Northern District of Illinois

CHICAGO — A Chicago travel agent was arrested today on a federal fraud charge for allegedly cheating at least 50 customers of approximately $525,000 by misrepresenting his ability to sell travel packages for the Hajj that included the visa required to enter Saudi Arabia.

The defendant, RASHID MINHAS, 42, of Chicago, was charged with mail fraud in a criminal complaint that was filed yesterday in U.S. District Court and unsealed this morning following his arrest.  He was scheduled to appear at 1:30 p.m. today before U.S. Magistrate Judge Sheila Finnegan in Federal Court.

Minhas was arrested without incident by FBI agents at his residence on the north side of Chicago.  Agents also executed a federal search warrant at his business, Light Star Hajj Group, located at 5801 Northwest Hwy., Chicago.  Minhas previously operated a travel agency in Chicago called City Travel & Tours.

According to the complaint affidavit, between March and November 2014, Minhas falsely represented that Hajj travel packages for September and October of this year included required Saudi Arabia entry visas.  Minhas allegedly knew that Light Star Hajj was not authorized by Saudi Arabia to obtain visas and that he did not intend to obtain the required Hajj visas.  He sold travel deals to at least 50 customers and deposited approximately $525,000 he collected into Light Star’s bank accounts, and then commingled those funds with other deposits and used the money to make partial refunds to customers, to transfer funds to Pakistan, and to pay personal expenses, the complaint alleges.

The affidavit describes the Hajj as an annual Islamic pilgrimage to Mecca, Saudi Arabia.  The Hajj is a mandatory religious duty for Muslims, and must be carried out at least once in a lifetime by all adult Muslims who are physically and financially capable of undertaking the journey.  This year, the Hajj pilgrimage was from Oct. 2-7, and each year, approximately two million pilgrims attend the Hajj.

The complaint states that agents reviewed Light Star’s bank records and determined that approximately $525,000 was deposited this year from the sale of Hajj travel packages.  An additional $586,000 was deposited from other sources, including the sale of Umrah travel packages, cash deposits and transfers.  Agents determined that approximately $745,000 was spent on expenditures that were not related to Hajj travel packages, including $159,000 in checks to cash, $339,000 in transfers to individuals in Pakistan, approximately $49,000 in checks to Minhas’ former wife, and other expenses.

The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

Mail fraud carries a maximum sentence 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 government is being represented by Assistant United States Attorneys Kenneth E. Yeadon and Kathryn Malizia.

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

CHICAGO — A northwest suburban man was sentenced today to life in prison for plotting in 2012 to kidnap, torture, extort and murder an innocent victim and then take control of the victim’s real estate holdings.  STEVEN MANDELL, 64, formerly known as “Steven Manning,” of Buffalo Grove, was tried in February of this year and convicted of conspiracy to commit kidnapping, extortion conspiracy, attempted extortion, possessing a firearm during a violent crime, being a felon-in-possession of a firearm, and obstruction of justice.

“This was an extremely serious and disturbing offense,” U.S. District Judge Amy J. St. Eve said in imposing the life term following a hearing in Federal Court.  “Your actions in this case, Mr. Mandell, were evil . . . and showed a complete disregard for human life.”

The judge also imposed a mandatory consecutive five-year sentence for use of a firearm and a $5,000 fine.  Mandell has been in custody since he was arrested in October 2012 and there is no parole in the federal prison system.

“Mr. Mandell was the mastermind of a truly barbaric crime,” Assistant U.S. Attorney Amerjeet Bhachu said in court today.  Mandell “was the principal author of an exceptionally sadistic and depraved plan to kidnap, torture, extort and murder,” Mr. Bhachu and Assistant U.S. Attorney Diane MacArthur argued in a sentencing memo.

Mandell, a Chicago police officer for approximately 10 years until 1983, served more than a decade on Illinois’ death-row for a murder conviction that was later overturned on legal grounds involving the admissibility of evidence at his trial, not because of innocence.   

A co-defendant in the 2012 murder plot, Gary Engel, who was 61 at the time, of Homer Glen and a former police officer in Willow Springs, committed suicide shortly after he was arrested with Mandell.

The evidence at trial showed that Mandell rented a location in the 5300 block of West Devon Avenue, known to him as “Club Med,” not knowing at the time that the FBI had installed a hidden camera and recording equipment after a cooperating witness reported Mandell’s plan.  Mandell and Engel outfitted the rental location to restrain, torture and kill the victim.  They developed a plan to lure him from his residence; stocked “Club Med” with all the tools they needed to carry out the crimes; and obtained all the trappings they needed to pose as police officers in connection with the victim’s abduction.

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. 

CHICAGO — A former area motorcycle and recreational vehicle dealer and his accountant were sentenced to 13½ and 2½ years, respectively, in federal prison for a $75.9 million fraudulent financing scheme that resulted in 18 lenders losing more than $58.8 million, federal law enforcement officials announced today.

RUSSELL S. OTT, 51, of Oswego, who pleaded guilty to bank fraud and tax evasion, was sentenced on Dec. 3 to 13½ years in prison, beginning Jan. 20, 2015, and ordered to pay approximately $61.16 million in restitution to the victim financial institutions and the United States Treasury.  Ott was the owner of Emily, Inc., which did business as Pro Source Motorsports and was located last in Morris, Ill.  Between 1995 and October 2008, Pro Source, the dealership at the center of the scheme, sold new and used motorcycles, luxury motor homes, recreational vehicles, all-terrain vehicles, boats and jet skis.  In 2007 and 2008, Ott also had ownership interests in Liberty Cycle in Libertyville, and Huntley Chevrolet in Libertyville.

BRIAN McMAHON, 55, of Naperville, who pleaded guilty to two counts of aiding and assisting the filing of Ott’s false tax returns, was sentenced today to 2½ years in prison, beginning Jan. 21, 2015, and ordered to pay $396,829 restitution to the U.S. Treasury.  McMahon was Ott and Emily, Inc.’s certified public accountant, and he also owned Triumph Suzuki in Naperville between 2001 and 2004 when he sold it to Ott.

The sentences were imposed by U.S. District Judge Edmond E. Chang in Federal Court in Chicago.

Eight other co-defendants who acted as straw buyers in sham vehicle sales were charged with Ott and McMahon in August 2013.  All eight have pleaded guilty and have been sentenced or are awaiting sentencing.

According to court documents, Ott’s bank fraud scheme involved two prongs:  in one, Pro Source Motorsports fraudulently obtained more than $31.3 million in direct financing through five lines of credit from Fifth Third Bank, which lost more than $27.1 million; and, in the second, individual straw borrowers obtained just under 200 fraudulent loans totaling more than $44.58 million, which resulted in 18 financial institutions losing more than $31.66 million.

Ott and the straw buyers fraudulently obtained money for their personal use and benefit, enabling them to maintain lavish lifestyles, operate various businesses, and/or make investments.  The money they obtained created the false appearance of personal wealth and helped induce the lenders to advance funds more readily due to their misplaced confidence that the defendants had sufficient personal wealth to repay the loans.

Ott and McMahon fabricated false personal and business tax documents and financial statements and provided them to Fifth Third Bank, which funded traditional “floor plan loans.”  Ott faxed false flooring requests with fictitious vehicle identification numbers for non-existent recreational vehicles, or real VINs for actual RVs but with dramatically inflated values.  Ott sometimes “double floored” vehicles by obtaining separate financing from Fifth Third and a different lender for the same vehicle. 

Ott enlisted the eight straw borrowers to obtain fraudulent loan proceeds to share with him even though they did not actually purchase the vehicles ― usually very expensive RVs ― for which the loans were made and the vehicles generally did not exist.  The lenders generally deposited the loan funds into Emily, Inc.’s bank account, and then Ott periodically disbursed the proceeds to straw borrowers to operate and support their own businesses and lifestyles, make investments, and make monthly payments on some of the loans to perpetuate the scheme.

Ott used fraudulently obtained funds to operate Pro Source, which lost money from approximately 2001 through 2008; and to make lavish purchases, including a house in Elburn for approximately $679,491 and subsequent improvements that increased the home’s cost to more than $1.1 million; a $258,000 vacation home in Butternut, Wis.; a $350,000 rental home in South Elgin; a Sky Hawk 172 Cessna airplane and hanger for approximately $200,000;  and pick-up trucks and other vehicles for family members and employees of Pro Source.  He also used the money to invest in and purchase other vehicle dealerships, including more than $3.6 million in Huntley Chevrolet, and more than $1 million in Liberty Cycle.

The sentences 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 James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.

The government is being represented by Assistant U.S. Attorney William Hogan.

CHICAGO — An Aurora man who allegedly led the Chicago area cell of the Guerrero Unidos Mexican drug trafficking cartel is among eight defendants who are facing federal narcotics charges here for their alleged roles in distributing kilogram quantities of heroin, federal law enforcement officials announced today.  The investigation, led by the Chicago DEA, resulted in the seizure of approximately 68 kilograms of heroin, nine kilograms of cocaine, and more than $500,000 in cash since August 2013.

The alleged cell leader, PABLO VEGA CUEVAS, 40, and his brother-in-law, ALEXANDER FIGUEROA, 37, both of Aurora, were arrested yesterday morning in southeast Oklahoma, and three other defendants were arrested in the Chicago area.  Arrest warrants were issued for three additional defendants, including one who is believed to be in Mexico.  Also yesterday, DEA agents and local police seized several automobiles and executed four federal search warrants at residences in Aurora, Chicago, and Rockford, as well as at a business tied to Vega, Salude Bienstar, in Aurora.

According to a 131-page complaint affidavit unsealed yesterday, Vega worked with various narcotics sources in Mexico to import wholesale amounts of heroin and cocaine from Mexico to Illinois, often concealing the narcotics in commercial passenger buses that traveled from Mexico to Chicago.  Vega’s organization stored drugs at warehouses in Aurora and Batavia, distributed drugs to wholesale customers, and collected cash proceeds on behalf of the Guerrero Unidos, the charges allege.

“This operation strikes at a major Mexican drug trafficking organization that is alleged to have routinely distributed large quantities of heroin and cocaine throughout the Midwest,” said Dennis Wichern, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration.  “These arrests will have a significant impact on the supply and distribution of heroin and cocaine in the Chicago area,” he said.

Vega and Figueroa appeared yesterday in Federal Court in Oklahoma and were ordered transferred to Chicago in custody.  Arrested in the Chicago area yesterday were: ELISEO BETANCOURT PEREIRA, 50, of Aurora; ROBERTO SANCHEZ, 39, of Chicago; and ISAIAS MANDUJANO, 29, of Rockford.  Those three appeared before U.S. Magistrate Judge Sidney I. Schenkier and remain in federal custody pending detention hearings that were scheduled for Thursday and Friday.

Arrest warrants remain outstanding for: WILFREDO FLORES-SANTOS, 43, of North Aurora; JOSE RODRIGUEZ, 31, of Chicago; and ARTURO MARTINEZ, 33 or 34, who is believed to be in Mexico.

According to the complaint affidavit, on Aug. 21, 2013, law enforcement officers discovered and seized approximately $200,000 in cash during a traffic stop of an individual in Chicago.  A subsequent search of the individual’s residence yielded 12 kilograms of heroin and nine kilograms of cocaine, as well as an additional $231,000, all of which the individual had delivered and picked up on behalf of a courier for Vega’s organization.  On June 7 of this year, approximately 25 kilograms of heroin and 60 grams of cocaine were seized from Rodriguez after Figueroa and Betancourt allegedly distributed the heroin to him.  Three days later, approximately 31 kilograms of heroin were seized from another individual allegedly supplied by Figueroa and Betancourt.

All of the defendants except Mandujano were charged with conspiring between August 2013 and November of this year to possess and distribute a kilogram or more of heroin.  The charge carries a mandatory minimum sentence of 10 years and a maximum of life in prison and a $10 million fine.  Mandujano was charged with possession with intent to distribute 100 grams of more of heroin in April of this year, which carries a mandatory minimum sentence of five years and a maximum of 40 years in prison and $5 million fine.  If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Mr. Wichern, of the DEA.  Police departments in Aurora, North Aurora, Addison, Arlington Heights, Chicago, Oak Lawn, Oswego, and Prospect Heights assisted in the investigation, as well as the Cook County Sheriff’s Police and the Internal Revenue Service Criminal Investigation Division.  The investigation was conducted under the umbrella of the Organized Crime Drug Enforcement Task Force (OCDETF).

The government is being represented by Assistant United States Attorneys Nicole Kim and Georgia Alexakis.

The public is reminded that a 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

CHICAGO — A Chicago company dealing in scrap metal has agreed to plead guilty to federal tax and currency transaction charges alleging that it engaged in cash transactions that resulted in underreporting its corporate income and underpaying its payroll taxes.  The defendant, TRI STATE METAL COMPANY, INC., was charged in a criminal information filed today in U.S. District Court in Chicago.  The case is the first prosecution resulting from an ongoing investigation of cash transactions in the local scrap metal industry being conducted by the Internal Revenue Service Criminal Investigation Division.

Tri State Metal, located at 1745 West Fulton St., in Chicago, was charged with one count of corruptly obstructing and endeavoring to obstruct and impede the IRS, and one count of structuring cash transactions in amounts less than $10,000.  Through its attorneys, Tri State authorized the government to disclose that it will plead guilty to the charges.  The company will be arraigned on a date to be determined in Federal Court.

The charges also include a forfeiture allegation claiming that $1.85 million in cash that was seized from a bank account and $118,420 in cash that was seized from Tri State’s offices, both in October 2012, are subject to criminal forfeiture.

According to the charges, between September 2008 and September 2012, Tri State obtained cash by negotiating checks made payable to fictitious individuals and used that cash to pay vendors and cash wages to employees, as well as to provide cash for the personal benefit of the deceased owner and president of Tri State, who was not named and was identified in the charges as Individual A.  The cash transactions were designed to assist the vendors, employees and Individual A in understating their income on federal tax returns, the charges allege.

As part of the corrupt endeavor, Tri State sold scrap to another scrap metal dealer, identified as Business A and, in return, allegedly received approximately 769 checks from Business A, all made payable to fictitious individuals in amounts less than $10,000.  Tri State allegedly failed to record these sales or the receipt of funds from Business A and failed to report the income on its corporate tax returns.

Individual A allegedly directed Tri State employees to issue checks payable to fictitious persons to obtain cash to pay vendors and employee wages.  Tri State paid certain vendors with both cash and checks, with vendors indicating how much they wanted to be paid in cash, and Tri State employees allegedly manipulated documents to conceal the cash payments.  During the four-year period, Tri State paid approximately 15 scrap metal vendors more than $6.17 million in cash, the charges allege.

The company also paid employees a portion of their wages with both cash and checks.  Tri State issued tax forms to its employees and filed quarterly returns with the IRS that allegedly falsely underreported the amount of wages paid by failing to include the amount of cash.  In total, Tri State allegedly paid its employees cash wages totaling more than $1.47 million and failed to collect and pay the IRS federal income tax withholdings, FICA taxes, and Medicare withholdings on the cash wages.

The charges further allege that Tri State cashed more than $6.41 million in checks drawn on its bank account and payable to fictitious payees at an unnamed currency exchange in Chicago.  Tri State also allegedly cashed at the currency exchange more than $2.92 million in checks issued by Business A to Tri State in the name of fictitious payees.

Tri State allegedly filed false federal corporate income tax returns for 2009, 2010, and 2011, that understated its gross receipts or sales by more than $2.92 million.  In addition, Tri State failed to report or otherwise account for approximately $840,720 in cash expenditures for the benefit of deceased Individual A, the charges allege.

The tax offense carries a maximum penalty of five years’ probation and a $500,000 fine, and the structuring offense carries a maximum penalty of five years’ probation and a $1 million fine, and each count carries an alternate maximum 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, and James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago.  The government is being represented by Assistant U.S. Attorney Patrick King.

The public is reminded that criminal charges 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.

Information

CHICAGO — A former officer and a former director of a bank in Will County have pleaded guilty to federal charges for fraudulently creating false reports that made it appear that the bank’s loan portfolio was in better shape than it actually was.  The defendants together concealed delinquent loan payments on behalf of two customers whose multiple loans totaled approximately $2.8 million, and together caused the bank to lose more than $1.1 million, according to their guilty pleas that were announced today by federal law enforcement officials.

One defendant, MARTIN E. SCHMIDT, JR., was senior vice president for lending and a member of the board of directors of First Community Bank and Trust, which operates in Beecher and Peotone in Will County. Co-defendant, DONNA M. BARBER, was vice president for mortgage lending.  First Community Bank and Trust cooperated with the federal investigation.

Schmidt, 57, of Beecher, pleaded guilty on Nov. 13 to making false bank reports and is free on his own recognizance pending sentencing on Feb. 26, 2015.  Barber, 53, of Beecher, pleaded guilty to the same charge last Thursday and is free on her own recognizance pending sentencing on March 17, 2015.  Both will be sentenced by U.S. District Judge Charles Kocoras in Federal Court in Chicago.  They were charged together in a criminal information that was filed in late October.

Making false bank reports carries a maximum penalty of 30 years in prison and a $1 million fine.  Schmidt’s plea agreement anticipates an advisory United States Sentencing Guidelines range of 41 to 51 months in prison.  Barber’s plea agreement anticipates an advisory guidelines range of 33 to 41 months in prison, with the government recommending a sentencing of approximately 22 months provided she continues to fully cooperate. 

In addition, Schmidt and Barber each face a 10-year prohibition on directly or indirectly participating in the affairs of any federally insured credit union or financial institution.

In pleading guilty, Schmidt and Barber admitted that they caused and made false entries in the bank’s past due accounts report for September 2009 by intentionally omitting to disclose as past due nine of Customer K’s loans and advances in the total principal amount of approximately $367,000, and 39 of Customer M’s loans in the total principal amount of approximately $2.5 million.

According to court documents, Schmidt was the point of contact for Customer K, and Barber was the point of contact for Customer M, and their compensation was based, in part, on the performance of the loans for which they were each responsible.  By September 2008, Schmidt and Barber each knew that Customers K and M were unable to make payments to the bank on their various loans.  They agreed that they needed to take action to prevent the delinquent accounts from appearing on the bank’s reports and began concealing their past due nature.  The false entries extended from September 2008 until October 2009.

Barber, with Schmidt’s knowledge and approval, and Schmidt made and caused false entries in loan records allowing Customer M to skip payments without paying the interest due and extending notes without interest payments being current.  Some false entries were made on a retroactive basis so the actual condition of the loans would not appear on the bank’s current monthly records.

Schmidt alone caused an unauthorized, undocumented advance of approximately $105,562 to be disbursed to Customer K to make payments on other delinquent loans.  He also approved approximately $269,038 in loans to Customer K at a time when he knew that Customer K was unable to repay these loans.  Schmidt also caused Barber to make entries in Customer K’s account records that allowed Schmidt to make unauthorized disbursements to Customer K. 

Schmidt deceived the bank’s board of directors by leading them to believe that he and Barber were properly managing the bank’s loans, when they were actually fraudulently creating reports that made it appear that the loan portfolio was in better shape than it was.

Schmidt caused the bank to lose more than $1.18 million resulting from both customers’ delinquent loans, which would not have been extended and would have been called in default at an earlier time, as well as by issuing an authorized $80,000 letter of credit and improperly guaranteeing $22,500 in insufficient funds checks for Customer K.  Schmidt and Barber were responsible for causing the bank to lose approximately $708,274 relating to Customer M’s loans, while Schmidt alone was responsible for the bank’s loss of approximately $475,100 resulting from Customer K’s loans.

The government is being represented by Assistant U.S. Attorney Brian Netols.

The guilty pleas 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.

Schmidt Plea Agreement

Barber Plea Agreement

CHICAGO — A former futures trader at an unnamed trading firm in Chicago was indicted on federal charges for allegedly stealing trade secrets from the firm, including computer code for electronic trading and strategies and other intellectual property.  The defendant, DAVID JACOB NEWMAN, was charged with three counts of theft of trade secrets in an indictment returned by a federal grand jury yesterday and made public today.

Newman, 32, of Chicago, began working at the trading firm as a clerk in 2004 and later as a trader until he left in March of this year, less than a week after he collected his 2013 bonus.  Newman will be ordered to appear for arraignment on a date to be determined in U.S. District Court in Chicago.

According to the indictment, the trading firm’s trade secrets included custom-made software for pricing financial products, communicating and executing trades on public exchanges, and analyzing trading risk.  They also included trading algorithms, trading profit and loss analysis, and the firm’s options modeling system.  Most of the computer code the firm used for trading was custom-made by its employees or consultants, and the firm invested considerable time and money in developing its computer code and intellectual property.  In 2011, Newman signed a document acknowledging that he understood the firm’s policies regarding protection of its trade secrets and proprietary information, and at no time was he authorized to copy or possess the firm’s trade secrets.

On Oct. 31, 2013, Newman allegedly accessed and copied computer files from a firm directory, containing trading algorithms, strategies, and analysis, onto a personal thumb drive.  On Nov. 5, 2013, Newman accessed and copied additional files containing such information from four firm directories used by four specific traders onto a personal thumb drive, the indictment alleges.  A week later, Newman established NTF LLC and was the sole owner and only member of the limited liability company.

On Feb. 24 of this year, Newman allegedly accessed and copied more than 400,000 computer files from the trading firm’s source code repositories onto a personal thumb drive.  Three days later, Newman signed an agreement with the CME Group to allow NTF LLC to establish its own interface with CME online trading platforms.

A day after Newman resigned from the trading firm in March, he established an account enabling NTF LLC to trade speculatively in the futures markets, the indictment states.

Each count of theft of trade secrets carries a maximum penalty of 10 years in prison and a $250,000 million fine.  If convicted, restitution is mandatory and the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorney Clifford C. Histed, deputy chief of the Securities and Commodities Fraud Section of the U.S. Attorney’s Office.

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

CHICAGO — Former Illinois State Rep. KEITH FARNHAM pleaded guilty today to a federal charge 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 of this year, less than a week after federal agents seized computers from his home and office.

Farnham, 67, of Elgin, remains on restrictive conditions of bond, including home incarceration with electronic monitoring, while awaiting sentencing, which U.S. District Judge Edmond E. Chang scheduled for March 19, 2015, in Federal Court.

Farnham, who must register as a convicted sex offender, faces a mandatory minimum sentence of five years and a maximum of 20 years in prison and a maximum fine of $250,000.  His plea agreement states that the government anticipates a United States Sentencing Guidelines range of at least 151 to 188 months in prison.  Federal inmates must serve at least 85 percent of their sentence and there is no parole in the federal prison system. 

In pleading guilty, Farnham admitted that on Nov. 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.

On March 13 of this year, 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 that day, 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 guilty plea 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 is being represented by Assistant U.S. Attorneys Timothy Storino and Michelle Petersen.

Plea Agreement

CHICAGO — Two principals of a defunct suburban company that purported to have billions of dollars to finance small businesses were indicted on federal fraud charges for allegedly swindling about $2 million in advance fees from approximately 125 business owners nationwide.  With no such assets and no history of funding small businesses, the defendants instead allegedly used the money they collected for personal purposes, including more than $1.1 million in so-called “loans” to themselves and others.

One defendant, ALBERTO B. COLÓN, was the chairman of the board and chief executive officer, while the other defendant, ARTEMIO RIVERA, was the treasurer and chief corporate counsel of the Commercial or Residential Development Group, Inc., also known as COR, which had a mailing address in Hoffman Estates.

Colón, 46, of West Dundee and formerly of Elgin, and Rivera, 56, of Falls Church, Va., who is a licensed attorney in Maryland, were each indicted on four counts of wire fraud and one count of mail fraud in a five-count indictment returned yesterday by a federal grand jury in Chicago.  The indictment also seeks forfeiture of approximately $2 million from both defendants, who will be ordered to appear for arraignment on a date to be determined in U.S. District Court in Chicago.

According to the indictment, Colón and Rivera defrauded business owners between September 2008 and December 2011 by making false representations that COR had billions of dollars in assets and would provide business owners with billions of dollars in funding; provide the funding within a specific time period; use the advance fees they collected for specific purposes related to the business owners’ requests; and refund the fees if COR failed to provide funding.  Both defendants knew that COR had no such assets and no history of funding businesses, the indictment alleges.

The defendants allegedly solicited business owners themselves and also used individuals they sometimes referred to as “rangers” to solicit business owners to apply for funding.  They fraudulently represented that COR had approved requests for funding in amounts ranging from $100 million to $1.2 billion, knowing that they had not secured funding for those projects, the charges allege.

Colón and Rivera also allegedly promised business applicants who signed so-called “Project Partner Agreements” and paid an advance fee of $20,000 that COR would apply the advance fee toward the creation of a new corporation, trust, and foundation to accept funding from COR.  Further, the charges allege that they falsely promised COR would contribute an additional $80,000 to the funding entities in exchange for signing project agreements.

As part of the scheme, Colón and Rivera allegedly made false statements in proceedings before the Illinois Department of Securities.

Each count of wire and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 million fine, or, alternatively, a fine totaling twice the loss or twice the gain, whichever is greater.  If convicted, restitution is mandatory and the court must impose a reasonable sentence under federal 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 Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.  The Illinois Department of Securities cooperated with the investigation. 

The government is being represented by Assistant U.S. Attorney Cristopher McFadden.

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

CHICAGO — A former chief of staff for an unnamed Chicago alderman pleaded guilty today to accepting a $7,500 cash bribe in exchange for obtaining the alderman’s letters of support for a license to sell alcohol in the alderman’s ward.  The defendant, CURTIS V. THOMPSON, JR., accepted the bribe from an individual who claimed he wanted to open a convenience store but was actually a cooperating witness in an FBI undercover investigation.

Thompson, 63, of Chicago, pleaded guilty to federal program bribery.  According to court documents, Thompson accepted 75 $100 bills in a Christmas card that the cooperating witness gave him at the alderman’s holiday party on Dec. 19, 2013.  Thompson admitted today that he used the money he received to pay personal expenses.

Thompson faces a maximum sentence of 10 years in prison and a $250,000 fine.  A written plea agreement states that the government anticipates a United States Sentencing Guidelines range of 12 to 18 months in prison.  Thompson was arrested in February of this year and is free on bond while awaiting sentencing, which U.S. District Judge Samuel Der-Yeghiayan scheduled for March 17, 2015, in Federal Court.

Thompson’s plea agreement and court documents describe a series of telephone conversations and in-person meetings between the cooperating witness and other individuals, including a meeting with Thompson on Oct. 7, 2013, in the alderman’s ward office.  During the meeting, the cooperating witness showed Thompson a note, which stated, “$7,500 to Ald for L.O.S.”  Thompson understood the note to mean payment of $7,500 in exchange for a letter of support from the alderman for a liquor license for a store to be opened in the ward.  After seeing the note, Thompson nodded his head and said “Okay.  I understand.”

At a meeting with Thompson, the alderman, and another individual in the ward office on Oct. 29, 2013, the cooperating witness handed the alderman a note, which stated, “$12k to you for letter of support[.]”  Thompson admitted that he was passed that note and that he understood that the cooperating witness was offering to pay money for a letter of support from the alderman for a liquor license.  A third meeting was held on Nov. 19, 2013, at which the cooperating witness explained he was going through the process of becoming a convenience store franchisee.

Over the next few weeks, Thompson prepared two letters of support on the alderman’s letterhead and signed the alderman’s name, after seeking and obtaining the alderman’s approval to write the letters.  Thompson knew that the cooperating witness had picked up the letters of support from the alderman’s ward office and understood they would be used to obtain a liquor license for the proposed store.  The bribe payment was exchanged a short time later.

The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorneys Megan Church and Bethany Biesenthal.

Plea Agreement

CHICAGO — A former west suburban home builder was sentenced to 2½ years in federal prison for failing to pay more than $1.27 million in federal income taxes and concealing certain business interests in his personal bankruptcy case.  The defendant, DENNIS WEISS, was sentenced after pleading guilty last year to one count each of filing a false federal income tax return and making false statements in a bankruptcy petition.

Weiss, 64, of South Elgin and formerly of St. Charles, owned Custom Homes by D. R. Weiss, Inc., and Reliable Home Solutions, Inc., both formerly located in St. Charles.  He was sentenced to 30 months in prison and was ordered to begin serving his sentence in January.  He was also ordered to pay $296,643 in restitution to the Internal Revenue Service by U.S. District Judge John Z. Lee, who imposed the sentence yesterday in Federal Court.

According to court documents, Weiss filed false individual federal income tax returns for 2005 through 2009, and he failed to file corporate tax returns for both of his companies.  Although he filed corporate tax returns on behalf of Custom for 1999 through 2004, he filed none starting in 2005.  Reliable was formed in 2006 and dissolved in 2008, and Weiss never filed a corporate return on its behalf and concealed the company’s existence from his tax preparer.

Between 2005 and 2009, Weiss paid personal expenses from Custom’s business bank account, accepted cash payments from Custom and Reliable customers, and failed to record the receipt of these funds on the books and records of the corporations, resulting in a total federal tax loss of $1,271,280.

On March 10, 2009, Weiss filed a personal bankruptcy petition and intentionally concealed the existence of Melrose Currency Exchange, Inc., which he had owned for several years.  In fact, Weiss had reported income from the currency exchange on his individual tax returns for 2005-2009.  Court documents also state that Weiss also falsely declared that he had no interest in any partnerships or joint ventures when, in fact, he held interests in three family held entities: Royal Fox Country Club LP, Royal Fox Country Club LP II, and Weiss Private Equity LP.  His false bankruptcy petition resulted in the discharge of his debts to approximately 43 trade creditors. (In re Dennis R. Weiss, 09 B 08028.)

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago.  The government was represented by Assistant U.S. Attorney Patrick King.

In addition to criminal penalties, defendants convicted of tax offenses remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed. 

CHICAGO — A high-level member of the Sinaloa Cartel in Mexico was sentenced today to 22 years in federal prison and, separately, guilty pleas were unsealed in the same case for twin brothers who ran the cartel’s Chicago distribution cell and supplied vast quantities of cocaine and heroin in cities across the United States and Canada.

At a sentencing hearing this afternoon, the government argued that ALFREDO VASQUEZ HERNANDEZ, 59, coordinated the use of airplanes, trains, and submarines for the Sinaloa Cartel to transport cocaine from Central and South America to Mexico, as well as from Mexico into and throughout the United States.  Vasquez Hernandez was placed on court supervision for five years after he is released from his 264-month sentence.  He must serve at least 85 percent of his sentence and is subject to deportation following his release from custody.

Vasquez Hernandez, who was extradited from Mexico in 2012, pleaded guilty in April this year to participating in the Sinaloa Cartel drug distribution conspiracy between May 2005 and December 2009.  In imposing sentence, U.S. District Chief Judge Ruben Castillo said he would have sentenced Vasquez Hernandez to 25 years but gave him credit for the time he was held in Mexico.

“We are tired, tired of drug trafficking and it continues to hurt this city and this country,” Judge Castillo said.  The judge noted it was difficult to determine Vasquez Hernandez’s role in the cartel, but said it was undeniable that he involved himself in a major shipment of drugs that was headed to Chicago.    

In pleading guilty without a plea agreement, Vasquez Hernandez admitted that he was responsible for smuggling only 276 kilograms of cocaine to Chicago in November 2008 for sale to twin brothers PEDRO and MARGARITO FLORES, who, unbeknownst to Vasquez Hernandez and co-conspirators, were cooperating with the U.S. Drug Enforcement Administration.

Also today, plea agreements that the Flores brothers, both 33, entered into when they pleaded guilty in August 2012 were unsealed and made public for the first time in advance of their anticipated sentencing next month in U.S. District Court.

According to the Flores brothers’ plea agreements, they and the Chicago distribution crew they controlled obtained and distributed from Chicago, Los Angeles, and elsewhere, on average, 1,500 to 2,000 kilograms of cocaine a month at certain times during the conspiracy and received some or all of that quantity from factions of the Sinaloa Cartel led by Joaquin Guzman Loera, also known as “Chapo,” and Ismael Zambada Garcia, also known as “Mayo.”  Using several warehouse locations in the Chicago area to unload and store shipments of cocaine and heroin, the Flores brothers and their crew sold the narcotics to wholesale customers in the Chicago area, as well as to customers in Milwaukee, Detroit, Cincinnati, Columbus, Philadelphia, New York, Washington, D.C., as well as Vancouver, British Columbia.

During the course of their conspiracy, the brothers admitted that they and their crew were responsible for transporting $938,415,000 in narcotics proceeds, in the form of bulk U.S. currency, from the United States to Mexico.

According to their plea agreements and a preliminary forfeiture order that was filed today, the Flores brothers agreed to forfeit more than $3.6 million in cash that was seized from them, in addition to more than $400,000 worth of assorted jewelry, several luxury automobiles, smaller amounts of cash, and electronics equipment, all of which were seized and forfeited in an administrative process by the DEA.

If Judge Castillo accepts their plea agreements and grants the government’s motion at sentencing next month, then he must sentence the Flores brothers to prison terms ranging between 10 and 16 years in federal custody.

At Vasquez Hernandez’s sentencing today, the government argued that he worked directly with Chapo Guzman and the Flores brothers to smuggle cocaine from place to place using various modes of transportation, including, for example, large cargo planes to fly more than 20 tons of cocaine directly from Columbia to Mexico.  Vasquez Hernandez specialized in using trains to smuggle drugs into the United States and transporting them to Chicago hidden in rail cars.

“This case is about drug trafficking at the highest levels at which it exists in the world.  [Vasquez Hernandez] conspired directly with Chapo Guzman and other leaders of the Sinaloa Cartel to traffic ton quantities of cocaine that were ultimately distributed into the United States.  The direct and indirect damage that those drugs have caused to communities in Chicago and elsewhere is immeasurable,” a team of federal prosecutors argued in a sentencing memo.

The Vasquez Hernandez sentencing and Flores brothers’ plea agreements were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Dennis Wichern, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration.

The DEA in Chicago led the investigation, joined by the Internal Revenue Service Criminal Investigation Division and the Chicago Police Department.  Also assisting were the DEA’s National Drug Intelligence Center, the Chicago High-Intensity Drug Trafficking Area task force, the U.S. Attorney’s Office in Milwaukee and the Milwaukee Police Department; the U.S. Attorney’s Office for the Central District of Illinois; the Chicago and Peoria offices of the Federal Bureau of Investigation; the Chicago office of the Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and the U.S. Marshals Service; the Cook County Sheriff’s Department, and other state and local law enforcement agencies.  The investigation was assisted by agents and analysts of the Special Operations Division (SOD), and attorneys from the Justice Department Criminal Division’s Narcotic and Dangerous Drug Section.  The Criminal Division’s Office of International Affairs assisted with the extraditions. 

The government is being represented by Assistant U.S. Attorneys Michael J. Ferrara, Erika Csicsila, Naana Frimpong, Georgia Alexakis, Kathryn Malizia, and Thomas D. Shakeshaft.  

CHICAGO — The former owner of the defunct Chicago Rush Arena Football League team was arrested today on federal fraud charges for allegedly concealing certain business interests and assets from creditors and overstating his net worth in connection with his purchase and operation of the indoor football team in 2013.  DAVID STARAL, JR., was charged with one count each of bankruptcy fraud and wire fraud in a criminal complaint that was filed Friday in U.S. District Court and unsealed this morning following his arrest at his residence in Kenosha, Wis.

Staral, 35, formerly of Chicago, is scheduled to appear at 11:30 a.m. today before U.S. Magistrate Judge Geraldine Soat Brown in Federal Court.

The bankruptcy fraud count alleges that Staral schemed to discharge more than $900,000 in unsecured debt, while concealing from his creditors and the bankruptcy trustee additional businesses he was involved with, income he had received before filing for bankruptcy, and at least two personal bank accounts that he had when he filed a voluntary bankruptcy petition on Jan. 7, 2013.  Staral allegedly failed to disclose in his bankruptcy filings his interest in an investment company called Star Julin Equity Partners and testified falsely under oath in a bankruptcy proceeding that he was unemployed and had no occupation after he had just purchased, and was serving as the manager of, the Chicago Rush.

Staral allegedly fraudulently purchased the Chicago Rush when, during purchase negotiations in February 2013, he falsely represented to the Arena Football League’s commissioner that he had a personal net worth of more than $5 million.  In fact, Staral had filed for bankruptcy the month before and claimed to have a negative net worth.  The purpose of Staral’s scheme was to enable him to purchase the Chicago Rush and benefit financially from ownership, while concealing that he did not have the financial ability to purchase and operate the team, according to an FBI affidavit.

Staral knew the requirements imposed upon him when filing for bankruptcy because he had previously filed a Chapter 7 bankruptcy petition in June 2002, resulting in the Bankruptcy Court discharging approximately $280,000 in debts and providing him with a fresh start, the affidavit states.

In 2012, Staral defrauded two individual investors in separate swindles, the complaint alleges as background.  In February 2012, Staral obtained $39,000 from Individual A to use in opening two bars/restaurants in the Chicago area and never made the interest payments he promised or returned the principal, and instead used the money for his own benefit.  In September 2012, Staral obtained $50,000 from Individual B and, instead of investing and trading the funds as he promised, Staral used the money to pay down a car loan, to generate cash for himself, and to pay personal expenses, among other things.

When Staral filed for bankruptcy in January 2013, he listed assets totaling $477,901, which were highly encumbered, and liabilities totaling more than $1.35 million, consisting primarily of mortgage and credit card debt and legal judgments against him.  (In re David Staral, 13 B 585).

Staral’s bankruptcy filings allegedly concealed two bank accounts, as well as the fact that he had received $50,000 from Individual B and he did not list Individual A as a creditor.  He also allegedly concealed his interest in Star Julin Equity Partners, an investment company he formed with Individual A just two months before the bankruptcy filing, Eventmark LLC, the bar/restaurant investment entity he managed, and his prior interest in FoodFunds, Inc.  The alleged concealment and false statements prevented the bankruptcy trustee from properly administering Staral’s bankruptcy estate and prevented the trustee and creditors from conducting a proper inquiry into Staral’s assets and ability to pay creditors, the affidavit states.

In negotiations to purchase the Chicago Rush through Star Rush Football LLC, Staral allegedly claimed a personal net worth in excess of $5 million and did not disclose that he had filed for bankruptcy one month earlier, among other things.  The commissioner of the Arena Football League told agents that the league would not have agreed to sell the team to Staral had it known about Staral’s alleged misrepresentations.

The charges further allege that Staral deposited approximately $5,000 from the sale of Chicago Rush tickets into his personal bank account and used some of the proceeds to cover personal expenses, including grocery and pharmacy payments, gas stations, and his car loan.

At a Bankruptcy Court creditors’ meeting on March 1, 2013, Staral allegedly made false statements under oath when he was questioned about his bankruptcy filings, knowing that he had concealed certain assets, failed to disclose certain debts, and failed to disclose his purchase of the Chicago Rush, among other things.

The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.  The U.S. Trustee Program’s Chicago office assisted in the investigation.

Bankruptcy fraud carries a maximum of five years in prison and wire fraud carries a maximum of 20 years in prison, and each counts carries a maximum $250,000 fine.  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 Matthew F. Madden.

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

CHICAGO — Six men were indicted on federal charges alleging a plot to force a former employee of a now-closed suburban restaurant to pay a business debt of approximately $40,000, federal law enforcement officials announced today. On June 1 of this year, five of the six defendants allegedly physically assaulted the victim outside a different restaurant in Aurora, where the victim was working at the time, simultaneously punching and kicking him in the head and body after he was knocked to the ground.

All six defendants were charged with one count of conspiracy to collect credit by extortionate means, and five of the six were also charged with one count of extortionate collection of credit by the use of violence and threats of violence, in a two-count indictment that was returned by a federal grand jury yesterday.

An arrest warrant is outstanding for JINHUANG ZHENG, 31, aka “Benny,” of Indianapolis, who was an owner and employee of a restaurant supply company in Indianapolis. MINGRUI SUN, 20, of Chicago, was arrested today, and BING LIANG CHEN, 26, also known as “Michael,” and DANIEL ZHU, 19, both also of Chicago, were arrested in August. JACK WU, 24, of Chicago, voluntarily surrendered today, and SHENG QUAN DONG, 41, aka “Peter,” is scheduled to be arraigned on Wednesday in U.S. District Court. Sun, Chen, Zhu, and Wu all remain in federal custody pending further court proceedings.

According to the indictment, before June 1, the victim was an employee of Restaurant A, which had locations in Naperville and Lombard, both of which are now closed. Restaurant A owed approximately $40,000 to Zheng’s Company A in Indianapolis. At the time of the attack, the victim worked at Restaurant B in Aurora, which had no affiliation with Restaurant A.

In May of this year, Zheng allegedly discussed the business debt with Dong and showed him paperwork evidencing the debt. In May and early June, Zheng and Dong allegedly recruited Chen, Zhu, and Sun to help collect the debt owed to Company A from the victim. On June 1, these five defendants met in Chicago’s Chinatown neighborhood to discuss the debt, agreed to work together to obtain payment from the victim through violence and threats of violence, and then traveled together to Aurora to confront the victim and to intimidate him into paying the debt, the indictment alleges.

During the June 1 assault, one of the defendants allegedly told the victim, in essence, that if he did not pay, he was going to die.

After the victim refused to pay the debt and was beaten, Chen allegedly recruited Wu ― agreeing to pay Wu $2,000 ― to return to the Aurora restaurant with him to again threaten the victim into paying the debt. In June and July, Chen and Wu allegedly drove to Aurora three times to confront the victim about the debt. On July 9, Chen allegedly threatened to break the windows of Restaurant B if another employee did not provide the victim’s telephone number. That same day, Chen and Wu allegedly followed the second employee to that employee’s home in an effort to learn where the victim lived.

The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Chicago and Aurora police departments assisted in the investigation.

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 government is being represented by Assistant United States Attorney Steven Dollear.

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

CHICAGO ― A Chicago Police officer was indicted on federal civil rights and obstruction charges alleging that he used excessive force by punching and kicking a victim and then lied in a police report to cover up the incident in 2012, federal law enforcement officials announced today.  The defendant, ALDO BROWN, was indicted on one count of violating the unnamed victim’s civil rights to be free from unlawful seizures and the use of unreasonable force by a law enforcement officer and two counts of obstruction of justice.

Brown, 37, joined the Chicago Police Department in December 2002.  He will be arraigned on a date yet to be scheduled in U.S. District Court.

The three-count indictment was returned by a federal grand jury yesterday and was 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.  The Independent Police Review Authority cooperated with and assisted in the investigation.

According to the indictment, on Sept. 27, 2012, Brown and Officer A entered a convenience store located on East 76th Street in Chicago.  When they arrived, the officers placed certain individuals inside the store in handcuffs, including Victim A.  Brown and Officer A then began searching the store and the individuals inside.  Shortly after Officer A removed the handcuffs from Victim A, Brown allegedly struck Victim A multiple times, resulting in bodily injury.

While Victim A was lying face down on the floor of the store, again in handcuffs, Brown recovered a firearm from Victim A’s rear pants pocket.  Then, while Victim A was still handcuffed and lying face down, Brown allegedly kicked Victim A.  Brown and Officer A then arrested Victim A.

One obstruction of justice count alleges that Brown made false statements in a tactical response report, including that Victim A was an “active resister,” who “fled” and “pulled away,” but the report did not indicate that Brown punched or kicked Victim A.  Brown allegedly knew that Victim A did not actively resist, attempt to flee the situation, or pull away, and Brown knew that he punched and kicked Victim A.

The second obstruction count alleges that Brown lied in an arrest report, which falsely stated, in part, that:

P.O. Brown approached the above subject to conduct a field interview at which time the above subject stated to P.O. Brown, “I got some weed on me” and reached toward his rear pants pocket at which time P.O. Brown observed a handgun inside the above subject rear pants pocket. P.O. Brown conducted a emergency take down for officer safety and recovered the gun from the above subject rear pants pocket. The above subject was trying to pull away from P.O. Brown at which time P.O. Brown delivered a open hand stun to gain control of the above subject…

Brown allegedly knew the arrest report was false for multiple reasons, including that he did not observe a firearm on Victim A at the time of a field interview; he did not know that Victim A had a firearm in his possession until after he struck Victim A multiple times, handcuffed him for a second time, and Victim A was lying on the floor of the convenience store; and Victim A did not pull away from him as the arrest report indicated.

The civil rights count carries a maximum sentence of 10 years in prison, and each count of obstruction of justice carries a maximum of 20 years in prison, and there is a $250,000 maximum fine on all three counts.  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 Nancy DePodesta.

An indictment 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.

Indictment

ROCKFORD — A Rockford, Ill. man was sentenced yesterday in federal court by U.S. District Judge Frederick J. Kapala on a federal drug trafficking charge.  The defendant, MICHAEL CRAIG, 44, was sentenced to 169 months in federal prison, to be followed by 5 years of supervised release.  Craig has been in federal custody since his arrest on March 15, 2013.

Craig pleaded guilty to the charge on March 21, 2014.  According to the written plea agreement, from June 1, 2010 through January 5, 2012, Craig ran a heroin trafficking organization in Rockford and conspired with his co-defendants, Michael W. Charles, Elbert Charles Dixon, Melvin Bradley, Denise Lambert, Devon Zachary and Jose Melendez, to distribute more than 1 kilogram of heroin.  The plea agreement noted that Craig and Melendez pooled their money and traveled together to obtain heroin from their suppliers in Chicago and that Craig then provided the heroin to Charles, Dixon, Zachery and others to distribute in Rockford.  The plea agreement further noted that Lambert aided Craig in his heroin trafficking operation by storing Craig’s heroin and heroin trafficking proceeds at her apartment in Rockford. Craig also admitted as part of the plea agreement that he directed Charles and Dixon to distribute heroin to a witness who was secretly cooperating with law enforcement on two occasions in June 2011.  Craig was also ordered to repay $2,300 in Abuy@ money used in the undercover operation.

Co-defendants Charles, Dixon, Bradley Lambert, Zachary and Melendez all previously pleaded guilty to conspiring to distribute heroin.  On May 28, 2014, Charles was sentenced to 151 months’ imprisonment.  On May 23, 2014, Dixon was sentenced to 70 months’ imprisonment.  On May 9, 2014, Bradley was sentenced to 18 months’ imprisonment.  On May 6, 2014, Zachery was sentenced to 124 months’ imprisonment.  On November 13, 2014, Jose Melendez was sentenced to 135 months imprisonment.  Lambert is awaiting sentencing and is facing a maximum sentence of 20 years’ imprisonment, in addition to a maximum fine of up to $1 million for her involvement in the conspiracy.  The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

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; Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms, & Explosives; Richard Meyers, Winnebago County Sheriff; Chet Epperson, Chief of the Rockford Police Department; and Hiram Grau, Director of the Illinois State Police.

The government is being represented by Assistant U.S. Attorney Joseph C. Pedersen.

ROCKFORD — A Chicago resident is now facing three federal bank robbery charges, federal officials announced today.  ADAM A. SANBORN, 29, of Chicago and formerly of Milton, Florida, was originally arrested on Sept. 10, 2014, and charged with the Aug. 23, 2014, robbery of the Byron Bank in Davis Junction, Illinois.  The federal grand jury in Rockford returned an indictment against Sanborn on Sept. 23, 2014, charging him with that robbery.

Today, 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, announced that the federal grand jury in Rockford returned a superseding indictment charging Sanborn with the robbery of the Byron Bank as well as the robbery of the First Community Bank and Trust in Peotone, Illinois, on Feb. 24, 2014, and the robbery of the Heartland Bank in Huntley, Illinois, on April 25, 2014.  Sanborn will appear before U.S. Magistrate Judge Iain D. Johnston on Nov. 20, 2014, at 11:00 a.m. and be arraigned on all three charges contained in the superseding indictment.  Sanborn has remained in custody since his initial arrest on Sept. 10, 2014.

United States Attorney Fardon praised the teamwork of the FBI and the Ogle County Sheriff’s Office, Huntley Police Department, and the Peotone Police Department in conducting the investigation.

Each bank robbery charge carries a maximum sentence 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 government is being represented by Assistant U.S. Attorney John G. McKenzie.

The public is reminded that a superseding 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 will have the burden of proving guilt beyond a reasonable doubt.

Superseding Indicmemt

CHICAGO ― A Chicago man was indicted on federal firearms charges alleging that he illegally sold firearms and illegally possessed nearly two dozen firearms, including assault rifles, handguns, and shotguns earlier this year.  All of the firearms were seized by ATF agents following alleged purchases by an undercover confidential source, federal law enforcement officials announced today.

The defendant, JIMMY WRIGHT, also known as “Lil Man,” 28, of Chicago, was charged with one count of selling firearms without a federal firearms dealer license and eight counts of being a convicted felon-in-possession of 22 firearms in a nine-count indictment returned yesterday by a federal grand jury.

Wright has remained in federal custody since he was arrested on Oct. 7 and charged in a criminal complaint.  He will be arraigned on a date to be determined in U.S. District Court in Chicago.

According to the charges, between July 21 and Sept. 22, 2014, Wright illegally sold firearms without a federal license.  According to the complaint affidavit, the confidential source purchased at least 12 firearms from Wright on six different dates between July 22 and Sept. 2.  These firearms included two assault rifles, seven handguns, two shotguns, and a “Tec 9” semi-automatic handgun with an obliterated serial number and an extended magazine.

The eight felon-in-possession counts allege that Wright illegally possessed a total of 22 firearms on eight different dates between July 22 and Sept. 22 of this year.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives; and Garry McCarthy, Superintendent of the Chicago Police Department.

Each count of being a felon-in-possession of firearms carries a maximum sentence of 10 years in prison, and selling firearms with a federal license carries a maximum sentence of five years in prison, and all nine counts carry a maximum fine of $250,000.  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 Timothy Storino.

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

CHICAGO — A southwest suburban man was sentenced to just over three years in federal prison for failing to report more than $3.1 million in gross receipts and gambling income and failing to pay more than $582,000 in federal income taxes.  The defendant, PAUL WEST, was sentenced after pleading guilty in August of this year to two counts of filing a false federal income tax return.

West, 62, of Lockport and formerly of Frankfort, also known as “Thomas Wilson,” and “Tom Wilson,” was in the business of selling materials for recycling, including scrap cardboard.  In 2007 and 2011, West under-reported his income from his recycling services and gambling, reporting that he owed little or no taxes.  For six other years between 2004 and 2011, he failed to file any individual income tax returns, despite gross receipts and gambling income over all eight years totaling $3,190,741.   

West was sentenced to 37 months in prison and ordered to pay $582,934 ― the amount of taxes he owed ― in restitution to the Internal Revenue Service.  U.S. District Judge Andrea R. Wood, who imposed the sentence last Friday in Federal Court, ordered West to begin serving his sentence on Jan. 15, 2015.

“West’s tax crimes wrongfully undermine our tax system and its fundamental premise of voluntary and truthful compliance,” Assistant U.S. Attorney Kaarina Salovaara argued at the sentencing.

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago.

In addition to criminal penalties, defendants convicted of tax offenses remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed. 

CHICAGO ― A former south suburban Lansing man was sentenced to nearly 20 years in federal prison for attempting to persuade an individual he believed was a 14-year-old girl to engage in illegal sexual conduct.  The defendant, MARTIN N. PAZDZUIRA, 47, formerly of Lansing, who has been in custody since he was arrested on federal charges in 2012, pleaded guilty in April of this year to one count of using the Internet to attempt to persuade an individual he believed was a minor to engage in illegal sexual conduct.

“Thank goodness it was law enforcement posing as ‘Emily,’ and not Emily,” U.S. District Judge Amy J. St. Eve said in imposing a sentence of 235 months, or 19 years, 7 months, yesterday in U.S. District Court.  The judge also ordered Pazdzuira placed on court supervision for life following his release from prison. 

Using the Internet to entice a minor to engage in illegal sexual conduct carries a mandatory minimum sentence of 10 years in prison and a maximum of life.

In pleading guilty, Pazdzuira admitted that he frequently used the Internet to chat with underage girls.  In August 2012, he began chatting with “Emily,” who he believed was 14, and told “Emily” that he was 16 years’ old.  In further chats, Pazdzuira made plans to meet “Emily” and take her to a hotel in Indiana to engage in illicit sexual conduct.  He was arrested when he showed up to meet “Emily,” who, unbeknownst to him, was an undercover law enforcement officer posing as a minor girl.

Pazdzuira has two prior convictions for child sexual exploitation offenses.  In 1995, he was convicted of aggravated criminal sexual abuse involving an 8-year-old child, and in 2005, he was convicted of possession of child pornography.

The sentence was 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.  The government was represented at sentencing by Assistant U.S. Attorney April Perry.

The investigation was conducted by the FBI’s Child Exploitation Task Force.  The task force is part of a nationwide effort known as the Innocence Lost National Initiative targeting those involved in the commercial sexual exploitation of children in the United States.  In Chicago, the CETF is comprised of FBI special agents and officers and investigators from the Chicago Police Department, the Cook County Sheriff's Office, and the Cook County State’s Attorney’s Office.

CHICAGO The U.S. Attorney’s Office will monitor the general election in Chicago and surrounding suburbs on Tuesday, Nov. 4, 2014, 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 and other personnel will be monitoring certain polling places, while other attorneys will be available to respond to complaints as needed.

The hotline number, staffed on Election Day only, is (312) 469-6157.

“This office has a long tradition of monitoring the polls on Election Day to help protect the integrity of the voting process,” Mr. Fardon said. “No one who is entitled to vote should in any way be inhibited from doing so, and we stand ready to ensure a fair process for all.”

Assistant U.S. Attorney Stephen Heinze coordinates the office’s election monitoring efforts and subsequent investigations, if any, in consultation with the Justice Department. 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 and voting rights complaints.

Complaints about ballot access problems or discrimination can also be made directly to the Civil Rights Division’s Voting Section in Washington at 1-800-253-3931 or 202-307-2767.

Federal law protects against such crimes as intimidating or bribing voters, buying and selling votes, altering vote tallies, stuffing ballot boxes, and marking ballots for voters against their wishes or without their input. It also contains special protections for the rights of voters and provides that they can vote free from acts that intimidate or harass them. For example, actions of persons designed to interrupt or intimidate voters at polling places by questioning or challenging them, or by photographing or videotaping them, under the pretext that these are actions to uncover illegal voting may violate federal voting rights law. Further, federal law protects the right of voters to mark their own ballot or to be assisted by a person of their choice.

Violations of federal voting rights statutes carry penalties ranging from 1 to 10 years in prison and fines up to $250,000.

CHICAGO — A former cancer research physician at Northwestern University’s Robert H. Lurie Comprehensive Center for Cancer in Chicago will pay the United States $475,000 to settle claims of federal research grant fraud.  Dr. Charles L. Bennett agreed to the settlement in a federal False Claims Act lawsuit that was first made public last year after the government investigated the claims made by a former employee and whistleblower who will receive a portion of the settlement.

In July 2013, Northwestern University agreed to pay the United States $2.93 million to settle identical claims against the university.  Northwestern, which fully cooperated during the investigation, did not admit liability as part of the settlement.

In a settlement agreement filed today in U.S. District Court, Dr. Bennett, of Columbia, S. Car., also did not admit liability, nor did the government concede that its claims were not well-founded.

In a lawsuit filed in January this year, the government contended that Dr. Bennett submitted false claims under research grants from the National Institutes of Health.  The settlement covers improper claims that Dr. Bennett submitted for reimbursement from the federal grants for professional and consulting services, food, hotels, travel, conference registration fees, and other expenses that benefited Dr. Bennett, his friends, and family from Jan. 1, 2003, through Aug. 31, 2010.

The allegations were initially made in a civil lawsuit filed under seal in 2009 by Melissa Theis, who in 2007 and 2008 worked as a purchasing coordinator in hematology and oncology at Northwestern’s Feinberg School of Medicine.  She will receive $80,750 from the settlement with Dr. Bennett, and earlier she received $498,100 from the settlement with Northwestern.  Her suit, which the government later settled on her behalf, alleged that the defendants submitted false claims to the United States when Dr. Bennett and others directed and authorized the spending of grant funds on goods and services that did not meet applicable NIH and government grant guidelines.

The allegations were investigated by the U.S. Department of Health and Human Services Office of Inspector General, the Federal Bureau of Investigation, the National Institutes of Health, and the U.S. Attorney’s Office.  The government contended Northwestern improperly submitted claims to NIH for grant expenditures for items that were for the personal benefit of Dr. Bennett, his friends and family that were incurred in connection with grants as to which he was the principal investigator.

The settlement with Dr. Bennett resolves the remaining claims and effectively ends the litigation.  The agreement reserves the authority of any federal agency, including HHS, to take any administrative action, such as suspending or debarring Dr. Bennett from receiving future research grants.  United States v. Charles L. Bennett, M.D., No. 09 C 1943 (N.D. Ill.).

Dr. Bennett agreed to pay the settlement by Dec. 1, 2014.  The agreement covers allegations that false claims were submitted to NIH for costs that Dr. Bennett incurred on his grant-funded research projects involving adverse drug-events, multiple myeloma drugs, a blood disorder known as thrombotic thrombocytopenic purpura, and quality of care for cancer patients.  Dr. Bennett allegedly billed those federal grants for family trips, meals and hotels for himself and friends, and “consulting fees” for unqualified friends and family members, including his brother and cousin.

The settlement with Dr. Bennett was announced by the United States Attorney’s Office for the Northern District of Illinois, the U.S. Department of Health and Human Services, Office of Inspector General – Chicago Region, and the Chicago Office of the Federal Bureau of Investigation.

The United States was represented by Assistant U.S. Attorney Kurt N. Lindland.

Settlement Agreement

CHICAGO — Twenty-nine northern Illinois and Indiana defendants are facing state or federal charges following a coordinated investigation of “cracking cards,” a scheme that costs banks millions of dollars and has its roots on Chicago’s south side and is spreading to other cities through rap music and social media. Six Indiana defendants include four men who are part of a group that has posted Internet rap videos referring to the cracking cards scheme and displaying large amounts of cash and expensive items, according to the charges announced today.

Federal agents and local law enforcement officers from the U.S. Postal Inspection Service, FBI, IRS Criminal Investigation Division, FDIC and U.S. Department of Labor Offices of Inspector General, the Chicago Police Department, and the Sheriff’s Offices of Cook and DeKalb counties began arresting the defendants yesterday. Sixteen are facing federal bank fraud charges in Federal Court in Chicago; six are facing federal charges in U.S. District Court in Hammond, Ind., and seven are facing state charges brought by the Cook County State’s Attorney’s Office.

Since at least 2011, the defendants and other individuals allegedly deposited counterfeit checks into banking accounts belonging to third parties who willingly or unwillingly surrendered their debit cards and PINs for use in the cracking cards schemes. The defendants then allegedly used automated teller machines or point of sale terminals at currency exchanges and retail stores to withdraw or spend funds that the banks advanced to the third-party accounts before learning that the deposited checks were bogus. The banks lost money they advanced to the account holders when the customers denied responsibility for the withdrawals and purchases.

Cracking cards schemes have become a popular method of obtaining illicit funds in Chicago and surrounding areas. The schemes often involve numerous participants, including some individuals affiliated with Chicago street gangs, the charges allege. Schemers use various methods to recruit bank customers to give up their debit cards and PINs, including approaching individuals at parties, schools, or on the street, and using social media outlets, such as Instagram and Facebook, to advertise opportunities for making fast cash by sharing a portion of the fraud proceeds.

“Our purpose today is to warn bank customers that fast cash schemes are usually too good to be true and they should always safeguard their account information, and, at the same time, we are putting those persons who engage in this type of illegal activity on notice that debit card fraud can result in serious state or federal charges, which carry severe penalties and consequences,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.

“Over the last three years, the United States Postal Inspection Service and other federal, state, and local law enforcement agencies, have conducted this major bank fraud investigation involving ‘cracking cards.’ The charges allege that defendants knowingly deposited fraudulent checks intending to defraud banks and their customers. The Postal Inspection Service is committed to working together with the banking industry to protect the public and preserve its trust in the U.S. mail and banking system,” said Antonio Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

According to the federal charging documents, after schemers obtained a debit card and PIN for a bank customer’s account, they manufactured or purchased one or more counterfeit checks to deposit into the account. The bogus checks often contained legitimate bank account and routing numbers that belonged to the accounts of actual businesses. Certain individuals developed a reputation for “making paper,” that is, making, printing, and selling counterfeit checks. The schemers then deposited, or recruited someone else to deposit, the counterfeit checks into the third party’s bank account, typically via an ATM transaction. The schemers then waited for the bank to credit the purported funds from the counterfeit check, usually within hours of the deposit, after which they often attempted a small ATM withdrawal of $100 or more to determine whether an account was credited with the advanced funds. If the transaction succeeded, schemers went to an ATM, a currency exchange, or point-of-sale terminal at a retail store to withdraw or spend the remaining funds that the bank advanced to the third-party account.

One defendant, MATTHEW MOSLEY, 26, of Chicago, allegedly “made paper,” that is, he manufactured counterfeit checks, which he used and sold to others in cracking cards schemes. Mosley was arrested yesterday and charged with bank fraud for allegedly causing banks to lose more than $32,000 in funds he withdrew after depositing counterfeit checks.

Mosley was one of 16 defendants charged with bank fraud in separate criminal complaints filed in U.S. District Court in Chicago. These 16 defendants allegedly caused bank losses totaling more than $1.7 million, with individual defendants responsible for amounts ranging from $26,000 to $260,000. Five of these defendants were arrested yesterday, one was already in custody, and arrest warrants were issued for 10 others.

Six other defendants were charged with conspiracy to commit bank fraud in a criminal complaint filed in U.S. District Court in Hammond. These defendants allegedly caused thousands of dollars in bank losses. Five of the six were arrested yesterday and remain in custody while the sixth was already in state custody. All six are scheduled to appear tomorrow morning in Federal Court in Hammond.

Four of these defendants ― KEVIN FORD, 26, of Chicago; CORTEZ STEVENS, 24, of Griffith, Ind.; STEPHEN GARNER, 23,of Portage, Ind.; and MIKCALE SMALLY, 21, of Chicago ― are identified in the complaint as part of a group that called themselves “R.A.C.K. Boyz,” “Rack Boyz,” or “TheRackBoyz.” The other two defendants, MERCEDES HATCHER, 21, of Danville, Ill., and BRITTANY SIMS, 24, of Portage, Ind., were identified as Ford’s and Garner’s girlfriends, respectively.

The RACK Boyz have Facebook and Twitter accounts and post videos on YouTube, including a rap video entitled, “For the Money,” which refers to cracking cards and shows the defendants wearing RACK Boyz shirts and displaying large amounts of cash, according to the complaint affidavit. Ford is also associated with a different so-called “money team,” known as BandKlan, which also has rap videos posted on YouTube.

The complaint alleges that the defendants use social media to recruit people with bank accounts or who will open bank accounts to use in the cracking cards scheme. They allegedly sent out numerous private messages and posted messages on their Facebook walls inviting people to participate in the scheme. The charges allege that the defendants were linked to numerous withdrawals from third-party bank accounts after counterfeit checks were deposited.

Ford also allegedly “made paper,” by printing fraudulent checks, and, on Oct. 20, Ford allegedly posted threats to law enforcement officers on his Facebook wall.

Seven defendants were arrested yesterday and today on state charges filed by the Cook County State’s Attorney’s Office. They are: RAPHAEL FOX, 23, of Chicago; TIERRE McKNIGHT, 19, of Country Club Hills; DONOVAN GRICE, 22, of Dolton; ROYTRELL LONG, 20, of Matteson; LAKEYA SHAMBLEY, 23, of Chicago; MICHAEL BONDS, 26, of Dolton; and ANTONIO CHAVIS, Jr., 21, of Chicago. Each was charged with continuing financial crimes enterprise, financial institution fraud, wire fraud, and Long, alone, was also charged with forgery.

In addition to Matthew Mosley, the remaining 15 Chicago federal defendants (all of Chicago unless noted otherwise) and the amounts of their alleged frauds are: DONNIVAN ALLEN, 25, $196,000; TYRONE BULLOCK, 25, $260,000; DURRAN DAVIS, 29, $90,000; SAMAJE DAVIS, 26, $140,000; MICHAEL GREEN, 27, $61,000; DAVEY HINES, 21, $85,000; CHESTER JACKSON, 23, $26,000; ANTWAN D. KINERMAN, 23, of Markham, $45,000; DENNIS MITCHELL, 26, of Hammond, $50,000; PAIGE PARKER, 24, $85,000; KEVIN THUNDERBIRD, 28, $45,000; RASHEED THURMAN, 28, $200,000; JAVON TURNER, 21, $70,000; MAHLIK WASHINGTON, 22, $100,000; and BLAKE WILLIAMS, 30, of Schaumburg, $230,000.

The charges identify Citibank, US Bank, JP Morgan Chase, Bank of America, and others as being among the victims of the schemes.

As a result of this investigation, CHRISTOPHER CAIN, 26, of Chicago, was charged previously with bank fraud in U.S. District Court in Chicago. Cain, who was the first defendant charged with card-cracking, pleaded guilty, admitting that he was responsible for bank losses totaling $184,877. Earlier this month, Cain was sentenced to five years in federal prison.

The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; David A. Capp, United States Attorney for the Northern District of Indiana; Anita Alvarez, Cook County State’s Attorney; Antonio Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; W. Jay Abbott, Special Agent-in-Charge of the Indianapolis Division of the Federal Bureau of Investigation; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division; Joe Moriarty, Special Agent-in-Charge of the Federal Deposit Insurance Corporation Office of Inspector General; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General; Garry McCarthy, Superintendent of the Chicago Police Department; Thomas Dart, Cook County Sheriff; and Roger A. Scott, DeKalb County Sheriff. Fraud investigators from several banks assisted in the investigation.

The 16 federal defendants in Chicago were each charged with one count of bank fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine. The six federal defendants in Hammond were each charged with one count of conspiracy to commit bank fraud, which carries a maximum sentence of five 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.

In the federal cases, the government is being represented in Chicago by Assistant United States Attorneys Kate Zell, Sunil Harjani, Elizabeth Pozolo, and Special Assistant U.S. Attorney Heidi Manschreck. In Hammond, the government is being represented by Assistant United States Attorney Diane Berkowitz. The state case is being prosecuted by the Public Corruption and Financial Crimes Unit of the Cook County State’s Attorney’s Office.

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

CHICAGO — A veteran federal prosecutor rejoined the U.S. Attorney’s Office today as the second-ranking official and will succeed the office’s longest-serving prosecutor upon his retirement early next month.  Zachary T. Fardon, United States Attorney for the Northern District of Illinois, announced the appointment of Joel R. Levin, who was a federal prosecutor for 28 years in Chicago, San Francisco, and Milwaukee, as First Assistant U.S. Attorney, succeeding Gary S. Shapiro, who has held the position for nearly 17 years of his 42-year career with the Justice Department.

Mr. Levin, 60, who was a trial partner with Mr. Fardon and others in the prosecution of former Illinois Gov. George Ryan, left government service in 2008 for private law practice.  He returned to the office today as the No. 2 official under Mr. Fardon.

Mr. Shapiro, 68, whose distinguished career over four decades included 16 months as the U.S. Attorney before Mr. Fardon took office a year ago, is retiring effective Nov. 3.

“I am very pleased to welcome Joel, my friend and former trial partner, as a senior member of our team, knowing that we are gaining the benefit of his judgment and counsel in the critically vital role of First Assistant.  This office is extremely fortunate to have Joel step into a leadership role and draw upon his breadth of experience, both in this and other U.S. Attorney’s Offices, as well as private practice,” Mr. Fardon said.

“At the same time, we are keenly aware that Gary’s retirement brings an end to his guiding influence, which has been steadfast through the tenure of five U.S. Attorneys, as well as five additional U.S. Attorneys while Gary was with, and led, the independent Organized Crime Strike Force.  We in law enforcement, and the citizens of the Northern District of Illinois, owe Gary our deepest gratitude for his four decades of public service and for upholding the highest principles of justice for all.  We congratulate him and wish him a wonderful retirement,” Mr. Fardon added.

Mr. Levin said: “It is humbling to replace Gary but I am honored by the opportunity of returning to public service and working with Zach, as well as the entire U.S. Attorney’s Office.  I am excited to contribute to protecting our national security, attacking the violence that has plagued our neighborhoods, rooting out public corruption, prosecuting health care fraud and bringing to justice those who attempt to undermine the integrity of our markets and financial system.”

Mr. Shapiro said: “Chicago is blessed with a remarkable federal prosecutor’s office, staffed with talented and dedicated public servants.  I’ve been able to investigate and try cases with some of the most creative and committed investigators imaginable, and in an atmosphere in which ‘doing the right thing’ was the only object.  I’ve been very lucky to be allowed to work here.”

The First Assistant U.S. Attorney, also known as the FAUSA, plays a major role in supervising all matters, including investigations and prosecutions involving international terrorism, public corruption, corporate fraud, and organized crime, including violent crime and narcotics and gang prosecutions.  The FAUSA also has significant responsibility for managing more than 300 employees, including currently 162 Assistant U.S. Attorneys in Chicago and Rockford, serving 18 counties and nine million residents in northern Illinois. 

Mr. Levin returns to the U.S. Attorney’s Office from Perkins Coie in Chicago, where he was a member of the firm’s White Collar & Investigations practice since 2008.  Mr. Levin was an Assistant U.S. Attorney in Milwaukee from 1980 to 1984, and an AUSA in San Francisco from 1984 to 1997, serving as chief of the Criminal Division his last two years there.  In 1997, he joined the U.S. Attorney’s Office in Chicago and held supervisory positions, including chief of the Financial Fraud and Special Prosecutions Section in 2007-08.  In addition to the public corruption prosecution of Ryan and other defendants in Operation Safe Road, Mr. Levin handled numerous financial fraud cases and was a member of the trial team in the prosecution of Gustavo “Gino” Colon, the leader of the Latin Kings street gang.

Mr. Levin received four Justice Department Director’s Awards for superior performance between 1990 and 2006; the Federal Bar Association’s Frank McGarr Award in 2002; and the Chicago Crime Commission’s Star of Distinction Award in 2006.  He has been an adjunct professor of law at Northwestern University since 2008.

Mr. Levin graduated from Yale University in 1976 and from Harvard Law School in 1979.

Mr. Shapiro served as the United States Attorney from July 1, 2012, to Oct. 23, 2013, between the terms of Mr. Fardon and Patrick J. Fitzgerald.  Former U.S. Attorney Scott R. Lassar appointed Mr. Shapiro First Assistant in January 1998, and Mr. Fitzgerald reappointed him in that position after taking office in 2001.  In 2007, Mr. Shapiro received a Justice Department Director’s Award for executive achievement.

He joined the Justice Department in 1972 as a trial attorney and, in 1974, he joined the Chicago Strike Force, a field office of the Justice Department’s Organized Crime and Racketeering Section.  In 1984, he became Attorney in Charge of the Chicago Strike Force, responsible for supervising all federal organized crime investigations and trials in Illinois, Indiana, and Wisconsin.  In 1990, when the Strike Force field offices nationwide were merged into the United States Attorney’s offices, Mr. Shapiro became Chief of the Organized Crime Section of the Chicago U.S. Attorney’s Office.  In 1992, he was appointed Chief of the Criminal Division.

Mr. Shapiro brought his considerable experience prosecuting organized crime and the Chicago “Outfit” to bear over the last decade in supervising Operation Family Secrets, which resulted in Frank Calabrese, Sr., a street crew leader, Joey “The Clown” Lombardo, and James Marcello, both Outfit capos, each being sentenced to life in prison for crimes related to more than a dozen mob murders and attempted murders, including some of Chicago’s most notorious Outfit hits, dating back to the 1960s.

Mr. Shapiro also helped oversee the decade-long civil investigation of systemic corruption nationwide in the Laborers’ International Union of North America (LIUNA), which resulted in an unprecedented out-of-court settlement and a top-to-bottom reformation of LIUNA’s election and internal policing structures designed to rid the union of decades of organized crime influence.  For this achievement, in 2000, Mr. Shapiro and other members of the team received the Attorney General’s Distinguished Service Award.

In the 1980s, Mr. Shapiro prosecuted Roy Williams, then president of the International Brotherhood of Teamsters; Allen Dorfman, once responsible for the management of the multi-billion-dollar Teamsters Central States Pension Fund; Joey Lombardo; and several pension fund trustees for conspiring to bribe then U.S. Sen. Howard Cannon, of Nevada, to kill proposed Senate legislation to deregulate the trucking industry.  Following Williams’ conviction and sentencing, he became the highest-ranking Teamsters official ever to testify against the mobsters who then controlled the Teamsters Union, and his cooperation contributed substantially to the subsequent convictions of the leaders of the organized crime families in Chicago, Kansas City and Cleveland for skimming millions of dollars from Las Vegas casinos.

Mr. Shapiro also prosecuted Harry Aleman, the notorious Chicago mobster and hitman, for operating a violent home invasion crew, and he oversaw the racketeering investigation and trial of Aleman, mob capo Ernest “Rocky” Infelise, and other Chicago Outfit members, as well as the prosecution of then-Cicero Town President Betty Loren Maltese.  Mr. Shapiro is also credited with helping turn Robert Cooley, a corrupt former Chicago lawyer, into a government cooperating witness, who testified in several Operation Gambat trials involving organized crime and judicial corruption in the early 1990s.

In the late 1970s, Mr. Shapiro headed the investigation and trials of Charles Nicosia, former mayor of East Chicago, Ind., and other East Chicago public officials and local contractors for significant bribery schemes involving the payment of millions of dollars to obtain and then skim the public works contract to revamp East Chicago’s water treatment and sewer system.

Mr. Shapiro graduated from Rice University in 1968 and from the University of Texas School of Law in 1971.

CHICAGO — An Illinois lawyer and Internet radio talk show host was convicted today on federal charges for engaging in two mortgage fraud schemes that defrauded lenders of a total of approximately $9.7 million.  The defendant, WARREN BALLENTINE, schemed with others to obtain more than two dozen fraudulent mortgage loans and represented buyers at multiple closings, knowing that they were fraudulently qualified for loans to purchase homes in Chicago and various southern suburbs.   

Ballentine, 43, of Durham, N. Car., and formerly of Country Club Hills, owned the Law Office of Warren Ballentine, LLC, in Country Club Hills.  He was found guilty of two counts of bank fraud, two counts of making false statements to lenders, and one count each of mail fraud and wire fraud by a jury that deliberated less than an hour total late yesterday and today following a trial that began Monday in U.S. District Court.

Ballentine remains free on bond pending sentencing, which was set for Jan. 21, 2015, before U.S. District Judge Matthew Kennelly.  Ballentine faces a maximum penalty on each count of 30 years in prison and a $1 million fine or an alternate fine of twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory.  Ballentine is also subject to forfeiture of more than $9.7 million.

The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

According to the evidence, between December 2004 and February 2005, Ballentine schemed with others to fraudulently cause various lenders to make at least eight loans totaling approximately $3.6 million by making false statements in loan documents, including applications, HUD-1 settlement statements, and occupancy statements concerning the buyers’ intention to occupy the homes they purchased as a primary residence.  Ballentine then represented buyers recruited by others at real estate closings, knowing that they had signed and submitted false documents and had been fraudulently qualified to purchase the properties in Chicago, Monee, Woodridge, and Mokena.

Between February 2005 and May 2006, Ballentine engaged in a similar, separate scheme with others to fraudulently cause various lenders to make at least 20 loans totaling approximately $6.1 million by making false statements in mortgage documents, including the buyers’ intention to occupy the homes as a primary residence.  Ballentine also represented these buyers at closings, knowing that they had been fraudulently qualified for the loans based on false documents, including some that Ballentine advised them to sign at closings.  These homes were scattered throughout Chicago and other suburbs, including Country Club Hills, Richton Park, and Markham.

The guilty verdict 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 Antonio Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

The government is being represented by Assistant U.S. Attorneys Jason Yonan and Andrew S. Boutros.

CHICAGO — A former Des Plaines man who solicited two undercover law enforcement officers to kill his estranged wife and her friends was sentenced today to 17 years and 7 months in federal prison.  The defendant, ZENON GRZEGORCZYK, has been in federal custody since he was arrested and charged in May 2012, following an investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives.  He pleaded guilty this past July in U.S. District Court.

Grzegorczyk, 51, was sentenced to serve 151 months in prison for murder-for-hire, consecutive to 60 months for possession of a firearm while arranging the murders.  He must serve at least 85 percent of his 211-month sentence and there is no parole.

“Other than actually committing the murders, it doesn’t get much more serious than this,” U.S. District Judge Elaine Bucklo said in imposing the sentence.

Grzegorczyk’s conduct posed a real risk to several potential victims and to the community at large, Assistant U.S. Attorneys Jennie H. Levin and Matthew M. Schneider argued at sentencing.  Grzegorczyk met with undercover officers on three occasions in April and May 2012 to discuss the murder of his estranged wife and her friends.  Initially, Grzegorczyk met with the officers to discuss the sale and shipment of firearms to Poland when he turned the conversation to murder-for-hire. 

Grzegorczyk told the officers that he wanted the proposed victims to be burned alive and said, “grab them, go some quiet place ― then burn them.  Believe me, I want to see those faces, I want to see those faces ― but can’t”

Later, Grzegorczyk showed the officers several photos of intended victims and said he was willing to pay $5,000 for each person killed.  He then identified the address of his estranged wife’s residence and told the officers that they should conduct surveillance because the intended victims spent time there.  He said the number of victims could change depending on who was present because he did not want any witnesses, and he agreed to pay them a $3,000 deposit for the murders.

At their third meeting, Grzegorczyk gave the officers several additional photos of intended victims and opened a brief case containing $45,000 in cash and a 9mm semi-automatic handgun with two magazines of ammunition.  Grzegorczyk said that he intended to leave for Poland in early June.

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl J. Vasilko, Special Agent-in-Charge of the Chicago Office of ATF.  

CHICAGO — A Chicago man who escaped from the Metropolitan Correctional Center in December 2012, just five days after he was convicted of armed robbery of two banks and attempting to rob two others in 2007 and 2008, was sentenced today to 36 years in federal prison.  Approximately $547,000 stolen in the two robberies remains missing.

JOSEPH BANKS, also known as “Jose Banks,” 39, “intimidated and terrified” employees and bystanders at each of the four banks and those victims’ fears were renewed when Banks escaped and remained at large for three days before he was recaptured, Assistant U.S. Attorney Renato Mariotti argued in seeking a lengthy sentence.

“The defense claims [Banks’] bank robberies were common, but they inflicted an uncommon level of terror, by his design,” Mr. Mariotti said.

Rejecting Banks’ claims that he is “humble” and “anti-gun,” U.S. District Judge Rebecca Pallmeyer called Banks “narcissistic,” adding that he was and remains “a threat and a menace” to society.  Judge Pallmeyer further rejected Banks’ so-called “sovereign citizen” defense, which he maintained at his trial in December 2012 and which he admitted was an act.

Banks was also ordered to pay $589,000 restitution.  He has been in federal custody for six years and will receive credit for time served.  He must serve 85 percent of his sentence and there is no parole in the federal prison system.

 With nearly two dozen prior convictions, Banks was found guilty at a trial in December 2012 of attempting to rob the First Commercial Bank, 6945 North Clark St., on Aug. 30, 2007, and Chase Bank, 5134 North Clark St., on Aug. 26, 2008.  He was arrested a week later on Sept. 3, 2008.

On Dec. 28, 2007, Banks was wearing a fake beard, a wig, sunglasses, gloves, a suit, and an overcoat when he entered the Citibank branch located 3128 North Ashland Ave.  Armed with a gun, he leaped the counter, pushed bank employees to the ground, and forced them to open the vault for him.  An employee suffered a panic attack and clutched his chest, hyperventilated, turned pale, and fell to the floor, thinking all the while that he was having a heart attack and would die.  Banks fled the bank with approximately $317,000, which was never recovered.

On July 19, 2008, wearing a black stocking mask that obscured his face, Banks robbed a different Citibank branch located at 3753 North Clark St.  Again, Banks brandished a gun and forced his way into the vault before fleeing with approximately $272,000.  Of that, approximately $42,000 was recovered from a safe deposit box while the remaining $230,000 has never been found.  Evidence at Banks’ trial showed that he spent some of the money on several vehicles.

Banks and his cellmate, Kenneth Conley, another convicted bank robber, escaped through the wall of their cell at the MCC and repelled down the exterior of the high-rise federal detention facility.  Conley was captured two weeks later and is serving a sentence of 20 years for bank robbery, consecutive to 41 months for the escape.

The sentence was 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.  Also representing the government were Assistant U.S. Attorneys Sheri Mecklenburg and Peter Salib.

ROCKFORD — A husband and wife, both formerly of Barrington Hills, Ill., were indicted today by a federal grand jury in Rockford on separate counts of making false statements in a bankruptcy case.  The indictment alleges that DANIEL APOSTOLOPOULOS, 52, and SOULA APOSTOLOPOULOS, 45, each filed a Chapter 7 Bankruptcy Petition, and fraudulently failed to disclose financial interests.

According to the indictment, on Oct. 23, 2009, Daniel Apostolopoulos filed a Chapter 7 bankruptcy Petition, and made false statements on a bankruptcy schedule and a Statement of Financial Affairs, both of which were filed under penalty of perjury.  Specifically, it is alleged that Apostolopoulos intentionally concealed his interest in a checking account, a Chicago restaurant, and property located in Wisconsin.  It is also alleged that Daniel Apostolopoulos failed to disclose his relationships with his father-in-law and sister-in-law, to whom he had transferred a Volvo and a Mercedes automobile within two years of filing, as well as concealing his prior ownership in other financial accounts.

The indictment further alleges that on March 4, 2010, Soula Apostolopoulos filed a Chapter 7 bankruptcy Petition, and made false statements on her Statement of Financial Affairs, filed under penalty of perjury.  According to the indictment, Soula Apostolopoulos fraudulently concealed income she received from her interest in a Chicago restaurant she previously purchased with her husband, as well as her interest in Wisconsin property and in financial accounts during the year preceding the filing of her bankruptcy.

Providing material false statements or documents under penalty of perjury in a bankruptcy case carries a maximum penalty of 5 years in prison, a fine of up to $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater.  The judge may also impose a sentence of probation of one to five years, and a term of supervised release of up to three years.  If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.

Members of the public are reminded that a criminal indictment contains only charges and is not evidence of guilt.  Each defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt of each defendant beyond a reasonable doubt.

The indictment 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 Michael D. Love.

Indictment

CHICAGO — Nearly three ounces of marijuana was confiscated after it was found hidden inside two sandwiches that a Cook County corrections officer allegedly tried to smuggle into the Cook County Jail last year in exchange for a $200 bribe.  As a result of that seizure and an allegedly broader conspiracy, the corrections officer, three inmates, two civilians, and a Chicago police dispatcher are facing federal charges in connection with alleged smuggling of marijuana and other contraband into the jail, sheriff’s department and federal law enforcement officials announced today.

In June 2013, three jail inmates allegedly conspired with two civilian women to bribe JASON MAREK, a corrections officer for the Cook County Department of Corrections since May 2011, to bring marijuana, cigarettes, tobacco, alcohol, food and other contraband into the jail for inmates’ consumption and for further distribution within the jail, according to a three-count criminal complaint that was filed yesterday and unsealed today.

According to the charges, an ounce of marijuana, which sells for approximately $200 outside the jail, could be sold for five times as much, or $1,000, inside the jail.

Marek, also known as “Murder” and “Murda,” 29, formerly of Orland Park, was assigned to the 3 to 11 p.m. shift at CCJ, Division 9, Tier 2H, when the alleged marijuana smuggling was thwarted on June 21, 2013.  He was arrested this morning and was released on his own recognizance after appearing before U.S. Magistrate Judge Jeffrey T. Gilbert in Federal Court.

Between June 15 and 24, 2013, three jail inmates – THADIEUS GOODS, PRINCE JOHNSON, and LAVANGELIST POWELL – who were housed in the same tier where Marek was assigned, allegedly conspired with two women to bribe Marek to smuggle the marijuana and other contraband into the jail.  During a recorded telephone call from the jail on June 15, 2013, Goods told his wife, PEARLISA STEVENSON, that, with her help, he had the opportunity to make some money by selling marijuana inside the jail as long as he also had a corrections officer willing to help him.

“Rooting out corruption in the Cook County Jail is a top priority of mine,” said Cook County Sheriff Thomas J. Dart.  “I’m thankful to our federal partners at the FBI and the U.S. Attorney’s Office for working closely with my staff to conduct such a thorough investigation and to charge this far-reaching case.”

  The arrests and charges were announced by Sheriff Dart, together with Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.  The investigation was a joint effort between the FBI and the Sheriff’s Office of Professional Responsibility, with Sheriff Dart’s full support, to improve the security and integrity within the Cook County Jail.

Goods, also known as “Big Weasy,” “Weasy,” and “Wang,” 36, of Calumet Park; Johnson, aka “Primo,” 32; and Powell, aka “JuJu” and “Juicy,” 22, both of Chicago, remain in state custody and will be transferred to face the federal charges on a date yet to be determined.

Stevenson, aka “Wang Wang,” 29, and NATOSHA McCOLLUM, aka “Tasha,” 21, who is Powell’s girlfriend, both of Chicago, were arrested this morning and were released on their own recognizance after appearing before Magistrate Gilbert.

Those six defendants ― Marek, Goods, Johnson, Powell, Stevenson, and McCollum ― were charged with conspiracy to possess with intent to distribute marijuana.

The seventh defendant, STEPHANIE LEWIS, 40, of Chicago, a “supervisor police operations” in the police dispatch group in the city of Chicago’s Office of Emergency Management and Communications, and who is Johnson’s girlfriend, was arrested last night.  She was charged with one count of illegally accessing a law enforcement computer to assist the alleged extortion and drug distribution conspiracy.  Lewis and three others ― Powell, Johnson, and McCollum ― were also charged with conspiracy to access a law enforcement computer to further extortion and a drug conspiracy.

Lewis was also released on her own recognizance.  Marek, Stevenson, McCollum, and Lewis were each ordered to return to court at 9:30 a.m. Friday for a status hearing before Magistrate Gilbert.

According to a 48-page complaint affidavit, Goods and Powell pre-sold marijuana to inmates within the CCJ.  In June 2013, inmates transferred funds to Stevenson and McCollum via the jail’s Inmate Trust Account system, allegedly to purchase marijuana and other contraband, which Goods, Powell, and Johnson expected to be brought into the jail.  After collecting the money from other inmates, McCollum and Stevenson discussed with Goods and Powell their efforts to purchase marijuana from drug dealers outside the jail.  Johnson and Lewis allegedly coordinated the delivery of contraband to Stevenson for delivery into the jail, and on June 21, 2013, Stevenson delivered the marijuana and other banned goods to Marek.  At the same time, McCollum and Stevenson paid Marek a $200 bribe to smuggle the contraband into the jail.  Marek attempted to deliver the marijuana to Goods but was intercepted by the FBI and the Sheriff’s Department’s Office of Professional Responsibility as he entered the jail.

After Marek failed to deliver the marijuana and contraband, Goods, Powell, and Johnson allegedly worked with McCollum and Lewis to obtain Marek’s home address and information about his family to threaten Marek and convince him to bring additional contraband into the jail.  Johnson allegedly contacted Lewis and, after informing her that Marek had accepted a bribe but failed to deliver the goods, asked Lewis to provide Marek’s personal information, including his home address and names of family members because Johnson and Goods planned to send their associates to Marek’s house.  After receiving Marek’s license plate number from McCollum, Lewis allegedly conducted an inquiry of Marek’s license plate on an OEMC computer linked to an Illinois State Police database, which queried the National Crime Information Center database, and Lewis then provided Marek’s home address to Johnson, the complaint alleges.

In June 2013, Good, Powell, and Johnson were housed in the jail’s Division 9, Tier 2H, where Marek was assigned for a 90-day rotation.  Tier 2H is located on the second floor of the south tower of Division 9, which is located at 2834 West 31st St., Chicago, and is comprised of two interconnected three-story buildings that house general population male inmates with a maximum security classification.

Each count of the complaint carries a maximum penalty of five 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 government is being represented by Assistant United States Attorneys Megan Church and Michelle Nasser.

The public is reminded that a 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

CHICAGO — A dermatologist in west suburban Lombard was convicted today of defrauding Medicare and private health insurers by submitting false claims for more than 800 patients resulting in losses totaling more than $2.6 million.  The defendant, DR. ROBERT KOLBUSZ, falsely diagnosed patients with actinic keratosis, or sun-induced skin lesions that have potential to become cancerous, and then billed public and private health insurers for treatments that were ineffective and falsely documented.

Kolbusz, 57, of Oak Brook, owns and operates the Center for Dermatology and Skin Cancer, Ltd., in Lombard and formerly located in Downers Grove.  He was found guilty of three counts of wire fraud and three counts of mail fraud by a jury that began deliberating on Friday after a four-week trial in U.S. District Court.

Kolbusz remains free on bond pending sentencing, which was scheduled for Feb. 13, 2015, by U.S. District Judge John Z. Lee.  Kolbusz faces a maximum penalty of 20 years in prison and a $250,000 fine on each count, or an alternate fine totaling twice the gross fraud loss or twice the gain, whichever is greater.  The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

According to the evidence at trial, between 2003 and 2010, Kolbusz falsely documented hundreds of patients’ records to support medically unnecessary, cosmetic treatments he ordered.  He typically billed for removing 15 or more lesions from hundreds of repeat patients, many for whom he treated on at least 10 or more occasions, and received insurance payments of up to $352.40 per treatment.  Overall, he falsely claimed to have removed more than 150 pre-cancerous lesions from each of approximately 350 Medicare patients, more than 450 patients covered by Blue Cross and Blue Shield, and additional patients covered by Aetna and Humana health insurance.  In fact, Kolbusz usually provided treatments that were merely cosmetic and that were not eligible for insurance payments.

Eight patients, several employees, and an expert witness testified for the government, while Kolbusz testified in his defense.  One patient, who was a teenager at the time, testified that she thought only that she was getting her freckles lightened while Kolbusz claimed that he had destroyed approximately 491 pre-cancerous lesions on her skin.

The guilty verdict 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; Lamont Pugh III, Special Agent-in-Charge of the U.S. Department of Health and Human Services Office of Inspector General in Chicago; and James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago.

The government is being represented by Assistant U.S. Attorneys Stephen Chahn Lee, Abigail Peluso, and Jessica Romero.

CHICAGO ― A Chicago investment advisor was convicted today of federal bank fraud charges for engaging in a scheme to defraud Oak Brook-based Leaders Bank and two of his clients of more than $3.2 million and ultimately causing the bank to lose more than $2.7 million.  The defendant, ROBERT J. LUNN, was found guilty of five counts of bank fraud by a federal jury that began deliberating yesterday following a trial that began Oct. 7.

Lunn, 64, of Chicago, who did business as Lunn Partners, LLC, an investment advisory business, remains free on bond pending sentencing, which was set for Jan. 21, 2015, by U.S. District Judge Charles Norgle.  Lunn faces a maximum sentence of 30 years in prison and a $1 million fine on each count, or an alternate fine totaling twice the fraud loss or twice the gain, whichever is greater, as well as mandatory restitution.  The court may also order forfeiture of any fraud proceeds.

According to the evidence at trial, Lunn fraudulently obtained a $1.32 million line of credit from the bank for his business, as well as separate loans of $1.4 million and $500,000 purportedly on behalf of two clients.  Lunn made a series of misrepresentations to Leaders Bank about his own assets, the purpose of the loans, and the knowing authorization of clients purportedly seeking the financing.  Instead, Lunn used substantially all of the fraudulently obtained funds for his own benefit, including mortgage payments and approximately $1.4 million in payments to other investment clients.

Lunn initially obtained a business line of credit from Leaders Bank for $480,000 in May 2001.  He increased the credit line twice in early 2004, first to $1.2 million and later to $1.32 million, all after he submitted personal financial statements to the bank falsely stating that he owned millions of dollars of stock in Morgan Stanley and Lehman Brothers.  In September 2002, Lunn arranged for an unsecured bank loan of $1.4 million, purportedly for the benefit of former Chicago Bulls star Scottie Pippen, a client at the time, after falsely representing the proceeds of the loan would be used by Pippen to finance the purchase of an interest in an airplane.  In June 2004, Lunn arranged a bank loan for $500,000 for the benefit of another former client, Robert Geras, a retired venture capitalist, without Geras’ knowledge or authorization, after submitting a net worth report for Geras and stating that Geras wanted short-term financing for a business investment.

The guilty verdict 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.  They thanked the U.S. Securities and Exchange Commission’s Chicago Regional Office for its cooperation and participation in the prosecution.  

The government is being represented by Assistant U.S. Attorney Kenneth Yeadon and Special Assistant U.S. Attorney Rich Stoltz, a senior attorney with the SEC.

CHICAGO — A former resident of Taiwan, who the United States has linked to the supply of weapons manufacturing machinery to North Korea, pleaded guilty today to conspiracy to violate U.S. regulations regarding the proliferation of weapons of mass destruction. The defendant, HSIEN TAI TSAI, admitted that he engaged in illegal business transactions involving the export of U.S. origin goods and machinery.

Tsai, 69, also known as “Alex Tsai,” was arrested in May 2013 in Tallinn, Estonia, and later was extradited to the United States, where he remains in federal custody.

Tsai pleaded guilty to conspiracy to defraud the United States in its enforcement of regulations targeting proliferators of weapons of mass destruction before U.S. District Judge Charles Norgle in Federal Court in Chicago. A sentencing status hearing was set for Dec. 5. Tsai faces a maximum sentence of five years in prison and a $250,000 fine. Under the terms of his plea agreement, the government will recommend a sentence of approximately 30 months in prison provided Tsai continues to fully cooperate with the United States.

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.

The Treasury Department said at the time that Tsai was designated for providing, or attempting to provide, financial, technological, or other support for, or goods or services in support of the Korea Mining Development Trading Corporation (KOMID), which was designated as a proliferator by President George W. Bush in June 2005. The Treasury Department asserted that Tsai “has been supplying goods with weapons production capabilities to KOMID and its subordinates since the late 1990s, and he has been involved in shipping items to North Korea that could be used to support North Korea’s advanced weapons program.” The Treasury Department further said that Global Interface was designated “for being owned or controlled by Tsai,” who was a shareholder of the company and acted as its president. Tsai was also the general manager of Trans Merits Co. Ltd., which was designated for being a subsidiary owned or controlled by Global Interface Company Inc. www.treasury.gov/press-center/press-releases/Pages/hp1359.aspx

After the OFAC designations, Tsai and others allegedly 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. For example, by August 2009 – approximately eight months after the OFAC designations –Tsai and others allegedly began using Trans Multi Mechanics to purchase and export machinery on behalf of Trans Merits and Tsai.

In pleading guilty, Tsai admitted that in September 2009 he was involved in the purchase of a Bryant center hole grinder from a U.S. company based in suburban Chicago, and exported it to Taiwan 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 a role in Trans Merits’ transaction involving LED road lights and an oil pump.

Charges remain pending against Tsai’s son, YUEH-HSUN TSAI, 37, of Glenview, Ill., also known as “Gary” Tsai. He was released on bond after he was arrested in May 2013 and has pleaded not guilty.

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; Gary Hartwig, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) in Chicago; and Ronald B. Orzel, Special Agent-in-Charge for the Chicago Field Office of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement. The Justice Department’s National Security Division and Office International Affairs assisted with the investigation. The Estonian Internal Security Service and the Estonian Prosecutor’s Office cooperated with the United States.

The government is being represented by Assistant U.S. Attorney Brian Hayes and Justice Department Trial Attorney Brandon L. Van Grack.

Plea Agreement

CHICAGO — A Chicago man was convicted today by a federal jury of conspiracy to violate U.S. sanctions from late 2008 through early 2010 by agreeing to assist Zimbabwe President Robert Mugabe and others in an effort to lift economic sanctions against Zimbabwe. The defendant, C. GREGORY TURNER, met multiple times in the United States and in Africa with Zimbabwean government officials, including President Mugabe and Gideon Gono, governor of the Reserve Bank of Zimbabwe, who were individually subject to U.S. sanctions.  A November 2008 “consulting agreement” provided for total payment of $3.4 million in fees for Turner and a co-defendant to engage in public relations, political consulting, and lobbying efforts to have sanctions removed by meeting with and attempting to persuade federal and state government officials, including Illinois members of Congress and state legislators, to oppose the sanctions.

Turner, 72, also known as “Greg Turner,” of Chicago and Israel, was found guilty of violating the International Emergency Economic Powers Act (IEEPA), following a trial that began Sept. 29 in U.S. District Court.  The jury, which began deliberating on Wednesday, acquitted Turner of one count each of conspiracy and acting as an agent in the United States of a foreign government without providing prior notification to the Attorney General.

Turner remains free on bond while awaiting sentencing, which U.S. District Judge Elaine Bucklo, set for Jan. 9, 2015.  He faces a maximum penalty of 20 years in prison and a $1 million fine.  The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

Turner’s co-defendant, PRINCE ASIEL BEN ISRAEL, 73, of Chicago, was sentenced in August to seven months in prison after pleading guilty to violating the Foreign Agents Registration Act (FARA). 

The sanctions against President Mugabe and other specially designated individuals in Zimbabwe ― for human rights abuses ― were initially imposed in 2003 by President George W. Bush, and have been continued annually by President Obama, starting in March 2009.  President Mugabe and his ruling ZANU-PF party have governed Zimbabwe since its independence in 1980.  The sanctions neither bar travel to Zimbabwe nor prohibit public officials from meeting with specially designated nationals to discuss removing the sanctions, but individuals may not provide services on behalf of or for the benefit of specially designated nationals.

According to the evidence at trial, in early November 2008, Turner and Ben Israel began having discussions with Mugabe, Gono, and other ZANU-PF leaders regarding the influence Turner and Ben Israel could wield to have the sanctions removed.  The defendants discussed with Mugabe, Gono, and others their association with many public officials who purportedly had close connections with then President-Elect Obama.  Turner violated IEEPA by conspiring to engage in public relations, political consulting, and lobbying efforts on behalf of President Mugabe and other Zimbabwe officials.  In early December 2008, Ben Israel’s U.S. bank blocked a wire transfer of $89,970 into his account from a Zimbabwe official affiliated with ZANU-PF, and Ben Israel later traveled to Africa and personally withdrew $90,000 from the bank account of that same Zimbabwe official.

Turner and Ben Israel arranged for trips by federal and state government officials to meet with President Mugabe and other Zimbabwean officials, including in November and December 2008, and January and December 2009; attempted to have Gono and other Zimbabwean officials speak at an issues forum in Washington, D.C., sponsored by a then U.S. Representative from California, and to assist those officials in obtaining visas to travel to the U.S. to attend the event; arranged for President Mugabe to meet with federal and state government officials in New York; lobbied a caucus of state legislators on behalf of Zimbabwean officials; and failed to apply to the Treasury Department for a license to engage in transactions and services on behalf of specially designated nationals.

In early December 2008, Turner and Ben Israel arranged for a delegation to travel to Zimbabwe.  After members of the delegation returned, President-Elect Obama’s transition team forwarded information about contact from a member of the delegation to the FBI based on its concerns that sanctions may have been violated sanctions by traveling to Zimbabwe, which was not itself prohibited.

Throughout 2009, Turner and Ben Israel continued to pass communications between Zimbabwean leaders and, purportedly, U.S. public officials while seeking payment for their services from Gono.  Turner led an effort to have Gono speak at an issues forum hosted by a then U.S. Representative from California in September 2009.  Turner attempted to assist Gono, as well as two other Zimbabwean officials, obtain visas to ensure that they could attend and participate in the forum. 

The guilty verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; John Carlin, Assistant Attorney General for the National Security Division; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.  The Justice Department’s Counterespionage Section assisted in the investigation.

The government is being represented by Assistant U.S. Attorneys Barry Jonas and Georgia Alexakis, and David Recker, a trial attorney with the Justice Department’s Counterespionage Section.

ROCKFORD — A Rockford man pleaded guilty today in Federal Court to bank robbery.  PEDRO J. CORDERO, 52, of Rockford, Ill., pleaded guilty before U.S. District Judge Frederick J. Kapala to the robbery of BMO Harris Bank, N.A., 2510 S. Alpine Rd., Rockford, Ill., on July 12, 2014.  Cordero also admitted to robbing two other local banks.

According to the written plea agreement, at approximately 10:00 a.m. on July 12, 2014, Cordero approached a teller at the counter of BMO Harris Bank, 2510 S. Alpine Rd., in Rockford, wearing an inside out San Antonio Spurs baseball cap and carrying a white and blue Kane County Cougars umbrella.  Cordero slid the teller a note demanding large bills out of the drawer and stated he had a gun.  The teller removed money and provided Cordero banded stacks of U.S. currency.  Cordero grabbed the money and left the 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 wore and the blue and white Kane County Cougars umbrella that he carried the previous day during the BMO Harris Bank robbery, as well as a large amount of 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.  According to the plea agreement, Cordero wore a San Antonio Spurs baseball cap during the robbery.  Cordero approached a teller at the counter and slid the teller a note that indicated he had a gun.  Cordero then asked for large bills, told the teller not to activate any alarms and stated that he had a gun.  The teller provided Cordero with money which he grabbed and then left the bank.

Cordero also admitted in the plea agreement that on June 2, 2014, he robbed the Associated Bank located at 4400 Center Terrace, Rockford, Ill.  Cordero admitted that he wore an inside out San Antonio Spurs baseball cap and carried a blue and white Kane County Cougars umbrella during the robbery.  Cordero approached a teller at the counter and said he needed to make a withdrawal.  Cordero handed the teller a blank withdrawal slip, told the teller to give him all the large bills and that he had a gun.  The teller removed money, which Cordero grabbed and then left the bank.

Bank robbery carries a maximum penalty of 20 years in prison, up to 5 years probation, a term of supervised release of up to 3 years following imprisonment, a fine of up to $250,000, and full restitution.  The Court must impose a reasonable sentence guided by the advisory United States Sentencing Guidelines.  Sentencing for Cordero is set for January 13, 2015, at 2:30 p.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 Chet Epperson, Chief of the Rockford Police Department.

The government is represented by Assistant U.S. Attorney Scott R. Paccagnini.

CHICAGO — A southwest suburban Bolingbrook man was arrested Saturday night for allegedly attempting to travel overseas to join a foreign terrorist organization operating inside Iraq and Syria, federal law enforcement officials announced today.  The defendant, MOHAMMED HAMZAH KHAN, 19, a U.S. citizen, was charged with attempting to join the Islamic State of Iraq and the Levant (ISIL), also known as the Islamic State of Iraq and Syria (ISIS).

Khan was taken into custody without incident at O’Hare International Airport by members of the Chicago FBI’s Joint Terrorism Task Force before he attempted to fly to Vienna, Austria, on his way to Istanbul, Turkey.

Khan was charged in a criminal complaint filed today in U.S. District Court with one count of attempting to provide material support to a foreign terrorist organization.  He appeared this morning in U.S. District Court before U.S. Magistrate Judge Susan Cox, and remains in federal custody pending a detention hearing at 10:30 a.m. Thursday.

According to the complaint affidavit, a roundtrip ticket was purchased for Khan on Sep. 26 to travel from Chicago to Istanbul, departing on Saturday, and returning later this week.

Law enforcement agents observed Khan passing through the security screening checkpoint Saturday afternoon at O’Hare’s international terminal.  Federal agents then executed a search warrant at Khan’s residence and recovered multiple handwritten documents that appeared to be drafted by Khan and/or others, which expressed support for ISIL, the affidavit alleges.  Some of those documents, including travel plans and materials referencing ISIL and jihad, are described in the complaint affidavit.

Khan was initially approached by U.S. Customs and Border Protection officers and was later interviewed later by FBI agents at the airport.

Attempting 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 United States Sentencing Guidelines.

The JTTF is comprised of Special Agents of the FBI, officers of the Chicago Police Department, and representatives from an additional 20 federal, state and local law enforcement agencies.  The Justice Department’s National Security Division assisted in the investigation.  U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), and the Illinois State Police also provided significant assistance.

The arrest and complaint were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.  The investigation is continuing, they said.

The government is being represented by Assistant U.S. Attorneys Matthew Hiller and Angel Krull.

The public is reminded that a complaint contains only charges and is not evidence of guilt.  The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Complaint

CHICAGO ― A former investment adviser was sentenced to 3½ years in federal prison for fraudulently obtaining approximately $4 million from more than 30 victims and misusing the money to make Ponzi-type payments to investors, pay personal expenses, and personal gambling, resulting in a loss of just over $3 million.  The defendant, OSCAR DONALD OVERBEY, JR., was a financial adviser at two north suburban locations for Ameriprise Financial, Inc., who engaged in a fraudulent financing scheme between approximately 1996 and 2007.

Overbey, 47, of Country Club Hills and formerly of Evanston, was ordered today to pay $3,090,833 in restitution by U.S. District Judge Gary S. Feinerman, who imposed the sentence yesterday in Federal Court.  Overbey was ordered to begin serving his 42-month sentence on Jan. 12, 2015.  Following his sentence, the judge ordered Overbey to be placed on supervised release for three years and prohibited him from gambling or visiting casinos or racetracks during that time.  Overbey was indicted in 2012 and pleaded guilty to wire fraud last February. 

According to court documents, among Overbey’s victims were two university workers and their two daughters.  He convinced them to invest $150,000 in a purported short-term, government-backed investment paying 10 percent interest.  The victims obtained funds from refinancing their home and from a home equity line of credit to make the investment.  Instead of investing the funds, Overbey misappropriated the entire amount to pay personal expenses and to make more than 10 Ponzi-type payments to other victims.

“The victims placed their trust in [Overbey], but never had a chance.  [Overbey] abused that trust and misused his education and skills as an investment advisor to benefit himself and to keep his scheme going,” Assistant U.S. Attorney Edward Kohler argued at sentencing.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Antonio Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.  The Illinois Securities Department cooperated with the investigation.

CHICAGO ― In the first federal prosecution of its kind, a high-frequency trader was indicted for allegedly manipulating commodities futures prices and illegally profiting nearly $1.6 million as a result of trading orders he placed through CME Group and European futures markets in 2011.  The defendant, MICHAEL COSCIA, was the manager and sole owner of the former Panther Energy Trading LLC, of Red Bank, N.J., which he formed in 2007.

Coscia, 52, of Rumson, N.J., a registered commodities trader since 1988, was charged with six counts of commodities fraud and six counts of “spoofing” in a 12-count indictment returned yesterday by a federal grand jury, 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, announced today. 

The indictment marks the first federal prosecution nationwide under the anti-spoofing provision that was added to the Commodity Exchange Act by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

Coscia will be arraigned on a date to be determined in U.S. District Court in Chicago.

“Traders and investors deserve a level playing field, and when the field is tilted by market manipulators, regardless of their speed or sophistication, we will prosecute criminal violations to help ensure fairness and restore market integrity,” Mr. Fardon said.  “This case reflects the reasons why, earlier this year, we established a Securities and Commodities Fraud Section, which is dedicated to protecting markets and preserving investors’ confidence,” he added.

According to the indictment, high-frequency trading is a form of automated trading that uses computer algorithms for decision-making and placing a high volume of trading orders, quotes, or cancelation of orders in milliseconds.  Coscia designed two computer programs he allegedly used in 17 different CME Group markets and three different markets on the London-based ICE Futures Europe exchange, including gold, soybean meal, soybean oil, high-grade copper, Euro FX and Pounds FX currency futures, to implement his fraudulent strategy.  It was illegal for traders to place orders in the form of “bids” to buy or “offers” to sell a futures contract with the intent to cancel the bid or offer before execution.

Between August and October 2011, Coscia allegedly defrauded participants in the CME Group and ICE Futures Europe markets.  In August 2011, Coscia began a high-frequency trading strategy in which he entered large-volume orders that he intended to immediately cancel before they could filled by other traders, the indictment alleges.

Coscia devised this strategy to create a false impression regarding the number of contracts available in the market, and to fraudulently induce other market participants to react to the deceptive market information he created, the indictment states.  His strategy moved the markets in a direction favorable to him, enabling him to purchase contracts at prices lower than, or sell contracts at prices higher than, the prices available in the market before he entered and canceled his large-volume orders, it adds.  Coscia then allegedly repeated this strategy in the opposite direction to immediately obtain a profit by buying futures contracts at a lower price than he paid for them, or by selling contracts at a higher price than he paid for them.  Each such trade allegedly occurred in a matter of milliseconds.  As a result of the aggregate of those fraudulent high-frequency trades, Coscia illegally profited approximately $1,592,867 over approximately three months, the indictment alleges.

As part of the scheme, Coscia’s trading programs looked for market conditions such as price stability, low volume at the best prices, and a narrow difference between the prices at which prospective purchasers were willing to buy and prospective sellers were willing to sell because his allegedly fraudulent trading strategy worked best under these conditions.  His trading programs sometimes placed a “ping order” of one contract to test the market and ensure that conditions would allow his strategy to work well.

Coscia allegedly designed his trading programs to place a “trade order” on one side of the market, intending that the trade order be filled.  He profited from his fraudulent strategy by filling the “trade order,” the charges allege.

He also designed his programs to place several layers of “quote orders” on the other side of the market from his trade orders ― either to buy contracts at a price higher than the prevailing offer, or to sell contracts at a price lower than the prevailing bid ― to create the illusion of market interest.  The quote orders would typically be the largest orders in the market within three ticks (the minimum price increment at which a futures contract could trade) of the best bid or offer price, usually doubling or tripling the total quantity of contracts within the best bid or offer price.

The indictment alleges that Coscia designed his programs to cancel the quote orders within a fraction of a second automatically, without regard to market conditions, even if the market moved in a direction favorable to the quote orders.  He programmed the quote orders to cancel because he did not intend for them to be filled, but instead intended to trick other traders into reacting to the false price and volume information, it adds.  Further, Coscia designed his programs to cancel all fraudulent and misleading quote orders immediately if any of them were even partially filled, because he intended them only to trick other traders into reacting to what appeared to be a substantial change in the market.

After Coscia filled his trade order through the use of fraudulent and misleading quote orders, he immediately entered a second trade order on the other side of the market and repeated his steps with misleading quote orders, causing the second trade order to be filled.  As a result, Coscia allegedly profited on the difference in price between the first and second trade orders.

The indictment details an example through trades that Coscia placed milliseconds apart in the Euro FX market during the early morning on Sept. 1, 2011.  By entering large orders that he intended to cancel at the time he placed them, and caused to be canceled before other traders could fill them, Coscia made a profit by buying 14 contracts at 14288 ticks and selling them at 14289 ticks less than one second later.

The government is being represented by Assistant U.S. Attorney Renato Mariotti.

Each count of commodities fraud carries a maximum sentence of 25 years in prison and a $250,000 fine, and each count of spoofing carries a maximum penalty of 10 years in prison and a $1 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 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

CHICAGO ― A Bolingbrook man pleaded guilty today to violating U.S. export laws, admitting that he shipped carbon fiber and microwave laminates, and attempted to ship a thermal imaging camera, from his company in Schaumburg to Pakistan without obtaining licenses from the U.S. Commerce Department, federal law enforcement officials announced today.

The defendant, BILAL AHMED, 34, was the president, agent, and owner of Trexim Corp., which used the address of a virtual office in Schaumburg.  He pleaded guilty to one count of violating the International Emergency Economic Powers Act (IEEPA).  Ahmed was arrested in March and remains free on a $100,000 secured bond pending sentencing on Jan. 15, 2015, in U.S District Court.

He faces a maximum penalty of 20 years in prison and a $1 million fine.  His plea agreement anticipates an advisory United States Sentencing Guidelines range of 57 to 71 months in prison.

In pleading guilty, Ahmed admitted that in 2009, he shipped carbon fiber ― Tenax-E HTS40 F13 12K 800 tex ― to Pakistan’s Space and Upper Atmosphere Research Commission (SUPARCO), believing that it would be used to make bullet-proof vests.  Ahmed knew that designated “dual use” goods required a license from the Commerce Department to be exported and that no goods could be shipped to certain entities, such as SUPARCO, without first receiving a U.S. export license.

Ahmed knew that the carbon fiber was subject to export regulation.  Specifically, the material was controlled for nuclear nonproliferation and anti-terrorism reasons and required a license from the Commerce Department’s Bureau of Industry and Security to be exported to Pakistan.  Neither Ahmed nor Trexim ever applied for or obtained the necessary license.

Ahmed also admitted that in 2103, he shipped microwave laminate ― RT/duroid 5870 High Frequency Laminates ― to SUPARCO in Pakistan without applying for or obtaining the required export license.

Ahmed was arrested in March as he attempted to ship to Pakistan a FLIR HRC-U thermal imaging camera, which was on a Commerce Department list of controlled export goods for reasons of national security and regional stability.

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 Edward Holland, Supervisory Special Agent, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Chicago Field Office.  The Justice Department’s National Security Division provided assistance in the case.

The government is being represented by Assistant U.S. Attorney Bethany Biesenthal.

Plea

CHICAGO — Twenty-two defendants are facing federal narcotics charges here for their alleged roles in importing, supplying, and distributing kilogram quantities of heroin and cocaine through interconnected drug trafficking organizations that operated in the Chicago area, as well as in Mexico, California, Oregon, Indiana, Ohio, and Pennsylvania. The investigation resulted in the seizure of more than $3.9 million from a residence in suburban Park Ridge in April 2013, as well as dozens of kilograms of cocaine, heroin, and marijuana.

Beginning Monday night through yesterday, 14 defendants were arrested in the Chicago area, two in California, and one each in Iowa and Pennsylvania, following an investigation led by FBI and DEA agents and other law enforcement partners assigned to the Chicago Strike Force, a permanent task force of centrally housed federal, state, and local law enforcement agencies targeting the intersection of drug cartels’ large-scale smuggling of narcotics and local street gangs’ extensive distribution organizations. Three others were already in custody, and one is a fugitive believed to be in Mexico.

Approximately $500,000 and a kilogram of cocaine were seized yesterday during the arrest of one defendant in Philadelphia. In Chicago, a loaded .32 caliber revolver, thousands of dollars in cash, and quantities of cocaine and heroin were seized during the arrests. In total, agents seized approximately $5 million, 78 kilos of cocaine, and 20 kilos of heroin, and a large quantity of marijuana during the entire investigation.

The defendants were charged with conspiracy or possession with intent to distribute narcotics in three separate criminal complaints that were filed Monday in U.S. District Court and unsealed following the arrests. The defendants arrested here had their initial appearances yesterday and were scheduled to have detention hearings starting tomorrow and continuing through Monday before U.S. Magistrate Judge Susan Cox in U.S. District Court.

“The Chicago Strike Force is a powerful collaboration of local, state, and federal law enforcement focused on the choke point between narcotics suppliers and street-level distributors,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “This investigation demonstrates the wisdom of the Strike Force and illustrates how dedicated teamwork can rise above jurisdictional and geographic borders, across state and international lines, to stem the flow of narcotics into our communities,” he said.

Mr. Fardon announced the charges with Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of investigation; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; Gary Hartwig, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI); and Garry F. McCarthy, Superintendent of the Chicago Police Department. The Addison, Berwyn, Oak Lawn, and Park Ridge police departments and the DuPage Metropolitan Enforcement Group also assisted in the investigation.

The Chicago Strike Force ― in addition to the DEA, FBI, HSI, and CPD ― also consists of the Internal Revenue Service Criminal Investigation Division, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Marshals Service, and officers from various state and local law enforcement agencies, including the Cook County Sheriff’s Police Department and the Illinois State Police.

“These Strike Force arrests demonstrate our collaborative and continuing endeavor to attack the persistent problem of drug trafficking in Chicago and the surrounding communities. I’d like to thank the United States Attorney’s Office and the DEA, our partners in this investigation, as well as the Chicago Police Department and Homeland Security Investigations, whose contributions were vital to the success of yesterday’s operation,” Mr. Holley said.

“This investigation is an example of the extraordinary work being done by the men and women at the Chicago Strike Force. Guns and drugs continue to be the underlying source of much of our city’s violence and yesterday’s arrests effectively dismantled a significant international criminal organization and its distribution network, responsible for trafficking narcotics on the streets of Chicago,” Mr. Riley said. “I applaud the FBI and the U.S. Attorney’s Office, as well as the other members of the Strike Force, for the exceptional job they did investigating these organizations.”

One of the three complaints charges VICTOR MATA MADRIGAL, 37, of Lombard, and eight members or associates of his alleged drug trafficking organization. Mata Madrigal allegedly imported wholesale amounts of cocaine and marijuana from Mexico into Chicago and distributed those narcotics to various wholesale customers.

On April 16, 2013, Strike Force agents seized $3,927,359 in alleged drug proceeds belonging to the Mata Madrigal organization from a residence in the 700 block of North Lincoln Avenue in Park Ridge. The cash was found inside numerous duffel bags, roller bags, and backpacks. Also seized were multiple cell phones, money counters, and packaging materials used to secure the cash. Mata Madrigal was arrested the same day and the complaint alleges that he continued to direct the drug operation while he was in custody.

The complaint charges that between April 2012 and May 2014 Mata Madrigal conspired with co-defendants JORGE SANCHEZ, of Philadelphia; JORGE MICHEL-MONROY, 45, of Philadelphia; SERGIO ZEPEDA, 30, of Berwyn; RAMON CONTRERAS, 23, of Chicago; ANTONIO MEIJA RODRIGUEZ, believed to be in Mexico; BALMORE URBANO, 31, of Bensenville; and STEPHANIE ARREDONDO, 22, of Franklin Park, to possess and distribute cocaine. The complaint also charges RICARDO HERNANDEZ, 30, of Chicago, and Urbano with possession with intent to distribute cocaine. If convicted, these nine defendants face a mandatory minimum of five years in prison and a maximum of 40 years and a $5 million fine.

Another complaint charges DANIEL CONTRERAS, 36, of Bellwood, with working with multiple individuals to obtain and sell wholesale quantities of cocaine. Daniel Contreras and codefendants ROBERTO CORTEZ, 39, of Rialto, Calif., and MICHAEL AGUIRRE, 26, of Maywood, allegedly purchased cocaine from the Mata Madrigal organization. Daniel Contreras also allegedly worked separately with HECTOR MURILLO, 29, of Cicero, and ADAN BACA, 36, of Schaumburg, to sell distribution-sized quantities of cocaine. Co-defendants RAFAEL RUIZ, 36, of Bellwood; ARMANDO GARCIA, 38, of Bellwood; and JOSEPH DE LA VEGA, 52, of Chicago, were allegedly wholesale cocaine customers of Daniel Contreras. EITEL MENDOZA, 37, of Culver, Ore., allegedly worked with Cortez to transport kilos of cocaine from Oregon to Illinois. If convicted, eight of these defendants face a mandatory minimum of five years in prison and a maximum of 40 years and a $5 million fine, while De La Vega alone faces a maximum sentence of 20 years in prison and a $1 million fine.

The third complaint charges JUAN MOYANO, 33, of Chicago, with purchasing narcotics from the Mata Madrigal organization and managing his own drug trafficking organization in Chicago that distributed heroin and cocaine, as well as possessed and transferred firearms. Moyano allegedly conspired with co-defendants NIKKOLAS CASILLO, 28, of Chicago, and JOSE VASQUEZ, 30, of Chicago, to distribute narcotics to their customers. Co-defendant JIM BAARTZ, 41, of Crystal Lake, was an alleged heroin customer of Moyano. If convicted, Moyano, Casillo, and Vasquez face a mandatory minimum of five years in prison and a maximum of 40 years and a $5 million fine, while Baartz alone faces a maximum sentence of 20 years in prison and a $1 million fine.

The government is being represented by Assistant United States Attorneys Patrick Otlewski and Nicole Kim.

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.

Madrigal Complaint

Contreras Complaint

Moyano Complaint

CHICAGO ― A Chicago used car broker and taxicab operator was arrested today after being indicted on federal charges for allegedly causing at least 180 vehicles that were salvaged or rebuilt to illegally obtain clean titles from Indiana and Illinois and, as a result, to illegally operate as licensed and registered taxicabs in the City of Chicago.

The defendant, ALEXANDER IGOLNIKOV, 67, of Northbrook, was charged with one count of conspiracy and two counts each of interstate transportation of false automobile titles and possession of false auto titles in a five-count indictment that was returned by a federal grand jury on Aug. 27 and unsealed today following his arrest.

Ignolikov was scheduled to appear at 3 p.m. today before U.S. Magistrate Judge Jeffrey T. Gilbert in Courtroom 1386 in U.S. District Court.

Igolnikov, also known as “Alexandr Igolnikov” and “Alex,” was the owner of Seven Amigos Used Cars and vice president of Chicago Elite Cab Corp., which operated taxis under city taxi medallions managed by Chicago Elite Cab and related entities affiliated with Chicago Carriage Taxi Company. City taxi medallion rules prohibit any vehicle that was ever issued a “salvage” or “rebuilt” title in any state from being used as a taxicab in Chicago.

The indictment alleges that between 2007 and April 2010 Ignolikov conspired with three unnamed auto brokers, two in Indiana and one in Illinois, to purchase vehicles with salvage titles from online auction sites; fraudulently obtain either clean or rebuilt Indiana titles for those vehicles by submitting false paperwork to the Indiana Bureau of Motor Vehicles; and then using those re-issued Indiana titles to obtain clean Illinois titles, concealing that the vehicles were previously issued salvage or rebuilt titles.

According to the indictment, in many instances, Ignolikov agreed with three auto brokers to have the damaged vehicles towed from the online auctions sites’ yards in out-of-state locations to the premises of Seven Amigos and Chicago Carriage near 26th Street and South Wabash Avenue in Chicago, where the vehicles would be repaired.

In addition to submitting false paperwork concealing the vehicles’ history and damage to Indiana authorities, Ignolikov and the brokers also submitted a false affidavit certifying that an Indiana law enforcement officer had personally examined the vehicles and verified certain identifying information, the charges allege. In reality, no officer had examined the vehicle and the affidavit of a police officer was signed by unnamed Officer A for a fee, or unnamed Officer B, or other individuals without any physical inspection, according to the indictment.

In some instances, based on the allegedly false towing paperwork and false police affidavits, the Indiana Bureau of Motor Vehicles issued clean titles to various auto brokers for vehicles that were previously issued salvage titles. In other instances, other individuals obtained Indiana rebuilt titles through fraud and then placed stickers on those titles concealing that the titles identified the vehicles as being rebuilt. After obtaining either a clean or rebuilt Indiana title for the vehicles, Ignolikov purchased the vehicles in the name of Seven Amigos, Chicago Elite Cab, or other businesses and paid a premium above the purchase price in exchange for the brokers’ work in securing the clean or rebuilt Indiana titles, the indictment alleges.

Finally, Ignolikov and his business associates allegedly used the clean and rebuilt Indiana titles to obtain clean Illinois titles for the vehicles, and later concealed from the City of Chicago the fact that the vehicles were previously issued salvage or rebuilt titles, which prohibited them from being used as taxis.

The arrests and indictment 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 Joseph Ferguson, Inspector General for the City of Chicago. The investigation is continuing, they said.

The government is being represented by Assistant U.S. Attorneys Margaret Schneider and Steven Dollear.

Conspiracy carries a maximum sentence of five years in prison, while each count of interstate transportation and possession of false auto titles carries a maximum penalty of 10 years in prison and all five counts carry a $250,000 maximum 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 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

CHICAGO ― A Chicago area man was sentenced today to 22 years in federal prison for producing child pornography involving two 16-year-old girls he met in private Internet chat rooms in 2012 and induced to take sexually explicit photos of themselves and send them to him. The defendant, MARK BARRETO, 36, of Elmwood Park and formerly of Chicago, who has been in custody since he was arrested on federal charges a year ago, pleaded guilty in June of this year to one count of manufacturing child pornography.

In imposing the sentence, U.S. District Judge Edmond Chang noted the “extremely serious” nature of Barreto’s crime and the vulnerability of both the teenage victims and others as young as 5-years-old who were discovered in pornographic images that Barreto possessed. The judge also ordered Barreto placed on court supervision for 10 years following his release from prison, and ordered him to pay $8,600 restitution to a known victim of child pornography who was identified through the National Center for Missing and Exploited Children.

“Whatever face [Barreto] may have presented to his family, co-workers, and the world at large, it is now apparent that he spent considerable time collecting and viewing images and videos of young children being raped and sexually abused,” Assistant U.S. Attorney Katherine Sawyer argued in seeking a lengthy sentence.

Manufacturing child pornography carries a mandatory minimum sentence of 15 years and a maximum of 30 years in prison.

U.S. postal inspectors conducted a search of Barreto’s residence in October 2012 and found a laptop computer that contained approximately 433 images and 15 videos of child pornography, as well as email accounts showing that he had been communicating with various minor females, including the two he induced to produce images and videos of child pornography for him.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Tony Gómez, Special Agent-in-Charge of the U.S. Postal Inspection Service in Chicago. The Bolingbrook and Naperville police departments and the Will County State’s Attorney’s Office, which initially charged Barreto before the case was adopted federally, assisted in the investigation.

CHICAGO ― A suburban immigration attorney and a man who provided translation services for the lawyer and his law firm were arrested today after being indicted on federal charges for allegedly falsifying requests for asylum for a dozen clients over approximately a decade. In some instances, the charges allege that the attorney and interpreter falsely claimed that their clients were seeking asylum because their clients were subjected to religious persecution by Islamic extremists in Iraq.

The attorney, ROBERT DEKELAITA, 51, of Glenview, and his contract interpreter, ADAM BENJAMIN, 61, of Skokie, were each charged with one count of conspiracy to commit immigration and naturalization fraud. DeKelaita was also charged with three counts each of immigration fraud and suborning perjury, and Benjamin was also charged with two counts each of immigration fraud and suborning perjury in a seven-count indictment that was returned by a federal grand jury on Sept. 4 and unsealed today following their arrests.

Federal agents with the Department of Homeland Security Office of Inspector General and the FBI today executed a search warrant at the law offices of R.W. DeKelaita & Associates, LLC, located in the 5800 block of West Dempster Street, in Morton Grove.

DeKelaita and Benjamin were scheduled to be arraigned at 2 p.m. today before U.S. District Judge Matthew Kennelly in Federal Court.

The arrests and indictment were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Armando Lopez, Special Agent-in-Charge of the Homeland Security Office of Inspector General in Chicago; and Robert J. Holley, Special Agentin- Charge of the Chicago Office of the Federal Bureau of Investigation. Homeland Security’s U.S. Citizenship and Immigration Services (USCIS), U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), and Customs and Border Protection, as well as the Farmington Hills, Mich., Police Department, assisted in the investigation.

Individuals granted asylum may later seek lawful permanent residence and, eventually, naturalized U.S. citizenship. The DHS Office of Inspector General will coordinate with other DHS branches to review the immigration status of DeKelaita’s clients, Mr. Lopez said.

The indictment alleges that between 2000 and 2011, in exchange for fees, DeKelaita and Benjamin agreed to submit false information to USCIS on behalf of clients who were foreign nationals, as well as coach these clients on how to best present the false information to an asylum officer, and represent these clients in presenting the false information during asylum interviews.

As part of the conspiracy, DeKelaita allegedly conducted screening interviews of his clients to determine information that might bar clients from lawfully receiving asylum. He then completed immigration forms on their behalf using false names, false religions, false travel dates, false dates of entry into the United States, false birthdays, and false family histories, and allegedly submitted these forms to USCIS. DeKelaita also wrote and created false asylum statements detailing fictitious accounts of purported religious persecution, including false accounts of rape and murder, the charges allege. The indictment alleges examples in which DeKelaita’s clients falsely claimed that they or immediate family members were victims of violence or threatened with violence by Islamic extremists in Iraq.

DeKelaita allegedly also submitted and caused the submission of false affidavits, baptismal certificates, identity documents, and other documents to USCIS and the Executive Office for Immigration Review on behalf of their clients. DeKelaita signed his clients’ names on certain immigration forms without their knowledge or permission, the indictment alleges.

DeKelaita and Benjamin allegedly assisted clients in memorizing false information in preparing them for asylum interviews. Benjamin allegedly intentionally mistranslated answers given by clients and added testimony not actually stated by them in an effort to secure asylum on their behalf. DeKelaita and Benjamin agreed and intended that their clients would obtain asylum and use it to seek lawful permanent residence and naturalization, according to the charges.

The government is being represented by Assistant U.S. Attorney Christopher Grohman.

Conspiracy to commit immigration and naturalization fraud, as well as each count of suborning perjury, carries a maximum sentence of five years in prison and a $250,000 fine, while each count of immigration fraud carries a maximum penalty of 10 years in prison and a $250,000 fine. The indictment also seeks forfeiture of approximately $60,000 from DeKelaita. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

ROCKFORD — A Crystal Lake, Ill. man was sentenced today to federal prison for mail fraud involving a secret shopper scheme. U.S. District Judge Frederick J. Kapala sentenced MICHAEL S. MACKAY, 48, of Crystal Lake, Ill., to 59 months in federal prison, to be followed by 3 years of supervised release. In addition, Mackay was sentenced to pay restitution of $26,971.39 to the victims of his scheme.

Mackay pleaded guilty to one count of mail fraud on June 13, 2014, admitting that from Sept. 2011 to at least May 16, 2012, he participated in a scheme to defraud victims into falsely believing they were hired to work as “secret shoppers” or payment processors. According to the written plea agreement, after applying to work-at-home advertisements on the Internet, victims would receive a letter with at least one counterfeit negotiable instrument, such as a counterfeit money order. The victims were instructed to deposit the counterfeit negotiable instrument in their financial institution, retain a certain percentage as payment for their services, go to the nearest Western Union and wire transfer the remaining proceeds as instructed. The victims were also instructed to report their experience, believing they were hired as secret shoppers to evaluate local businesses, via email to an email address contained in the letter. The participants in the scheme received the proceeds via the wire transfers before the victims learned that the money orders were counterfeit.

Mackay admitted that during the course of the scheme he received at least $2.5 million in counterfeit negotiable instruments in packages sent to Crystal Lake from New York, Nigeria, and Ghana, and other locations. Each package contained counterfeit money orders and other negotiable instruments in amounts ranging from $500 to $2,000 each of which appeared to be issued by either the United States Postal Service, American Express, Capital One Bank, Citizens National Bank of Texas, First National Bank, or the Navy Federal Credit Union. Mackay received emails from other scheme participants that contained instructions, a “secret shopper” letter, and United States Postal Service Express mailing labels. Mackay then placed a “secret shopper” letter in a United States Postal Service express mailing envelope along with at least two counterfeit money orders to multiple victims throughout the United States. Mackay received wire transfers of at least $10,000 from his victims and others involved in the scheme as payment for his role in the scheme before the victims learned that the negotiable instruments were counterfeit.

The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Antonio Gomez, Postal Inspector-In-Charge of the Chicago Division of the U.S. Postal Inspection Service.

The government was represented by Assistant U.S. Attorney Michael D. Love.

CHICAGO ― A high-ranking leader of the Traveling Vice Lords street gang who directed a violent west side drug-trafficking conspiracy was sentenced today to 35 years in federal prison after a judge ruled that he “very likely” murdered an off-duty Chicago police detective and a woman in August 2008.

“Your drug trafficking activities were a scourge on your community,” Judge Lefkow said.

The judge also ruled that the government met its burden in proving by a preponderance of evidence that it was “very likely” that Austin committed the murders of Det. Robert Soto and Kathryn Romberg on Aug. 13, 2008, and then subsequently attempted to obstruct the murder investigation. The victims were shot as they sat in a parked car in the 3000 block of West Franklin, about three blocks east Kedzie and one block south of Ohio. During a sentencing hearing that began last month, the government presented evidence that Austin shot and killed the pair after mistaking them from for a rival drug dealer and the drug dealer’s companion.

“We are gratified that the Court found Austin responsible for the murders of Detective Soto and Ms. Romberg. Jason Austin is a violent drug dealer, and today’s 35-year sentence provides a modest measure of justice,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.

“Jason Austin sold heroin and crack cocaine in the area of Kedzie and Ohio for years. He ran the block, had employees who worked for him, and he sold thousands of dollars of heroin a day. Austin controlled his territory through fear, violence, and threats of violence. He kept guns at the ready to stave off the competition. Austin thought of Kedzie and Ohio as his,” Assistant U.S. Attorneys Maribel Fernandez-Harvath and Matthew Madden argued in seeking a significant sentence.

Austin and 30 other members and associates of the Traveling Vice Lords were arrested in November 2010 as part of Operation Blue Knight, which focused on around-the-clock retail street sales of crack cocaine and heroin in the area of Kedzie and Ohio, known as “KO.” Significant amounts of crack cocaine and heroin were seized during the two-year investigation, which the Chicago Police Department’s Organized Crime Division began in 2008 and the Federal Bureau of Investigation joined several months later. Overall, their efforts resulted in a total of 104 defendants being arrested on state and federal charges in this and related investigations.

The evidence at trial showed that Austin conspired with others to distribute heroin to customers via hand-to-hand transactions in the “KO.” The heroin, named “Blue Magic,” alone accounted for as much as $8,000 a day in sales, between approximately 6 a.m. and 11 p.m., seven days a week. During the investigation, law enforcement officers repeatedly observed the conduct of co-conspirators at KO. Surveillance, often video recorded, documented hand-to-hand drug transactions, controlled purchases of narcotics by undercover Chicago police officers, and controlled purchases of narcotics by confidential sources.

Mr. Fardon announced the sentence with Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Garry McCarthy, Superintendent of the Chicago Police Department. The investigation was conducted by the Chicago Police Department’s Organized Crime Division and the FBI’s Safe Street Task Force, together comprising the FBI-CPD Joint Task Force on Gangs. It was also conducted under the umbrella of U.S. Organized Crime Drug Enforcement Task Force (OCDETF), with assistance from the High Intensity Drug Trafficking Area Task Force (HIDTA).

ROCKFORD — A former McHenry County sheriff’s deputy who was that department’s representative on the state’s Internet Crimes Against Children Task Force was sentenced today to 50 years in federal prison for child sexual abuse and exploitation. The defendant, GREGORY M. PYLE, 39, of Crest Hills, Ill., formerly of Crystal Lake, Ill., was also placed on lifetime supervision after release from custody by U.S. District Court Judge Frederick J. Kapala, who imposed the sentence in Federal Court in Rockford.

Pyle, a sheriff’s deputy for more than a decade, pleaded guilty on Jan. 3 of this year, admitting that he crossed a state line with intent to engage in a sexual act with a minor. Today’s sentencing hearing will be completed at 2:30 p.m. on Oct. 21, 2014, when restitution and special conditions of supervised release will be imposed.

“For over five years, [Pyle] was entrusted with the efforts of the McHenry County Sheriff’s Office to protect children from exploitation and abuse. When he knew he was under investigation, [Pyle] successfully obstructed investigators determining the full scope of his criminal conduct,” Assistant U.S. Attorney Michael D. Love argued in requesting a 50-year sentence.

In pleading guilty, Pyle admitted that on Dec. 13, 2008, he had custody of a child under 12 years of age, when he drove the child from Crystal Lake, Ill. to Milwaukee, Wis., intending to engage in sexual acts with the child and to produce visual depictions of the sexual conduct. Pyle admitted that he stayed overnight in a Milwaukee hotel and engaged in sexual acts with the child that were sadistic, masochistic, and violent. The defendant produced images of the child engaged in these sexual acts and later distributed the images over the Internet.

The sentencing 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 Illinois State Police, the McHenry County Sheriff’s Department, and the Illinois Internet Crimes Against Children Taskforce assisted in the investigation.

The government was represented by Assistant U.S. Attorney Michael D. Love.

CHICAGO ― A Mexican national who fled to Mexico, was arrested there, and agreed to extradition, was sentenced today to the maximum of 40 years in federal prison for sexually molesting two minor girls and producing child pornography. The defendant, EDGAR HERNANDEZ, 36, pleaded guilty earlier this year to one count each of manufacturing child pornography and possessing child pornography.

At a sentencing hearing today, one victim, who was 15 at the time, and a relative of the other victim, who was 7 at the time, told U.S. District Judge Samuel Der-Yeghiayan about the traumatic damage that Hernandez inflicted upon the victims’ lives. “The defendant scarred the victims for life,” Assistant U.S. Attorney John Kness argued in seeking a high sentence after the victim’s statements were presented.

Judge Der-Yeghiayan imposed the maximum sentence of 30 years in prison on the manufacturing count, to be served consecutively with the 10-year maximum term on the possession count. Hernandez is subject to deportation upon release from custody, but he was also ordered to remain under court supervision for 10 years, and he must serve at least 85 percent of his sentence. There is no parole in the federal prison system.

According to court records, Hernandez resided in a Chicago apartment and the 7-year-old victim was entrusted to his care and had a series of occasional overnight visits between September and December 2009. Hernandez engaged in sexual conduct with the victim on approximately a dozen occasions, and he used the digital video camera on his cellular telephone to make two video recordings of the sexual abuse in November 2009. The victim’s relative discovered the videos in December and contacted the Chicago Police Department, which began an investigation that was soon joined by the FBI. During the investigation, law enforcement discovered Hernandez’s sexual abuse of the 15-year-old victim, including additional video recordings.

Upon learning that the younger victim’s relative had reported his crimes to law enforcement, Hernandez fled to Mexico on Dec. 24, 2009, taking the older victim with him. That victim was reunited with her family in early 2010, but Hernandez remained a fugitive after he was charged. He was arrested in Mexico in April 2013 and was returned to Chicago last October after agreeing to summary extradition.

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 Garry McCarthy, Superintendent of the Chicago Police Department.

CHICAGO — A former Cook County sheriff’s deputy pleaded guilty today to violating the civil rights of a man being held in the county’s detention lockup facility in Maywood in 2010. The defendant, RAFAEL MUNOZ, pleaded guilty at his arraignment after he was charged last week with using unreasonable force.

Munoz, 39, of Chicago, admitted that he grabbed and forcibly pulled the chain that connected a pretrial detainee’s ankle shackles to each other, causing the victim to flip forward and his head and face to hit the concrete floor. As a result of using excessive force, the victim suffered injuries, including a broken nose, a broken tooth, swelling, bruising, and bleeding from cuts to his lip and nose.

Munoz, who became a sheriff’s deputy in August 2006 and resigned last year, is scheduled to be sentenced on Dec. 10 by U.S. Magistrate Judge Maria Valdez in U.S. District Court. He faces a maximum sentence of a year in prison and a $100,000 fine. Munoz also agreed not to seek or accept any future law enforcement employment or any position that would require or permit him to supervise or care for detainees or prisoners.

According to Munoz’s plea agreement, the victim, identified as M.O., was arrested on July 8, 2010, and transported to the Maywood lockup, where he was detained in a holding cell. In that cell, M.O. was restrained with his hands handcuffed behind his back and his legs in ankle shackles. Shortly after 2 a.m. on July 8, 2010, Munoz entered the cell in response to M.O.’s request to loosen his handcuffs. Munoz ordered M.O. to turn around and face the wall and M.O. complied with Munoz’s instructions such that M.O.’s back and handcuffs faced Munoz while M.O. faced the rear of the cell. Throughout Munoz’s interaction with M.O., the victim complied with Munoz’s orders and did not pose a threat to Munoz, any other person, or himself.

After forcing the victim to fall by pulling his ankle chain, Munoz admitted that he attempted to cover up his use of excessive force by completing three false law enforcement reports. In each of those documents, Munoz reported that he entered the cell and “grabbed [M.O.’s] handcuffs to loosen at which time [M.O.] rolled onto the cell floor,” which Munoz knew was false.

The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Acting Assistant Attorney General Molly Moran of the Justice Department’s Civil Division; 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 Andrianna Kastanek and Nathalina Hudson and DOJ Trial Attorney Ali Ahmad.

Plea Agreement

CHICAGO — The former longtime elected clerk for the Village of Burnham was sentenced today to 18 months in federal prison for stealing more than $650,000 from her office at the south suburb’s village hall and using most of the cash to gamble at casinos.  The defendant, NANCY DOBROWSKI, pleaded guilty in May to one count each of wire fraud and filing a false federal income tax return, admitting that she stole at least $650,862, and failed to pay more than $200,000 in federal income taxes.

Dobrowski, 70, of Burnham, served as Burnham’s elected clerk from 1980 until she resigned on May 29, 2013, when FBI agents executed a federal search warrant at the clerk’s village hall office.  As clerk, Dobrowski was responsible for managing Burnham’s finances and depositing cash and checks collected by the clerk’s office into the village’s bank accounts.

Dobrowski committed “nine years of pillage,” U.S. District Judge Charles Kocoras said, and ordered her to begin serving her sentence on Oct. 21.  He also ordered Dobrowski to pay a total of $913,704 in restitution ― $709,501 to Burnham and $204,203 to the Internal Revenue Service ― but noted Dobrowski’s inability to pay such an amount.  Before imposing the sentence in U.S. District Court, the judge heard statements from Burnham Mayor Robert Polk and a Burnham police sergeant, as well as a letter from the chief of the village’s volunteer fire department, about the debilitating financial effect that Dobrowksi’s theft had on public safety and village services.  The amount she stole was enough to fund the police department for six months and leaves the small, working class village in debt, the mayor said.

Between at least 2004 and May 2013, Dobrowski took cash the village received as payment for fees and fines from the public.  She then used most of the cash to gamble at casinos in Indiana and elsewhere either by taking cash to casinos or by depositing the money into her personal bank account and then withdrawing it from automated teller machines at casinos.  She falsely represented the village’s finances to auditors and covered up her fraud scheme by causing false entries in village books.

As part of the fraud scheme, Dobrowski took cash from both the village cash register and the collection of money received as tow bonds.  She recorded false amounts of tow bond money that had been received to make it appear that the village collected less cash than it had actually received, and sometimes she used tow bond money to balance the cash register.

To conceal her misappropriation of cash from the village cash register, Dobrowski waited a week to deposit cash into the village’s bank accounts instead of making daily deposits.  By delaying deposits, Dobrowski could use funds received by the village in the later week to make up for funds she had taken during the prior week, making the deposit appear to match the revenues despite having taken cash from the register.

Dobrowski further concealed the scheme by failing to record checks received from the public as payment for village fees and services.  She would place the unrecorded checks into the register to compensate for an equal amount of cash she had taken, making the register appear balanced.  She provided false information to the village’s outside audit firm regarding the village’s revenues and regularly disposed of the cash register tape to conceal that the village’s revenues often did not match the deposits into village bank accounts.

Dobrowski also admitted filing a false federal income tax return for the years 2007-12, knowing that her total income was substantially greater than what she reported because she failed to report the cash she misappropriated from the village as income.  Dobrowski agreed that she caused a total tax loss of $204,203 during those years.

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 C. Lee, Special Agent-in-Charge of the Chicago Office of the Internal Revenue Service Criminal Investigation Division.

The government is being represented by Assistant U.S. Attorney Steven Block.

CHICAGO ― A former suburban man who was living in Michigan when he was arrested in 2011 was convicted by a federal jury of sex-trafficking three victims, including two minors, federal law enforcement officials announced today.  The defendant, FABRIEL DELANEY, was found guilty of all eight counts against him, including sex-trafficking by force, fraud and coercion, and of minors.  The jury began deliberating late Wednesday and returned its verdict yesterday afternoon following a trial that began Aug. 25 in U.S. District Court. 

Delaney, also known as “Face,” 28, formerly of Palatine, as well as Battle Creek and Kalamazoo, Mich., faces a mandatory minimum sentence of 15 years in prison and a maximum of life on multiple counts.  U.S. District Judge John Darrah scheduled sentencing for Dec. 10.

Delaney has been in federal custody since July 2011 when he was arrested by FBI agents outside a hotel in Tinley Park.  According to the evidence at trial, Delaney transported two minor females and a young woman from Kalamazoo to the hotel to engage in prostitution at what he believed was a bachelor party.  Delaney specifically expected the victims to engage in sexual activity with 10 to 12 men for $150 to $300 per customer.  Instead, Delaney was arrested at the hotel as part of a sting that followed a long-term investigation of his sex trafficking crimes.

All three victims, who were 16, 17, and 20-years-old at the time, testified about their prior involvement with Delaney at the trial.  They testified that, at first, Delaney took half of the money they were paid and, later, took all of the money they were paid, after advertising their services on various Internet websites.  The adult victim testified that Delaney threatened her by holding a hot iron next to her face, and there was additional testimony about beatings and other threats of violence.

The investigation began in September 2010 when Illinois State Police made a traffic stop in Will County and found Delaney driving with three female passengers, including one of the minor victims, who Delaney was sex-trafficking at a hotel in the Joliet area.  Delaney typically met customers in a hotel parking lot to ensure they were not undercover police before sending them to the victim’s hotel room.

The verdict 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.  FBI field divisions in Detroit and Indianapolis assisted in the investigation, as well as the Cook County Sheriff?s Police Department, the Illinois State Police, police departments in Kalamazoo and Battle Creek, Mich., and the Will County State’s Attorney?s Office.

The government is being represented by Assistant U.S. Attorneys Rajnath Laud and Dylan Smith.

CHICAGO — A suburban physician whose medical license was suspended after he was arrested earlier this year pleaded guilty today to health care fraud and illegally prescribing controlled substance medications.  The defendant, SATHISH NARAYANAPPA BABU, who owned Anik Life Sciences Medical Corp., admitted that he illegally prescribed oxycodone and other controlled substances, and fraudulently billed Medicare approximately $500,000, and fraudulently collected approximately $216,000, for services he did not provide.

Babu, 47, of Bolingbrook, operated Anik Life Sciences, a home-visiting physician’s office, in Darien and, previously, in Arlington Heights.  He was arrested in February following an investigation by the Drug Enforcement Administration, the U.S. Department of Health and Human Services Office of Inspector General, and the Federal Bureau of Investigation.

As part of his plea agreement, Babu agreed to surrender his DEA registration.  He faces a maximum sentence of 10 years in prison on one count of health care fraud and four years in prison on one count of illegally prescribing a controlled substance, and a $250,000 maximum fine on each count.  The government anticipates an advisory United States Sentencing Guidelines range of 57 to 71 months in prison, according to Babu’s plea agreement.

Babu remains free on bond, which prohibits him from writing any prescriptions or submitting any claims to Medicare, while awaiting sentencing on Jan. 21, 2015, by U.S. District Judge John J. Tharp, Jr.

Babu also agreed to forfeit approximately $126,000 that was seized when he was arrested, as well as three automobiles ― a 2013 BMW, a 2001 BMW, and a 2010 Lexus.

In pleading guilty, Babu admitted that between November 2012 and December 2013, he issued multiple prescriptions for controlled substances to a purported patient who was actually an undercover agent, despite never having seen or examined the patient.  The prescriptions totaled approximately 300 pills containing 80mg strength oxycodone, 180 pills containing 5-325mg strength hydrocodone, and 120 pills containing 1 mg strength of alprazolam.  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 purportedly 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 purportedly 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 purported 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 purported 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 purportedly 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; Jack Riley, 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 officials commended the assistance of United Healthcare in the investigation.  The government is being represented by Assistant U.S. Attorney Sarah Streicker.

Plea Agreement