Northern District of Illinois
Press releases recorded for this federal judicial district.
West Dundee Man Indicted for Allegedly Receiving and Possessing Child PornographyRead the Press Release
CHICAGO ― A federal grand jury returned a two count indictment charging BRUCE H. NIGGEMANN with receiving and possessing child pornography, federal law enforcement officials announced today.
Niggemann, 65, of West Dundee, was indicted April 16 on one count of receiving and one count of possessing child pornography, all via computer. The indictment was under seal until Niggemann’s arrest this morning. Niggemann was arraigned earlier today in U.S. District Court before Judge Charles R. Norgle, Sr. He remains in federal custody until a detention hearing scheduled for April 27, 2015 at 11:30 before Magistrate Judge Sheila M. Finnegan.
The indictment also seeks forfeiture of a laptop computer and a desktop computer and hard drives that were seized at Niggemann’s residence when special agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) executed a federal search warrant at Niggemann’s residence in West Dundee.
In the circumstances in this case, receiving child pornography carries a maximum sentence of 40 years and a mandatory minimum sentence of 15 years in prison, while the count of possession carries a maximum sentence of 20 years, and a mandatory minimum sentence of ten years. Each count also carries a maximum fine of $250,000. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Gary Hartwig, Special Agent-in-Charge of HSI in Chicago. The Kane County Sheriff’s Office assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Kaarina Salovaara.
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.
Indictment
Two Men Arrested for Conspiracy to Manufacture Marijuana in Rockford Warehouse on 11Th StreetRead the Press Release
ROCKFORD — Two Chicago area men were arrested today after being indicted yesterday by a federal grand jury in Rockford and charged with conspiring to manufacture, possess and distribute 1,000 or more marijuana plants. Arrested were: GEORGE H. BACUS, 51, of Niles, Ill., and JEREMIAH N. CLEMENT, 37, of Des Plaines, Ill. Also charged in the indictment were YOUSIF Y. PIRA, 62, of Chicago, Ill., and JUSTIN T. PAGLUSCH, 33, of Ingleside, Ill. 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. According to the indictment, Bacus initially contracted to purchase the warehouse on Jan. 2, 2013. The indictment alleges that Clement later entered into a lease with an option to purchase the warehouse. The warehouse was destroyed by a fire on Jan. 6, 2015.
Bacus is scheduled to appear before U. S. Magistrate Judge Iain D. Johnson for an initial appearance today at 3:00 p.m. in federal court in Rockford. Clement is scheduled to appear in federal court in Hartford, Connecticut at 1:30 p.m today. Arrest warrants for Pira and Paglusch were issued on April 21, 2015, and both are still at large.
The charge carries a mandatory minimum sentence of 10 years in prison and a maximum of life in prison and a $10 million fine. 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. 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 indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Carl J. Vasilko, 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.
Indictment
Former North Chicago School Board Member Sentenced to 30 Months in Federal Prison for Bus Contracts Fraud SchemeRead the Press Release
CHICAGO ― A former North Chicago school board member, and the last defendant of five, was sentenced today to 30 months in federal prison for receiving at least $566,000 in kickbacks from three co-defendants who controlled several different transportation companies that received more than $21 million in student bus contracts over nearly a decade.
The defendant, ALICE SHERROD, 63, of North Chicago, pleaded guilty in September 2013 to one count each of wire fraud and filing a false federal income tax return. Sherrod admitted that between 2001 and 2010 she schemed to deprive the approximately 4,000-student North Chicago Community Unit School District 187 (NCSD) of her honest services. Sherrod, who was the school district’s Director of Transportation, participated in the fraud scheme with four co-defendants, including Gloria Harper, who was the former President of the North Chicago school board. The three co-defendants funneled kickbacks totaling at least $800,000 to Harper and Sherrod and made more than $9.6 million in profits.
“Unlike three of her co-defendants, she was in a position of public trust that affected poor children. She did not think about who she was hurting. And this went on for more than five years.” U.S. District Judge Sharon Johnson Coleman said in imposing the sentence today. Judge Coleman ordered Sherrod to serve her sentence beginning August 31, 2015. The judge also ordered Sherrod to pay approximately $7.2 million in restitution.
“The North Chicago School District has one of the highest low-income populations in the state. But rather than looking out for the interests of the district’s taxpayers and the children who depended on the schools for education, Sherrod selfishly used her position to enrich herself, and then filed false tax returns,” Assistant U.S. Attorney Matthew Getter argued in the government’s sentencing memorandum.
All five defendants pled guilty last year and have been sentenced. In addition to Sherrod’s sentence of 30 months imposed today, Gloria Harper, 64, of Berwyn and formerly of Gurnee, received a 10 year sentence, Tommie Boddie, 69, of Harvest, Ala., and formerly of Wadsworth received a one-day term of imprisonment followed by a three year term of supervised release including nine months’ home confinement; Derrick Eubanks, 50, of Lake Villa received six months’ imprisonment; and Barrett White, 55, of Matteson, received a one day term of imprisonment followed by a one year term of supervised release during which White will spend the first six months of supervised release serving weekend imprisonment.
Sherrod, who was District 187's transportation director from 2001 to July 2010, used her position, along with Harper, to enrich themselves secretly by soliciting and accepting gifts and cash from their three co-defendants in exchange for favorable official action regarding student transportation contracts. Initially, Harper and Sherrod received kickbacks of approximately $4,000 to $5,000 a month but, by 2003, they were collecting approximately $20,000 a month.
From the late 1990s until mid-2003, the NCSD contracted with various companies to provide student transportation, including T&M Transportation, which was owned in part and controlled by Boddie, and Eubanks Transportation, which was owned in part and controlled by Eubanks. In 2001, Harper and Sherrod met with Boddie and agreed they would arrange for the NCSD to increase the number of students that T&M transported in exchange for kickback payments.
In May 2003, Harper suggested to Boddie and Eubanks that they join together to form one company ― Safety First Transportation, Inc., which won the NCSD’s transportation contract in 2003, and Harper, Sherrod, Boddie, and Eubanks agreed that they would split the profits from the contract. After an IRS audit of Safety First in 2006-2007, White, who had been acting as the “bagman” for the kickbacks, began receiving funds from Safety First as both an employee and a contractor, even though he provided little service other than being the bagman.
In April 2008, the defendants agreed to set up a new company, Quality Trans, LLC, to replace Safety First and to assume its contracts with the school district. All five agreed to continue splitting profits from Quality Trans, and Boddie, Eubanks and White continued making cash payments to Harper and Sherrod.
The sentence 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 Stephen Boyd, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago. The North Chicago School District cooperated with the investigation.
Smoke Shop Owner and Employee Charged with Conspiring to Distribute Synthetic Drugs That Led to Death of Area YouthRead the Press Release
CHICAGO — A former smoke shop owner and her employee were charged by criminal complaint yesterday for allegedly conspiring to distribute substances containing controlled substance analogues at the Cigar Box, a store formerly located in the Fox Valley Mall in Aurora, federal law enforcement officials announced today.
Ruby Mohsin, 52, of Glen Ellyn, and Mohammad Khan, 63, of Glendale Heights, were charged with conspiracy in United States District Court in Chicago. Both defendants will make their initial appearance at a date yet to be determined in U.S. District Court. According to the affidavit, between March 1, 2011 and August 12, 2011, defendant Mohsin purchased hundreds of packages of synthetic drugs such as iAroma and Zero Gravity containing controlled substance analogues from an Iowa-based manufacturer and distributor.
According to the affidavit, synthetic cannabinoids (sometimes referred to as synthetic marijuana) are a large family of substances with chemical structures similar to tetrahydrocannabinol (THC) in cannabis that mimic the effects of THC by acting on the same receptors in the central nervous system. Synthetic cannabinoid chemicals are typically manufactured in China and shipped to the United States in powder form. The powder is then mixed with acetone and sprayed on plant material such as marshmallow leaf and packaged for sale. These new drugs (or analogues) are not listed in the Controlled Substance Act, but still have the same dangerous effects as the scheduled substances or compounds. Accordingly, in 1986, Congress enacted the Controlled Substances Analogue Enforcement Act to address this issue.
On June 14, 2011, Mohsin sold three one-gram packages of “iAroma Hypnotic,” “iAroma Train Wreck,” and “iAroma Mango,” containing the controlled substance analogue JWH-210 for the sale price of $20 to 19-year old Max Dobner and a friend. Shortly afterwards, Max Dobner smoked a portion of the package of iAroma Hypnotic, suffered a severe adverse reaction, and died when he crashed his car into a house in North Aurora, Illinois. The FDA laboratory determined that the packages of iAroma Hypnotic, iAroma Train Wreck, and iAroma Mango that Mohsin sold to Max Dobner contained the controlled substance analogue JWH-210. A toxicology examination revealed the presence of JWH-210 in Max Dobner’s blood at the time of his death and no other drugs or alcohol.
According to the complaint affidavit, Mohsin and Khan continued to offer synthetic drugs containing controlled substance analogues for sale at the Cigar Box after Max Dobner’s death. On August 4, 2011, Khan sold two packages of “Head Trip” and “Kush Potpourri” containing the controlled substance analogue JWH-122 for $30 to an undercover Aurora Police officer.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Dennis Wichern, Special Agent-in-Charge of the Chicago office of the Drug Enforcement Administration; John Redmond, Special Agent-in-Charge of the Food and Drug Administration’s Office of Criminal Investigations in Chicago, and Stephen Boyd, Acting Special Agent in Charge, IRS Criminal Investigation Division. The Kane County Sheriff’s Office, the Aurora Police Department, the Yorkville Police Department, and the Bettendorf, Iowa Police Department also assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Matthew M. Schneider.
The charge in the criminal complaint carries a maximum penalty of 20 years in prison and a maximum fine of $1,000,000. 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 a criminal complaint 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.
Complaint
Leader of A $23 Million Medicare Fraud Conspiracy Sentenced to 10 Years in PrisonRead the Press Release
CHICAGO—A Chicago man was sentenced today to a 120 month term of imprisonment for taking control of two Chicago-area home health companies and using them to bilk Medicare out of more than $20 million. JACINTO “JOHN” GABRIEL, JR., 48, has been in custody since February 2014, when he entered a guilty plea to charges of conspiracy to commit health care fraud and tax evasion.
In sentencing Gabriel, U.S. District Judge Charles Norgle ordered him to pay $23.3 million in restitution to the Medicare program and $1.5 million to the Internal Revenue Service.
According to sentencing papers filed by the government, Gabriel fraudulently obtained confidential background information of hundreds of Medicare beneficiaries and then used that information to sign them up as patients of Perpetual Home Health, Inc. and Legacy Home Healthcare Services, companies that he controlled. “Gabriel used elderly patients as commodities to bill Medicare. Patients were intentionally misdiagnosed with medical conditions that they did not have, and then used to bill Medicare for treatment that they did not need,” the government wrote in its sentencing memorandum.
Gabriel was charged with eleven other defendants, including doctors and company employees who were enlisted to help implement the scheme. In pleading guilty to the charges, Gabriel admitted to directing company staff to alter and create patient records and doctor’s orders to support fraudulent Medicare claims; to make payments to doctors and others for referring patients and signing doctor’s orders; and to divert proceeds of the fraud scheme to him through friends, associates, and shell companies.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, Robert J. Holley, Special Agent-in-Charge of the Federal Bureau of Investigation’s Chicago office, Lamont Pugh III, Special Agent-in-Charge of the Chicago regional office of the U.S. Department of Health and Human Service’s Office of Inspector General, and Stephen Boyd, Acting Special Agent-in-Charge of the Internal Revenue Service’s Criminal Investigation Division in Chicago. The government was represented by Assistant U.S. Attorneys Brian Havey, Raj Laud, and Sam Cole.
PACE Department Manager Arrested for Allegedly Accepting More Than $280,000 in Kickbacks and GratuitiesRead the Press Release
CHICAGO ─ The Department Manager of Applications at PACE was arrested yesterday on a federal complaint for allegedly accepting over $280,000 in kickbacks and gratuities in exchange for the influence he exerted in placing certain information technology (“IT”) contractors at PACE and in their employment at PACE.
In a criminal complaint that was filed on Monday in the U.S. District Court and unsealed yesterday, the defendant, RAJINDER SACHDEVA, 51, of Schaumburg, was charged with receiving kickbacks and gratuities in connection with his employment at PACE, which is the Suburban Bus Division of the Regional Transportation Authority and receives federal funds. He appeared yesterday before U.S. Magistrate Judge Susan E. Cox in Federal Court and is being held in federal custody pending a detention hearing at 4:00 p.m. today before Magistrate Judge Cox.
Sachdeva was arrested yesterday without incident in Schaumburg. According to the complaint affidavit, Sachdeva oversees the implementation and performance of the database management system Oracle at PACE. According to the complaint, he supervises both PACE employees in the Applications Department and IT contractors from outside vendors that provide Oracle IT support at PACE.
According to the complaint affidavit, between January 2010 and the present, Sachdeva corruptly demanded, accepted, and agreed to accept kickbacks and gratuities, intending to be influenced and rewarded with the hiring and continued employment of IT contractors who worked at PACE via outside vendors. Sachdeva allegedly concealed payments that he received, either by obtaining the money through a company that employed the IT contractors and in which Sachdeva’s wife possessed an interest, or by obtaining payments directly from the IT contractors.
According to the complaint affidavit, Sachdeva, via his wife or his own consulting company, was paid in excess of $280,000 between 2010 and 2014, in exchange for the influence he exerted in placing certain IT contractors at PACE and in their continued employment at PACE. The complaint alleges that one of the IT contractors that Sachdeva placed at PACE in exchange for kickbacks and gratuities during approximately 2013 took over the PACE IT support services previously performed by a different contractor. Sachdeva allegedly told a cooperating witness that he wanted his share for placing people at PACE and that Sachdeva stated that the current contractor was only getting the job because of the defendant’s efforts.
According to the cooperating witness, who along with Sachdeva’s wife owned the company used to conceal the kickbacks, the company hired a contractor to serve as a subcontractor for a vendor that had a contract to provide IT support to PACE. This contractor then began to work as an IT contractor at PACE. While the contractor was working at PACE, the cooperating witness and Sachdeva’s wife’s company paid Sachdeva (via his consulting company) and his wife over $64,000.
The complaint also alleges that Sachdeva directed yet another contractor, a former PACE analyst supervised by Sachdeva, to submit invoices for PACE IT work to the cooperating witness and Sachdeva’s wife’s company using the false name “Sue Peters.” According to the complaint, this contractor then sent an invoice to their company using the false name, and caused an invoice to be submitted to the PACE IT vendor who then invoiced PACE for the time. PACE paid the invoice for “Sue Peters,” and the cooperating witness and Sachdeva’s wife’s company ultimately received the money they had invoiced for “Sue Peters.” Around that time, Sachdeva also directed the cooperating witness to pay the contractor, who submitted the false invoice, approximately 80% of what their company had billed for the “Sue Peters” invoice, which the cooperating witness did.
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 Michelle T. McVicker, regional Special Agent-in-Charge of the U.S. Department of Transportation, Office of Inspector General. PACE also assisted in the investigation.
The government is being represented by Assistant United States Attorneys Matthew F. Madden and Erika Csicsila.
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
Information Technology Manager Indicted for Damaging Servers and Illegally Intercepting Email Accounts of Former EmployerRead the Press Release
CHICAGO ― A former information technology manager for a Northbrook-based company was indicted Tuesday for allegedly damaging servers maintained by the company, intercepting company emails without authorization, and disclosing the contents of intercepted emails without authorization. The defendant, George N. Turner, was charged with one count of computer fraud, two counts of illegal wire interceptions, and four counts of disclosing information obtained from illegal wire interceptions in a seven count indictment returned by a federal grand jury, announced 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.
Turner, 50, of Vernon Hills, will appear for an arraignment before Judge Feinerman on April 21, 2015, in U.S. District Court. The indictment seeks forfeiture of computers that were seized from Turner that were used in the commission of the crime.
According to the indictment, Turner worked for the victim company as the manager of information technology from approximately October 2007 through March 2014, during which time he had authorization to have access to the victim company’s computer network and servers, including the email server. Turner no longer worked for the company after March 2014, and was no longer authorized to access the victim company’s computer network or servers.
Beginning in April 2014, Turner allegedly intercepted the company email accounts of two of the victim company’s executives. Additionally, on May 12, 2014, Turner allegedly accessed and caused significant damage to some of the victim company’s servers. In July 2014, Turner allegedly sent multiple emails containing information he obtained from the victim company’s executives’ email accounts. In four separate emails, Turner allegedly sent to other persons the victim company’s payroll information, executive bonus information, and pricing information.
“This defendant used his skills to cause significant damage to his former employer, and illegally to obtain private information. Cybercrime hurts companies and their employees, and we will prosecute those responsible,” stated Zachary T. Fardon, United States Attorney, after the charges were announced.
The computer fraud count carries a maximum penalty of 10 years in prison and a $250,000 fine. Each of the illegal wire interception counts carries a maximum penalty of 5 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.
The government is being represented by Assistant United States Attorney Shoba Pillay.
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.
Indictment
Cary, Illinois Man Charged in Federal Court with Robbery of Fifth Third Bank in Woodstock, IllinoisRead the Press Release
ROCKFORD — A Cary, Ill. man was charged today in federal court with bank robbery. MICHAEL FETERICK, 45, of Cary, Ill., also known as “Michael Retterly,” was charged with the robbery of Fifth Third Bank, 1745 South Eastwood Drive, Woodstock, Ill., on April 15, 2015. According to the complaint, at about 10:50 a.m., Feterick entered the bank and presented a note written in black sharpie stating "Money, no dye pack" to a bank teller. The teller provided the subject with money from the teller’s drawer and left the bank. Feterick was arrested late yesterday by the FBI, and law enforcement officers of the Crystal Lake and Woodstock Police Departments, at a hotel in Algonquin, Ill. Feterick is presently in federal custody pending his initial appearance before U.S. Magistrate Judge Iain D. Johnston at 3:30 p.m. today.
Bank robbery carries a maximum potential penalty of up to 20 years in prison, up to 3 years of supervised release following imprisonment, a fine of up to $250,000, and full 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 a complaint 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 charge 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 Federal Bureau of Investigation; Robert W. Lowen, Chief of the Woodstock, Illinois Police Department; and James R. Black, Chief of the Crystal Lake, Illinois Police Department. The U.S. Marshals Service, and law enforcement officers of the McHenry County Sheriff’s Department and the Algonquin, Illinois Police Department assisted in the investigation.
The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.
Complaint
Man Sentenced to 30 Months in Federal Prison for Possessing over 50,000 Images of Child PornographyRead the Press Release
CHICAGO — A man formerly of Lafayette, Indiana and now in federal custody was sentenced yesterday to 30 months in federal prison for amassing a large collection of child pornography over multiple years. The defendant, THOMAS MANNING, 54, pleaded guilty last July to possessing child pornography, admitting that he had collected more than 50,000 illicit images and videos.
Manning was also ordered to pay a total of $9,750 in restitution to five identified victims who submitted restitution requests to the Court, as well as a $12,500 fine. He was placed on supervised release for five years following his prison term by U.S. District Chief Judge Sharon Johnson Coleman. There was also an order of forfeiture granted, and the defendant will forfeit certain computer equipment used in commission of the crime. Manning must serve at least 85 percent of his sentence before he is eligible for release. There is no parole in the federal prison system.
Manning was an employee of the Environmental Protection Agency, who worked as an Information Technology Specialist and maintained and oversaw EPA’s loaner pool of computers that were shared among EPA employees for official use. According to court documents, in 2012, the defendant used one of the laptops at EPA to search for and view child pornography. The defendant tried to erase his activity, using software designed for that purpose, and then returned the laptop to EPA. In July 2012, another EPA employee was in the process of reassigning the laptop to a new user, when the employee discovered evidence suggesting use of the laptop to view child pornography. The employee informed his supervisor, and the matter was referred to EPA’s Office of the Inspector General. After further investigation, agents learned that Manning also possessed tens of thousands of images of child pornography on a personal hard drive that he stored in a locked drawer in his EPA office.
“Both the number of images defendant collected and the types of images defendant collected distinguish him as someone who had much more than a passing interest in seeing small children being hurt, humiliated, and exploited,” Assistant U.S. Attorney Julie Porter wrote in a sentencing memo.
The federal investigation was conducted by the Environmental Protection Agency, Office of Inspector General (EPA OIG).
“The OIG will continue to work with the U.S. Attorney’s Office to investigate EPA employees engaging in this type of criminal activity,” said Christopher Gaffney, Special Agent in Charge, Environmental Protection Agency, Office of Inspector General.
The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Christopher Gaffney, Special Agent in Charge, Environmental Protection Agency, Office of Inspector General.
The government was represented by Assistant U.S. Attorney Julie Porter.
Former Moecherville Water District Board President Charged with Allegedly Stealing Water District FundsRead the Press Release
CHICAGO — A former Moecherville Water District (MWD) board president appeared in U.S. District Court in the Northern District of Illinois today on federal charges for allegedly stealing $33,597 in property mortgaged and pledged to the Secretary of Agriculture acting through the U.S. Department of Agriculture, Rural Development (USDA-RD), over the course of three months.
The MWD is a not-for-profit corporation that supplied water to households located in the Moecherville neighborhood of Aurora, Illinois. The defendant, MARK McDONALD, 57, of Aurora, was MWD board president, and in that capacity, was responsible for depositing the MWD customers’ payments into the water district’s bank account and writing checks to pay the expenses and purchase goods and services for the benefit of the MWD. McDonald was charged with 15 counts of disposal and conversion of property mortgaged and pledged to the Secretary of Agriculture, acting through the USDA-RD; one count of making a false statement; and three counts of filing a false tax return in an indictment that was returned by a federal grand jury April 7. The offenses are alleged to have been committed between April 2009 and February 2013.
McDonald was arraigned today before U.S. District Judge Young B. Kim and released on an unsecured $4,500 bond. His next status date is set for April 28 before U.S. District Court Judge Robert W. Gettleman.
According to the indictment, between 2005 and 2006, the MWD received $2.7 million in loans from the USDA-RD for the reconstruction of the MWD’s water distribution facilities. The MWD secured repayment of the reconstruction loans by mortgaging and pledging to the Secretary of Agriculture, acting through the USDA-RD, the MWD’s property and assets, and the revenues collected from the operation of the water facility, which included water payments made by the MWD’s customers. In October 2010, the United States filed a foreclosure complaint against the MWD due to the MWD’s failure to timely repay the USDA-RD reconstruction loans. Also in October 2010, a federal judge appointed the Illinois Rural Water Association (IRWA) to be the Receiver of the MWD and authorized IRWA to take custody, control, and possession of the MWD’s facilities, assets, and funds.
The indictment alleges that, on 15 separate occasions between July 2010 and October 2010, and during his tenure as MWD board president, McDonald disposed of and converted to his own use MWD property in the form of cash water payments and bank account funds, which was mortgaged and pledged to the Secretary of Agriculture, acting through the USDA-RD. The indictment also seeks forfeiture of $33,597, the total amount of MWD property that McDonald is alleged to have disposed of and converted to his own use illegally. McDonald also is accused of making a false statement to agents of the USDA-Office of the Inspector General and the Internal Revenue Service in the course of their investigation into the disposition of the MWD’s cash assets and the MWD’s expenditures. Lastly, McDonald is accused of underreporting his income on his U.S. Individual Income Tax Returns to the IRS for the tax years 2008, 2009, and 2010.
The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, Anthony Mohatt, Special Agent-in-Charge, U.S. Department of Agriculture-Office of the Inspector General, and Stephen Boyd, Special Agent-in-Charge of the Internal Revenue Service-Criminal Investigation.
“As the Board President of the Moecherville Water District, Mr. McDonald had a responsibility to water district customers and the U.S. Department of Agriculture to ensure that customer funds were handled with accountability and integrity.” said Mr. Fardon. “Mr. McDonald violated the trust of the residents of Moecherville by stealing some of that money for his own personal use.”
“IRS-Criminal Investigation is committed to bring justice to those who commit crimes against our society,” said Mr. Boyd. “We are committed to protecting the citizens of Aurora, Illinois and all American taxpayers by following the money and holding individuals accountable for their actions. As the board president of the water district, Mr. McDonald, has violated the people’s trust by converting Moecherville Water District funds to his personal use.”
Each count of the disposal and conversion of property pledged to the Secretary of Agriculture, acting through the USDA-RD, and the count of making a false statement carries a maximum penalty of 5 years in prison and a $250,000 fine. Each count of filing a false tax return carries a maximum penalty of 3 years in prison and a $100,000 fine, together with the costs of prosecution. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant United States Attorney Renai S. Rodney.
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.
Indictment
U.S. Attorney’s Office and Cook County State’s Attorney’s Office Conducting Joint Investigation of Police Shooting DeathRead the Press Release
CHICAGO — Federal officials confirmed today that they are conducting a criminal investigation into the death of Laquan McDonald, 17, who died on Oct. 20, 2014, during an encounter with Chicago Police. McDonald, who was armed with a knife, was near West 41st Street and South Pulaski Road on the city’s southwest side, when he was shot and killed during an encounter with police.
United States Attorney Zachary T. Fardon confirmed the investigation along with FBI Special Agent in Charge Robert J. Holley and Cook County State’s Attorney Anita Alvarez. The joint investigation is being led by the Chicago Office of the Federal Bureau of Investigation in coordination with the Independent Police Review Authority, the U.S. Attorney’s Office, and the Cook County State’s Attorney’s Office.
Federal Tax Prosecutions Serve as Reminder to Taxpayers to Comply with Tax Obligations as April 15 Deadline ApproachesRead the Press Release
CHICAGO -- Eleven Chicago and suburban residents, among others, are facing federal prosecution for alleged federal income tax crimes in various separate cases filed recently. Defendants from Bolingbrook and Palatine were charged with evading income taxes by funneling hundreds of thousands of dollars to bank accounts that they controlled and using the money for their own personal purposes. A tax preparer from Lockport was charged with assisting clients in obtaining over $1 million in fraudulent refunds and other defendants from Chicago were indicted in an alleged scheme to use stolen identities to fraudulently claim and obtain tax refunds based on fictitious returns.
“The IRS Criminal Investigation Division is focused on ensuring that taxpayers pay their fair share,” said Stephen Boyd, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago. “Tax fraud does not know a season -- IRS special agents pursue criminals year round, not only at filing deadlines. Taxpayers who might be thinking about cheating should think twice or they will risk the consequences,” he said.
“Federal tax prosecutions occur throughout the year but at this time of year it is especially prudent to remind taxpayers of the importance of voluntary compliance with their tax obligations,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
In addition to criminal penalties, including incarceration, fines, and the costs of prosecution, convicted defendants remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed, Mr. Fardon noted. And those making false claims against the government may be required to pay restitution or may be sued civilly for an amount greater than the fraudulent claims, he added.
LEOPOLDO RODRIGUEZ, 42, of Bolingbrook, was indicted April 9 on 3 counts of tax evasion and 3 counts of filing false federal income tax returns. Rodriguez worked at Chicago Pallet Service, which was a business that bought and sold pallets, and the indictment alleges that Rodriguez diverted income from the sale of pallets by his employer to bank accounts that he maintained and controlled, including a bank account maintained in the name of a business he operated called Sugar Daddy Stables. Specifically, the indictment alleges that Rodriguez diverted approximately $230,000 in 2010, approximately $370,000 in 2011, and approximately $530,000 in 2012. Rodriguez also allegedly filed false individual tax returns for each of those years when he failed to report the income that he diverted from his employer on his personal returns. Rodriguez will be arraigned at a date to be determined by the district court. Each count of filing false returns carries a maximum sentence of 3 years in prison and each count of tax evasion carries a maximum sentence of 5 years in prison. Each of the counts also carries a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. Assistant U.S. Attorney Brian Hayes is representing the government.
WILLIAM DADDANO, 58, of Palatine, was indicted April 7 on 2 counts of tax evasion and 2 counts of filing false federal income tax returns. Daddano, who owned real estate appraisal businesses, allegedly evaded payment of taxes by having his appraisal companies issue checks to a defunct company and funneling the money through a bank account maintained under the name of the defunct company, Real Property Valuation, and then using the money as his own personal income. The indictment alleges that Daddano used Real Property Valuation to divert over $350,000 in 2008 and over $280,000 in 2009, and that he filed false corporate and personal returns for each of those years. Daddano will be arraigned on a date to be determined by the district court. Each count of tax evasion carries a maximum sentence of 5 years in prison and each count of filing a false income tax return carries a maximum sentence of 3 years in prison. Each of the counts also carries a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. The government is represented by Assistant U.S. Attorney Sheri Mecklenburg.
Two additional defendants were indicted on April 2, 2015 in an alleged scheme to fraudulently claim tax refunds in excess of $290,000. EBONY RICHARDSON, 34, of Chicago and LATASHA WEATHERALL, 35, of Chicago, were each charged with 4 counts of wire fraud and 2 counts of theft of government funds in an 8-count indictment. According to the indictment, Richardson and Weatherall caused over 120 fraudulent tax returns to be filed on behalf of various taxpayers without the taxpayer’s knowledge or consent and then caused refunds exceeding $290,000 to be deposited into various accounts controlled by the defendants. The indictment alleges that the fraudulent returns contained false amounts related to items of income, wages, pension distributions, federal tax withholdings, Earned Income Credits, and education and other credits. Richardson and Weatherall each allegedly had control and access to multiple accounts into which the fraudulent refunds were deposited as part of the scheme. Each count of wire fraud carries a maximum sentence of 20 years in prison, each count of theft of government funds carries a maximum of 10 years, and all counts carry a maximum fine of $250,000 or twice the gross gain to the defendants or loss to the government. Assistant U.S. Attorney Michelle Petersen is representing the government.
Other recently charged cases include the following:
TIFFANY EICHELBERGER-MYERS, 32, formerly of Lockport, was charged April 10 with 2 counts of willfully assisting in the preparation of false income tax returns. Eichelberger-Myers worked as a tax preparer at Shelby Investment, LLC and managed a branch location that did business under the name “Tiff’s Taxes.” The information alleges that she fraudulently obtained over $1,100,000 in tax refunds for clients for tax years 2010 through 2012 by falsely claiming, among other things, business losses and education expenses on behalf of her clients. Each count of assisting in the preparation of false returns carries a maximum sentence of 3 years in prison and a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. (Assistant U.S. Attorney Sarah Streicker)
DAVID A. BROWN, 47, of Country Clubs Hills, was charged April 9 on 27 counts of wire fraud, 33 counts of filing false claims, and 4 counts of filing false income tax returns. Brown, who owned and operated a tax preparation business under the name of Tax Professional Consultant Agency, Inc. in Chicago, allegedly prepared and filed returns on behalf of clients that falsely claimed business losses, casualty and theft losses, and Schedule A deductions, in addition to false claims of entitlement to Earned Income Credits and Educations Credits for the 2008 through 2012 tax years. Brown was also charged with filing false individual tax returns on his own behalf for tax years 2010 through 2013. Brown will be arraigned on a date to be determined by the district court. Each count of wire fraud carries a maximum sentence of 20 years in prison, each count of filing a false claim carries a sentence of 5 years in prison, each count of filing a false tax return carries a sentence of 3 years in prison, and all counts carry a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. The United States Secret Service also participated in the investigation. (Assistant U.S. Attorney Bolling Haxall)
SOL K. WINER, 75, of Highland Park was charged April 10 with filing a false income tax return. The information alleges that Winer substantially underrepresented his total income for tax year 2011. The charge carries a sentence of 3 years in prison and a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. (Assistant U.S. Attorney Patrick King)
DYONE DORSEY, 39, and JANET DORSEY, 42, of Chicago, were charged on April 2, 2015 in a 35-count indictment with preparing and assisting in the preparation of false income tax returns. According to the indictment, the Dorseys owned and operated a tax return preparation business in Chicago that did business under the name “Dorsey’s Tax Service.” Between 2009 and 2011, the Dorseys allegedly assisted in the preparation of income tax returns on behalf of clients that falsely claimed business losses as well as other deductions and credits to which the clients were not entitled. The indictment also charged the Dorseys with filing a false joint income tax return on their own behalf for tax year 2010 as well as charging the Dorseys individually for filing false income tax returns on their own behalf for tax years 2008 and 2009. Each of the charges carries a sentence of 3 years in prison and a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. (Assistant U.S. Attorney Ryan Fayhee)
RONALD TAYLOR, 49, of Evanston, was charged on April 1, 2015 in a 4-count indictment with filing false claims and theft of government funds. The indictment alleges that Taylor filed three income tax returns for trusts for the 2007, 2008, and 2009 tax years falsely claiming entitlement to refunds totaling $900,000 and stealing a tax refund of $300,000. Each count of filing a false claim carries a maximum sentence of 5 years in prison, each count of theft of government funds carries a maximum sentence of 10 years in prison, and all counts carry a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. (Assistant U.S. Attorney Jeremy Daniel)
SOLOMON SMITH, JR., 56, of Berkeley, was charged on April 1, 2015 in a 2-count indictment with filing and assisting in the preparation of filing of false tax returns. According to the indictment, Smith filed income tax returns for trusts that falsely claimed, among other things, income and tax withholding amounts, and falsely claimed entitlement to a refund of $381,180 for 2008 and $381,213 for 2009. Each count carries a maximum sentence of 3 years in prison and a maximum fine of $250,000 or twice the gross gain to the defendant or loss to the government. (Assistant U.S. Attorney Stephen Heinze)
In each case, if convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that criminal charges 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.
Truck Driver Sentenced to 4 Years in Prison for His Role in A $1.7 Million Investment ScamRead the Press Release
CHICAGO — A Chicago man was sentenced today to 48 months in prison by U.S. District Court Judge John Z. Lee for scamming people whom he had persuaded to invest in a bogus lending program involving short-term, high-interest loans to distressed homeowners. The defendant, GREGG E. STEINNAGEL, was also ordered to a three year term of supervised release and to pay $1,734,270 in restitution to 20 victims of the fraud scheme. Steinnagel was ordered to report to the Bureau of Prisons on July 10, 2015.
According to sentencing papers filed by the government, one of the victims entrusted her life savings to Steinnagel, a truck driver, and to a deceased co-schemer named Jeffrey Fazzio, a restaurant/department store worker who was posing as an attorney. Another victim entrusted Steinnagel and Fazzio with retirement money that he had saved. “It did not seem to matter to Steinnagel and Fazzio whether or not their victims could afford to lose any money. Steinnagel and Fazzio were willing to defraud anyone who was willing to provide them with money,” the government argued in a sentencing memorandum. Many of the victims of Steinnagel’s fraud were present and spoke at the sentencing.
“Mr. Steinnagel preyed on victims who themselves were in financial need,” said U.S. District Judge John Z. Lee in sentencing the 54-year-old Steinnagel to a prison term at the high end of the range established by federal sentencing guidelines.
In November 2014, Steinnagel pled guilty to one count of wire fraud, admitting that he and Fazzio led victims to believe that their money would be invested and repaid at high rates of interest, with no risk of loss because their investment money was supposedly secured by real estate. As evidence that their money had been invested, Steinnagel and Fazzio provided victims with fabricated promissory notes purportedly signed by the owners of the real estate securing the victims’ investments. The defendants lulled victims with occasional cash payments, in amounts of several hundred dollars or several thousand dollars, to gain their trust and induce them to continuously invest larger amounts of money. Steinnagel and Fazzio then kept most of the victims’ money and failed to repay them. Steinnagel admitted to using at least some of the victims’ funds to gamble at casinos in the Chicago area, Florida, and Nevada.
The sentence was announced this afternoon by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Federal Bureau of Investigation’s Chicago office. The government was represented by Assistant U.S. Attorney Brian Havey.
Melrose Park Police Department Detective Arrested for Possession with Intent to Distribute Cocaine and Illegal Firearm PossessionRead the Press Release
CHICAGO — A Melrose Park detective was arrested yesterday for allegedly attempting to possess with intent to distribute five kilograms or more of cocaine and possession of a firearm in furtherance of a drug trafficking crime. The defendant, GREGORY SALVI, was arrested following an investigation by the Chicago Office of the Federal Bureau of Investigation.
Salvi, 42, of Melrose Park, was charged by criminal complaint that was unsealed following his initial appearance today. He appeared today before Magistrate Judge Jeffery Cole in U.S. District Court and is scheduled for a detention hearing on Tuesday, April 14, at 10:15 a.m.
As set forth in the complaint affidavit, on April 9, 2015, Salvi attempted to possess with intent to distribute five kilograms or more of cocaine, which he expected to deliver to the informants in return for money. The complaint further charges that Salvi was carrying a loaded Glock .45 caliber handgun and driving a police vehicle at the time he attempted to obtain cocaine.
Also according to the complaint affidavit, the defendant used his position as a law enforcement officer with the Melrose Park Police Department in order to unlawfully acquire narcotics from the Melrose Park Police Department. It is alleged in the complaint that Salvi twice stole narcotics held in evidence by the Melrose Park Police Department, which he then distributed to two individuals who, unbeknownst to Salvi, were cooperating with law enforcement. Specifically, in November 2014, Salvi distributed heroin to a cooperating individual. Then, in December 2014, Salvi distributed cocaine to a cooperating individual. According to statements made by the Salvi, on one occasion Salvi used his position as a law enforcement officer to take real narcotics from the police evidence storage, which Salvi replaced with fake narcotics, and Salvi planned to sell the real narcotics to narcotics traffickers.
Also, according to the complaint affidavit, during recorded conversations in January and February 2015, Salvi offered to sell two kilograms of cocaine to a cooperating individual that were being tested by a local laboratory for the police department. During that same time period, Salvi offered to procure firearms for a cooperating individual, and offered to help remove the firearms’ serial numbers.
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 FBI. The Melrose Park Police Department is fully cooperating in the investigation.
If convicted of both charges in the complaint, intent to distribute and possession of a firearm in furtherance of a drug trafficking crime, the defendant could be sentenced to a mandatory minimum sentence of 15 years’ imprisonment, a maximum of life imprisonment, and a maximum fine of $10 million. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorney Patrick Otlewski.
A complaint contains merely 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
US Army National Guard Soldier and His Cousin Indicted for Conspiring to Support Terrorism (ISIL)Read the Press Release
CHICAGO ― U.S. Attorney Zachary T. Fardon of the Northern District of Illinois, Assistant Attorney General for National Security John P. Carlin, and Special Agent in Charge Robert J. Holley of the Chicago Division of the Federal Bureau of Investigation announced today that two Aurora, Illinois, men were indicted Thursday for allegedly conspiring to provide material support to Islamic State of Iraq and the Levant (ISIL), a foreign terrorist organization.
Army National Guard Specialist HASAN EDMONDS, 22, and JONAS EDMONDS, 29, were arrested last month by members of the Chicago FBI’s Joint Terrorism Task Force (JTTF) and remain in federal custody. The defendants were charged in an indictment filed yesterday in U.S. District Court of the Northern District of Illinois with one count of conspiring to provide material support and resources to a foreign terrorist organization. Both defendants will be arraigned April 8, at 10:00 in front of Magistrate Judge Sheila M. Finnegan
Conspiring to provide material support to a foreign terrorist organization carries a maximum penalty of 15 years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorneys Barry Jonas and John Kness of the Northern District of Illinois, and Trial Attorney Lolita Lukose of the National Security Division’s Counterterrorism Section.
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.
Indictment
U.S. Attorney's Office to Conduct Election Day Monitoring Election Day Hotline: (312) 469-6157Read the Press Release
CHICAGO -- Consistent with a long-standing practice of the office, the U.S. Attorney’s Office will monitor the election in Chicago on Tuesday, April 7, 2015, Zachary T. Fardon, United States Attorney for the Northern District of Illinois, announced today. As part of the monitoring effort, the office will operate a hotline for candidates or the public to call to report any complaints relating to voting. In addition, Assistant U.S. Attorneys will be available to respond to complaints as needed.
The hotline number is (312) 469-6157.
Coordination of the monitoring efforts and subsequent investigations, if any, will be directed by Assistant U.S. Attorney Maureen Merin. The Chicago Office of the Federal Bureau of Investigation and the U.S. Marshals Service will assist in this effort by following up, if necessary, on any election fraud complaints.
Chicago Prepaid Cellphone Business Owner Pleads Guilty to Filing False Federal Income Tax ReturnsRead the Press Release
CHICAGO — A business owner of Chicago based prepaid phone stores pleaded guilty yesterday to federal income tax fraud, admitting that he filed four false tax returns, resulting in a tax loss to the United States of more than $174,093, beginning in 2009. The defendant, Ken Leon, 47, of Westmont, pleaded guilty to one count of filing a false individual federal income tax return in 2012 at his arraignment in U.S. District Court after he was charged in a single-count information filed late last month. U.S. District Court Judge Sara L. Ellis set sentencing for June 25, 2015.
Leon was the owner of Ezbuyphones, a prepaid phone business with three Chicago stores, which sold cellphones and accessories and prepaid cell phone minutes and provided electronic bill-paying services. Beginning no later than 2009 and continuing through 2012, the defendant received from his business significant income that he failed to report to the Internal Revenue Service. He received income from his business in two ways; he periodically made cash and check deposits from his business into his personal bank accounts and he paid personal expenses from his corporate bank account, such as mortgage payments for his residence and credit card expenditures on travel, clothing, groceries, and restaurants.
In pleading guilty, Leon admitted that he caused a federal tax loss of $174,093 by filing false tax returns for 2009 - 2012. Leon did not provide accurate information to an accountant who prepared his returns. Specifically, he reported that he had earned only slightly more than $110,000 for the year 2012, when, in fact, his wages and compensation totaled approximately $347,546.
Leon faces a maximum sentence of three years in prison and a $250,000 fine, and his plea agreement contemplates an advisory United States Sentencing Guidelines range of 12 to 18 months in prison.
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 Division of the Federal Bureau of Investigation, and Stephen Boyd, Special Agent in Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
Federal tax law requires that U.S. taxpayers pay taxes on all income earned worldwide and to report certain foreign financial accounts.
The government is being represented by Assistant U.S. Attorney William Ridgway.
Plea Agreement
Suspended North Side Pharmacist Pleads Guilty to Trafficking Counterfeit ViagraRead the Press Release
CHICAGO — A suspended Chicago pharmacist today admitted to illegally obtaining counterfeit Viagra and Cialis from China and illegally dispensing the bogus medications at his north side pharmacy. The defendant, MICHAEL MARKIEWICZ, who owns Belmont Pharmacy, 6148 West Belmont, pled guilty to trafficking counterfeit Viagra from his pharmacy between 2010 and 2012. United States District Court Judge John Z. Lee scheduled sentencing for July 8, 2015.
The Illinois Department of Professional Regulation suspended Markiewicz’ pharmacist license and revoked the license of Belmont Pharmacy in November 2012. The store continues operating as a nutrition and herb retailer.
Markiewicz, 38, of Norridge, was charged in April 2013 with eight counts of violating the federal Food, Drug and Cosmetic Act; four counts of trafficking in counterfeit drugs or goods using a counterfeit mark; and three counts of smuggling, in a 15-count indictment. A superseding indictment was returned in March 2015 by a federal grand jury. Defendant Markiewicz pled guilty today to Count One and Count Five of the superseding indictment, trafficking and attempting to traffic in counterfeit Viagra and holding for sale and dispensing counterfeit Viagra.
The plea was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John J. Redmond,Special Agent-in-Charge of the Food and Drug Administration’s Office of Criminal Investigations; and Tony Gomez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
According to the plea agreement, between 2010 and 2012, via the Internet, Markiewicz ordered approximately 1600 counterfeit Viagra and Cialis tablets from China. The customs declaration on each outer packaging stated that it contained a “gift pen,” and the counterfeit drugs were hidden in unlabeled clear plastic baggies underneath the pen in the package. Markiewicz then sold the counterfeit drugs at his pharmacy to customers who had sought to purchase the medications without a prescription.
Trafficking counterfeit drugs carries a maximum penalty of 20 years in prison and a $5 million fine, and violating the federal Food, Drug and Cosmetic Act carries a maximum sentence of three years in prison and a $250,000 fine. The Belmont Pharmacy is subject to forfeiture.
The government is being represented by Assistant U.S. Attorneys Samuel B. Cole and Eric S. Pruitt.
West Chicago Man Sentenced to 10 Years in Federal Prison for Transporting A Minor Interstate for Criminal Sexual PurposesRead the Press Release
CHICAGO ― A West Chicago man was sentenced Monday to the maximum of 10 years in federal prison for transporting a minor for criminal sexual purposes. The defendant, NICACIO JAIMES-MORENO, 52, pled guilty in October 2014, to one count of knowingly transporting a minor interstate with the intent to engage in sexual activity. The defendant has been in federal custody since the filing of charges August 2013.
At the sentencing hearing, a victim impact statement was read to U.S. District Judge John J. Tharp describing the traumatic damage that Jaimes-Moreno inflicted upon the victim’s life. “The defendant engaged in serious criminal conduct that has caused lasting and immeasurable harm to his victim,” Assistant U.S. Attorney Matthew Ebert argued in seeking the highest sentence possible in the Government’s Sentencing Memorandum. “Further compounding the trauma inflicted by defendant, he was a parental figure to the victim, and she was very much in defendant’s custody, care, and supervisory control throughout the time defendant was sexually assaulting her.”
According to court documents, the defendant began sexually abusing the victim at age 11 and continued the abuse for over four years in various places the defendant lived with the victim and her mother throughout Mexico, Oklahoma, Indiana and Illinois; all while not allowing the victim to attend school. Further, court records describe that during the years the defendant was sexually assaulting the victim, he prevented her from telling anyone that he was assaulting her and she was only allowed outside when chaperoned by defendant.
Judge Tharp imposed the maximum sentence of 10 years in prison. Jaimes-Moreno was also ordered to three years supervised court supervision but is subject to deportation upon release from custody because he is not a United States citizen. He must serve at least 85 percent of his sentence. There is no parole in the federal prison system.
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 case was prosecuted by Assistant U.S. Attorneys Matthew Ebert and Rachel Cannon.
Wrigley Field Rooftop Owner Indicted in Alleged Scheme to Defraud Chicago Cubs, State and Local Taxing AuthoritiesRead the Press Release
CHICAGO ― An owner and operator of a rooftop entertainment venue overlooking Wrigley Field was indicted on federal fraud charges for allegedly scheming to withhold approximately $600,000 due and owing collectively to the Chicago Cubs, the State of Illinois, Cook County, and the City of Chicago, federal law enforcement officials announced today.
The defendant, R. MARC HAMID, 46, an attorney licensed in Illinois and residing in Chicago, owned and operated the rooftop venue Skybox on Sheffield located beyond the right field wall and bleachers of Wrigley Field. Hamid also owned and operated companies that purchased and re-sold tickets to entertainment and sporting events, including JustGreatTickets.com and Just Great Seats. Hamid was charged with four counts of mail fraud in an indictment that was returned yesterday by a federal grand jury. He will be arraigned on a date yet to be determined in U.S. District Court.
The indictment also seeks forfeiture of at least $600,000 in alleged fraud proceeds.
According to the indictment, for the years 2008 through 2011, Hamid caused Skybox on Sheffield to submit false annual royalty statements to the Chicago Cubs that fraudulently under-reported event attendance figures by thousands of paid attendees, and under-reported gross revenues for the rooftop by a total of more than $1.5 million. By concealing the actual revenues of Skybox on Sheffield from the Cubs, Hamid caused Skybox on Sheffield to withhold hundreds of thousands of dollars in royalty payments rightfully owed to the Cubs under the terms of the rooftop’s agreement with the Cubs.
Hamid also caused Skybox on Sheffield to submit false sales tax returns to the State of Illinois and false amusement tax returns to Cook County and the City of Chicago that fraudulently under-reported event attendance and gross revenues during 2008-2011. By concealing the actual attendance and revenues of Skybox on Sheffield, Hamid caused Skybox on Sheffield to withhold hundreds of thousands of dollars due and owing to the state and local taxing authorities.
According to the indictment, Hamid caused Skybox on Sheffield to falsely report that the rooftop had 200 or fewer attendees at certain events, when Hamid knew that more than 200 persons had attended the events, making it appear that the rooftop had complied with city ordinances limiting the number of attendees at the rooftop to 200 per event. Hamid also allegedly caused sales revenues for Skybox on Sheffield to be diverted to his ticket businesses, including Just Great Tickets and Just Great Seats, in order to conceal some of the rooftop revenues from the Cubs and others. According to the indictment, Hamid used the unlawfully withheld funds to pay Hamid’s personal expenses, and business expenses of Skybox on Sheffield and Hamid’s other businesses.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Stephen Boyd, Acting Special Agent in Charge of the Internal Revenue Service Criminal Investigation in Chicago; and Tony Gómez, Postal Inspector in Charge of the U.S. Postal Inspection Service in Chicago. The government is being represented by Assistant U.S. Attorneys Ryan Hedges, Barry Jonas, and Katherine Neff Welsh.
Each count of mail fraud carries a maximum sentence of 20 years in prison and a $250,000 fine or an alternate fine of twice the loss or twice the gain, whichever is greater. 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 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.
Indictment
Volo, Illinois Woman Charged in Federal Court with Attempted Robbery of Chase Bank in JohnsburgRead the Press Release
ROCKFORD — A Lake County woman was charged yesterday in federal court with attempted bank robbery. TERESA M. KNOWLES, 39, of Volo, Ill., was charged with the attempted robbery of Chase Bank located at 2911 Commerce Drive, Johnsburg, Illinois, on March 24, 2015. According to the complaint, Knowles entered Chase Bank at about 4:36 p.m. and approached a teller window at the counter and passed a note to the teller demanding money. The teller refused to turn over any money to the defendant and the defendant left the bank. Thereafter, officers of the McHenry Police Department stopped Knowles in a vehicle matching the description of the vehicle used in the attempted robbery.
Knowles is scheduled to appear before U. S. Magistrate Judge Iain D. Johnson for an initial appearance on March 31, 2015, at 11:00 a.m. in federal court in Rockford.
Attempted bank robbery carries a maximum potential penalty of up to 20 years in prison, up to 3 years of supervised release following imprisonment, a fine of up to $250,000, and full 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 a complaint 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 charge 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 Federal Bureau of Investigation; Keith Von Allmen, Chief of the Johnsburg, Illinois Police Department; John M. Jones, Chief of the McHenry, Illinois Police Department; and Phillip Perlini, Chief of the Grayslake, Illinois Police Department.
The government is represented by Assistant U.S. Attorney Michael D. Love.
Former Tinley Park Man Charged with Bankruptcy Fraud for Concealing Seven Luxury Cars Worth $294,000Read the Press Release
CHICAGO — A former Tinley Park resident was charged by information today with concealing his ownership of seven luxury cars during his 2012 bankruptcy proceeding. The charges allege that JOSEPH W. CAMPBELL, 49, concealed cars having a total value of approximately $294,000, including a Lamborghini worth $122,000, a 1966 Chevrolet Corvette, a 1971 Chevrolet Corvette, a 1978 Pontiac Firebird Trans Am, a 1981 DeLorean, a 1989 Pontiac Firebird Trans Am, and a 1997 Dodge Viper. Campbell will be arraigned at a later date in U.S. District Court.
According to the information filed in court, Campbell concealed his ownership of the luxury cars from his creditors, the bankruptcy court, and the trustee in his bankruptcy case by failing to disclose them in his bankruptcy petition. He is also charged with lying under oath about his ownership of the cars in testimony he provided during a creditors’ meeting, a discovery deposition, and a bankruptcy court hearing.
The crimes of bankruptcy fraud and making false statements during a bankruptcy proceeding each carry a maximum penalty of 5 years in prison and a $250,000 fine, or an alternate fine totaling twice the loss or twice the gain, whichever is greater. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
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 Patrick Layng, United States Trustee for the Northern District of Illinois.
The government is being represented by Assistant U.S. Attorney Jacqueline Stern.
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.
Information
One Man Arrested While Attempting to Travel Abroad; Both Chicago Area Men Spoke of Using Army Uniforms, Military Knowledge and Access to Attack Illinois Military InstallationRead the Press Release
CHICAGO ― U.S. Attorney Zachary T. Fardon of the Northern District of Illinois, Assistant Attorney General for National Security John P. Carlin, and Special Agent in Charge Robert Holley of the FBI’s Chicago Division announced today that two Aurora, Illinois, men were arrested Wednesday night for allegedly conspiring to provide material support to Islamic State of Iraq and the Levant (ISIL), a foreign terrorist organization.
Army National Guard Specialist Hasan Edmonds, 22, a U.S. citizen, was arrested without incident at Chicago Midway International Airport by members of the Chicago FBI’s Joint Terrorism Task Force (JTTF) while attempting to fly to Cairo, Egypt. Jonas Edmonds, 29, a U.S. citizen, was arrested without incident at his home in Aurora. After the arrests on Wednesday night, agents executed search warrants at the residences of both defendants. The defendants were charged in a criminal complaint filed yesterday in U.S. District Court of the Northern District of Illinois with one count of conspiring to provide material support and resources to a foreign terrorist organization. The initial appearances of Hasan Edmonds and Jonas Edmonds are scheduled at 3:00 p.m. today before U.S. Magistrate Judge Sheila Finnegan.
As alleged in the complaint, in late 2014, Hasan Edmonds came to the attention of the FBI. The investigation subsequently revealed that he and Jonas Edmonds had devised a plan for Hasan Edmonds to travel overseas for the purpose of waging violence on behalf of ISIL. Hasan Edmonds, a current member of the Illinois Army National Guard, planned to use his military training to fight on behalf of ISIL. As part of their plans, Hasan Edmonds booked airline travel to depart yesterday from Chicago and arrive in Cairo today, with layovers in Detroit and Amsterdam.
As alleged in the complaint, both defendants also planned for Jonas Edmonds to carry out an act of terrorism in the United States after Hasan Edmonds departed. In particular, both defendants met with an FBI undercover employee and presented a plan to carry out an armed attack against a U.S. military facility in northern Illinois, an installation where Hasan Edmonds had been training. Jonas Edmonds asked the FBI undercover employee to assist in the attack and explained that they would use Hasan Edmonds’ uniforms and the information he supplied about how to access the installation and target officers for attack.
“We will pursue and prosecute with vigor those who support ISIL and its agenda of ruthless violence,” said U.S. Attorney Fardon. “Anyone who threatens to harm our citizens and allies, whether abroad or here at home, will face the full force of justice.”
“According to the charges filed today, the defendants allegedly conspired to provide material support to ISIL and planned to travel overseas to support the terrorist organization,” said Assistant Attorney General Carlin. “In addition, they plotted to attack members of our military within the United States. Disturbingly, one of the defendants currently wears the same uniform of those they allegedly planned to attack. I want to thank the many agents, analysts, and prosecutors who are responsible for disrupting the threat posed by these defendants.”
“The arrests today are the culmination of a successful investigation that involved a great deal of coordination and communication with our law enforcement and military partners,” said Special Agent in Charge Holley. “Throughout the course of this investigation, the defendants were closely and carefully monitored to ensure the safety of the public and our service men and women.”
Conspiring to provide material support to a foreign terrorist organization carries a maximum penalty of 15 years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.
The case was investigated by the FBI’s JTTF, 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. Assistant Attorney General Carlin joins U.S. Attorney Fardon in extending his appreciation to the JTTF.
The Chicago Police Department, U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI), the Illinois State Police, the Aurora Police Department and the Illinois National Guard also provided significant assistance.
The government is being represented by Assistant U.S. Attorneys Barry Jonas and John Kness of the Northern District of Illinois, and Trial Attorney Lolita Lukose of the National Security Division’s Counterterrorism Section.
The public is reminded that a complaint contains only charges and is not evidence of guilt. The defendants are presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint
Huntley Contractor Charged with Mail Fraud, Causing False Statements to Be Made on Forms Required by Erisa, and Failing to Collect and Pay over $600,000 in Federal TaxesRead the Press Release
ROCKFORD — A Huntley, Ill., concrete contractor was charged today by a federal grand jury in a twenty-seven count indictment. THOMAS MANNING, 58, president of T. Manning Concrete, Inc., located in Huntley, was charged with five counts of mail fraud, five counts of causing false statements to be made on forms required by ERISA, sixteen counts of failing to collect and pay FICA taxes from employee wages, and one count of obstructing the IRS by causing false W-2s and Form 941s to be filed with the IRS.
As alleged in the indictment, Manning, as president of T. Manning Concrete, Inc., hired laborers and cement masons from Unions in Northern Illinois. The Unions provided benefits to their members through various employee benefit plans. Each benefit plan was required to file annual reports stating the total contributions received. T. Manning Concrete was required, by collective bargaining agreements, to submit monthly reports to the benefit plans that stated the number of hours each covered employee worked and to turn over the company’s contributions to those benefit plans. According to the indictment, beginning in 2006, Manning devised a scheme to defraud the benefit plans by understating the number of hours worked by T. Manning Concrete’s covered employees in the monthly reports, and under-paying the monthly contributions that were required on behalf of its covered employees. The indictment also alleges that in order to conceal the understatement of hours and to defraud the benefit plans, Manning caused the covered employees to be paid for the additional hours “under the table,” using checks drawn upon non-payroll bank accounts under Manning’s control. It is alleged that Manning used the U.S. Mail to send the reports and contribution checks to the benefit plans.
By falsely reporting the number of hours worked by covered employees, the indictment claims, Manning caused the benefit plans to make false statements in their annual reports they were required by ERISA to file. The indictment further charges that between 2007 and 2010, Manning, as president of T. Manning Concrete, failed to collect, account for, and pay over a total of approximately $600,680.12 for the employees’ share of Federal Insurance Contribution Act (FICA) taxes due to the IRS on the wages paid using “under the table” checks. Further, it is alleged that from January 2007 through December 2010, Manning obstructed the administration of the internal revenue laws by using the non-payroll bank accounts to pay wages without reporting those wages or withholding and paying over FICA or federal income taxes on those wages to the IRS, thereby causing false W-2s and Form 941s to be filed with the IRS.
Each count of mail fraud carries maximum penalties of 20 years in prison and a $250,000 fine, or an alternate fine of twice the loss or twice the gain derived from the offense, whichever is greater. Each count of a false statement in the benefit plans’ annual reports carries maximum penalties of 5 years’ imprisonment and a $250,000 fine. Each count of willful failure to collect or pay taxes carries a maximum sentence of 5 years’ imprisonment, and a $10,000 fine. Each count also carries a maximum period of up to 3 years of supervised release following imprisonment. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
Manning will be arraigned before United States Magistrate Judge Iain D. Johnston on March 31, 2015, at 11:00 a.m. in U.S. District Court in Rockford.
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 indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; James Vanderberg, Special Agent-In-Charge of the Chicago Region of the U. S. Department of Labor, Office of Inspector General; Jeffrey A. Monhart, Director for the Chicago Region of the U.S. Department of Labor - Employee Benefits Security Administration; Stephen Boyd, Special Agent-in-Charge of the Internal Revenue Service - Criminal Investigation Division in Chicago; and Tony Gomez, Postal Inspector-in-Charge of the Chicago Division of the U.S. Postal Inspection Service.
The government is represented by Assistant U.S. Attorney Scott R. Paccagnini.
Indictment
U.S. Attorney Fardon Hosts Second Roundtable to Discuss Building Community TrustRead the Press Release
CHICAGO — Members of the community including religious, civic, and business leaders, youth leaders, and top law enforcement met yesterday to continue discussions around building community trust in the neighborhoods of Chicago. This is the second of such meetings, hosted by U.S. Attorney Zachary T. Fardon, and is a follow up to the original roundtable held in December 2014 with United States Attorney General Eric Holder. Among those participating in today’s meeting were Ronald Davis, Executive Director of President Obama’s Task Force on 21st Century Policy, Cook County State’s Attorney Anita Alvarez, Chicago Police Superintendent Garry McCarthy, and Deputy Chief Janey Rountree of the Mayor’s office.
The Department of Justice has made the issue of community policing and trust a top priority. Yesterday’s roundtable facilitated a candid dialogue about policing and trust issues, and focused on next steps for improving relationships between law enforcement and the community.
Mr. Davis, who is also Director of the Department of Justice’s Community Oriented Policing Services in Washington D.C. (known as “COPS”) led a discussion about the recently issued Interim Report from the President's Task Force on 21st Century Policing. In that report, the Task Force seeks to identify best practices and makes recommendations to the President on how policing practices can promote effective crime reduction while building public trust. The Task Force specifically examined, among other issues, how to foster strong, collaborative relationships between local law enforcement and the communities they protect.
As part of their ongoing dialogue, yesterday’s roundtable participants shared several important ideas for strengthening the relationship between law enforcement and our communities, and they committed to continue the dialogue going forward.
Four Convicted in $1.6 Million Luxury Automobile Loan Fraud SchemeRead the Press Release
CHICAGO — Three Chicago-area defendants, and a fourth defendant from Decatur, Ga., were convicted of federal bank fraud charges for engaging in a scheme to fraudulently obtain 51 luxury automobile loans totaling approximately $1.6 million without ever intending that the borrowers would purchase the high-end cars that they claimed to be buying. As a result, various credit union lenders, including Credit Union 1, Great Lakes Credit Union, Navy Federal Credit Union, Pentagon Federal Credit Union, and Sherwin-Williams Credit Union, incurred losses totaling at least $853,000. Two of the four charged defendants were convicted today by a jury in U.S. District Court Andrea R. Wood’s courtroom. Two additional defendants involved in the scheme pled guilty before trial.
The two men convicted at trial yesterday were PRECIOUS W. HOUSE, 47, of Chicago, the president of Rolling Auto, Inc. of Plymouth, Ind., and XPress Automotives of Chicago, two wholesale auto dealerships that purported to be selling many of the autos. HOUSE was convicted of five counts of bank fraud. Also convicted at trial was BRIAN K. HUGHES, 41, of Homewood, the president of Hughes Corporate Consulting. HUGHES was convicted of four counts of bank fraud and one count of making false statements on a loan application. The defendants’ sentencings were set for June 2015.
Two remaining defendants pled guilty: KEITH B. FOSTER, 46, of Harvey, pled in October 2014 to one count of making false statements on a loan application. FOSTER was sentenced to 12 months imprisonment and has been ordered to surrender April 6, 2015. CRYSTAL WILLIAMS, 31, of Decatur, Georgia, pled guilty in September 2014 to one count of bank fraud and will be sentenced at a later date.
According to court records, between February and November 2013, defendants HOUSE and HUGHES recruited individuals seeking loans and agreed to find loans for them in exchange for a fee of 20 to 30 percent of the loan. The defendants obtained at least 36 automobile loans of the 51 total sought on behalf of the applicants, and the defendants fraudulently obtained approximately $1.12 million of the total $1.6 million for which they applied.
In order to obtain the loans, the defendants made, and caused the loan applicants to make, false representations in documents such as loan applications, vehicle purchase orders, and verifications of employment. The false statements concerned the applicants’ income, employment, credit history, intent to use the loan proceeds to purchase automobiles, and the existence of contracts obligating the borrowers to purchase vehicles from defendant HOUSE and his companies, Rolling Auto and XPress Automotives. The purchase orders falsely represented that the loan applicants had contracts to purchase from HOUSE’s dealership various luxury autos made by BMW, Chevrolet, Jaguar, Lexus, Mercedes-Benz, Nissan, and Porsche. If the individual applicants refused to cash checks obtained as part of the scheme, defendant HUGHES threatened them with civil lawsuits and criminal prosecutions. Defendant HOUSE then deposited the loan proceeds into bank accounts he controlled in Illinois, California, and Georgia.
The indictment was previously 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 was represented by Assistant U.S. Attorneys Christopher R. McFadden and Sunil Harjani.
Each count of bank fraud and making false statements on loan applications carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. The Court may impose an alternate fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. The Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
Chicago Area Man Convicted on Child Pornography ChargesRead the Press Release
CHICAGO ― A Chicago area man was convicted today for producing child pornography involving a minor whom he photographed in sexually explicit photos as a part of a fantasy world that the defendant created. The defendant, JOHN GABRIEL, 79, of Lockport, who has been in custody since he was arrested on federal charges in September 2013, was found guilty of one count of manufacturing child pornography. U.S. District Court Judge John J. Tharp has not yet set a sentencing date. According to court documents and witness testimony during the four day trial, defendant Gabriel enticed a 17 year old girl by creating a religious fantasy world in which he used the pseudonym “Sarah” to email the victim under the guise of being an angel who had selected the victim to participate in a “Program” run by the angels, in order to save young boys from Satan. In addition to instructing the minor victim about the Program, Sarah suggested that the victim should develop a closer relationship with defendant. For example, in one email, Gabriel wrote “listen closely to those things John [defendant] tells you. You can have a happy life and you can leave all the dirty nasty sinful things behind.”
Essentially, according to the emails received by the victim, the Program dictated that if participants had sex with troubled young boys, under the age of 18, then they were assisting in training the boys in better behavior, and to fight the devil. In addition, according to these emails, each time a participant had sex with a troubled boy; a wealthy benefactor would purchase guide dogs for the blind and fund children’s wings for hospitals. The defendant took sexually explicit photos of the victim and posted them on an Internet website, purportedly for the purpose of recruiting the troubled young boys to have sex with the victim.
Gabriel faces a minimum sentence of fifteen years in prison for manufacturing child pornography, and a $250,000 fine. The Court must impose a reasonable sentence under federal statues and the advisory United States Sentencing Guidelines.
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 case was prosecuted by Assistant United States Attorneys Barry Jonas and Shoba Pillay.
Owner and Executives Convicted in Medicare Referral Kickback Conspiracy at Closed Sacred Heart HospitalRead the Press Release
CHICAGO - The former owner and chief executive officer, the chief operating officer, and the chief financial officer of the now-closed Sacred Heart Hospital were convicted by a jury after a nearly two-month trial of collectively paying hundreds of thousands of dollars in illegal kickbacks in exchange for the referral of hospital patients who were insured by Medicare and Medicaid. The jury found that EDWARD J. NOVAK, 60, of Park Ridge, Sacred Heart’s owner and chief executive officer, ROY M. PAYAWAL, 66, of Burr Ridge, executive vice president and chief financial officer, and CLARENCE NAGELVOORT, 59, of Chicago, paid physicians concealed bribes and kickbacks to induce patient referrals and to increase the patient census, which, in turn, increased hospital revenue.
Sacred Heart Hospital was a 119-bed acute care facility located at 3240 West Franklin Blvd., in Chicago. The hospital closed and filed for bankruptcy in 2013, after Medicare payments were suspended in the aftermath of criminal charges that were first filed in April 2013.
All three defendants were convicted of one count of conspiring to violate the federal healthcare anti-kickback statute by offering and paying kickbacks and bribes, directly and indirectly, to physicians to induce them to refer patients to the hospital for services that would be reimbursed by Medicare and Medicaid. The charged conspiracy spanned from no later than 2001 through April 2013. The jury also convicted defendant Novak of 26 substantive counts of paying kickbacks for patient referrals, defendant Payawal of 17 substantive counts of paying kickbacks for patient referrals, and defendant Nagelvoort of 11 substantive counts of paying kickbacks for patient referrals. The jury acquitted defendant Payawal of ten substantive kickback counts and Nagelvoort of one substantive kickback count. The jury did not reach a verdict on one substantive kickback count for defendant Novak.
Defendants remain free on bond pending their sentencings, which have been scheduled for July 2015. Each count in the indictment carries a maximum penalty of five years in prison and a $250,000 fine and restitution is mandatory. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
Four defendants previously entered guilty pleas in the case. These defendants are: Dr. SUBIR MAITRA, 73, of Chicago; Dr. JAGDISH SHAH, 70, of Oakbrook; ANTHONY J. PUORRO, 57, formerly of Chicago, who was Sacred Heart’s chief operating officer; and NOEMI VELGARA, 64, of Chicago, who was Sacred Heart’s vice president of geriatric services and was responsible for overseeing the Golden L.I.G.H.T. medical clinics, including managing employees responsible for marketing, and recruiting and transporting patients.
Four additional physicians associated with Sacred Heart Hospital are scheduled to proceed to trial later this year.
The verdict was announced by U.S. Attorney Zachary T. Fardon for the Northern District of Illinois; Lamont Pugh III, Special Agent-in-Charge of the Chicago Region of the U.S. Department of Health and Human Service Office of Inspector General; 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. Attorneys Joel Hammerman, Ryan Hedges, Kelly Greening, Diane MacArthur, Debra Bonamici, and Brian Wallach.
The case falls under the umbrella of the Medicare Fraud Strike Force, which expanded operations to Chicago in February 2011, and is part of the Health Care Fraud Prevention & Enforcement Action Team, a joint initiative announced in May 2009 between the Justice Department and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Dozens of defendants have been charged in health care fraud cases since the strike force began operating in Chicago.
To report health care fraud and to learn more about the Health Care Fraud Prevention & Enforcement Action Team, go to: stopmedicarefraud.gov.
Former Illinois State Representative Keith Farnham Sentenced to Ninety Six Months for Transporting Child PornographyRead the Press Release
CHICAGO — Former Illinois State Rep. KEITH FARNHAM was sentenced to ninety six months in prison today by U.S. District Court Judge Edmond E. Chang as a result of his conviction of transporting child pornography via computers in his office and residence in Elgin last year. Farnham resigned his seat in the Illinois General Assembly in March 2014, less than a week after federal agents seized computers from his home and office.
Farnham, 67, of Elgin, was also ordered to pay a $30,000 fine. Farnham was ordered by Judge Chang to report to prison on May 19, 2015. Farnham will remain on a bond that restricts him to his home and requires around-the-clock electronic monitoring. "This is a despicable crime." said District Court Judge Chang while imposing sentence. "The sex assaults of children in each of the 2700 images represent their own nightmare."
Farnham pled guilty in December 2014, admitting that on November 25, 2013, he sent an email from a computer in his Elgin office with the following message: "do you trade. This is what I lik." Farnham attached two files to the email that he knew contained child pornography. In addition, he possessed images and videos depicting child pornography on computers and electronic storage devices in his residence, car, and offices.
During the course of the investigation, agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) executed federal search warrants at Farnham’s state office and residence in Elgin and seized computers and electronic storage devices. On the day the warrant was executed in March 2014, Farnham possessed no fewer than 2,765 images of real minors engaged in sexually explicit acts, including sexual intercourse, with prepubescent children. Some of the images involved sadistic or masochistic conduct and depictions of violence, according to Farnham’s guilty plea. According to the court documents, HSI agents were investigating information received from the HSI Cyber Crimes Center that an email address, later linked to Farnham, was being used to trade child pornography on the Internet.
"The defendant’s criminal conduct extends far beyond simply viewing sexually explicit photographs online. The defendant actively traded and bartered images and videos depicting child pornography, bragged to others about his own hands-on sexual abuse and exploitation of a six-year-old girl, and actively hid his tracks from law enforcement in order to continue his criminal conduct," the government stated in its sentencing memorandum. "As an elected official, the defendant held himself out as being concerned about ‘protecting your children on the internet’ at the same time, however, he led another life, surfing the internet and message boards for sexually explicit images and further victimizing children of sexual abuse and exploitation."
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Gary Hartwig, Special Agent-in-Charge of HSI in Chicago.
The government was represented by Assistant U.S. Attorneys Timothy Storino and Michelle Petersen.
Chicago Revenue Inspector Sentenced to 12 Months Probation for ExtortionRead the Press Release
CHICAGO — A former Revenue Inspector for the City of Chicago’s Department of Business Affairs and Consumer Protection was sentenced today by U.S. District Court Judge Amy St. Eve to 12 months’ probation as a result of his conviction of extortion under color of official right. ELIAS GARZA, 55, of Chicago pled guilty in February 2011 to a one-count information, admitting that while employed as a Revenue Inspector in 2009, he received money from a confidential source and an individual who controlled stores in Chicago that sold cigarettes. Garza would, in return, provide advanced notification of upcoming City inspections of those stores that were designed to ensure proper payment of taxes on cigarettes. Defendant Garza admitted that in May 2009, he accepted $500 from the confidential source in return for providing information about upcoming inspections of Individual A’s stores, and that in September 2009, Garza accepted another $300 in return for his promise to alert them of upcoming inspections.
According to his plea agreement, Garza cooperated with the United States Attorney’s Office and the Cook County State’s Attorney’s Office in their ongoing investigations of public corruption.
The sentencing 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 Ferguson, City of Chicago Inspector General.
The government was represented by Assistant U.S. Attorney Matt Getter.
Taiwan Businessman Sentenced to 24 Months for Conspiring to Violate U.S. Laws Preventing Proliferation of Weapons of Mass DestructionRead the Press Release
CHICAGO – Assistant Attorney General for National Security John P. Carlin; U.S. Attorney Zachary T. Fardon of the Northern District of Illinois; Special Agent in Charge Robert J. Holley of the FBI’s Chicago Office; Special Agent in Charge Gary Hartwig of U.S. Immigration and Customs Enforcement, Homeland Security Investigations (ICE-HSI) in Chicago; and Acting Special Agent in Charge David Nardella of the U.S. Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement of the Chicago Field Office announced today that a former resident of Taiwan, who the United States has linked to the supply of weapons manufacturing machinery to North Korea, was sentenced today to serve 24 months in federal prison by U.S. District Court Judge Charles R. Norgle of the Northern District of Illinois. The defendant, Hsien Tai Tsai, 69, pleaded guilty in October 2014, admitting that he conspired with others to interfere with and obstruct U.S. regulations that seek to disrupt the proliferation of weapons of mass destruction. When imposing sentence, Judge Norgle credited Tsai for the substantial assistance he provided, and would continue to provide, to the government in its investigation of weapons of mass destruction proliferators. Tsai, also known as Alex Tsai, was arrested in May 2013 in Tallinn, Estonia, and was later extradited to the United States, where he remains in federal custody.
“Aggressive enforcement of U.S. laws targeting those who supply goods, services, or other support to proliferators of weapons of mass destruction is vital to ensuring global safety,” stated Zachary T. Fardon, United States Attorney, after the sentence was announced. “As this case demonstrates, companies and individuals who seek to evade these laws will confront an international law enforcement community working cooperatively and effectively to stem these threats,” said U.S. Attorney Fardon.
“Hsien Tai Tsai violated a critical sanctions regime and undermined and interfered with U.S. efforts to disrupt North Korea's weapons of mass destruction and advanced weapons programs,” said Assistant Attorney General Carlin. “These sanctions are meant to raise the cost for WMD proliferators to do business and deter others from proliferating by denying them access to our financial and commercial systems. This prosecution makes clear that we will use all of our tools to identify and arrest WMD proliferators and to disrupt their efforts to undermine our country's security. I’d like to thank all who helped with this investigation and prosecution.”
According to court documents, Tsai was associated with at least three companies based in Taiwan – Global Interface Company Inc., Trans Merits Co. Ltd., and Trans Multi Mechanics Co. Ltd. – that purchased and then exported, and attempted to purchase and then export, from the United States and other countries machinery used to fabricate metals and other materials with a high degree of precision.
In January 2009, under Executive Order 13382, which sanctions proliferators of weapons of mass destruction and their supporters, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated Tsai, Global Interface and Trans Merits as proliferators of weapons of mass destruction, isolating them from the U.S. financial and commercial systems and prohibiting any person or company in the United States from knowingly engaging in any transaction or dealing with them. At that time, the Treasury Department said that Tsai was designated because he provided, or attempted to provide, financial, technological, or other support for, or goods or services in support of, the Korea Mining Development Trading Corporation, which the Treasury Department has stated is North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons. Additionally, Tsai had been involved in shipping items to North Korea that could be used to support North Korea’s advanced weapons program. After the OFAC designations, Tsai and others continued to conduct business together, but attempted to hide Tsai’s and Trans Merit’s involvement in those transactions by conducting business under different company names, including Trans Multi Mechanics. Later, in 2013, Trans Multi Mechanics was also designated by OFAC.
In pleading guilty, Tsai admitted that he was involved in multiple commercial and financial transactions to undermine the sanctions against WMD proliferations, including the purchase of a Bryant center hole grinder from a U.S. company based in suburban Chicago, and exported it to Taiwan in 2009 using the company Trans Multi Mechanics. A Bryant center hole grinder is a machine tool used to grind a center hole, with precisely smooth sides, through the length of a material. Tsai also admitted having a role in Trans Merits’ transactions involving LED road lights and an oil pump, and using third parties to wire transfer funds to the United States.
The case was investigated by the FBI, ICE-HSI and the U.S. Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement, with assistance provided by the Justice Department’s Office of International Affairs. The Estonian Internal Security Service and the Estonian Prosecutor’s Office cooperated with the United States. The case was prosecuted by Assistant U.S. Attorney Brian Hayes of the Northern District of Illinois and Trial Attorney Brandon L. Van Grack of the Justice Department’s National Security Division.
Ukrainian Businessman Arrested in Austria on U.S. International Corruption Conspiracy ChargesRead the Press Release
CHICAGO ― Dmitry Firtash, 48, a Ukrainian businessman, was arrested Wednesday by Austrian authorities in Vienna on a provisional arrest request based on charges filed in the Northern District of Illinois, announced Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.
The charges result from an investigation, which the FBI has conducted for several years, of an alleged international corruption conspiracy. Firtash’s arrest is not related to recent events in Ukraine.
Firtash, who controls Group DF, an international conglomerate of companies, remains in Austrian custody unless he meets the bail condition of posting a €125 million bond, which was set today in a Vienna court. The U.S. government will seek his extradition.
The charges are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
The department has worked closely with and has received significant assistance from its law enforcement counterparts in Austria and greatly appreciates their assistance in this matter. Significant assistance was also provided by the Criminal Division’s Office of International Affairs. The Chicago Office of the FBI conducted the investigation.
Physician Charged with Receiving a KickbackRead the Press Release
ROCKFORD — An Illinois physician was arrested this morning on a charge of illegal remunerations. NEIL SHARMA, 34, of Lemont, Illinois, a licensed Illinois physician and the medical director of an Illinois healthcare company, is charged with receiving a kickback in the amount of $2,500 in cash, from an individual in return for his referring Medicaid and Medicare patients to the individual's company for medical treatment.
According to the complaint and supporting affidavit, Sharma is employed by Company A, which is contracted with both Medicare and Illinois Medicaid to provide health care benefits to Medicare and Medicaid beneficiaries. Company A is a managed care organization contracted with the State of Illinois to provide services under Illinois’ Integrated Care Program. Company A gets paid Medicaid funds based on the number of Medicaid patients enrolled with the company. As the medical director of Company A, SHARMA is involved in all major clinical patient care programs including review of medical care provided and medical professional aspects of provider contracts.
Also described in the complaint and supporting affidavit, Company B is contracted with Company A to provide services for Medicaid beneficiaries. In February 2015, SHARMA offered an individual who owns Company B an additional 500 patients at an increased rate. SHARMA also offered to refer to Company B Medicaid and Medicare patients in two new programs Company A planned to implement. In exchange, SHARMA wanted a cash payment immediately and additional cash payments every month after for an unidentified length of time. SHARMA planned to conceal the payments received from the individual by being named the medical director for the individual’s other health care companies not contracted with Company A.
According to the complaint and supporting affidavit, on February 27, 2015, in Rockford, the individual provided SHARMA $2,500 in United States currency. After SHARMA received the $2,500, on March 9, 2015, Company B started seeing new Medicaid and Medicare patients referred by SHARMA that are part of one of Company A’s new programs.
The charge of illegal remunerations carries a maximum potential penalty of up to 5 years in prison, a fine of up to $25,000, and full restitution. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines. Sharma is scheduled to appear today in Federal Court in Rockford before U.S. Magistrate Iain D. Johnston at 11:00 a.m. for arraignment.
The public is reminded that a complaint 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, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation.
The government is represented by Assistant U.S. Attorney Scott R. Paccagnini.
Complaint
Glenview Real Estate Broker Sentenced to 40 Months in Federal Prison for $4.2 Million Investor FraudRead the Press Release
CHICAGO — A former managing director of Panorama Global Partners, LLC, a company that falsely purported to trade in certain financial instruments, was sentenced today to 40 months in federal prison for fraudulently obtaining approximately $4.2 million in investor funds and for misappropriating approximately $3.9 million of those funds.
The defendant, RICHARD DEMARIA, 45, of Glenview, was also ordered to pay $3.9 million in restitution by U.S. District Judge Robert W. Gettleman. DeMaria, who pleaded guilty in December 2013, was ordered to surrender to begin serving his sentence on May 19.
Before imposing the sentence, Judge Gettleman stated that the sentence he imposed sent a message that “there will be a price to pay for” investor fraud.
DeMaria admitted that between approximately August 2008 and January 2009, he and a business associate fraudulently obtained approximately $4.2 million from victim investors, by falsely telling victim investors that their money would be used to lease and trade certain financial instruments DeMaria did not plan to, and did not use most of the investor money for the promised purpose, but rather misappropriated the money. In addition, as DeMaria soon learned, neither he nor his business associate had the ability to lease or trade these instruments. DeMaria used at least $3.9 million of investor money for other purposes, including $90,000 on an Aston Martin for a business associate and $600,000 on an Indiana home for another business associate. DeMaria also used approximately $70,000 of investor funds for construction on his ex-wife’s Evanston home and almost $2 million on business expenses related to DeMaria’s struggling real estate development business.
DeMaria entered into so-called “Subscription Agreements” with victim investors, on behalf of Panorama Global Partners, LLC, in which he promised to use their funds to purchase financial instruments. When victim investors asked for a return of their investment, DeMaria lied to them, saying that he had invested the money, when in fact he had misappropriated it.
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 Federal Bureau of Investigation in Chicago. The government was assisted by the Securities and Exchange Commission.
The government was represented by Assistant United States Attorney Shoshana Gillers.
Nurse Charged with Health-Care Fraud Scheme for Billing Medicare for Unnecessary ServicesRead the Press Release
CHICAGO — A registered nurse was arrested today on a federal health care fraud charges. The nurse defendant, JAMES ADEMIJU, who operates two nursing agencies, Adonis Inc. and BestMed-Care Services Ltd., was arrested this morning and charged with health care fraud in a criminal complaint. The complaint alleges a scheme to defraud Medicare by billing for unnecessary nursing services that were provided to patients who were not confined to the home and who were obtained via illegal payments for patient referrals. For over three years, beginning in 2011, a total of approximately $5 million was paid to the two agencies by Medicare for services rendered to patients deemed to be homebound.
Ademiju, 41, of Matteson, a licensed registered nurse in Illinois since 2006, is scheduled to appear at 3:00 p.m. today before U.S. Magistrate Judge Mary M. Rowland in U.S. District Court.
Simultaneous with Ademiju’s arrest, agents from the FBI, the U.S. Department of Health and Human Services Office of Inspector General, and other law enforcement agencies executed search warrants at the offices of Adonis Inc., and BestMed-Care Services Ltd., both located in Dolton. Warrants were also executed to seize alleged fraud proceeds maintained in bank accounts maintained by Adonis Inc. and BestMed-Care Services Ltd.
The arrests 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 Regional Office of the HHS-OIG. The Railroad Retirement Board Office of Inspector General is also participating in the investigation.
According to a 56-page affidavit in support of the arrest, search and seizure warrants, the charge against Ademiju arises from the investigation of Suburban Home Physicians, a Schaumburg company that did business as Doctor At Home. In a related case, an indictment was returned last month against a doctor, Alan Newman, and a nurse, Diana Jocelyn, at Suburban Home Physicians. According to the affidavit unsealed today, Ademiju works at two nursing agencies, Adonis, as the office manager, and BestMed-Care Services, as the administrator. Between February 2011 and December 2014, Medicare paid Adonis approximately $1.9 million and BestMed-Care Services approximately $3.1 million for skilled-nursing services.
Adonis and BestMed-Care Services allegedly obtained many patients from a marketing company which claimed to offer "free" nursing services to Medicare beneficiaries. Adonis and BestMed-Care Services paid hundreds of dollars per patient to a marketing company which would refer patients to Adonis and BestMed-Care Services.
According to the affidavit, Adonis and BestMed-Care Services referred many patients to physicians at Suburban Home Physicians, even when patients had primary-care physicians and continued to see those primary-care physicians. Physicians at Suburban Home Physicians then certified the patients for skilled-nursing services, even when patients did not qualify for skilled-nursing services that were covered by Medicare.
Also described in the complaint, nursing assessments signed by Ademiju contained false information about patients. For example, Ademiju signed nursing assessments that falsely stated that patients were homebound and that falsely stated that patients needed assistance with activities of daily living such as dressing and bathing themselves. Adonis and BestMed-Care Services then billed Medicare for long periods in part by periodically discharging patients, claiming the patients no longer needed services, and then re-admitting the same patients a short time later without telling the patients that they had been discharged or re-admitted. In some instances, a patient was discharged from one agency and then admitted at the other agency in less than a week, and sometimes even on the same day.
One patient, Patient LD, who received nursing services from Adonis and BestMed-Care Services and was certified for such services by a physician at Suburban Home Physicians, told law enforcement that she began receiving nursing services after getting a call out of the blue and being told that a physician and nurse would come visit her. Patient LD said that she was not confined to the home during the time that she received nursing services, and said that the nursing visits were "worthless." Medicare paid Adonis and BestMed-Care Services more than $11,000 for the nursing services provided to Patient LD.
Another patient described in the complaint, Patient JS, who received services from Adonis and BestMed-Care Services and was certified for such services by a physician at Suburban Home Physicians, told law enforcement that he realized that the nursing visits were unnecessary and eventually stopped them. Patient JS told law enforcement that he felt bad for having allowed the visits to go on as long as he had even when he knew they were unnecessary. Medicare paid Adonis and BestMed-Care Services more than $13,000 for the nursing services provided to Patient JS.
The government is being represented by Assistant U.S. Attorney Stephen Chahn Lee.
Ademiju was charged with one count of health care fraud and faces a maximum penalty of 10 years in prison and a $250,000 fine or a fine totaling twice the gain or loss, whichever is greater, and restitution is mandatory. 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 and an indictment are 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 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. Scores of defendants have been charged locally in health care fraud cases since the strike force began operating in Chicago.
To report health care fraud to learn more about the Health Care Fraud Prevention & Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.
Complaint
Two Executives Indicted for Scheming to Defraud Chicago and Other Governments of Grant Funds Intended to Establish Charging Stations for Electric VehiclesRead the Press Release
CHICAGO — Owners of a green tech startup company that installed and maintained charging stations for plug-in electric vehicles were indicted yesterday for allegedly engaging in a scheme to fraudulently obtain federal and state grant funds, from the City of Chicago, the State of Pennsylvania Department of Environmental Protection, and two California entities: the Bay Area Air Quality Management District, and the Association of Bay Area Governments.
Defendants Mariana Gerzanych, 36, and Timothy Mason, 58, both of California, were co-owners of 350Green LLC of Los Angeles, California, which purported to install and maintain charging stations for plug in electric vehicles. Between 2010 and 2012, 350Green obtained over $2.9 million in grants from the City of Chicago, the Pennsylvania Department of Environmental Protection, the Association of Bay Area Governments, and the Bay Area Air Quality Management District, to install and maintain public electric vehicle charging stations.
Gerzanych and Mason were each charged with five counts of wire fraud in an indictment returned by a federal grand jury yesterday and announced today. They will appear before U.S. District Court for arraignment at a later date. According to the indictment, between August 2010 and September 2012, as principals of 350Green, Mason and Gerzanych applied for and received over $2.9 million in grants from the City of Chicago, the Pennsylvania Department of Environmental Protection, the Association of Bay Area Governments, and the Bay Area Air Quality Management District. The grant funds were intended to support installation and operation of charging stations for electric vehicles. In particular, the indictment alleges that, in order to obtain grant funds, Mason and Gerzanych falsely claimed that a company called Actium Power had supplied Level 3 DC fast chargers to 350Green and that 350Green had paid Actium Power for those chargers, when in fact Actium Power did not supply the chargers, and the actual manufacturer of the chargers was never paid. Further, the indictment alleges that, in order to obtain the grant funds, 350Green submitted claims to the City of Chicago falsely representing that subcontractors and vendors had been paid when in fact, they had not.
As a result of Mason and Gerzanych’s false claims, the City of Chicago and the State of Pennsylvania Department of Environmental Protection paid 350Green. In order to cover up the scheme, the indictment further alleges that Mason and Gerzanych made false statements to 350Green’s governmental partners regarding 350Green’s financial status and reasons for 350Green’s financial difficulties.
Each count of the indictment carries a maximum penalty of 20 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The indictment also seeks forfeiture of approximately $1.9 million.
“These grant funds were intended to help communities live in a more eco-friendly way. The Department of Justice will not tolerate fraud at the expense of such an important mission,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
“There will always be those who see innovation as just another mark for fraud and deception, so we are gratified by the continuing collaboration with our federal partners in stopping old school exploitation of new programs directed at tomorrow's challenges,” said Inspector General Joseph Ferguson.
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; Joseph Ferguson, Inspector General for the City of Chicago; and John R. Hartman, Deputy Inspector General for Investigations of the U.S. Department of Energy Office of Inspector General. Also participating in the investigation was the Harrisburg, Pennsylvania Office of the Federal Bureau of Investigation.
The government is being represented by Assistant United States Attorney Maureen E. Merin.
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.
Indictment
Rockford Man Sentenced to More Than 10 Years in Federal Prison for Possessing Heroin, Marijuana and A FirearmRead the Press Release
ROCKFORD — A Rockford man was sentenced today in federal court to a total of 124 months in federal prison for committing firearms and drug trafficking offenses. JARIMNE FREEMAN, 30, was sentenced by U.S. District Judge Frederick J. Kapala to serve 64 months’ imprisonment for possessing with intent to distribute heroin and marijuana. In addition, the court sentenced Freeman to serve a consecutive term of 60 months’ imprisonment for possessing a firearm in furtherance of his drug trafficking crime. After serving his sentence in federal prison, Freeman will be placed on 3 years of supervised release. Freeman was also ordered to pay a special assessment of $200.
Freeman pleaded guilty on October 21, 2014. According to the written plea agreement, on October 10, 2013, Freeman agreed to meet with an individual who was cooperating with the Winnebago County Sheriff’s Department (“WCSD”) at a location in Rockford and sell the cooperating individual 10 grams of heroin. The plea agreement noted that Freeman was arrested by WCSD deputies when Freeman arrived at the agreed upon location. The plea agreement further noted that at the time Freeman was arrested by WCSD deputies and Freeman’s vehicle was searched, Freeman possessed approximately 8.9 grams of heroin and approximately 57.2 grams of marijuana in plastic bags in the center console, approximately 267 grams of marijuana in two plastic bags in the back seat, and a loaded FEG 9mm pistol under the driver’s side floor mat of Freeman’s vehicle. Freeman also possessed approximately 9.6 grams of heroin in a plastic bag and $1,691 in his front right pants pocket. Freeman admitted that he intended to sell the heroin and marijuana he possessed on October 10, 2013 to other individuals. Freeman further admitted in the plea agreement that he possessed the FEG 9mm pistol on October 10, 2013 to protect his heroin and marijuana and his drug trafficking proceeds. The plea agreement further noted that in the eight months prior to October 10, 2013, Freeman sold approximately 50 grams of heroin per month to his customers for a total of approximately 400 grams of heroin.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Carl J. Vasilko, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; and Gary Caruana, Winnebago County Sheriff.
The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.
Suspended Physician Sentenced to 1 ½ Years for Illegally Dispensing Oxycodone and Falsely Billing Medicare in Undercover ProbeRead the Press Release
CHICAGO — A suburban physician whose medical license was suspended was sentenced today to 18 months in prison for health care fraud and illegally prescribing controlled substance medications. The defendant, SATHISH NARAYANAPPA BABU, who owned Anik Life Sciences Medical Corp., pled guilty in September 2014 to illegally prescribing oxycodone and other controlled substances, and fraudulently billing Medicare approximately $500,000, and fraudulently collecting approximately $216,000, for services he did not provide. Babu, 48 of Bolingbrook, operated Anik Life Sciences, a home-visiting physician’s office, in Darien and, previously, in Arlington Heights.
U.S. District Court Judge John J. Tharp also imposed a term of three years of supervised release and a restitution amount of $221,012. Babu agreed to forfeit the approximately $126,000, which was seized at the time of his arrest and will be credited toward the restitution ordered. Also forfeited were three automobiles ― a 2013 BMW, a 2001 BMW, and a 2010 Lexus. Babu was ordered to begin serving his sentence on May 13, 2015.
“This crime wasn’t an isolated act, it was a calculated, systematic effort to milk Medicare,” commented Judge Tharp while imposing sentence, “The defendant was stealing money from those in need….putting many in need at risk.” Babu admitted that he engaged in a scheme to defraud Medicare from approximately November 2011 through February 2014. In addition, Babu admitted that between November 2012 and December 2013, he issued multiple prescriptions for controlled substances to a patient, who was actually an undercover agent, despite never having seen or examined the patient. Babu also permitted unlicensed personnel associated with Anik Life Sciences to issue prescriptions to the patient. During the same period, Babu submitted false claims to Medicare for services provided to the patient that were not rendered by Babu or another licensed medical professional.
According to court documents, the undercover agent posed as a healthy individual covered by Medicare and seeking physician services to obtain prescription medication, including oxycodone. The agent claimed to have shoulder pain from a previous injury and to be on disability. On approximately 10 occasions, representatives from Anik Life Sciences, none of whom were licensed as physicians, nurses, or other medical professionals, visited the undercover agent in his purported apartment.
Babu caused unlicensed personnel from Anik Life Sciences to provide medical care ― including prescriptions issued under Babu’s name and DEA registration number for controlled substances ― to the undercover agent and then billed Medicare for that care. Medicare and its contractor paid about $4,000 to cover the costs of the prescriptions that Babu issued to the undercover agent.
In addition to the undercover agent, Babu had other patients, whom he certified and re-certified as eligible for home health services under Medicare, and submitted claims for care he provided, including home visits and diagnostic testing and review, without regard to whether the claimed services were medically necessary. Babu hired three foreign medical school graduates who were not licensed physicians in the United States to conduct home visits and advertised these individuals as “MDs” or doctors. Babu submitted Medicare claims indicating that he personally conducted the patient visits and provided comprehensive medical evaluations that he did not actually perform.
Babu also maintained an office staff that he directed to order certain diagnostic tests for every patient, including ultrasound and autonomic nervous system testing, without regard to medical necessity. He further prescribed controlled substances to patients who he had never seen or examined and permitted his unlicensed staff to fill out prescriptions and order refills for patients.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Dennis A. Wichern, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; Lamont Pugh III, Special Agent-in-Charge of the Chicago Regional Office of the HHS-OIG; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The government was represented by Assistant U.S. Attorney Sarah Streicker.
Psychologist and Pschotheraphy Services Owner Sentenced to over Seven Years, and Employee Sentenced to over Five Years in $1.5 Million Medicare FraudRead the Press Release
Chicago − Bryce Woods, 37, an employee of Take Action, Inc., and Inner Arts, Inc., which claimed to provide psychotherapy services to Medicare beneficiaries residing in skilled nursing homes in the Chicago area, was sentenced today by U.S. District Court Judge Virginia M. Kendall to 70 months in federal prison for submitting false claims totaling more than $1.5 million to Medicare for psychotherapy services. Codefendant Keenan R. Ferrell, 55, who was the owner and operator of Take Action, Inc., and Inner Arts, Inc., as well as a licensed psychologist in Illinois, was sentenced to 88 months in federal prison back in August 2014.
“This is an abuse of a program designed for people who need it,” remarked U.S. District Judge Kendall in imposing the sentence today. “This was an egregious fraud.” Judge Kendall also ordered both Woods and Ferrell to serve two-year terms of supervised release and to pay $1,525,496 in restitution.
Ferrell and Woods, both of Chicago, were each convicted of six counts of health care fraud at a jury trial in June 2013. The defendants were convicted of submitting false claims to Medicare for over five years. In each fraudulent claim, Ferrell and Woods represented that Ferrell had provided 45-50 minutes of one-on-one psychotherapy to patients living in skilled nursing homes, when in fact, the sessions were conducted by Woods, psychology graduate students recruited by Ferrell, or others with limited or no supervision.
Knowing that psychotherapy services were reimbursable by Medicare only when performed by an enrolled provider or when “incident to” the services of an enrolled provider, Ferrell and Woods arranged for Ferrell, who was an enrolled Medicare provider and licensed medical doctor, to authorize Inner Arts and Take Action to accept assignment of his claims to Medicare. Ferrell and Woods arranged with psychology graduate students and others to see patients at various skilled nursing facilities. Ferrell himself did not attend or otherwise participate in or supervise any therapy sessions conducted in the nursing homes. As a result, Ferrell was not physically present and immediately available when Take Action and Inner Arts therapists were in nursing homes to visit with patients. As part of the scheme, Ferrell and Woods billed Medicare for more patient visits than had actually been conducted. The defendants also billed Medicare for psychotherapy sessions that Ferrell purportedly provided to patients who in fact were deceased at the time of the purported sessions. In his sentencing arguemnt, Assistant U.S. Attorney Paul Tzur said, “Defendant Woods filed over 31,000 separate claims to Medicare, which was an out and out lie.”
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge for the Chicago Office of the Federal Bureau of Investigation; and Lamont Pugh, Special Agent-in-Charge of the Health and Human Services, Office of Inspector General.
The government is represented by Assistant U.S. Attorney Paul Tzur. The case was investigated by the FBI and the Health and Human Services, Office of Inspector General.
Arlington Heights Company and Its Owner and Employee Charged with Illegal Export and Import of Military ArticlesRead the Press Release
CHICAGO — An Arlington Heights company, its president, and a former employee were indicted on federal charges for unlawfully exporting and importing military articles, including components used in night vision systems and on the M1A1 Abrams tank, which is the main battle tank used by the U.S. Armed Forces. The defendants were charged in an indictment returned by a federal grand jury in January and made public this week.
VIBGYOR OPTICAL SYSTEMS, INC., a company located in Arlington Heights, purported to manufacture optics and optical systems, including items that were to be supplied to the U.S. Department of Defense (DOD). Instead of manufacturing the items domestically, as it claimed, VIBGYOR illegally sent the technical data for, and samples of, the military articles to manufacturers in China, then imported the items from China to sell to its customers—including DOD prime contractors. BHARAT “Victor” VERMA, 74, of Arlington Heights, VIBGYOR’s president, and URVASHI “Sonia” VERMA, 40, of Chicago, a former VIBGYOR employee and owner of a now-defunct company that operated as a subcontractor for VIBGYOR, were also charged in the indictment.
According to the indictment, between November 2006 and March 2014, the defendants conspired to defraud the United States and violate both the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR). The Arms Export Control Act prohibits the export or import of defense articles and defense services without first obtaining a license from the U.S. Department of State and is one of the principal export control laws in the United States. Under the International Traffic in Arms Regulations, any person seeking to import items designated as defense articles on the United States Munitions Import List is required to obtain a permit to do so from the Bureau of Alcohol, Tobacco, Firearms and Explosives. VIBGYOR won subcontracts to supply optical components and systems to DOD prime contractors by misrepresenting the location of manufacture of the items it supplied. BHARAT VERMA falsely claimed that the items VIBGYOR supplied were manufactured domestically, when they actually had been manufactured in China, based on information illegally exported to Chinese manufacturers. In addition to illegally providing technical data for a military item to China, URVASHI VERMA attempted to ship an example of one of the military items to the Chinese manufacturer.
“The Arms Export Control Act and the International Traffic in Arms Regulations are vital to preventing embargoed countries from gaining access to our sensitive military technology, and to ensuring that our armed forces are not issued substandard equipment,” stated Zachary T. Fardon, United States Attorney, after the charges were announced. “Where companies and individuals seek to violate AECA and the ITAR, we will not hesitate to act.”
VIBGYOR, BHARAT VERMA, and URVASHI VERMA are charged with one count of conspiracy to violate both the Arms Export Control Act and the International Traffic in Arms Regulations; one count of conspiracy to defraud the United States—each offense punishable by up to five years’ imprisonment—and one count of violating the Arms Export Control Act, with a maximum possible penalty of 20 years in prison and a fine up to $1,000,000. VIBGYOR and BHARAT VERMA were also charged with international money laundering, an offense with a maximum possible sentence of 20 years’ imprisonment and a fine up to $500,000. The defendants are scheduled to be arraigned Friday, February 20, at 1:00 p.m. before U.S. Magistrate Judge Susan E. Cox at the Everett McKinley Dirksen United States Courthouse in Chicago.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, Gary Hartwig, Special Agent-in-Charge of Homeland Security Investigations Chicago, James C. Lee, Special Agent-in-Charge of the Chicago Office of the Internal Revenue Service, and Brian Reihms, Special Agent-in-Charge of the Department of Defense Criminal Investigative Service in Chicago.
The government is being represented by Assistant United States Attorneys Diane MacArthur, Bolling W. Haxall, and Shoba Pillay and Trial Attorney Casey Arrowood of the Justice Department’s National Security Division.
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.
Indictment
River Forest Man Sentenced to 12 1/2 Years in Prison for Sending Threats to Kill Chicago Politicians, Local Police, and OthersRead the Press Release
CHICAGO — A River Forest man was sentenced today to 12 ½ years in federal prison for mailing and emailing threatening communications to kill Chicago area politicians and River Forest police officers, as well as oil executives in Texas and California. A jury found the defendant, RONALD HADDAD, Jr., 39, guilty in April 2014 of all 30 counts against him ― 28 counts of mailing threats and two counts of emailing threats. U.S. District Judge Virginia Kendall imposed the sentence today in Federal Court.
“This is a very serious case, with very real victims,” said Judge Kendall in imposing the sentence, “the response was a tremendous drain on the City.” The judge also ordered Haddad to serve three years of supervised release following his sentence. Haddad is in federal custody, and since he was arrested and charged in 2009, he underwent several mental competency evaluations.
“From December 2007 through January 2009, [Haddad] carried out an unrelenting campaign to terrorize public officials and private citizens in Chicago and across the country. [His] threat letters promised death to anyone who failed to obey him . . . . Terror is what [he] sought, and that is what he achieved,” the government argued in a sentencing memo.
The evidence at trial showed that Haddad sent multiple threatening communications in three waves starting in Dec. 2007, again in June and July 2008, and again in January 2009. The first group of letters, addressed to individuals such as former Chicago Mayor Richard M. Daley and former Chicago Ald. Bernard Stone, contained white powder. The letters in June and July 2008 contained a brown substance, and the letters and packages in January 2009 contained an oily substance or shotgun shells that appeared to be rigged to explode. None of the substances or shells proved to be harmful but witnesses who opened the letters and packages testified that they were fearful when they opened them.
The sentencing 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 Chicago Police Superintendent Garry F. McCarthy. The government was represented by Assistant U.S. Attorney William Ridgway.
Federal Charges Filed in Sex Trafficking of MinorRead the Press Release
CHICAGO − A man who allegedly sex trafficked an underage girl by force was charged in a criminal complaint in U.S. District Court in Chicago. The defendant, ALLEN C. IROEGBULEM, 24, of Roselle, Illinois, was charged with sex trafficking of a minor. The charges were announced today 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.
Iroegbulem appeared today before U.S. District Court Judge Daniel Martin at the Dirksen Federal Courthouse, was will remain in custody pending a detention hearing. The defendant was charged in a criminal complaint filed on February 4, 2015.
According to the complaint, beginning in December 2013, and continuing through February 2014, the defendant transported “Minor A” from the Chicagoland area to Rockford, Illinois, where he arranged for the minor to perform commercial sex acts with at least four men in exchange for money, all in the same night. The minor continued to perform sex acts at the direction of the defendant in hotel rooms throughout the Chicagoland area, at a house on the west-side of Chicago and in Wisconsin, where the minor was continually ordered to perform sex acts with several men at one time, over the course of three months. In addition, Iroegbulem physically assaulted the minor.
The complaint also states that the defendant provided another minor, “Minor C,” with drugs in a hotel room, causing her to pass out. He then arranged for two men to perform sex acts on Minor C while she was in a drugged state.
The investigation was conducted jointly by the FBI and the Carol Stream Police Department and assisted by the McHenry County State’s Attorney’s Office, the McHenry County Sheriff’s Department, the Woodstock Police Department, the DuPage County Sheriff’s Office, and the Schaumburg Police Department.
If convicted, the defendant faces a maximum penalty of life in prison.
The public is reminded that a complaint is not evidence of guilt and that all defendants in a criminal case are presumed innocent until proven guilty in a court of law.
The government is being represented by Assistant United States Attorney Bethany Biesenthal.
Complaint
Chicago Psychiatrist Pleads Guilty to Taking Kickbacks to Prescribe Anti-Psychotic Drug; Will Also Pay U.S. and Illinois $3.79 MillionRead the Press Release
CHICAGO — A long-time Chicago psychiatrist pleaded guilty today to a federal crime for receiving illegal kickbacks and benefits totaling nearly $600,000 from pharmaceutical companies in exchange for regularly prescribing the anti-psychotic drug clozapine to his patients. The defendant, Dr. MICHAEL J. REINSTEIN, also agreed to pay the United States and the State of Illinois $3.79 million to settle a parallel civil lawsuit alleging that, by prescribing clozapine in exchange for kickbacks, Reinstein caused the submission of at least 140,000 false claims to Medicare and Medicaid for the clozapine he prescribed for thousands of elderly and indigent mentally ill patients in at least 30 area nursing homes and other facilities, federal and state law enforcement officials announced today.
Reinstein, 71, of Skokie, pleaded guilty to one count of violating the federal Medicare and Medicaid Anti-Kickback Statute at his arraignment in U.S. District Court after he was charged on February 3. His cooperation plea agreement calls for the government to recommend a sentence of 18.5 months in prison when he is sentenced on a date to be determined by U.S. District Judge Sharon Johnson Coleman.
Both the criminal and civil cases involve the promotion of generic clozapine, a rarely prescribed anti-psychotic drug that has serious potential side effects and is generally considered a drug of last resort, particularly for elderly patients. While clozapine has been shown to be effective for treatment-resistant forms of schizophrenia, it is also known to cause numerous side effects, including a potentially deadly decrease in white blood cells, seizures, inflammation of the heart muscle, and increased mortality in elderly patients.
Reinstein, a psychiatrist in the Chicago area since 1973 with an office in Chicago’s Uptown neighborhood since at least 1999, quickly became one of the largest prescribers of generic clozapine in the country after obtaining a consulting agreement worth $50,000 per year, plus other compensation, from the manufacturer of the drug.
Under the civil settlement, Reinstein will pay the United States $1,837,968 and the State of Illinois $1,956,741 within 10 days. The settlement resolves a civil lawsuit that the United States filed in November 2012, and the State of Illinois joined in March 2013, on behalf of the U.S. Department of Health and Human Services and the Illinois Department of Healthcare and Family Services. United States v. Reinstein, 12 C 9167 (NDIL).
“Physicians must prescribe medications for their patients solely on the basis of the patient’s best medical interests and not because those decisions were improperly influenced by kickbacks and other financial favors,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
“The Department of Justice is committed to ensuring that physicians who accept payments from pharmaceutical manufacturers to influence prescribing decisions are held accountable,” said Acting Assistant Attorney General for the Justice Department’s Civil Division Joyce R. Branda. “Schemes such as this one undermine the health care system and take advantage of elderly patients who are among the most vulnerable health care recipients.”
“The defendant put his patients at great risk of serious health problems to benefit his personal interests at taxpayer expense,” said Attorney General Lisa Madigan, whose office handled the civil litigation.
In March 2014, Teva Pharmaceuticals USA, Inc., and IVAX Pharmaceuticals LLC, paid the United States and the State of Illinois $27.6 million to settle allegations that they violated state and federal False Claims Acts by making payments to Reinstein in return for his prescriptions of clozapine to his patients.
The civil lawsuit against Reinstein alleged that he solicited and accepted kickbacks from IVAX and Teva in exchange for prescribing clozapine to Medicare and Medicaid patients between August 2003 and July 2011. Reinstein violated the federal and state False Claims Acts by causing the submission of prescription drug claims to the Medicare and Medicaid programs for clozapine prescriptions generated by the kickbacks IVAX and Teva paid Reinstein, the suit alleged.
Reinstein also submitted and/or caused to be submitted to both Medicaid and Medicare claims for his professional services involving “pharmacologic management” of those patients for whom he prescribed clozapine. However, Reinstein allegedly did not engage in meaningful pharmacological management, because his prescribing decisions for his clozapine patients were based on the kickbacks he received rather than his independent medical judgment or the individual needs of his patients.
Apart from the admissions Reinstein made in his guilty plea to criminal conduct, the civil settlement is neither an admission of liability by Reinstein nor a concession by the United States or the State of Illinois that their claims were not well-founded.
In pleading guilty in the criminal case, Reinstein admitted that until 2003, he prescribed Clozaril, the brand name version of the clozapine molecule, even though less expensive, generic versions of the drug were available after 1997, because the manufacturer of Clozaril paid Reinstein thousands of dollars annually for speaking engagements to promote the drug. After the patent for Clozaril expired, Reinstein resisted pharmacy and drug company efforts to switch his patients to generic clozapine and he continued to be the largest prescriber of Clozaril to Medicaid recipients in the United States. In July 2003, the manufacturer of Clozaril stopped paying Reinstein for speaking engagements and he agreed to meet with IVAX representatives about switching his patients to generic clozapine.
Shortly later in 2003, Reinstein agreed to switch his patients to IVAX’s generic clozapine after IVAX agreed to pay him $50,000 per year under a consulting agreement and to fund a clozapine research study by a Reinstein-affiliated entity. IVAX renewed its annual consulting agreement with Reinstein and Teva continued paying Reinstein consulting and speaker fees realted to clozapine after acquiring IVAX in January 2006. Teva and IVAX employees renewed consulting and speaking agreements with Reinstein for $50,000 each year between 2004 and 2007, $40,000 for 2008, and $24,000 for 2009. Between 2004 and 2009, Teva and IVAX paid Reinstein a total of approximately $234,000 for consulting and speaking related to clozapine.
Between 2004 and 2009, the manufacturer of an orally disintegrating form of the clozapine molecule also paid Reinstein for speaking engagements, totaling approximately $135,000. In addition, this same manufacturer paid Reinstein’s research company at least $20,000 for a study related to orally disintegrating clozapine, with Reinstein acting as the principal investigator and using his patients. In part because of these payments, between January 2005 and March 2006, Reinstein switched more than half of his patients from generic clozapine to the orally disintegrating clozapine.
Further, employees of Teva and IVAX caused the pharmaceutical companies to pay entertainment expenses for Reinstein and his associates, including expensive meals, tickets to sporting events, and all-expense-paid trips to Miami, all as part of an effort to induce him to prescribe IVAX/Teva clozapine. These entertainment expenses totaled approximately $30,000.
In March 2006, during an all-expense-paid trip to Miami, Teva and IVAX employees asked Reinstein what they could do to get him to prescribe more clozapine and less of the orally disintegrating clozapine to his patients. Reinstein told them that Teva should hire Individual A, whom he described as an important source of patient referrals for him. In May 2006, Teva hired Individual A to a part-time position entering white blood cell count data for some of Reinstein’s patients into the national clozapine registry at a rate of $20 per hour for a maximum of 30 hours per week. Over the next several months, Reinstein switched hundreds of his patients from the orally disintegrating clozapine to generic clozapine, knowing that Teva’s hiring of and payments to Individual A were illegal because they were at least partly in return for his prescriptions of clozapine. Between July 2006 and July 2011, Teva paid Individual A approximately $112,000.
In July 2006, Teva paid a research company affiliated with Reinstein for another clozapine study. The payments to the research company by IVAX in 2004 and Teva in 2006 totaled approximately $61,000. During this time period, the research company made monthly payments to Reinstein for rent and medical director fees. Overall, Reinstein admitted receiving payments totaling approximately $592,000 through various forms of illegal remuneration. In each scenario, Reinstein knew that the compensation was illegal because the payments were at least partly in exchange for his prescriptions of clozapine.
The civil settlement resulted from of a coordinated effort by the U.S. Attorney’s Office for the Northern District of Illinois, the Civil Fraud Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, the Department of Health and Human Services Office of Inspector General, the Chicago Office of the Federal Bureau of Investigation, and the Illinois Attorney General’s Office.
In the civil case, the United States was represented by Assistant U.S. Attorney Eric S. Pruitt, and the State of Illinois was represented by Assistant Illinois Attorney General Robert Barba. Assistant U.S. Attorney Ryan S. Hedges is representing the government in the criminal case.
Plea Agreement
Thirty Two Defendants Facing Federal or State Charges Alleging the Laundering of over $100 Million in Narcotics Proceeds Through Cash-For-Gold SchemeRead the Press Release
CHICAGO — Thirty-one defendants face federal money laundering charges for their roles in a conspiracy that allegedly laundered more than $100 million in drug proceeds for the Mexico-based Sinaloa Cartel by purchasing gold, reselling it to companies in Florida and California, then transmitting the money from the United States to Mexico. One additional defendant faces state money laundering charges in DuPage County. The federal charges, contained in a criminal complaint, stem from a multi-year investigation of money laundering and drug trafficking led by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI); the Internal Revenue Service’s Criminal Investigation Division; and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), together with other federal, state, and local law enforcement agencies.
Agents this week seized 12 firearms while arresting 12 of the federal defendants. Ten of those defendants were arrested in the Chicago area, and two werearrested in Kentucky and Georgia. Four federal defendants, including two of the alleged conspiracy leaders, were already in state or federal custody. Fifteen defendants are fugitives, several of whom are believed to be in Mexico. Agents also arrested the defendant facing state charges. Prior to this week’s arrests, in the course of the three-and-a-half-year investigation, agents seized more than $2.8 million in U.S. currency, 28 firearms, 42 kilograms of cocaine (92 pounds), and over two tons of marijuana, as well as large amounts of heroin and methamphetamine.
Thirty-one of the defendants were charged with conspiring to launder narcotics proceeds for the Sinaloa Cartel in a 311-page criminal complaint that was filed Monday in U.S. District Court and unsealed following the arrests Tuesday morning. The federal defendants arrested yesterday in the Chicago area appeared before Magistrate Judge Daniel Martin in U.S. District Court yesterday and eight remain in federal custody pending detention hearings scheduled for later this week.
Alleged conspiracy leaders DIEGO PIENDA-SANCHEZ, 30, and CARLOS PARRA-PEDROZA, 31, were arrested on related money laundering charges in late-September 2014, while visiting the United States from their native Guadalajara, Mexico. A federal grand jury charged both men by indictment in December 2014, with multiple counts of money laundering based on four of the 49 separate instances of money laundering noted in the complaint filed on Monday. That case is currently before Judge Harry D. Leinenweber in U.S. District Court.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, with Gary Hartwig, Special Agent-in-Charge of HSI in Chicago; James C. Lee, Special Agent-in-Charge of IRS’s Criminal Investigation Division; and Carl J. Vasilko, Special Agent-in-Charge of ATF in Chicago. The following agencies also provided significant assistance in the investigation: the Drug Enforcement Administration; Cook County Sheriff’s Office; DuPage County Sheriff’s Office; Chicago Police Department; Buffalo Grove Police Department; the Joliet Metropolitan Area Narcotics Squad, and the United States Marshals Service. The investigation was conducted under the umbrella of the United States Organized Crime Drug Enforcement Task Force (OCDETF).
“The drug trade is driven by money earned at the expense of countless devastated lives and ravaged communities,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “These charges reflect the tireless work of federal, state, and local authorities to stop not only those individuals who make that destructive business possible, but profitable.”
“Chicago is a hub for narcotics money laundering, with dirty money changing hands all too often in public parking lots throughout the city and suburbs,” said Special Agent-in-Charge Hartwig. “Criminals are turning to sophisticated trade-based schemes to launder their money and cover their tracks, but these arrests should serve as a stern warning to those doing business with drug traffickers – you will ultimately pay the price.”
Special Agent in Charge James C. Lee of the Internal Revenue Service Criminal Investigation Division (IRS CI) in Chicago added, “IRS Criminal Investigation is committed to fighting the war on drugs. IRS CI brings, and will continue to bring, its financial expertise to disrupt and dismantle the Sinaloa Cartel’s drug trafficking organization.”
The complaint alleges that Pineda-Sanchez, Parra-Pedroza, and 29 associates laundered more than $100 million in drug proceeds since 2011 for the Sinaloa Cartel. The defendants’ money laundering activities on behalf of the Sinaloa Cartel spanned throughout the Unites States, including; Illinois, Wisconsin, Indiana, Ohio, Kentucky, Georgia, California, Texas, and North Carolina. Pineda-Sanchez and Parra-Pedroza are high ranking Mexico-based money brokers who allegedly used a network of individuals in Chicago, Fort Lauderdale, and Los Angeles to launder illicit drug proceeds through a gold-based scheme. According to the complaint, Pineda-Sanchez, Parra-Pedroza, and others routinely directed United States based members of their organization to collect narcotics proceeds, to use the money to purchase scrap and fine gold from local businesses, and to ship that gold to refineries based in Florida and California. The refineries in turn transmitted the cash value of the gold to Parra-Pedroza and other co-conspirators in Mexico.
As part of the undercover law enforcement operation, HSI Chicago collected more than $4.5 million in drug proceeds from 38 different money couriers on 49 occasions between June 2013 and August 2014.
The complaint details several instances in which Parra-Pedroza warned a confidential informant, who was working with law enforcement, of the dangers of losing drug money entrusted to the organization. In one such instance, Parra-Pedroza told the informant about unidentified Mexican associates who had coerced a man to accept responsibility for losing their drugs or money by “cut[ting] his fingers off.”
The money laundering complaint charges Pineda-Sanchez, Parra-Pedroza, and the following co-defendants with one count each of conspiring to commit money laundering: Jose Abel Mendoza-Parra, 22, of Mexico; Maria Loera-Alvarado, 36, of Mexico; Ernesto Ruiz-Ramirez, 25, of Joliet, Illinois; Mario Herrera, of Chicago; Anthony Leiva, 53, of Northlake, Illinois; Teodocio Caro, 54, of Mexico; Luis Reyna-Tellez, 19, of Cicero, Illinois; Hector Chavez-Cuevas, 36, of Cicero, Illinois; Juan Carlos Nunez-Galvez, of Berwyn, Illinois; Jose Sanantonio, 28, of Berwyn; Pedro Saucedo-Palominos, 42, of Chicago; Omar Lopez-Cabrera, 32, of Chicago; Virgil Durbin, 47, of Kentucky; Valentin Rodriguez, 37, of Markham, Illinois; Alma Lorena Ortiz de Rosas Vera, 38, of Mexico; Casmiro Isias-Padilla, 37, of Chicago; Efren Mota, 48, of Chicago; Felix Lemus-Guevara, 29, of Georgia; Pedro Urquiza-Osorio, 53, of Texas; Luis Armando Acosta-Vizcarra, 43, of Mexico; Joel Estrada, 27, of Chicago; Harranah Samori, 42, of Matteson, Illinois; Gabriel Salcedo, 53, of Berwyn; Tomas Salgado-Reyna, 30, Chicago; Oscar Acosta, 36, Melrose Park, Illinois; Federico Barrera-Perez, 45, of Chicago; Emmanuel Diaz, 28, of Naperville, Illinois; Jose Hernandez-Ochoa, 28, of Berwyn; Alfonso Nevarez, 40, of Northlake; and Oscar Montes-Lamas (deceased). Jaime Cabadas-Barajas, 30, of Chicago, faces one count of state money laundering charges in DuPage County.
If convicted, the defendants charged with federal money laundering face a maximum of 20 years’ imprisonment and a fine of $500,000 or twice the gross gain or loss resulting from the charged offense.
The government is represented by Assistant United States Attorneys Peter M. Flanagan and Ryan P. Fayhee, and by Special Assistant United States Attorney Minnie D. Yuen.
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.
Complaint
Former Federal Prison Chaplain Pleads Guilty to Passing Messages for Convicted Killer Frank Calabrese, Sr.Read the Press Release
CHICAGO - A former federal prison chaplain who ministered to convicted killer Frank Calabrese, Sr., pleaded guilty today to passing messages from Calabrese concerning the recovery of a hidden violin from a residence Calabrese once owned in Williams Bay, Wis., federal law enforcement officials announced today. The defendant, Eugene Klein, 66, was charged in June, 2011, and pled guilty today in front of U.S. District Court Judge John W. Darrah to one count of conspiracy to defraud the United States. Judge Darrah set sentencing for June 23, 2015, in Federal Court. Klein faces a maximum sentence of five years in prison and a $250,000 fine.
According to court documents, Klein obstructed enforcement of Special Administrative Measures (“SAMs”), first imposed on Calabrese in November 2008, to prevent him from further participating in illegal activities while incarcerated by restricting Calabrese’s contacts with others. Calabrese told Klein that he had hidden a valuable Stradivarius violin in his Wisconsin residence. In an effort to prevent the government from seizing the instrument and applying the proceeds toward a $4.4 million restitution judgment that Calabrese owed to his victims, Calabrese formulated a plan and enlisted Klein and two individuals to remove the violin from the Wisconsin residence.
Klein, of Springfield, Mo., a Roman Catholic priest, was employed as a chaplain at the U.S. Bureau of Prisons Medical Center for Federal Prisoners in Springfield, Mo., where Calabrese served a life sentence prior to his death in 2013. As chaplain, Klein was permitted to meet with Calabrese on a regular basis to provide religious ministry, such as the sacrament of Holy Communion. Because of the position of trust he occupied, Klein was able to have close and frequent communication with Calabrese.
Klein knew that prison rules prohibited him from taking letters and messages into and out of the prison. He was also informed of the SAMs and understood they prohibited the passing of any information or messages to or from Calabrese. The SAMs, which have been renewed annually and remained in effect in 2011, restricted Calabrese?s privileges in prison, including his access to the mail, media, telephone and visitors. Under the SAMs, Calabrese was prohibited from having contact with anyone outside the prison, except his attorney and certain immediate family members. Except for communications with his attorney, all oral and written communications with immediate family members, including mail and visits, were subject to review and/or observation to ensure that Calabrese did not pass any messages to anyone that could be used to further criminal activity.
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 John F. Oleskowicz, Special Agent-in-Charge of the U.S. Department of Justice Office of the Inspector General, Chicago Field Office.
The government is being represented by Assistant U.S. Attorneys Amarjeet Bhachu and Jennie Levin.
Plea Agreement
Suburban Attorney Sentenced to 70 Months for Stealing $2.34 Million in Clients’ FundsRead the Press Release
Chicago --- A suburban real estate attorney and radio talk show host was sentenced today to 70 months imprisonment for stealing approximately $2.34 million from her clients. The defendant, KATHLEEN NIEW, 59, of Burr Ridge, was also ordered to pay restitution of $2.34 million to the victims of her fraud and forfeit assets related to the crime. “The sentence must promote respect for the law . . . something has to be done when a case like this comes up.” U.S. District Court Judge Harry Leinenweber said in imposing the sentence. Judge Leinenweber also ordered three years of supervised release, and Niew is to report to the Federal Bureau of Prisons on April 14, 2015.
Niew operated Niew Legal Partners, LLC, in Oak Brook. She was charged with 10 counts of wire fraud by a federal grand jury in August 2013 and pled in June 2014 to all counts of the indictment. She was disbarred in 2013.
According to court records, the victims, a husband and wife, who were Niew’s clients, transferred approximately $2.34 million into Niew’s attorney escrow account to be used for closings on commercial real estate transactions. Niew used the funds for her own benefit, contrary to the false representations she made to the couple. Without the victims’ knowledge, Niew used their funds to finance the purchases of various gold mining operations and not to purchase any commercial property for the victims as originally intended. Further, as part of the fraud scheme, Niew arranged to receive a 20 percent finder’s fee for herself from mining operation investments in exchange for providing approximately $1.5 million in funds that belonged to her clients.
At the sentencing hearing today, Judge Leinenweber also found Niew responsible for defrauding another client out of $500,000. Niew falsely told that victim that she needed to borrow $500,000 to help buy assets in her upcoming divorce proceeding. Niew, however, was not divorcing her husband, and she sent the victim’s funds to one of the same investment operations where she had sent previous victims’ money.
“Niew blatantly stole $2.8 million of her clients’ money, and then lied to cover up the scam. When confronted and caught, Niew undertook acts that can only be described as shocking for an attorney licensed by the bar – creating false cover-up documents, lying to her clients, and lying under oath (once again) to the ARDC,” argued Assistant United States Attorney Sunil Harjani in the government’s sentencing memorandum.
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 case was prosecuted by Assistant United States Attorneys Sunil Harjani and Andrew Boutros.
Rockford Man Pleads Guilty to Fraud Involving More Than $500,000 in Fictitious Money OrdersRead the Press Release
ROCKFORD — A Rockford, Ill. man pleaded guilty today before U.S. District Judge Frederick J. Kapala for producing a fictitious financial instrument that appeared to be issued under the authority of the U.S. Treasury. In pleading guilty, BRADLEY SHERMAN HAMPTON, 55, admitted that on Aug. 31, 2009, he created a fictitious $48,780 money order in an attempt to defraud Regions Bank and the U.S. Treasury.
According to the written plea agreement, Hampton also admitted that in 2009 he produced eight other fictitious money orders in an attempt to defraud. The nine fictitious money orders totaled $547,578.47 and purported to be issued under the authority of a Federal Reserve Bank, the Department of the Treasury, or the United States Treasury. The fictitious money orders were made payable to Chase Home Finance, Chase National Payment Service, Holcomb State Bank, Regency Worldwide Development, Inc., Harley Davidson Credit, and the Faith Center in Rockford, Ill.
Producing a fictitious financial instrument carries a penalty of up to 25 years in prison, up to 5 years of supervised release following imprisonment, and a maximum fine of either $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater. The Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines, as well as restitution. Sentencing for Hampton is set for June 1, 2015, at 9:00 a.m.
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 Federal Bureau of Investigation; and Frank Benedetto, Special Agent-in-Charge of the Secret Service’s Chicago Field Office.
The government is being represented by Assistant U.S. Attorney Michael D. Love.
Plea Agreement
Rockford Man Sentenced to 62 Months in Federal Prison for Bank RobberyRead the Press Release
ROCKFORD — A Rockford man was sentenced today in federal court for bank robbery. PEDRO J. CORDERO, 52, of Rockford, Ill., was sentenced by U.S. District Judge Frederick J. Kapala to 62 months in federal prison, to be followed by 3 years of supervised release, for the robbery of BMO Harris Bank, N.A., 2510 S. Alpine Rd., Rockford, Ill., on July 12, 2014. Cordero was also ordered to pay restitution to the bank.
Cordero pleaded guilty to the charge on Oct. 3, 2014. According to the written plea agreement, on July 12, 2014, Cordero, wearing an inside out San Antonio Spurs baseball cap and carrying a white and blue Kane County Cougars umbrella, robbed BMO Harris Bank. The next day, Cordero was stopped by the Rockford Police for a traffic violation. In his car, Cordero possessed the San Antonio Spurs baseball hat he had worn and the blue and white Kane County Cougars umbrella that he had carried the previous day during the BMO Harris Bank robbery, as well as $10,000 in U.S. currency from the bank robbery.
In addition, Cordero admitted in the plea agreement to robbing the U.S. Bank located at 1107 East State St., Rockford, Ill., on May 8, 2014, and the Associated Bank located at 4400 Center Terrace, Rockford, Ill., on June 2, 2014. The court ordered that Cordero pay full restitution to those banks as well.
The sentencing 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 Federal Bureau of Investigation; and Chet Epperson, Chief of the Rockford Police Department.
The government was represented by Assistant U.S. Attorney Scott R. Paccagnini.
CEO and Head Trader of Bankrupt Sentinel Management Sentenced to Prison Terms for $665 Million Fraud Scheme Before Firm’s 2007 CollapseRead the Press Release
CHICAGO — The former chief executive officer of the bankrupt Sentinel Management Group, Inc., was sentenced today to 14 years, and the firm’s former head trader was sentenced to eight years, in federal prison for defrauding hundreds of victims, including customers of Sentinel’s own clients, of more than $665 million before the firm collapsed in August 2007. The former CEO, ERIC A. BLOOM, misappropriated securities belonging to scores of customers by using them as collateral for a loan that Sentinel obtained from Bank of New York Mellon Corp. The bank loan was used, in part, to purchase millions of dollars’ worth of high-risk, illiquid securities not for customers, but for a trading portfolio maintained for the benefit of Sentinel’s officers, including Bloom, members of his family, and corporations controlled by the Bloom family.
Bloom, 49, of Northbrook was convicted in March 2014 of 18 counts of wire fraud and one count of investment adviser fraud after a four-week trial in U.S. District Court. The case is the largest financial fraud case ever prosecuted in Federal Court in Chicago.
U.S. District Court Judge Ronald Guzman said Bloom lied, cheated, and stole from Sentinel’s clients. “I don’t know how he [Bloom] could have expected anything short of horrific losses in any market downturn,” the judge said in imposing the sentence, which he ordered Bloom to start serving on April 30.
Sentinel was located in suburban Northbrook and managed short-term cash investments of futures commission merchants, commodity pools, hedge funds, and other customers. Sentinel’s former head trader, CHARLES K. MOSLEY, 51 of Vernon Hills, pleaded guilty in October 2013 to two counts of investment adviser fraud. He was sentenced after Bloom to eight years in prison, and was ordered to surrender on July 29.
Judge Guzman also ordered both defendants to pay restitution totaling $665,923,451.
“The magnitude of Bloom’s crimes is enormous, and the impact on his victims devastating, with victims around the world suffering losses . . . The Financial crisis did not cause Sentinel’s implosion; it merely tore away the façade of Sentinel’s legitimacy,” Assistant U.S. Attorney Clifford C. Histed argued in a sentencing memo. “The Sentinel case has had an enormous effect on the business and legal community in Chicago for years, and will continue to do so for years to come, and has become an infamous risk management case study,” he added.
Robert B. Wasserman, the Commodity Futures Trading Commission’s chief counsel for its Division of Clearing and Risk, testified at today’s hearing and said in a previous declaration said that Bloom’s fraud scheme “posed the threat of a massive liquidity crisis in the futures market and subjected over a dozen FCMs to immediate risk of insolvency.”
According to court records and the evidence at trial, Bloom was responsible for Sentinel’s day-to-day operations, misled customers four days before Sentinel declared bankruptcy by blaming Sentinel’s financial problems on the “liquidity crisis” and “investor fear and panic” when he knew that the actual reasons for Sentinel’s financial problems were its purchase of high-risk, illiquid securities, excessive use of leverage, and the resulting indebtedness on the Bank of New York loan, which had a balance exceeding $415 million on Aug. 13, 2007. Sentinel declared bankruptcy on Aug. 17, 2007.
Between January 2003 and August 2007, Bloom fraudulently obtained and retained under management more than $1 billion of customers’ funds by falsely representing the risks associated with investing with Sentinel, the use of customers’ funds and securities, the value of customers’ investments, and the profitability of investing with Sentinel. Bloom used customers’ securities invested in Sentinel’s “125 Portfolio” and its “Prime Portfolio” as collateral for its loan with Bank of New York to purchase millions of dollars’ worth of high-risk, illiquid collateralized debt obligations (CDOs).
Bloom lied about customers’ investments and engaged in an undisclosed trading strategy with Sentinel’s own “House Portfolio,” which they traded for the benefit of themselves and Bloom family members. The undisclosed trading strategy included extensive borrowing and a high concentration of CDOs that were inconsistent with the representations Bloom made to customers regarding separate investment portfolios. The undisclosed strategy affected all customers, regardless of the trading portfolio in which they were invested, because Bloom directed employees to use customers’ securities as collateral when Sentinel borrowed money from the Bank of New York and so-called “repo” lenders, and then used the borrowed money to carry out the undisclosed trading strategy. (Under a repurchase agreement, known as a “repo,” a party such as Sentinel, effectively a borrower, sold securities to a counterparty, effectively a lender, with an agreement to repurchase the securities at a later date.)
As part of the fraud scheme, Bloom falsely represented the returns generated by the securities in each Sentinel portfolio to customers. Rather than giving customers the actual returns generated by a particular portfolio, Bloom directed employees on a daily basis to pool the trading results for all of Sentinel’s portfolios and then allocated the returns to the various portfolios as they saw fit. To conceal the scheme, to encourage customers to invest additional funds, and to otherwise lull customers, Bloom on a daily basis caused false and misleading account statements to be created and distributed to customers, including via email. These account statements reported returns earned by customers without disclosing that the returns actually were allocated by Bloom and his employees and were not the result of the market performance of the customers’ particular portfolios. The account statements also listed the purported value of securities being held by each portfolio without disclosing that the securities were being used as collateral for Sentinel’s loan from Bank of New York.
In July and August 2007, Bloom knew that Sentinel was approaching insolvency and that defaulting on the Bank of New York loan was a real possibility, yet he caused Sentinel to take in more than $100 million in customers’ money and continued to conceal Sentinel’s true financial condition from customers.
The sentence 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 James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago. Also assisting in the investigation were the Labor Department’s Employee Benefits Security Administration, the Commodity Futures Trading Commission, and the Securities and Exchange Commission. The CFTC and the SEC filed separate civil enforcement lawsuits following the collapse of Sentinel, which remains in bankruptcy proceedings.
The government was represented by Assistant U.S. Attorneys Clifford C. Histed and Patrick M. Otlewski.
Suburban Man Sentenced to 25 Years in Federal Prison for Cheating 455 Investors of $105 Million and Causing $34 Million LossRead the Press Release
CHICAGO ― A northwest suburban man was sentenced today for engaging in a lengthy investment fraud scheme in which he and a co-defendant swindled approximately $105 million from 455 investors who invested in funds they purported to operate. The defendant, DANIEL SPITZER, pleaded guilty to 10 counts of mail fraud last July on the day his trial was scheduled to begin in Federal Court. Spitzer misused the money he raised from investors for his own benefit and to make Ponzi-type payments to investors, resulting in a loss of $33.98 million to at least 279 victims, many of them elderly.
Spitzer, 55, of North Barrington and formerly of the U.S. Virgin Islands, caused “very substantial damage,” U.S. District Judge James Zagel said in imposing the sentence today, a day after he ordered Spitzer into federal custody. The judge also ordered restitution of $33.98 million.
Spitzer engaged in an “extended act of greed,” between late 2004 and early 2010, Assistant U.S. Attorney Madeleine Murphy argued at today’s hearing.
According to court records, Spitzer was the principal officer and sole shareholder of Kenzie Financial Management; the sole manager and member of Kenzie Services, LLC; the president of Draseena Funds Group, Corp.; the manager of DN Management Company, LLC; and the manager of Nerium Management Company.
Co-defendant ALFRED GEREBIZZA, 59, formerly of Crystal Lake and Palm Beach Gardens, Fla., was the secretary and a director of Draseena and a sales agent for the Kenzie Funds, who also held himself out as a trader. Gerebizza was convicted at trial last July of 10 counts of mail fraud and six counts of federal income tax fraud. He is in federal custody awaiting sentencing.
Through these entities, Spitzer controlled 12 investment funds collectively known as the “Kenzie Funds.” Spitzer and Gerebizza offered and sold to the public investments in the various Kenzie Funds in the form of membership interests and limited partnerships. Through sales agents and various marketing materials, they informed investors and potential investors that their investments would be used primarily in foreign currency trading, that the Kenzie Funds had never lost money, and that they had achieved profitable historical returns. The defendants had to continually raise funds through the solicitation of new investors in the Kenzie Funds to make payments on investments made by earlier investors, all of which they concealed and intentionally failed to disclose to both new and earlier investors. Although Spitzer and Gerebizza falsely represented to prospective investors and current investors that different Kenzie Funds had different levels of risk and different investment strategies, they commingled the money invested in all 12 Kenzie Funds, then misappropriated a significant portion, and only invested less than one-third of the approximately $105 million raised from investors.
The defendants represented to investors that the Kenzie Funds had rates of returns ranging from 4.52 percent to 13.54 percent over the prior five years, although the bank accounts for the Kenzie Funds reflected that the total net return during that period was less than one percent. As of June 30, 2009, they represented that the Kenzie Funds were worth approximately $250 million when, in fact, the Funds collectively had only approximately $4 million in their bank accounts.
The sentence 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; Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and James C. Lee, Special Agent-in-Charge of the Chicago Office of the Internal Revenue Service Criminal Investigation Division. The Chicago Regional Office of the Securities and Exchange Commission assisted the investigation.
The government was represented by Assistant U.S. Attorneys Madeleine Murphy, Jason Yonan, and Jessica Romero.