malley was a friend of Bills and that it was important to Bills that Redflex hire him. Finley personally signed O’Malley’s contract, which included provisions for lucrative increases in O’Malley’s compensation as new red-light cameras were added, according to the plea agreement.
After Finley became CEO of Redflex in 2007, O’Malley’s commissions escalated and Bills continued to assist the company, including having at least one red-light contract “sole-sourced” to Redflex, the plea agreement states. Finley states in the plea agreement that she knew Redflex was also paying personal expenses for Bills in order to buy his influence and expand Redflex’s business with the city. These expenses included meals, golf outings, rental cars, airline tickets to Phoenix, rooms at the Biltmore Hotel and other entertainment, according to the plea agreement.
Redflex’s technology uses cameras to automatically record and ticket drivers who run red lights. Between 2004 and 2008, the city paid Redflex approximately $25 million, according to the indictment against Finley, Bills and O’Malley. Bills was a voting member of the city’s Request For Proposal evaluation committee that recommended awarding the contracts to Redflex, the indictment states. In February 2008, the city awarded the “sole-sourced” contract to Redflex, paying the company approximately $33 million, according to the indictment. The city followed up that contract with another one the same month – agreeing to pay Redflex approximately $66 million for the installation of nearly 250 additional red-light cameras.
Bills, 54, of Chicago, was indicted on nine counts of mail fraud, three counts of wire fraud, three counts of federal program bribery, three counts of filing a false federal income tax return, and one count each of extortion and conspiracy to commit federal program bribery. He has pleaded not guilty and is scheduled to proceed to trial on Jan. 11, 2016, before Judge Kendall. Bills retired from the city in 2011.
O’Malley, 74, of Worth, pleaded guilty in December to one count of conspiracy to commit bribery in a federal program. No sentencing date has been set.
The government is represented by Assistant United States Attorney Laurie J. Barsella.
Plea Agreement
Taxicab Operator Pleads Guilty to Falsifying Titles of Salvaged Cars and Re-Using Them as Taxis on Chicago StreetsRead the Press Release
CHICAGO — A Northbrook man pleaded guilty Thursday to charges he illegally obtained clean titles for salvaged and rebuilt vehicles and put them to use as taxicabs on the streets of Chicago.
As the owner of Seven Amigos Used Cars Inc., ALEXANDER IGOLNIKOV fraudulently obtained paperwork to conceal the history of the damaged cars in order to bypass City of Chicago laws that prohibit the use of salvaged and rebuilt vehicles as taxicabs, according to a written plea agreement. Federal prosecutors contend that Igolnikov, who also served as vice president of Chicago Elite Cab Corp., caused approximately 180 impaired vehicles to be used as taxicabs on Chicago streets after they were falsely given clean titles in Indiana and Illinois, according to the plea agreement.
Igolnikov’s scheme, which spanned from 2007 through April 2010, was uncovered in an investigation by federal authorities and the City of Chicago Inspector General’s Office.
Igolnikov, 68, of Northbrook, pleaded guilty to one count of conspiracy to transport, receive and possess a counterfeit security. He faces a maximum sentence of 5 years in prison and a maximum fine of $250,000 or twice the gross gain or gross loss from the offense. U.S. District Judge Edmond E. Chang scheduled a sentencing hearing for November 19, 2015, at 10:00 a.m. As part of the plea agreement, Igolnikov reserved the right to dispute the total number of vehicles involved in the scheme.
After procuring from online auction sites significantly damaged cars with salvage titles, Igolnikov and his associates fraudulently obtained “rebuilt” titles for those damaged vehicles by submitting false paperwork– including affidavits with the forged signature of an Indiana law enforcement officer – to the Indiana Bureau of Motor Vehicles, the plea agreement states. The vehicles were then transported to the Chicago business of Chicago Carriage Taxi Company, which was also used by Seven Amigos Used Cars. After obtaining the Indiana rebuilt title for a salvaged vehicle, Igolnikov and his associates placed a sticker over the “rebuilt” section of the Indiana certification and then used that title to obtain a clean Illinois title from the Illinois Secretary of State’s Office, according to the plea agreement. Igolnikov purchased the newly certified vehicles in the names of Seven Amigos Used Cars, Chicago Elite Cab and other related corporate entities, the plea agreement states.
Igolnikov and his business associates, including Chicago Elite Cab, operated the fraudulently certified vehicles as taxicabs in Chicago – in violation of the city’s medallion laws, which prohibit any vehicle that was ever issued a “salvage” or “rebuilt” title in any state from being used as a taxicab, the plea agreement states.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Joseph M. Ferguson, Inspector General for the City of Chicago.
The government is represented by Assistant United States Attorneys Margaret Schneider and Steven Dollear.
Plea Agreement
Naperville Businessman Sentenced to Seven Years in Federal Prison for Defrauding Investors of More Than $3 MillionRead the Press Release
CHICAGO — A Naperville businessman who fraudulently coaxed his clients into investing millions of dollars in bogus Turkish bonds was sentenced Thursday to seven years in federal prison.
JOHN T. BURNS III persuaded a dozen clients of USA Retirement Management Services to invest more than $3.3 million in Turkish bonds on the promise of lucrative returns. Burns fraudulently told his clients, many of whom were retirees, that he had substantial experience investing money on behalf of clients, that he and his parents were personally invested in the bonds, and that the profitable returns in those investments were providing financial security to him and his family. In reality, Burns was a mortgage salesman with no professional investment experience, and his family hadn’t invested in the Turkish bond program because it didn’t exist.
“You were a good salesman, and they bought it,” U.S. District Judge Charles P. Kocoras said in pronouncing the 84-month sentence. Judge Kocoras also ordered Burns, 56, of Naperville, to pay $3,383,113 in restitution.
A jury in November convicted Burns on two counts of wire fraud and three counts of mail fraud. His scam was part of a larger Ponzi-type scheme involving two principal members of USA Retirement Management Services – ROBERT PRIBILSKI and MAHMUT ERHAN DURMAZ, according to a federal indictment returned against the trio. Taken together, the total scheme defrauded 120 defendants out of $28 million, according to the indictment.
Pribilski, 57, of Lisle, pleaded guilty last year to one count of wire fraud and is awaiting sentencing. Durmaz, 45, formerly of Streamwood and Los Angeles, Calif., fled the United States in 2010 and is a fugitive believed to be residing in Turkey. USA Retirement Management Services, which had offices in Oak Brook Terrace and southern California, was shut down by the U.S. Securities and Exchange Commission in 2010.
“Despite having no prior experience in estate planning or handling investments for clients, the defendant held himself out as an experienced, certified estate planner” to gain access to financial records and to pitch the Turkish bond investment to clients, Assistant U.S. Attorney Ryan S. Hedges argued in the government’s sentencing memorandum. “The defendant’s motive to lie was greed; pure and simple,” argued Hedges, noting that Burns received substantial commissions from USA Retirement Management Services for each client who pledged funds into the bogus bonds.
Evidence at Burns’ week-long trial revealed that he identified potential investors by purporting to provide estate planning seminars in Illinois and California. Burns sent out mass mailings to lure people to the seminars, including a postcard that promoted his presentation and offered a free meal to attendees. Burns then used the seminars to schedule follow up interviews with prospective clients, during which he pitched what he claimed was a uniquely profitable investment opportunity in the Turkish bonds. What Burns didn’t tell the clients is that the Turkish bonds didn’t exist, and that their investments were being used to pay other investors in a Ponzi-type scheme.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The government is being represented by Mr. Hedges and Assistant U.S. Attorney Matthew F. Madden.
The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement. The task force is working to investigate and prosecute significant financial crimes, and to combat discrimination in the lending and financial markets. For more information on the task force, visit: www.StopFraud.gov.
Rockford Man Arrested for Illegaly Possessing A FirearmRead the Press Release
ROCKFORD — A Rockford man was arrested today for illegally possessing a firearm. CLIFFORD HORTON, 27, of Rockford, Ill., was charged yesterday by a federal grand jury in Rockford for possessing a .380 caliber pistol as a convicted felon. Horton is scheduled to be arraigned today at 1:00 p.m. before U.S. Magistrate Judge Iain D. Johnston in federal court in Rockford.
The charge of being a felon in possession of a firearm carries a maximum penalty of up to 10 years in federal prison and a fine of up to $250,000. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The arrest was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jeffery Magee, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; Gary Caruana, Winnebago County Sheriff; and, Chet Epperson, Rockford Police Chief.
The government is represented by Assistant U.S. Attorney Scott R. Paccagnini.
Indictment
Aurora Man Pleads Guilty to Attempting to Join Jihadist Militant Group in SyriaRead the Press Release
CHICAGO — An Aurora man pleaded guilty in federal court Tuesday to charges he attempted to travel overseas to join a jihadist militant group in Syria.
ABDELLA AHMAD TOUNISI, 21, was arrested at O’Hare International Airport in April 2013 as he attempted to board a flight bound for Istanbul, Turkey. Tounisi had spent four months conducting online research related to overseas travel and violent jihad, focusing specifically on Syria and the Jabhat al-Nusrah terrorist group.
Tounisi had made online contact with an individual he believed to be a recruiter for Jabhat al-Nusrah. Tounisi and the purported recruiter exchanged a series of emails in which Tounisi shared his plan to get to Syria by way of Turkey, as well as his willingness to fight for the jihadist cause, according to a written plea agreement.
Tounisi pleaded guilty to one count of attempting to provide material support to a foreign terrorist organization. He faces a maximum of 15 years in prison and a $250,000 fine. U.S. District Judge Samuel Der-Yeghiayan scheduled a sentencing hearing for Dec. 9, 2015, at 10:30 a.m.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The investigation was conducted by the Chicago FBI’s Joint Terrorism Task Force, which is comprised of Special Agents of the FBI, officers of the Chicago Police Department, and representatives from an additional 20 federal, state and local law enforcement agencies. The Justice Department’s National Security Division assisted in the investigation.
“Foreign terrorist groups threaten the safety of the United States,” Mr. Fardon said. “The Joint Terrorism Task Force should be commended for uncovering this plan and preventing a terrorist organization from enlisting a new member.”
Jabhat al-Nusrah is listed by the U.S. Department of State as an alias for al-Qa’ida in Iraq (AQI), a designated foreign terrorist organization. During online exchanges with the purported recruiter, Tounisi said he planned to travel from Istanbul to the Turkish city of Gaziantep, which lies near the border of Turkey and Syria, and then in to Syria, according to the plea agreement.
Tounisi, who is a U.S. citizen, requested an expedited passport and purchased an airline ticket for the flight from Chicago to Istanbul. He arrived at O’Hare on the evening of April 19, 2013, and was arrested after passing through security in the international terminal.
The government is represented by Assistant United States Attorneys William Ridgway and Barry Jonas.
Plea Agreement
Former President of Chicago Construction Company Indicted in $1.9 Million Union Fraud SchemeRead the Press Release
CHICAGO — The former president of a Southwest Side construction company paid off-the-books cash wages to workers and under-reported their hours as part of a scheme to defraud the benefit funds of the employees’ labor union, according to a federal indictment unsealed Friday.
While serving as president of My Baps Construction Corp., YASHVANT C. PATEL paid less-than-union-scale wages to dozens of employees, including illegal aliens, in order to reduce the employer contributions to the benefit funds of the Construction and General Laborers’ District Council of Chicago and Vicinity, according to the indictment. Patel falsely reported that My Baps and a sister company, Vijay Construction Corp., owed approximately $600,000 less to the benefit funds and approximately $1.3 million less to the companies’ employees than what was required by collective-bargaining agreements with the union, the indictment states.
Patel, 59, of St. Charles, was arrested Friday morning. He is scheduled to make an initial court appearance at 11:30 a.m. today before U.S. Magistrate Judge Daniel G. Martin in Chicago.
The indictment charges Patel with four counts of mail fraud and four counts of making false statements in documents required to be kept pursuant to the Employee Retirement Income Security Act (ERISA). The indictment seeks forfeiture from Patel of $1.9 million.
From January 2009 through October 2010, Patel controlled the daily operations and finances of My Baps and Vijay, both of which operated as concrete and asphalt contractors while sharing a principal place of business at 7601 S. Kedzie Ave. in Chicago, the indictment states. Patel had authority over the bank accounts of both companies, and he approved expenditures to outside entities, including monthly payments to the benefit funds, according to the indictment. The benefit funds, in turn, provided union members with pension, health and training benefits. Pursuant to collective-bargaining agreements, My Baps and Vijay were required to pay their employees certain wages, and to provide the benefit funds with monthly remittance reports identifying the hours worked and the total contribution due for each covered employee, according to the indictment.
The indictment charges that Patel under-reported approximately 33,000 hours of work performed by his employees, some of whom were not lawfully entitled to work in the United States, resulting in purportedly lower employer contributions into the union’s benefit funds. Patel paid many of these workers in under-the-table cash payments, at wages that were less than what was required by the collective-bargaining agreements, the indictment states.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor’s Office of Inspector General in Chicago, Section of Labor Racketeering & Fraud Investigations; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
Each count of mail fraud carries a maximum sentence of 20 years in prison, a $250,000.00 fine and mandatory restitution. Each count of making false statements in ERISA documents carries a maximum sentence of five years in prison, a $250,000 fine, and mandatory restitution. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is represented by Assistant United States Attorney Christopher McFadden.
Indictment
CEO of Chicago-Based Health Care Company Charged with Billing Medicare for Phony and Non-Existent Treatment of the Elderly in $1.2 Million SchemeRead the Press Release
CHICAGO — The chief executive officer of Chicago-based Home Physician Services LLC was arrested Thursday on charges that he billed Medicare for up to $1.2 million in fraudulent or non-existent services purportedly provided to the elderly and homebound.
HENRY SMILIE, 54, of Lake Zurich, was taken into custody Thursday morning. At the same time, federal agents executed search warrants at the Chicago and Schaumburg offices of Home Physician Services, where Smilie serves as chief executive officer. He was charged with Medicare fraud in a federal criminal complaint that was unsealed after his arrest.
The charges against Smilie are part of an ongoing investigation into a scheme to fraudulently increase Medicare bills for doctors of home health patients for care that did not qualify for reimbursement or simply wasn’t performed at all. According to a federal affidavit filed with the complaint, doctors employed by Smilie billed Medicare for treatment provided to elderly patients who were supposedly confined to their homes, enabling his company to claim physician fees for in-home treatment. In reality, the patients were not confined to their homes and thus were not qualified to receive the in-home services, according to the affidavit. From February 2012 to July 2014, Medicare paid Home Physician Services $1.2 million for Care Plan Oversight, the billing code for doctor supervision of treatment of a home-health patient, the affidavit states.
Smilie is scheduled to make an initial appearance at 2:00 p.m. this afternoon before U.S. Magistrate Judge Daniel G. Martin. The Medicare fraud count carries a maximum penalty of 10 years in prison, a $250,000 fine and mandatory restitution. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Lamont Pugh III, Special Agent-in-Charge of the Chicago Region of the U.S. Department of Health and Human Services Office of Inspector General.
“Home health care fraud carries a very high price tag in our communities,” Mr. Fardon said. “Our partners at the federal, state and local level are committed to rooting out and combatting fraud, waste and abuse in the home health care system.”
According to the affidavit, Home Physician Services, whose principal office is located at 6002 N. Keating Ave. in Chicago, arranges in-home visits for elderly and homebound patients, and contracts with doctors who perform house calls and oversee the patients’ treatment plans. The physicians assign their bill-collecting rights to Home Physician Services, in return for being paid directly by the company. As part of the scheme, Smilie reported to Medicare that his physicians had performed services for the patients, when, in fact, little or no such treatment was rendered, the affidavit states.
According to the affidavit, federal agents have interviewed several current and former employees of Home Physician Services, including some who claimed to have reported fraudulent billing practices to Smilie before they were contacted by federal agents. One former employee, identified in the affidavit as “Individual F,” reported to agents that Smilie instructed him on how to complete the Care Plan Oversight paperwork so that the company could bill the maximum amount to Medicare – even if the treatment was not fully performed, the affidavit states. Another former employee of Home Physician Services – identified in the affidavit as “Individual H” – said the company performed a routine swab of each patient and then billed $1,000 to Medicare for each swab, according to the affidavit.
Individual F told agents Smilie stressed to employees that the minimum duration of the purported treatment needed to add up to 30 minutes, which is the barometer for triggering maximum payment by Medicare for certain Care Plan Oversight service, according to the affidavit. “Individual F told agents that Smilie instructed him to find whatever he could in the patient file to use to document the CPO, and if he did not find enough events to total 30 minutes, to just ‘make it up,’” the affidavit states.
The affidavit goes on to state that Individual F told agents that home-health agency workers from outside entities, such as nurses and therapists, called Smilie to get signed physician orders for treatment. Individuals F and H said they saw Smilie using rubber stamps of physicians’ signatures to create those orders, according to the affidavit. Individual F said that when he notified Smilie that the rubber stamping of physicians’ signatures may be illegal, Smilie “laughed and said that Home Physician Services’ CPO activities were also illegal,” the affidavit states.
As part of the investigation, a confidential source posed undercover as a 71-year-old Medicare recipient, according to the affidavit. Although able-bodied and not confined to his home, the confidential source was certified as homebound by Home Physician Services, the affidavit states. During secretly recorded visits by physicians from Home Physician Services, the confidential source is seen walking outside of his home to tend to his dogs, and explaining to the doctors that he enjoys gardening and visiting friends outside the home, the affidavit states. The confidential source received several house calls from doctors at Home Physician Services, who continued to certify him as homebound in bills submitted to Medicare.
The Medicare Fraud Strike Force began operating in Chicago in February 2011, and consists of agents from the FBI and HHS-OIG, working together with prosecutors from the U.S. Attorney’s Office and the Justice Department’s Fraud Section. The strike force is part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Defendants have been charged locally in health care fraud cases since the strike force began operating in Chicago.
The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant U.S. Attorney Renato Mariotti.
To report health care fraud or to learn more about the Health Care Fraud Prevention & Enforcement Action Team (HEAT), logon to: StopMedicareFraud.gov.
Complaint
Former Chief Operating Officer of Sacred Heart Hospital Sentenced to 21 Months in Prison for Conspiring in Kickback SchemeRead the Press Release
CHICAGO — The former chief operating officer of Sacred Heart Hospital was sentenced Friday to 21 months in prison for arranging payoffs to doctors in exchange for referring patients to the now-shuttered facility on Chicago’s West Side.
CLARENCE NAGELVOORT, 60, of Chicago, conspired with other hospital executives to pay kickbacks and bribes to doctors to induce the referrals. The payoffs were disguised in a number of ways, including compensation for consulting work, instructional services and lease agreements, and through the provision of free professional staff.
A jury convicted Nagelvoort in March of one count of conspiracy to violate the federal healthcare anti-kickback statute, and 11 counts of paying kickbacks for patient referrals. In addition to the prison term, U.S. District Judge Matthew F. Kennelly ordered Nagelvoort jointly liable for an $8.48 million forfeiture with his co-conspirators, EDWARD NOVAK and ROY PAYAWAL.
Novak, of Park Ridge, was the hospital’s former owner and chief executive officer. He was sentenced Wednesday to 54 months in prison. Payawal, of Burr Ridge, served as the hospital’s chief financial officer. Judge Kennelly sentenced Payawal on Thursday to 12 months and one day in prison. Other convicted executives, including the chief operating officer who succeeded Nagelvoort and the Vice President of Geriatrics, are awaiting sentencing.
The hospital executives are among nine defendants convicted in a multi-year investigation of Sacred Heart, a 119-bed acute care facility at 3240 West Franklin Boulevard in Chicago. From 2001 through April 2013, the executives conspired to pay kickbacks and bribes to physicians to induce them to refer patients to the hospital for services that would be reimbursed by Medicare and Medicaid. Evidence at trial revealed that hospital administrators tried to conceal the kickbacks by creating sham professional and lease agreements with doctors. The hospital closed in 2013 in the aftermath of the criminal indictments.
The Sacred Heart investigation was carried out by the Medicare Fraud Strike Force, which is part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative between the U.S. Justice Department and the U.S. Department of Health and Human Services to prevent fraud and to enforce anti-fraud laws around the country. Dozens of defendants have been charged in numerous fraud cases since the strike force began operating in Chicago in 2011.
“It is illegal for hospitals and other health care providers to pay for patient referrals,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “We will continue to pursue these cases through our investigative partnerships with federal, state and local authorities.”
Mr. Fardon announced today’s sentence along with Lamont Pugh III, Special Agent-in-Charge of the Chicago Region of the U.S. Department of Health and Human Services Office of Inspector General; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
In addition to Nagelvoort, Novak and Payawal, the prior convictions include:
Dr. PERCY CONRAD MAY JR., of Chicago, a physician who practiced at Sacred Heart. His sentencing is scheduled before Judge Kennelly on Sept. 24, 2015, at 1:30 p.m.
Dr. SUBIR MAITRA, of Chicago, a physician who practiced at Sacred Heart. He was sentenced by Judge Kennelly in 2014 to six months in prison.
Dr. JAGDISH SHAH, of Oak Brook, a physician who practiced at Sacred Heart. His sentencing will be set at a future date to be determined by Judge Kennelly.
ANTHONY J. PUORRO, formerly of Chicago, who was Sacred Heart’s chief operating officer after Nagelvoort. His sentencing will be set at a future date to be determined by Judge Kennelly.
NOEMI VELGARA, of Chicago, who was Sacred Heart’s vice president of geriatric services. Her sentencing will be set at a future date to be determined by Judge Kennelly.
Dr. SHANIN MOSHIRI, also known as “Shawni Moshiri,” of Chicago, a physician who practiced at Sacred Heart. Dr. Moshiri is scheduled to be sentenced by Judge Kennelly on Oct. 21, 2015, at 1:30 p.m.
The government is being represented by Assistant United States Attorneys Joel Hammerman, Ryan Hedges, Kelly Greening, Diane MacArthur, and Brian Wallach.
Federal Court Permanently Bars Bolingbrook, Illinois, Woman from Preparing Federal Tax Returns for OthersRead the Press Release
WASHINGTON – A federal court has permanently barred a Bolingbrook, Illinois, woman and her tax preparation business from preparing federal tax returns for others, the Justice Department announced today.
The civil injunction order prohibits Judy Brooks and Judy Brooks & Associates Financial Services Corporation (JBA) from acting as a tax return preparer and from continuing to operate a tax preparation business. Brooks agreed to entry of the injunction by U.S. District Court Judge Samuel Der-Yeghiayan of the Northern District of Illinois.
According to the complaint, Brooks prepares returns containing false expenses from non-existent businesses and claiming head of household filing status for customers who were ineligible. In addition, the complaint alleges that Brooks fabricates tax credits, including education credits, child and dependent care credits, and residential energy credits. These actions resulted in inflated tax refunds to which her customers were not entitled.
The complaint alleges the Internal Revenue Service (IRS) examined 59 income tax returns that Brooks or JBA prepared for tax years 2010 through 2013, and of those returns, 100 percent underreported the customer’s tax due. The IRS calculated a deficiency of approximately $6,729 per examined return, according to the suit.
The injunction order requires Brooks to provide the United States with a list of her customers since 2010, and to send a copy of the court’s injunction order to all customers for whom she prepared returns.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2015. The IRS has some tips on its website for choosing a tax preparer, and has launched a free directory of federal tax preparers. In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on here. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.
Injunction
Two Brothers from Des Plaines Among 24 Defendants Charged with Trafficking Large Quantities of Cocaine and HeroinRead the Press Release
CHICAGO — Two dozen defendants are facing federal drug charges after a two-and-a-half-year investigation uncovered their roles in trafficking wholesale amounts of cocaine and heroin and distributing it in the Chicago area and Wisconsin.
Agents from the Federal Bureau of Investigation and Drug Enforcement Administration assigned to the Chicago Strike Force, seized 77 kilograms of cocaine and 138 grams of heroin during the course of the investigation, which was dubbed “Operation Alley Cat.” Authorities exposed the trafficking rings through the use of wiretapped cellular phones and extensive surveillance.
Several of the defendants were arrested Wednesday morning. Two kilograms of cocaine, a half kilogram of heroin and two guns were seized during the arrests.
The defendants were charged in two separate criminal complaints filed Monday in U.S. District Court and unsealed following the arrests. They will begin making initial court appearances this afternoon before U.S. Magistrate Judge Sidney I. Schenkier in Chicago.
According to affidavits filed in support of the arrests, the investigation revealed that two separate networks of drug traffickers were operating in the Chicago area and Wisconsin.
The Cruz Organization
The affidavits allege that LUIS ANTONIO CRUZ, 48, of Des Plaines, and JULIO SANTIAGO, 41, of Chicago, worked with narcotics brokers who had obtained wholesale quantities of cocaine and heroin from suppliers. The pair then distributed smaller quantities of the narcotics to customers on consignment, a practice known as “fronting,” and collected proceeds from the customers following the sales, according to the affidavits. Once the drugs were sold, Cruz and Santiago made arrangements to pay the suppliers and the brokers, the affidavits state.
Cruz and Santiago used various city and suburban locations to store, process and package the cocaine and heroin, according to the affidavits. These locations included two residences in Des Plaines, one of which belonged to Cruz and the other to a co-defendant, ANTONIO GRIMALDO, 56; and the Chicago homes of Santiago and a co-defendant, CRISTINO MERCED, 51, both of which were located in the Belmont Cragin neighborhood on the Northwest Side, the affidavits state.
The charges allege that Cruz’s brother, CARLOS ALBERTO CRUZ-CARRERA, 42, helped Cruz with pickups and deliveries of heroin and by counting the proceeds from the sales. Cruz-Carrera is a resident of Puerto Rico but lived with his brother in Des Plaines during his involvement in the scheme, authorities said.
The affidavits describe a wide-ranging network of alleged suppliers, brokers and sellers within the Cruz Organization.
JOEL CHAVEZ, 53, and EMMANUEL FERNANDEZ, 34, obtained wholesale quantities of cocaine from a supplier and delivered it to Cruz on credit, the charges allege. After Cruz and Santiago diluted, re-packaged and re-sold the cocaine to others, Cruz delivered proceeds from the sales to Chavez and Fernandez, both of whom reside in Chicago, according to the affidavits.
JOSE NUNEZ, 31, of Chicago, obtained cocaine and heroin from suppliers and delivered it to Cruz and Santiago on credit, the charges allege. Cruz regularly arranged for partial payments and re-payments to Nunez and to Nunez’s suppliers after Cruz and Santiago had re-sold the drugs to others, according to the affidavits.
The affidavits state that Nunez later introduced to Cruz an alleged supplier, JOSE RAMOS-GARNICA, 23, of Chicago. The introduction allowed Cruz to place orders for cocaine and heroin directly with Ramos-Garnica, the affidavits state. On April 17, 2014, authorities seized a half kilogram of cocaine from Ramos-Garnica, according to the affidavits.
DELVI COMPRES, 33, of Cicero, supplied Santiago with kilogram quantities of cocaine, which Santiago processed and re-sold to others before paying Compres, according to the affidavits.
ARCILIO LAUREANO-NAVARRO, 30, of Chicago, purchased heroin from Cruz and then re-sold it in Wisconsin, according to the affidavits. After agents seized heroin from Laureano-Navarro in 2013, Cruz began selling it directly to a Wisconsin resident, DAVID LOZADO-OTERO, 35, of Milwaukee, the affidavits state. On some occasions Cruz would deliver the heroin to Lozado-Otero in Wisconsin, and other times Lozado-Otero would pick it up from Cruz in the Chicago area, according to the affidavits.
The affidavits state that several other narcotics distributers obtained drugs from Cruz’s organization, including GILBERTO DANIELS, 31, of Chicago; ERIC COBARRUBIA, 39, of Chicago; FRANCISCO QUINTANA, 46, of Chicago; JUAN VAZQUEZ-DELGADO, 35, of Chicago; and SANTIAGO DIAZ-GALLEGOS, 41, of Chicago.
Cruz, Santiago, Cruz-Carrera, Chavez, Fernandez, Ramos-Garnica, Compres, Cobarrubia, Grimaldo, Nunez, Merced, Daniels, Laureano-Navarro and Lozado-Otero were charged with conspiring with each other to knowingly and intentionally possess with intent to distribute cocaine and heroin. If convicted, they each face a maximum of life in prison and a $10 million fine.
Quintana, Vazquez-Delgado and Diaz-Gallegos were each charged with knowingly and intentionally possessing a controlled substance with the intent to distribute. If convicted, Quintana faces a maximum of 20 years in prison and a $1 million fine; Vazquez-Delgado faces a maximum of 40 years in prison and a $1 million fine; and Diaz-Gallegos faces a maximum of life in prison and a $10 million fine.
The Acosta Network
The affidavits state that ALFREDO ACOSTA, 52, also known as “Mecha” and “Jose Esteban Resendiz Ayvar”, conspired with a Mexican supplier and others to distribute cocaine and heroin in the early part of 2014. Acosta stashed the drugs in a home he referred to as “the office,” located in the 4000 block of West Irving Park Road in Chicago, the affidavits state. Acosta used the stash house to accept deliveries of narcotics from his supplier’s couriers, and to store drugs and cash, according to the affidavits.
In January 2014, Acosta arranged a deal with a Mexican supplier to receive 10 kilograms of cocaine, the affidavits state. Unbeknownst to Acosta, his telephone conversation with the supplier’s courier, EDWIN AMAYA, had been surreptitiously recorded by federal authorities, according to the affidavits. The wiretapped conversation revealed the location of the deal, allowing agents to track Amaya, 37, of Chicago, as he attempted to deliver the cocaine, the affidavits state. On Jan. 16, 2014, agents seized ten bricks of wrapped cocaine from Amaya’s car in an alley on the Northwest Side of Chicago, the affidavits state.
The affidavits describe another cocaine deal Acosta arranged with his Mexican supplier a few months later. Acosta’s telephone conversation with the supplier had been covertly recorded by federal authorities, allowing agents to observe and record the encounter, the affidavits state. On April 29, 2014, agents observed Acosta and the Mexican supplier’s courier, JUAN DAVILA, 20, of Cicero, conduct the transaction in the parking lot of a coffee shop in the 3900 block of West Irving Park Road in Chicago, the affidavits state. Agents later followed Davila to a residence in the 2300 block of North McVicker Avenue in Chicago, where they seized 65 kilograms of cocaine from two duffel bags stashed in a cargo van in the garage, according to the affidavits.
The affidavits describe Acosta’s extensive network of suppliers, couriers and sellers. LEONARDO HERNANDEZ, 33, of Chicago, worked as a courier for Acosta’s network and delivered drugs to its customers, according to the affidavits. Those customers included CARLOS NAVA, 42, of Chicago; RAMON MENDOZA-RAMOS, 47, of Chicago; and DANIEL RIVERA, 32, of Berwyn; each of whom received wholesale amounts of drugs from Acosta on consignment, the affidavits state. Acosta collected the money after the drugs were sold, according to the affidavits.
Acosta, Nava, Mendoza-Ramos and Hernandez were charged with conspiring with each other to knowingly and intentionally possess with intent to distribute cocaine and heroin. If convicted, they each face a maximum of life in prison and a $10 million fine.
Amaya, Rivera and Davila were each charged with knowingly and intentionally possessing a controlled substance with the intent to distribute. If convicted, they each face a maximum of life in prison and a $10 million fine.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Dennis A. Wichern, Special Agent in Charge of the Chicago Field Division of the Drug Enforcement Administration.
“The charges announced today reflect the determined work of our law enforcement partners on the Chicago Strike Force,” Mr. Fardon said. “Aggressively pursuing this type of investigation is critical to preventing the stream of narcotics into our communities.”
“The Chicago FBI office has a long and successful history of working side by side with our law enforcement partners and dedicated prosecutors to address the flow of drugs through our communities, but we know our work is far from over,” said Special Agent Holley. “Today’s charges and arrests demonstrate our commitment to continue unceasingly in those collaborative efforts.”
"Our promise is the never-ending commitment of the DEA and the Chicago Strike Force to attack and bring to justice these drug-trafficking organizations that inflict damage upon our neighborhoods and families,” Special Agent Wichern said. “I applaud all the members of the Strike Force and the U.S. Attorney’s Office for their exemplary work.”
The investigation was conducted through the U.S. Organized Crime Drug Enforcement Task Force (OCDETF) Chicago Strike Force, which consists of DEA, FBI, U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), Bureau of Alcohol, Tobacco, Firearms and Explosives, Chicago Police Department, Internal Revenue Service Criminal Investigations Division, U.S. Marshals Service, and task force officers from various state and local law enforcement agencies, including the Cook County Sheriff’s Police Department and the Illinois State Police.
The government is being represented by Assistant United States Attorneys Lindsay Jenkins, Yasmin N. Best and Jordan Palmore.
The public is reminded that complaints contain only charges and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Cruz Complaint
Acosta Complaint
Chicago Sex Trafficker Sentenced to 10 Years in Federal Prison for Prostituting Underage GirlsRead the Press Release
CHICAGO — A West Side man who forcefully recruited three underage girls into the commercial sex trade and then profited from their activities was sentenced Thursday to 10 years in federal prison.
ARNELL CHASE MISHER, 31, of Chicago, enticed three girls – ages 13, 16 and 17 – to engage in sex acts for money during the summer of 2012. Misher admitted in a plea agreement that he helped to prepare an online advertisement on Backpage.com that featured explicit photographs of the 17-year-old, and that he personally accompanied the 13-year-old to the “track,” an area known for prostitution. Misher would wait near the “track” and have the girl deliver to him all of the proceeds she made from her sexual encounters with adult men.
U.S. District Judge Harry D. Leinenweber sentenced Misher to 120 months in prison, to be followed by 5 years of supervised release.
“The seriousness of the defendant’s crime cannot be overstated,” said Assistant U.S. Attorney Christopher V. Parente. “The damage that has been done to these minor children will never, and can never, be undone.”
Misher and a co-defendant, BRAUNDII YOUNG, 23, of Chicago, each pleaded guilty in December to one count of conspiracy to engage in sex trafficking by force, fraud and coercion. Judge Leinenweber scheduled Young’s sentencing hearing for Aug. 27, 2015.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The investigation was conducted by the FBI’s Child Exploitation Task Force, which targets commercial sexual exploitation of children as part of an effort known as the Innocence Lost National Initiative. In Chicago, the CETF is comprised of special agents from the FBI and investigators from the Chicago Police Department, the Cook County Sheriff’s Office, and the Cook County State’s Attorney’s Office. The Cook County Human Trafficking Task Force assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Christopher V. Parente.
Real Estate Developer Charged with Swindling Investors <br>In $2 Million Ponzi SchemeRead the Press Release
CHICAGO — A Florida businessman has been charged in federal court with running a Ponzi scheme involving the sale of bogus investments in his real estate development company. RICHARD L. THOMPSON, 60, induced investors to purchase shares in his real estate development company, Latten Management LLC, and to personally loan him money, on the false premise that his company owned more than two hundred acres of property in Tennessee, according to a criminal information filed Tuesday in U.S. District Court in Chicago. Thompson took in approximately $2.1 million in the scheme, including $125,000 from an investor in west suburban Naperville, who purchased shares in Thompson’s company with funds from a retirement account, the information states.
Thompson, of Sarasota, Fla., was charged with one count of wire fraud. He will make an initial appearance before U.S. Magistrate Judge Maria Valdez on a date to be determined by the Court.
The information alleges that Thompson founded Latten Management in Florida in 2007 to develop vacation properties in Tennessee. Thompson personally purchased 54 acres of land in an area known as Green Mountain, and 15 acres in an area known as Green Ridge Park, according to the information. There were mortgages on both properties, and Thompson kept title in his name without ever transferring them to Latten Management, the information alleges.
Thompson and other individuals later purchased 217 acres, known as Catawba Peak, in another area of Tennessee, with Thompson guaranteeing payment for the mortgage loan, the information states. Thompson and the other owners defaulted on the loan when full payment came due in approximately February 2009, leaving a debt of approximately $9.8 million, according to the information. Latten Management never owned the Catawba Peak property, the information states.
From early 2009 until April 2011, Thompson offered and sold shares in his company by telling investors that it owned the three properties in Tennessee, and that the company would develop them into vacation destinations, according to the information. Thompson gave tours of Green Mountain, Green Ridge Park, and Catawba Peak to investors, but concealed the fact that Latten Management didn’t own the properties, according to the information. The information further alleges that Thompson concealed the fact that he and the other individuals had defaulted on the Catawba Park loan. In fact, Thompson knew that Latten Management did not own any real property, and that the investors’ shares in the company were not secured by any property, the information charges. According to the information, Thompson caused losses to Latten investors of approximately $1,652,000. Thompson misappropriated a substantial portion of investors’ funds to pay for his own personal expenses, including his home mortgage, his family’s credit cards, electric bills, college tuition, life insurance, and a Lexus, the information states.
In order to conceal his scheme, Thompson had to continually obtain new funds in order to satisfy his existing obligations to repay investors through Ponzi-type payments, according to the information. He also publicly filed false documents with the Securities and Exchange Commission, and intentionally misled investors about the status of their investments and loans, the information charges.
One of the duped investors lived in Naperville, according to the information. That investor transferred $125,000 in personal retirement savings to an account in Sarasota to purchase shares in Latten, according to the information.
In addition to the investments in Latten shares, Thompson also fraudulently obtained approximately $667,000 in personal unsecured loans from individuals by falsely representing that he would use their money to cover costs associated with developing Latten projects, according to the information. These personal loans were evidenced by promissory notes signed by Thompson, who promised to repay them with interest, even though he knew he did not have the financial ability to do so, the information states.
Thompson used a portion of the personal loans to pay for his own expenses, and to repay some of the Latten investors, according to the information. This part of the scheme resulted in a loss of approximately $500,000 to the individuals, the information states.
The information was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
If convicted, Thompson faces a maximum sentence of 20 years in prison, and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greater. The Court would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.
The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The government is being represented by Assistant United States Attorney Jacqueline Stern.
Information (38.76 KB)
Accountant Charged with Embezzling Nearly $130,000 from the Illinois Medical District CommissionRead the Press Release
CHICAGO — A senior accountant at the Illinois Medical District Commission embezzled nearly $130,000 from the agency by directing funds into her personal accounts while fraudulently claiming the payments had been sent to the agency’s energy provider, according to a federal criminal complaint unsealed today.
CYNTHIA FERNANDEZ-ALONSO, 42, of Berwyn, was arrested by FBI agents this morning. She was charged with embezzlement in a criminal complaint filed yesterday in U.S. District Court and unsealed after the arrest. She is scheduled to make an initial court appearance at 11:00 a.m. today before U.S. Magistrate Judge Sheila Finnegan.
According to the complaint affidavit, Fernandez-Alonso worked as a senior accountant for the Illinois Medical District Commission, a governmental agency that receives federal funds to facilitate collaboration among the various medical, health and social service agencies operating within the Illinois Medical District on Chicago’s Near West Side. Fernandez-Alonso had the sole responsibility of authorizing payments from the Commission’s bank account to its outside vendors, including Constellation Energy, the Commission’s electrical and natural gas supplier, according to the complaint affidavit.
From February 2014 to at least April 2015, according to the affidavit, Fernandez-Alonso used her position to direct payments from the Commission’s bank account into two personal checking accounts. Fernandez-Alonso recorded the payments in the Commission’s internal records, but attributed them as having been sent to Constellation Energy, according to the affidavit.
The affidavit describes how Fernandez-Alonso arranged for 32 separate direct deposits into her personal accounts at Bank of America and Chase Bank, totaling $129,487. On the same day she received one such deposit – for $4,852 on Dec. 10, 2014 – a purchase was made with her Chase debit card at Kay Jewelers for $2,847, the affidavit states.
The charge of embezzlement from a program receiving federal funds carries a maximum penalty of 10 years in prison and a $250,000 fine, as well as mandatory restitution. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The arrest and complaint were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorney Maureen E. Merin.
The public is reminded that a complaint contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint