Northern District of Illinois
Press releases recorded for this federal judicial district.
Chicago Man Surrenders After Being Indicted in Alleged Conspiracy to Illegally Traffic Guns from Indiana to ChicagoRead the Press Release
CHICAGO ― A Chicago man self-surrendered to law enforcement authorities today on federal charges alleging that he conspired with others to buy at least 43 firearms in Indiana and illegally transport those firearms to Chicago for sale. The new defendant, WINSTON GERALDS, allegedly conspired with previous defendant David Lewisbey and others in the interstate gun trafficking conspiracy.
Geralds, 24, also known as “Worm,” was indicted on one count each of conspiracy and dealing firearms without a federal license, and two counts each of illegally transporting firearms across state lines and interstate travel to sell guns without a license. He pleaded not guilty to the charges after presenting himself with his attorney for arraignment in U.S. District Court. He was taken into federal custody and a detention hearing was scheduled for 1:30 p.m. Friday before U.S. Magistrate Judge Geraldine Soat Brown in Federal Court.
Geralds was charged in a seven-count indictment returned by a federal grand jury on May 28. A co-defendant, MAURICE STRICKLAND, 26, of Chicago, was charged with one count of being a felon-in-possession of a firearm. Strickland, also known as “Reece,” was arrested on June 9, pleaded not guilty, and remains detained in federal custody.
The indictment alleges that Geralds accompanied Lewisbey on multiple trips to Crown Point, Ind., and Indianapolis between April 21-23, 2012, and purchased firearms at gun shows and other venues. It adds they illegally brought the firearms to Chicago, where they sold no fewer than 43 guns to previous defendants, who then sold the guns to an individual who was cooperating with ATF agents. All of those guns were recovered by law enforcement.
Lewisbey, 24, of South Holland; Levaine Tanksley, 29, of Chicago; and Charles Lemle, 28, of Chicago, were previously convicted of various firearms offenses and sentenced. Michael Hall, 29, of Chicago, is awaiting sentencing.
Geralds allegedly accompanied Lewisbey and participated in each of the gun transactions on April 21-23, 2012, and conspired with him in illegally selling the firearms across the state line. At the time, Strickland lived in a residence in the 6800 block of South Langley Avenue where Tanksley sold some of the guns he bought from Lewisbey. Strickland was charged with illegally possessing a firearm on April 22, 2012, because of a previous felony conviction.
The indictment against Geralds and Strickland was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl Vasilko, Special Agent-in- Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The Chicago Office of the Federal Bureau of Investigation, the Chicago Police Department, and the Illinois State Police assisted in the investigation, which was conducted with the Chicago High Intensity Drug Trafficking Task Force (HIDTA).
Conspiracy and dealing firearms without a federal license each carry a maximum sentence of five years in prison, while each count of illegally transporting firearms across state lines, and interstate travel to sell guns without a license carry a maximum penalty of 10 years in prison. The felon-in-possession count against Strickland carries a maximum sentence of 10 years in prison. Each count carries 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. Attorneys Christopher Parente and Bethany Biesenthal.
Indictment
U.S. Files Lawsuit Against IPC the Hospitalist Company, Alleges Overbilling of Federal Health Insurers for Physician ServicesRead the Press Release
CHICAGO — The United States filed a civil lawsuit against California-based IPC The Hospitalist Company, Inc., and its subsidiaries, alleging that IPC submitted false claims to federal health care programs, the U.S. Attorney’s Office announced today. The complaint alleges that IPC violated the federal False Claims Acts by knowingly engaging in systematic overbilling for hospital evaluation and management services billed to Medicare, Medicaid, and other federal health benefit programs.
The government’s complaint, intervening in a whistleblower’s lawsuit, was filed yesterday in U.S. District Court. Last December, when the whistleblower’s lawsuit was unsealed, the United States gave notice of its intention to file its own complaint.
IPC, based in North Hollywood, Calif., is one of the largest hospitalist companies in the United States, employing 2,500 hospitalist physicians and other health care providers in more than 1,300 facilities in 28 states. Hospitalists are physicians who work only in hospitals and other long-term care facilities, overseeing and coordinating inpatient care for patients from admission to discharge.
The government’s lawsuit alleges that IPC physicians sought payment for higher and more expensive levels of medical service than were actually performed ― a practice commonly referred to as “upcoding.” Specifically, the lawsuit alleges that IPC encouraged its physicians to bill at the highest levels regardless of the level of service provided and pressured physicians with lower billing levels to “catch up” to their peers.
“IPC’s upcoding scheme caused, and still continues to cause, Medicare, Medicaid and other federal payors to overpay millions of dollars to IPC,” the suit states. “As a result of corporate/management pressure, and/or in keeping with IPC corporate culture and expectations to maximize billings, IPC hospitalists have routinely and systematically submitted upcoded claims for payment to the United States,” it adds.
The lawsuit was originally filed under seal in 2009 by Dr. Bijan Oughatiyan of Dallas, who worked as a hospitalist for IPC in San Antonio from 2003 to 2008, under the qui tam or whistleblower provisions of the False Claims Act. The federal law and similar state statutes permit private individuals to sue for false claims on behalf of the government and to share in any recovery. The Act also allows the government to intervene or take over the lawsuit, as it has done in this case, and to recover three times its damages plus civil penalties ranging from $5,500 to $11,000 for each false claim submitted.
As alleged in the government’s complaint, more than half of IPC’s revenues have come historically from government medical insurers, including Medicare and Medicaid, as well as the TRICARE Program, the Federal Employee Health Benefits Program, and the Railroad Retirement Medicare Program.
The lawsuit alleges that IPC pressured and encouraged its physicians to engage in systematic overbilling of the codes submitted to government health benefit programs for evaluation and management procedures such as admission, subsequent hospital visits, and discharge of patients. Based on IPC’s regular and detailed monitoring of the codes billed by individual physicians, the lawsuit alleges that IPC was aware that its physicians were using the highest-level billing codes (those which require the most work and are reimbursed at the highest amounts) at rates far in excess of what would normally be expected. It further alleges that IPC knew or should have known that its physicians could not have actually been performing the services at the levels for which claims were submitted.
The complaint illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered more than $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.
The case is being handled by the U.S. Attorney’s Office for the Northern District of Illinois and the Fraud Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, with assistance from the U.S. Department of Health and Human Service’s Office of Inspector General, the Office of Personal Management’s Office of Inspector General, and the Railroad Retirement Board’s Office of Inspector General. The government is being represented by Assistant U.S. Attorney Eric Pruitt and DOJ Senior Trial Counsel Elizabeth Rinaldo.
The case is captioned United States ex rel. Oughatiyan v. IPC The Hospitalist Company, Inc., et al., No. 09 C 5418 (N.D. Ill.). The claims asserted against IPC are allegations only, and there has been no determination of liability. In a civil case, the government has the burden of proving the allegations by a preponderance of the evidence.
Complaint
Former Chicago Tax Preparer Sentenced to Six Years in Federal Prison for Tax and Unemployment Insurance Fraud SchemesRead the Press Release
CHICAGO ― A suburban Chicago woman was sentenced to six years in federal prison for operating a federal income tax fraud scheme as well as one of the largest fictitious employer unemployment fraud schemes ever prosecuted nationwide. The defendant, JACQUELINE KENNEDY, who owned a south side tax preparation business, engaged in one scheme to falsely claim federal tax refunds and, together with 15 co-defendants, engaged in a related scheme using the identities of other individuals, including some of her tax service clients, to fraudulently obtain millions of dollars from state unemployment insurance agencies in Illinois, Indiana and four other states.
Kennedy, 41, formerly of Country Club Hills, received the six-year prison term and was ordered to pay more than $4.8 million in restitution last Thursday by U.S. District Judge Joan Lefkow. Kennedy and her co-defendants were indicted in April 2012, and, after initially being released on bond, Kennedy became a fugitive in September 2012 while she continued to commit unemployment insurance fraud. She was arrested in December 2012 and has remained in federal custody.
Judge Lefkow said Kennedy’s conduct “undermines the public’s confidence in the validity of state unemployment programs.” Kennedy has been defiant and “made choices knowing full well they were illegal,” the judge added.
Kennedy pleaded guilty in December to one count of making false claims for tax refunds, one count of wire fraud, and three counts of mail fraud. Kennedy owned and managed ATAP Financial Enterprises, Inc., ATAP Tax & Business Solutions, Inc., and ATAP Tax Services, Inc., (collectively ATAP), all tax preparation businesses located at one time at 1757 West 95th St., in Chicago. Between January 2008 and April 2010, Kennedy prepared more than 200 false income tax returns by attaching false W-2 forms from fictitious entities to her clients’ tax returns to inflate their Earned Income Tax Credit.
Between February 2009 and December 2012, Kennedy and her co-defendants registered 97 fictitious companies they created with state unemployment agencies and then filed more than 900 false unemployment insurance claims for fictional employees who were purportedly terminated from the fictitious companies without fault. Proceeds from the claims were deposited on debit cards that Kennedy and her co-defendants used to withdraw the proceeds of their scheme.
After a sentencing hearing on May 30, Judge Lefkow ruled last week that Kennedy alone was responsible for restitution totaling $4,815,740, consisting of a $546,619 loss resulting from the tax fraud scheme, and an actual loss of $4,269,121 from the unemployment insurance benefits fraud scheme. She also found that Kennedy intended a loss of more than $13.8 million from the unemployment fraud scheme.
In total, Kennedy and co-defendants bilked state unemployment insurance agencies in Illinois, Indiana, Kansas, Minnesota, Mississippi, and Oklahoma out of approximately $9.1 million, including nearly $6 million from the Illinois Department of Employment Security.
In addition to Kennedy, who was a leader and organizer of the schemes, all 15 codefendants have been convicted, and 11 of them have been sentenced to terms ranging from probation to three years in prison, while four others are awaiting sentencing.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor’s Office of Inspector General, Office of Labor Racketeering and Fraud Investigations; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Social Security Administration Office of Inspector General also assisted in the investigation.
The government was represented by Assistant U.S. Attorneys Michelle Petersen and Andrianna Kastanek.
Alleged Associate of “NullCrew” Arrested on Federal Hacking Charge Involving Cyber Attacks on Companies and UniversitiesRead the Press Release
CHICAGO — A Tennessee man was arrested and charged with federal computer hacking for allegedly conspiring to launch cyber attacks on two universities and three companies since last summer, federal law enforcement officials announced today. The defendant, TIMOTHY JUSTIN FRENCH, is allegedly associated with a group of individuals, known as “NullCrew,” who have claimed responsibility for dozens of high-profile computer attacks against corporations, educational institutions, and government agencies.
French, 20, was arrested without incident by FBI agents at his home in Morristown, Tenn., east of Knoxville, last Wednesday. He waived a detention hearing today in Federal Court in Knoxville, and will be transferred in custody to face prosecution in U.S. District Court in Chicago, where no court date has yet been scheduled. French was charged with conspiracy to commit computer fraud and abuse in a criminal complaint that was filed under seal on June 3 and was unsealed upon his arrest.
French, also known as “Orbit,” “@Orbit,” “@Orbit_g1rl,” “crysis,” “rootcrysis,” and “c0rps3,” and members of NullCrew allegedly launched computer attacks that resulted in the release of computer data and information, including thousands of username and password combinations.
“Cyber crime sometimes involves new-age technology but age-old criminal activity ― unlawful intrusion, theft of confidential information, and financial harm to victims,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “Hackers who think they can anonymously steal private business and personal information from computer systems should be aware that we are determined to find them, to prosecute pernicious online activity, and to protect cyber victims.”
According to the complaint affidavit, NullCrew has used Twitter accounts to announce dozens of attacks against various victims, including the websites of two organizations in July 2012 and eight computer servers belonging to a large company in September 2012. In both instances, the announcements included links to posts on Pastebin, a website that allows uploading of text files for others to view, containing usernames and passwords associated with those victims. In November 2012, NullCrew announced an attack on a foreign government’s ministry of defense, releasing more than 3,000 usernames, email addresses, and passwords purportedly belonging to members of the defense ministry.
The affidavit states that the FBI has been working with a confidential witness who was invited to join online chats with members of NullCrew. During these chats, which occurred through Skype, Twitter, and CryptoCat, Nullcrew members discussed past, present, and future computer hacks, shared current computer vulnerabilities and planned target, and discussed releases of their victims’ information. The witness has assisted with the investigation primarily in an effort to help the FBI, the affidavit states.
The complaint charges French with involvement in five cyber attacks launched by NullCrew: a July 19, 2013, attack on University A, a large public university; a Feb. 1, 2014, attack on Company A, a large Canadian telecommunications company; attacks in early 2014 against University B and California-based Company B, both announced by NullCrew on April 20, 2014 as part of a series of hacking attacks; and an attack against Company C, a large mass media communications company, that NullCrew announced on Feb. 5, 2014.
In each of these instances, information allegedly hacked from the victims’ computers was released by NullCrew and caused significant financial damages to the universities and companies, including the costs of responding to the computer intrusions, conducting damage assessments, and restoring the computer systems.
During each of the attacks, the investigation identified a computer user named “Orbit,” who was using an internet protocol (IP) address assigned to French’s Morristown, Tenn., address. Records from the victims’ computers show access from the same IP address at or around the time the attacks were being discussed or occurred, according to the complaint.
The computer hacking charge in this case carries a maximum sentence of 10 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 arrest and charge 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. Attorney William Ridgway.
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
Roscoe Man Sentenced to 295 Months in Federal Prison for Transporting Child Pornography via the InternetRead the Press Release
ROCKFORD — A Roscoe, Ill. man was sentenced today in federal court by U.S. District Judge Frederick J. Kapala to 295 months in federal prison, followed by 5 years of supervised release, for transporting child pornography via the internet. JASON NICOSON, 36, who pled guilty on May 20, 2013, admitted in his written plea agreement that in December 2011 and January 2012, he used the internet to transport images and videos that contained multiple visual depictions of minors engaging in sexually explicit conduct.
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 and the Illinois Internet Crimes Against Children Taskforce assisted in the investigation.
The government was represented by Assistant U.S. Attorney Michael D. Love.
Crystal Lake Man Pleads Guilty in Secret Shopper SchemeRead the Press Release
ROCKFORD — A Crystal Lake, Ill. man pleaded guilty today in federal court before U.S. District Judge Frederick J. Kapala to mail fraud. MICHAEL S. MACKAY, 47, of Crystal Lake, Ill., admitted 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.
Sentencing for Mackay is set for Sept. 19, 2014, at 2:30 p.m. Mackay faces a maximum sentence of 20 years’ imprisonment, a term of supervised release of up to 3 years following imprisonment, and a fine of up to $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater. The Court may also impose a term of probation of between 1 and 5 years, and must order restitution to the victims of the offense in an amount determined by the Court. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.
The guilty plea 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 is represented by Assistant U.S. Attorney Michael D. Love.
Plea Agreement
27 Defendants Facing State or Federal Drug Charges for Allegedly Selling Heroin and Crack Cocaine on City’s West SideRead the Press Release
CHICAGO — Twenty-seven defendants are facing state or federal narcotics charges for their alleged roles in supplying and distributing heroin and crack cocaine in the neighborhood just north of Douglas Park on the city’s west side. An investigation led by officers of the Chicago Police Department and agents of the Drug Enforcement Administration assigned to the Chicago Strike Force, resulted in federal charges against 14 defendants and state charges against 13 others, who police and federal agents began arresting early this morning.
Eight handguns, an AR-15 assault rifle, approximately $140,000, nearly a half-kilogram of heroin, and some cocaine were seized this morning during the arrests. Another half-kilogram of heroin was seized during the course of the investigation from last August through this month. Early today, Chicago police, DEA agents, and other Chicago Strike Force law enforcement partners also executed eight search warrants upon several defendants’ residences and four alleged stash houses.
The federal defendants were charged with conspiracy or possession with intent to distribute narcotics in five separate criminal complaints that were filed yesterday in U.S. District Court and unsealed following the arrests. The federal defendants were scheduled to begin appearing at 3 p.m. today before U.S. Magistrate Judge Daniel Martin in U.S. District Court. The state defendants were charged with delivery of a controlled substance in separate complaints and will appear later in state court.
According to a 169-page affidavit in support of the federal arrests and search warrants, the investigation revealed that KENNETH SHOULDERS, a leader of the Conservative Vice Lords (CVL) street gang, controlled the distribution of narcotics in the area bounded by West Roosevelt Road, West Fillmore Street, and South California and South Kedzie avenues immediately north of Douglas Park. Shoulders, 47, of Chicago, also known as “Kenny Shannon,” allegedly assigned responsibility for narcotics distribution on specific corners within the 12 blocks he controlled to specific individuals, who further delegated distribution to shift workers who sold heroin and crack cocaine throughout the day.
The area is just south of the Interstate 290 Eisenhower Expressway corridor that has been referred to as the “Heroin Highway” because of the accessibility it provides to city and suburban heroin customers.
An admitted member of the “12th Street” faction of the Traveling Vice Lords (TVL) street gang (named for Roosevelt Road’s location at 1200 south on Chicago’s street grid) told investigators in 2013 that Shoulders is a high-ranking member of the Conservative Vice Lords who controlled all of the Vice Lords and drug operations in the area known as “12th Street,” north of Roosevelt Road between the 1100 and 1200 blocks. This cooperating individual told agents that the 12th Street Vice Lords consist primarily of CVL members, but also members of the TVL, Black Souls Nation, Gangster Disciples, and New Breed street gangs. The non-Vice Lord members are mostly “pack workers” or street level drug dealers who have no direct allegiance to the 12th Street Vice Lords other than making money from selling drugs within the 12th Street territory.
“This case mirrors the trending alignment of Chicago’s street gangs into localized drugdealing factions, and the investigation is another example of the extraordinary cooperation among the Chicago Police Department, DEA and other local, state and federal law enforcement agencies,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “While this case focuses on narcotics trafficking and the complaint does not allege these defendants committed any acts of violence, we believe that bringing serious charges such as these is an effective tool in reducing violence in our communities,” he said.
“This operation demonstrates how police and prosecutors are continuing to work together to dig in at the local level and hammer away at the drug markets plaguing our communities,” said Cook County State’s Attorney Anita Alvarez. “We are pleased to be an active participant in the Chicago Strike Force efforts and look forward to continued success.”
Mr. Fardon and Ms. Alvarez announced the charges with Garry F. McCarthy, Superintendent of the Chicago Police Department; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division.
“This investigation stemmed from numerous citizen complaints, and those citizens should now be able to enjoy their communities without the threat of these alleged gang and narcotic activities,” said Chicago Police Department First Deputy Superintendent Al Wysinger. “I am extremely proud of the members of our department who led this investigation, and the entire joint law enforcement Strike Force that tracked this alleged criminal organization’s illegal activities and is bringing the offenders to justice to make our community safer,” he said.
“This is exactly the type of case we envisioned when we put together the Chicago Strike Force,” Mr. Riley said. “To go after alleged significant criminal organizations and hold the leaders of those organizations accountable for their actions, with the shared desire that the positive results will be felt in our communities.”
The investigation was conducted through the U.S. Organized Crime Drug Enforcement Task Force (OCDETF) Chicago Strike Force, which ― in addition to the DEA, IRS-CID and CPD ― consists of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), the Federal Bureau of Investigation, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the U.S. Marshals Service, and task force officers from various state and local law enforcement agencies, including the Cook County Sheriff’s Police Department and the Illinois State Police.
The complaint affidavit alleges that Shoulders was a wholesale supplier of heroin and worked with his partner, DERRICK WASHINGTON, 44, of Hazel Crest, aka “D-Rock;” his sister, SANDRA SHOULDERS, 49, of Chicago, aka “Penny;” and his son, KENNETH WILLIAMS, 29, of Chicago, aka “Lil’ Kenny,” and other members of the “Shoulders drug trafficking organization.” Another cooperating individual told investigators that Williams managed his father’s heroin distribution at the corner of West Fillmore and South Francisco, and that a state defendant, CHARLES WEATHERSBY, 31, managed Shoulders’ crack cocaine distribution from the same corner.
The Shoulders drug trafficking organization operated its heroin distribution from its main stash house at 211 South Lavergne Ave., as well as specific locations in the 12th Street area, such as 2902 and 2950 West Fillmore St., and 1107 South Mozart St., the charges allege. Other defendants allegedly diluted the heroin to increase profits, shuttled heroin among the various stash and retail locations, advised Shoulders when a new supply was needed, and returned his share of the profits to him. The Shoulders organization’s heroin was typically packaged in small user-portion plastic bags with either a green dollar sign or a black bomb symbol stamped on them.
One federal complaint charges nine defendants ― Shoulders, Washington, Sandra Shoulders, Williams, ANTHONY HAYES, 48, aka “Mustafa;” HARRISON HALL, 50; TIARA WHITE, 27; MARLEANA PORTER, 20; and CRANE MARKS, 50, all of Chicago ― with conspiracy to possess and distribute more than a kilogram of heroin. If convicted, they each face a mandatory minimum sentence of 10 years in prison and a maximum of life imprisonment and a $10 million fine.
RODNEY BEDENFIELD, 40, of Chicago, aka “Bump,” was charged separately with supplying heroin to the Shoulders organization. MARC DAVIS, 45, of Chicago, allegedly supplied heroin to Bedenfield, and was charged with QUEENIE VARGAS, 25, of Chicago, an alleged courier who transported heroin for Davis. If convicted, these three defendants face a mandatory minimum of five years in prison and a maximum of 40 years and a $5 million fine.
DORIAN MILLER, 42, of Riverdale, and JEWNEUS WILSON, 35, of Chicago, were charged separately with being heroin customers of Bedenfield. If convicted, they face a maximum of 20 years in prison and a $1 million fine.
The state defendants, in addition to Weathersby, are: JIM DUNBAR, 19; AMOS HADLEY, 61; DAVID HIGGS, 37; DEONTE HOLLINGWORTH, 26; PARIS HOLMES, 18; JOHN PERRY, 26; NIKKI SANDERS, 21; MILTON TAYLOR, 30; ANTWONE WASHINGTON, 20; NATHANIEL YANCEY, 21; SHARDELL GREEN, 27; and ANTWONE HENRY, 27, all of Chicago.
Assistant United States Attorneys Stephen P. Baker, Shoba Pillay and Katherine A. Sawyer are representing the government in the federal cases. Assistant State’s Attorney Aaron R. Bond is handling the state cases.
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.
Shoulders et al. Complaint
Illinois State Rep. Derrick Smith Convicted of Taking $7,000 BribeRead the Press Release
CHICAGO — Illinois State Rep. DERRICK SMITH (10th District) was convicted today on federal corruption charges for accepting a $7,000 cash bribe in March 2012 to write an official letter of support for a daycare center that he believed was seeking a state grant as part of an undercover investigation. Smith was found guilty by a jury that began deliberating Monday afternoon following a trial that began on May 28.
Smith, 50, of Chicago, was convicted of one count each of bribery and attempted extortion. No sentencing date was immediately set. A status hearing was set for Sept. 23 before U.S. District Judge Sharon Johnson Coleman. Bribery carries a maximum sentence of 10 years in prison and attempted extortion carries a maximum of 20 years, and both counts carry a $250,000 maximum fine. The court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
According to the evidence at trial, a confidential source identified as “Pete,” who worked on Smith's political campaigns and who, unbeknownst to Smith, was cooperating with the FBI, had numerous conversations with Smith about helping a fictional daycare owner obtain a purported state grant in exchange for a cash bribe. On March 2, 2012, Smith provided “Pete” with an official letter of support for the daycare owner to obtain a $50,000 Early Childhood Construction Grant from the state’s Capital Development Board. In return, during a recorded meeting on March 10, 2012, “Pete” gave Smith $7,000 cash, purportedly from the fictional daycare owner.
In March 2011, Smith was appointed state representative for the 10th District, which covers portions of Chicago=s near west and near northwest sides. He was campaigning for his General Assembly seat in the March 20, 2012, primary election when he was arrested on March 13, 2012. Despite being impeached, he was elected to his seat in November 2012 while the charges were pending, but he became a lame duck this past February when he lost his primary bid for re-election.
Trial evidence showed that “Pete” approached the agents in December 2011 and said that that Smith was willing to trade political and non-political favors for money. During multiple recorded in-person meetings and telephone calls beginning Jan. 24, 2012, Smith agreed to write a letter of support for the purported grant application in exchange for a $7,000 bribe. On Jan. 26, 2012, Smith and “Pete” toured the daycare facility and Smith was given information about its purported expansion plans.
Throughout February 2012, Smith and “Pete” had multiple conversations in which “Pete” told Smith that the daycare was applying for an Early Childhood Construction Grant. During those recorded conversations, Smith agreed to provide a letter of support in exchange for the daycare owner’s payment of $7,000. In late February 2012, Smith directed “Pete” to have the daycare owner draft a letter for Smith to sign, and law enforcement sent a draft letter of support to Smith’s office via email. On March 2, 2012, “Pete” retrieved the letter, which was signed by Smith on his official letterhead and was addressed to the Illinois Capital Development Board.
During early March 2012, Smith told “Pete” that he wanted payment from the daycare owner, and Smith rejected payment by cashier’s check because he did not want any trace of the money. Smith told “Pete” that he wanted the $7,000 in cash, and agreed to give “Pete” $2,000 for arranging the deal. On March 10, 2012, “Pete” met with Smith in Smith’s vehicle and “Pete” counted out the $7,000 ― all in $100 bills ― for Smith during their recorded meeting.
Smith did not report receipt of the cash on his Illinois campaign finance reports. After he was arrested, Smith admitted to agents that he had accepted $7,000 in exchange for the letter of support and, accompanied by agents, he retrieved $2,500 from beneath a chest at the foot of his bed at his home and returned that money to the agents.
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.
The government is being represented by Assistant U.S. Attorneys Marsha A. McClellan and Michael T. Donovan.
Barge Captain and Marine Company Convicted in Fatal 2005 Explosion That Discharged Slurry Oil in Chicago CanalRead the Press Release
CHICAGO — The captain of a petroleum barge that exploded in 2005, resulting in the death of a crew member, and the company that owned and operated the vessel were convicted today on federal charges of felony maritime negligence and causing thousands of gallons of oil to pollute the Chicago Sanitary and Ship Canal. The defendants, DENNIS MICHAEL EGAN and EGAN MARINE CORP., were found guilty following a bench trial that was conducted intermittently since last September in U.S. District Court.
Egan, 35, of Topeka, Ill., and formerly of Lemont, and Egan Marine, of Lemont, were each convicted of one count of negligent manslaughter of a seaman and one count of oil pollution of a navigable waterway. The verdict was delivered in an oral ruling from the bench by U.S. District Judge James Zagel, who heard closing arguments on Friday, concluding 13 nonconsecutive days of trial.
Judge Zagel tentatively set sentencing for Sept. 24.
The negligent manslaughter count against Dennis Egan carries a maximum sentence of 10 years in prison and a $250,000 fine, and the same count against Egan Marine carries a maximum penalty of five years’ probation and a $500,000 fine. The misdemeanor oil pollution count carries a maximum penalty against Dennis Egan of a year in prison and a $100,000 fine, while Egan Marine faces a maximum sentence of a year’s probation and a $200,000 fine. Both defendants face a minimum fine of $2,500 on the pollution count. Restitution is mandatory. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Neal R. Marzloff, Special Agent-in-Charge of the U.S. Coast Guard Investigative Service, Central Region in Cleveland; and Randall Ashe, Special Agent-in-Charge of the U.S. Environmental Protection Agency’s Criminal Investigation Division in Chicago.
According to the evidence at trial and court records, on Jan. 19, 2005, a fully-loaded Egan Marine tank barge, known as the EMC-423, being pushed by the tow boat Lisa E, was transporting approximately 600,000 gallons of clarified slurry oil (CSO) from the ExxonMobil Oil Corp. refinery near Joliet to the Ameropan Oil Corp. facility near the canal and California Avenue in Chicago. CSO is a byproduct of petroleum refining that can also be used as fuel, among other uses. About 4:40 p.m., just after clearing the Cicero Avenue Bridge and heading northeast parallel to the I-55 Stevenson Expressway, a large explosion erupted on the barge. As a result, the EMC-423 sank, discharging thousands of gallons of the combustible heavy oil into the canal. Immediately after the blast, crewman Alexander Oliva, 29, who had been aboard the barge, was determined to be missing. His body was recovered from the canal near Laramie Avenue on Feb. 4, 2005.
Judge Zagel ruled that Oliva’s death resulted from the explosion and the negligence that created the explosion. Egan Marine and its employees negligently vented combustible vapors from the cargo hold of the barge to the deck of the vessel, causing an explosion hazard. Oliva was using a propane-fueled open flame from a handheld “rosebud torch” to heat a cargo pump on the barge deck. CSO hardens in cold temperatures, requiring the cargo pump to be heated to offload the oil at its destination. The use of an open flame to heat the pump near the vented vapors caused the explosion and, ultimately, Oliva’s death, the destruction of the barge, and the oil pollution of the canal.
Dennis Egan was the captain and pilot of the Lisa E and the EMC-423 barge, which had no crew, self-propulsion or navigation system of its own. Dennis Egan was negligent and inattentive to his duties on the vessels by allowing an open flame to be used on the deck of the EMC-423, which was loaded with 599,424 gallons of the slurry oil. Egan Marine, which owned both vessels, was negligent in allowing the use of the open flame aboard the barge, resulting in the explosion and Oliva’s death.
“Without question it is against Coast Guard regulations, the standard of care, and is downright reckless, to employ the use of a propane torch on top of 600,000 gallons of a petroleum by-product,” the government claimed in closing argument brief.
Both Dennis Egan and Egan Marine violated the oil pollution provisions of the federal Clean Water Act by negligently causing the discharge of thousands of gallons of oil into the canal, which is a navigable U.S. waterway.
The government is being represented by Assistant U.S. Attorneys Timothy Chapman and Matthew Hiller and Special Assistant U.S. Attorney Crissy Pellegrin, of the U.S. EPA’s Office of Regional Counsel for Region 5 in Chicago.
Salesman and CEO of Former Downstate Telecommunications Business Indicted in Alleged $6 Million Financing Fraud SchemeRead the Press Release
CHICAGO — During three telephone conference calls with an outside auditing firm and his own company’s CEO and CFO in November 2012 and January 2013, a sales representative for a downstate computer and telecommunications business posed as an employee of a global telecommunications company that the downstate firm had partnered with and, with his CEO’s alleged knowledge and participation, lied about the downstate company being owed millions of dollars by its larger international partner, according to a federal fraud indictment.
As a result, DAVID GODWIN, the chief executive officer, president and board chairman of the former ContinuityX Solutions, Inc., of Metamora, Ill., and JOHN COLETTI, a ContinuityX sales representative, allegedly secured $6 million in November 2012 from two victim financing companies for ContinuityX based on the allegedly false assurances that its global marketing partner owed ContinuityX $12 million in receivables.
Godwin, 52, of Germantown Hills, Ill., was charged with six counts of wire fraud, and Coletti, 53, of Canyon Country, Calif., was charged with four counts of wire fraud, in an indictment returned yesterday by a federal grand jury in Chicago. The indictment also seeks forfeiture of approximately $6 million from both defendants. Both defendants will be ordered to appear for arraignment on a date to be determined in U.S. District Court in Chicago.
According to the indictment, an unnamed global telecommunications company entered into a joint marketing agreement with ContinuityX under which ContinuityX billed the larger company for computer and telecommunications services, including networked computer server space, which ContinuityX provided to the international firm’s customers. Godwin and Coletti allegedly falsely represented to the two victim financing companies in Atlanta and Baltimore, an auditing firm, and ContinuityX’s chief financial officer and investors, that ContinuityX was owed $12 million for services it provided to the global firm’s customers. Godwin allegedly caused ContinuityX to create false emails and invoices as part of the fraud scheme and knew that a signature was forged on a purchase order.
Godwin and Coletti together fraudulently arranged the conference calls in which Coletti posed as an employee of the global telecommunications partner to falsely assure auditors, ContinuityX’s CFO, and the two victim financing companies that the accounts receivable were legitimate and that payment was forthcoming, the indictment alleges.
To conceal the false invoices, Godwin allegedly fraudulently caused ContinutyX to file a Form 10-Q with the U.S. Securities and Exchange Commission in November 2012, which Godwin certified as CEO of ContinuityX, purportedly recognizing $4 million in revenue from the global telecommunications company that Godwin knew was false.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 million fine, and restitution is mandatory. If convicted, 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 Chicago office of the Securities and Exchange Commission cooperated with the investigation.
The government is being represented by Assistant U.S. 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
Schaumburg Man Arrested on Federal Charge for Allegedly Transporting Child PornographyRead the Press Release
CHICAGO — A Schaumburg man was arrested and charged with transporting child pornography for allegedly transmitting two pornographic images of a prepubescent minor to an undercover law enforcement officer last week, federal law enforcement officials announced today. The defendant, KURT S. MAYER, was charged in a criminal complaint filed today in U.S. District Court following his arrest Friday night.
Mayer, 34, had an initial appearance Saturday before U.S. Magistrate Judge Geraldine Soat Brown and remains in federal custody pending a detention hearing at 1:30 p.m. Wednesday before Magistrate Judge Brown in Federal Court.
According to the complaint affidavit, a detective with the Washington, D.C., Metropolitan Police Department, who was assigned to an FBI task force and working in an undercover capacity, received an email last Thursday in response to an online advertisement. The user of the email account who responded to the ad was subsequently identified as Mayer.
The undercover officer exchanged a series of emails and instant messages with the individual, later identified as Mayer, during which Mayer allegedly sent the two images depicting child pornography. The undercover officer was able to confirm that that the child was real and that Mayer had just taken the photos as he had claimed in his messages, the complaint alleges.
On Friday, law enforcement agents were able to identify the email account and Internet address associated with the individual who responded to the online advertisement, as well as the identity and address of the customer associated with that Internet address. Mayer was arrested Friday evening near his home at the same time as agents were executing a federal search warrant at his residence.
Transportation of child pornography carries a mandatory minimum sentence of five years in prison and a maximum of 20 years 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 arrest and charge 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 Schaumburg Police Department assisted with executing the search warrant and Mayer’s arrest. The investigation is continuing, they said.
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.
The government is being represented by Assistant U.S. Attorney R. Matthew Hiller.
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.
Rockford Man Sentenced to 420 Months in Federal Prison for Possessing Crack Cocaine and A FirearmRead the Press Release
ROCKFORD — A Rockford man was sentenced today in federal court to a total of 420 months in federal prison for committing firearms and drug trafficking offenses. DAYTON POKE, 35, was sentenced by U.S. District Judge Frederick J. Kapala to serve 360 months’ imprisonment for possessing with intent to distribute crack cocaine and for possessing a firearm as a felon. In addition, the court sentenced Poke to serve a consecutive term of 60 months’ imprisonment for possessing a firearm in furtherance of his drug trafficking crime. After serving his sentence in federal prison, Poke will be placed on 5 years of supervised release. Poke was also ordered to pay a special assessment of $300.
Poke was found guilty of possessing with intent to distribute crack cocaine, possessing a firearm as a felon and possessing a firearm in furtherance of a drug trafficking crime following a two-day jury trial on May 7, 2014. According to the evidence introduced at trial, on July 6, 2011, two Rockford Police Gang Unit detectives stopped a car driven by Poke for a traffic violation after it pulled into a residential driveway on 10tth Avenue in Rockford. During the traffic stop, the detectives searched the car and found a loaded handgun hidden underneath the driver’s seat, and crack cocaine inside the car’s center console. Prior to the stop by police, Poke had been convicted of a crime punishable by a term of imprisonment exceeding one year.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Carl J. Vasilko, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; and Chet Epperson, Chief of the Rockford Police Department.
The government is represented by Assistant U.S. Attorneys Mark T. Karner and Joseph C. Pedersen.
Chicago Investment Fund Manager Facing Criminal Charge for Allegedly Defrauding 41 Investors of $11.3 MillionRead the Press Release
CHICAGO — A Chicago investment fund manager fraudulently obtained more than $11.3 million from 41 investors and misused the funds for his own benefit, as well as to repay certain investors in a Ponzi-type scheme, according to a criminal fraud case announced today by federal law enforcement officials. The defendant, NEAL GOYAL, was the founder and sole managing member of Blue Horizon Asset Management, LLC, and Caldera Advisors, LLC, both of which were unregistered investment advisors.
Goyal, 33, of Chicago, was charged with one count of wire fraud in a criminal information filed yesterday in U.S. District Court, where he will be ordered to appear for arraignment on a date yet to be determined.
The U.S. Securities and Exchange Commission filed a parallel civil fraud lawsuit yesterday and obtained a court order freezing the assets of Goyal and his funds. The SEC suit alleges that Goyal stole his investors’ money to fund his own lavish lifestyle, to pay business expenses, and to support a variety of personal business ventures including a bar and two children’s clothing boutiques that his wife operates in Chicago. United States Securities and Exchange Commission v. Neal V. Goyal, et al.14 CV 3900 (NDIL).
According to the criminal case, between June 2006 and May 2014, Goyal obtained more than $11.3 million from investors through offering and selling limited partnerships in three Blue Horizon funds and a Caldera Equity Fund by making false representations about the intended use of the funds, the investment returns generated, and the source of the investment returns and principal paid to investors. In fact, Goyal allegedly misappropriated the investors’ funds for his own benefit and concealed the fraud scheme by creating and distributing false account statements.
Beginning in early 2006, Goyal represented that funds invested in the Blue Horizon funds would be used for long and short trading in equities, options, and other securities. By June 2006, Goyal began sending false account statements to investors that inflated the financial results from trading purportedly being done by those funds, the charging document alleges. By the first half of 2008, Goyal allegedly knew that he intended to misuse the funds for himself and to make Ponzi-type payments to certain investors. By January 2009, Goyal had stopped trading for two Blue Horizon funds and had not traded at all for the third Blue Horizon fund. In February 2009, Goyal allegedly began engaging in a similar fraud scheme with investments in the Caldera Equity Fund.
Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or an alternate fine totaling twice the loss or twice the gain, whichever is greater, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The charge 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 commended the assistance of the SEC. The government is being represented by Assistant U.S. Attorney Kenneth Yeadon.
The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Information
Chicago Man Indicted on Federal Charges for Allegedly Illegally Trafficking and Possessing Dozens of FirearmsRead the Press Release
CHICAGO ― A Chicago man is facing federal gun charges for allegedly illegally trafficking nearly 40 firearms and illegally possessing at least 11 firearms between 2010 and 2012. The defendant, EARL GARDNER, was arrested last night by Chicago Police officers on a federal warrant issued after he was indicted last Wednesday by a federal grand jury.
Gardner, 25, of the 5900 block of South Bishop Street, was charged with one count of dealing firearms without a federal license and four counts of being a convicted felon in possession of firearms.
He pleaded not guilty today at his arraignment before U.S. Magistrate Judge Mary Rowland and was ordered to remain in custody pending a detention hearing at 1:30 p.m. Friday in U.S. District Court.
According to the indictment and a prosecutor’s statements in court today, Gardner engaged in the business of dealing 39 firearms without a federal license between Dec. 29, 2010, and June 7, 2012, when he sold the guns to a cooperating individual. Those 39 firearms included more than a dozen semi-automatic pistols, 10 revolvers, 10 rifles, three shotguns, and two TEC-9 9 mm pistols. On Sept. 19 and 22, 2011, and Jan. 21 and Feb. 9, 2012, Gardner allegedly illegally possessed two or more firearms on each date after having been convicted of a felony, which disqualified him from possessing a gun. Among the 11 firearms that Gardner allegedly possessed were various 9 mm and .22, .38, and .45 caliber pistols, as well as several rifles, including two Norinco Model SKS 7.62 x 39 mm rifles.
Dealing firearms without a federal license carries a maximum sentence of five years in prison, while each count of being a felon-in-possession of firearms carries a maximum 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 statutes and the advisory United States Sentencing Guidelines.
The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives; and Chicago Police Superintendent Garry McCarthy. The government is being represented by Assistant U.S. Attorney Timothy Chapman.
The public is reminded that an indictment is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Suburban Business Owner and Bookkeeper Charged with $1.2 Million Credit Card Fraud Scheme and $1.5 Million Tax EvasionRead the Press Release
CHICAGO ― A suburban businessman and his bookkeeper are facing federal fraud charges for allegedly cheating credit card companies of approximately $1.2 million and evading their personal federal income tax obligations of more than $1.5 million, federal law enforcement officials announced today. The defendants, VIET NGUYEN and ADELINA MIGUEL, are scheduled to be arraigned on Thursday on one count each of wire fraud and tax evasion that were brought in a criminal information filed last Thursday in U.S. District Court.
Because the defendants allegedly intentionally failed to keep records concerning which credit card charges were fraudulent, authorities are appealing for anyone who thinks they might be a victim to contact an Internal Revenue Service Criminal Investigation agent at 630-493-5224.
Nguyen, 41, of St. Charles, owned and operated various companies, including Expedite Media Group, Inc., VB Management Holding Company, Inc., and Pure Small Business, Inc., which provided internet marketing and internet technology services such as website development and mass marketing through emails. Miguel, 37, of Joliet, was the office manager and bookkeeper for those companies and she managed payroll, handled credit card charges, and issued tax forms to employees.
According to the indictment, between 2008 and March 2012, Nguyen and Miguel allegedly swindled customers, credit card companies and banks by fraudulently charging customers’ credit and debit cards and bank accounts for services that were not provided. Nguyen directed Miguel and other staff to make fraudulent charges to meet daily sales quotas that he set and he and Miguel knew could not be met without fraudulently charging for services that were not provided, it adds.
As part of the scheme, Nguyen allegedly opened new companies so that he could fraudulently obtain new merchant accounts. There were so many customer complaints about fraudulent charges that Nguyen’s merchant accounts were frequently cancelled, and Nguyen incorporated new companies to get around that problem, the indictment alleges.
Because the companies’ federal income tax obligations flowed through Nguyen’s personal income tax returns, he was charged with tax evasion for allegedly filing false returns for 2009 that underreported his income. Miguel was charged with tax evasion or allegedly filing a false return for 2009 that underreported her income. In all, both defendants allegedly caused a tax loss of more than $1.57 million for 2008-10.
Among other things, Nguyen and Miguel allegedly caused the companies to pay their personal expenses, including Nguyen’s payments for a Rolls Royce, Bentley, Hummer, Ferrari, Land Rover, two Audis and other autos, as well as mortgage payments, cash withdrawals, credit card charges, skating lessons, dental bills, utilities, and property taxes. Nguyen directed Miguel to enter payments for personal expenses as business expenses in the companies’ ledgers to avoid reporting the payments as personal income on their tax returns, the indictment alleges.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Illinois Attorney General Lisa Madigan, whose office assisted in the investigation. The government is being represented by Assistant U.S. Attorney Jacqueline Stern.
Wire fraud carries a maximum sentence of 20 years in prison and a $250,000 fine or an alternate fine of twice the loss or twice the gain, whichever is greater. Tax evasion carries a maximum of five years and a $250,000 fine. In addition to criminal penalties, including the costs of prosecution, 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. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that criminal charges are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Illinois Hospice Executive, Three Former Employees and Company Indicted for Allegedly Falsely Elevating Level of Patients’ CareRead the Press Release
CHICAGO — An owner and three former employees of an Illinois hospice company, as well as the company itself, were indicted on federal health care fraud charges for allegedly engaging in an extensive scheme to obtain higher Medicare and Medicaid payments by fraudulently elevating the level of hospice care for patients. In many instances, the level of hospice care allegedly exceeded what was medically necessary or actually provided, including for some patients who did not have terminal illnesses or who were enrolled far longer than the required life expectancy of six months or less.
One defendant, SETH GILLMAN, 45, of Lincolnwood, an attorney and the coadministrator and co-owner of Passages Hospice, LLC, which was based in Lisle and has suspended operations, was initially charged in a criminal complaint when he was arrested in January.
Gillman, together with three new individual defendants and Passages Hospice, were charged in an 18-count indictment returned by a federal grand jury on Thursday.
Gillman, Passages, and GWEN HILSABECK, 47, of Pontiac, Ill., who served as coadministrator of Passages, were each charged with 16 counts of health care fraud and one count of conspiracy to obstruct a federal audit. Hilsabeck was also charged with one count of making false statements regarding a health care benefit program in a patient’s initial plan of care.
Also indicted were CARMEN VELEZ, 35, of Palatine, who served as Passages’ director of nurses for the Chicago region and director of clinical services, and ANGELA ARMENTA, 34, of Wheeling, who served as Passages’ director of certified nursing assistants for the Chicago region. They were charged with four counts each of health care fraud.
All four individual defendants and Passages are scheduled to be arraigned on June 2 in U.S. District Court in Chicago.
According to court documents, Passages did not have its own inpatient facility, but instead deployed nurses to visit hospice patients in nursing homes and private residences. Between August 2008 and January 2012, Passages received more than $90 million in Medicare payments for hospice services, including more than $20 million billed as general inpatient services.
The indictment alleges that between August 2008 and January 2012, Gillman and the other defendants caused Passages to submit false claims to Medicare and Medicaid for medically unnecessary hospice care for patients who were not terminally ill and did not qualify for general inpatient care.
Gillman, Hilsabeck, and Passages allegedly paid bonuses to nursing directors and certified nursing assistant directors, including Velez and Armenta, to increase the number of patients on general inpatient care. In addition, they offered incentives, such as payments to nursing homes based on the number of patients on general inpatient care to increase Passages’ patient census, the indictment alleges.
In August and September 2009, Gillman, Hilsabeck, Passages, and Velez, allegedly conspired to obstruct a federal audit by agreeing to alter patient files that had been requested by TrustSolutions, which contracted with the Centers for Medicare and Medicaid Services to audit providers for fraud and abuse.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; 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 Illinois Attorney General’s Office is also participating in the investigation.
The government is being represented by Assistant U.S. Attorney Stephen C. Lee.
Each count of health care fraud carries a maximum penalty of 10 years in prison and a $250,000 fine, while conspiracy to obstruct a federal audit and making false statements regarding a health care benefit program each carry a maximum sentence of five years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The Medicare Fraud Strike Force began operating in Chicago in February 2011, and consists of agents from the FBI and HHS-OIG, working together with prosecutors from the U.S. Attorney’s Office and the Justice Department’s Fraud Section. The strike force is are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Scores of defendants have been charged locally in health care fraud cases since the strike force began operating in Chicago.
To report health care fraud to learn more about the Health Care Fraud Prevention & Enforcement Action Team (HEAT), go to: StopMedicareFraud.gov.
Indictment
Warren Man Sentenced to More Than Six Years in Federal Prison for Robbery of Kent Bank in FreeportRead the Press Release
ROCKFORD — A Warren, Ill. man was sentenced today in federal court for armed bank robbery. The defendant, Derrick W. Holmes, 24, was sentenced by U.S. District Judge Frederick J. Kapala to 76 months in federal prison for the robbery of Kent Bank, 996 West Fairview Road, Freeport, Ill., on Sept. 26, 2013. The court also ordered Holmes to pay restitution of $6,338 to Kent Bank.
Holmes pled guilty to the charge on Jan. 27, 2014. According to the written plea agreement, on Sept. 26, 2013, at approximately 1:05 p.m., Holmes entered Kent Bank while wearing gloves, dark glasses, and a blue knit stocking type hat covering his face. Holmes approached the teller counter, raised his arm and pointed a BB gun pistol at an employee of Kent Bank. Holmes told the teller and the other tellers present to give him all their money, put their teller drawers on the counter and that no one will get hurt. The teller pulled a teller drawer and put it on the counter in front of Holmes. Holmes took $6,338 out of the teller drawer stuffed it in his pants pockets. Holmes then walked out of the bank and fled on a motorcycle.
Holmes also admitted in his written plea agreement that on Sept. 26, 2013, he attempted to enter the Community Bank, 401 South Church Street, Orangeville, Ill., in order to rob it but was unable to enter the bank because bank employees locked the doors when they saw Holmes approaching the bank wearing a navy blue ski mask. Holmes has been in federal custody since his arrest by the Nashville, Tenn. Police Department on October 6, 2013.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; David Snyders, Sheriff of Stephenson County; and Mark Rohloff, Sheriff of Green County, Wisconsin.
The government was represented by Assistant U.S. Attorney Joseph C. Pedersen.
Former Illinois State Rep. Keith Farnham Indicted for Allegedly Possessing, Receiving, and Transporting Child PornographyRead the Press Release
CHICAGO ― A federal grand jury returned a four-count indictment charging former Illinois State Rep. KEITH FARNHAM with possessing, receiving, and transporting child pornography, federal law enforcement officials announced today. Farnham was initially charged with one count of possession of child pornography in a criminal complaint filed last month in U.S. District Court.
Farnham, 66, of Elgin, was indicted yesterday on one count of possessing child pornography involving a minor under age 12, one count of receiving child pornography, and two counts of transporting child pornography, all via computer. Farnham, who was previously released on his own recognizance with conditions, including home incarceration and electronic monitoring, will be arraigned on a date yet to be determined in Federal Court.
The indictment also seeks forfeiture of a computer hard drive that was seized at Farnham’s residence on March 13, when 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.
Farnham resigned his seat in the Illinois General Assembly on March 19.
According to the complaint affidavit, 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.
Possession of child pornography of a minor under age 12 carries a maximum sentence of 20 years in prison, while each count of receiving and transporting child pornography carries a mandatory minimum sentence of five years and a maximum of 20 years, and a maximum fine of $250,000 on each count. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Gary Hartwig, Special Agent-in-Charge of HSI in Chicago.
The government is being represented by Assistant U.S. Attorney Michelle Petersen.
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
Tax Preparer Sentenced to 46 Months in Prison for Filing 3,200 False Returns Claiming Refunds Totaling $3.37 Million for ClientsRead the Press Release
CHICAGO — A former Chicago tax preparer was sentenced today to nearly four years in federal prison for filing nearly 3,200 false federal income tax returns that claimed refunds totaling more than $3.37 million for clients. The defendant, VERLEAN HOLLINS, was sentenced to 46 months in prison and fined nearly $800,000 after pleading guilty in January to two counts of aiding and assisting in the preparation of false federal income tax returns.
Hollins, 43, of South Holland, was ordered to begin serving her sentence on Sept. 23 by U.S. District Judge Samuel Der-Yeghiayan. The $798,250 fine, which Hollins agreed to but does not currently have the ability to pay, represents twice the product of the 3,193 false returns multiplied by Hollins’ average client fee of $125.
This was “not a minor offense, there was significant loss to the government over a period of years,” Judge Der-Yeghiayan said in imposing the sentence in U.S. District Court. “Defendant stole from the people,” he said, adding her crime “became a business lifestyle.”
Hollins, who owned Taxes, Etc., Inc., a tax preparation business located in the 2300 block of East 71st Street, admitted that for calendar years 2009 through 2011, she filed a total of 3,193 individual income tax returns for clients, each of which claimed false education tax credits. As a result, she falsely claimed refunds totaling more than $3.372 million for her clients, the majority of whom paid her approximately $125 to prepare their returns. The vast majority of Hollins’ clients never indicated that they or a dependent were eligible for a college tuition credit, and among the small number of her clients who were eligible for the tax credit, none provided any documents to support eligibility.
The government is being represented by Assistant U.S. Attorney Kaarina Salovaara.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
Remarks as Prepared for Delivery by U.S. Attorney Zachary T. Fardon on Violence in Chicago Before the City Club of ChicagoRead the Press Release
CHICAGO ― Today is important to me. I am honored to be here, and I am going to take this opportunity to talk candidly with you about a topic that is deeply important to me.
My office focusses on some significant areas: terrorism, public corruption, financial crimes, cybercrime. But today I am going to focus on one topic: violence in the city of Chicago.
[Slide presentation.]
I wanted to start with those slides because I think we need to starkly define the problem ― to look at it, to understand what is happening, and where, and why.
This is a gang problem, and a gang faction problem.
This is a disparate impact on certain neighborhoods problem.
It’s a fairness problem. A right-and-wrong problem.
This is an economic problem. It’s a reputational problem.
This is a community problem.
A church problem. A parenting problem.
This is a local, state and federal government problem.
This is a law enforcement problem.
And most of all, it a social justice problem.
It is my problem. It is your problem. It is our problem.
In this room we have business leaders, law leaders, and civic leaders. We have thoughtful people, and powerful people. I appreciate you being here today. I want us to talk about this problem: today, tomorrow, every day, every week, until we come to a better place than where we are now.
Changing what you just saw is going to take sustained investment, involvement and commitment from the government and from you -- the business, legal and civic communities. It will take all of us, doing everything we can, and with a long view; this is a marathon not a sprint. We’re talking about a generational change. But we can do it. And we must do it. So we will.
Let me tell you now about what we’re doing at the United States Attorney’s Office.
Our office here has about 150 Assistant U.S. Attorneys. Of those, 20 work in our Civil Division, and the rest are criminal litigators — federal prosecutors. Among our 130 federal prosecutors, for years, we have had the largest group work on issues related to violent crime. Historically, those prosecutors have worked under the auspices of our Narcotics & Gangs section. And over the past couple of decades, we’ve had major, successful prosecutions out of that section ― racketeering cases, narcotics cases, gun cases, criminal conspiracy cases ― against senior leadership within each of those major gangs: the Gangster Disciples, the Latin Kings, the Black P Stones, and the Black Disciples, and others.
As successful as those cases were in dismantling gang leadership, they of course did not represent an end to the violence. At their time, in their place, they helped. But the violence did not stop.
And unfortunately, over the past decade, the gang problem has grown more complex, rather than less. The factioning that I described makes these issues more challenging for law enforcement to grab hold of and tackle. With many gangs, we no longer have the old-school, clearly delineated gang leadership, with corporate hierarchical structure, where we can readily identify the CEO and top brass of the gang, investigate, indict and lock them up — as we did with Larry Hoover, Jeff Fort, Augustin Zambrano and others.
Instead, more and more often, many gangs are factioned, with little central leadership, and the violence is often between factions within the gangs and no longer about protecting the gang enterprise ― narcotics or otherwise ― but instead, more and more, these shootings and killings are for base, indiscriminate and petty reasons ― revenge, disrespect, perceived disrespect sometimes through social media ― kids pulling the trigger over nothing.
And so as our problems change, so must we.
After I started in October, I put my head down and did my due diligence. I spoke with the lawyers in my office, with judges, with defense lawyers, with law enforcement; I read everything I could read on violence in Chicago; I went to court to observe what we were doing, and I ingrained myself in our major investigations and programmatic efforts.
Through that process, I came to a conclusion that was shared by my senior leadership in the office. We decided that while we are very proud of what we have accomplished in the past, now was and is the right time for us to write the words Violent Crime on a piece of paper, draw a circle around them, assign a cadre of talented federal prosecutors, and say to them: your job, your sole mission, is to help the city and the district tamp down on violent crime. And you are empowered to work together, to think strategically, and to use whatever tools you think best suited to accomplish that mission ― the federal narcotics statutes, the gun statutes, racketeering, fraud, money laundering, the federal robbery and extortion statutes, and prevention and reentry tools ― ways of trying on the front end to prevent these kids from shooting at each other.
So that is exactly what we did. In March, I announced internally a restructuring of our Criminal Division and among the changes that went into effect on March 31 was the creation of a new Violent Crimes section. That section has one mission: to help the city and district tamp down on violent crime.
I believe that the standing up of our Violent Crimes section at the U.S. Attorney’s Office comes at an opportune time. The nature, extent and quality of cooperation and collaboration across local, state and federal law enforcement is at an all-time high.
As someone who served as a prosecutor here in the late 1990s and early 20-oughts, and who has served in another city and district, I believe we have a uniquely strong and committed law enforcement community here in Chicago.
Let me give you a few concrete examples:
We have monthly collaborative law enforcement meetings ― attended by the Chicago Police Department, the FBI, DEA, ATF, IRS, HSI and others ― to talk about investigations and prosecutions of the most violent criminals in Chicago. I often attend these meetings myself, and there are senior prosecutors from my office and the Cook County State’s Attorney’s Office there. We gather in a large room, sit around a table, and talk about specific individuals and investigations. Information flows freely between the city, the state and the feds. We leave that room and work collaboratively to make cases on those violent offenders, and then we get back in that room every month to talk about what more we can do. And my office works with Anita Alvarez’s office to make sure we bring the best cases, against the worst offenders, in the right forums.
Another example: Separate and apart from those meetings, for over two years now, we have had in this district a joint Strike Force, called the OCDEFT Strike Force, comprised of topnotch agents and officers from DEA, CPD, FBI, ATF, HSI, USMS, and various Sheriffs’ offices. And officers and agents assigned to this OCDEFT Strike Force all work together, full time, in integrated units, under one roof, with the focused mission of attacking major drug trafficking organizations and gangs at the “choke point” between cartels and street drug distribution, which usually means gangs. My office has a prosecutor embedded in the Strike Force, and CCSAO has a prosecutor embedded in the Strike Force, and many other state and federal prosecutors work cases stemming from the Strike Force. That is remarkable cross pollination and collaboration by law enforcement. And that is what it’s going to take to help move the needle on violence in this city.
A third example: Project Safe Neighborhoods. About a decade ago, law enforcement in Chicago recognized that a disproportionate number of shootings and homicides were concentrating in these six CPD districts I showed in the slide presentation. So we initiated a program, called Project Safe Neighborhoods or “PSN” and created a joint federal, state and local PSN Task Force (different than the OCDEFT Strike Force), the purpose of which is use federal gun statutes to investigate the most violent criminals in those six afflicted districts.
That task force is more than a decade old and going strong. There are committed officers from CPD and ATF, who work with my office and the CCSAO, to investigate and bring those cases. The task force meets monthly. And separate from those meetings every month or so, a senior prosecutor from my office gets together with a senior prosecutor from the CCSAO to go through pending gun cases and make strategic decisions about which office should charge which defendants with gun crimes.
Those are three concrete examples of my overarching point: this truly is a progressed, progressive and committed law enforcement community we have in the city of Chicago. I believe that the new Violent Crimes section in my office will help us continue and build upon those important programs.
Apropos of that, I want to take a few minutes to tell you about another aspect of who we are and what we do to fight violent crime. This area is something that, in my view, not enough people realize or understand that we do at the U.S. Attorney’s Office. When people think of us, they think we carry a stick, we are prosecutors/enforcers. But we also offer a carrot. We try to help and incentivize people not to commit violent crimes.
Thousands of offenders, people convicted of committing acts of violence, are released from state and federal prisons in Illinois every year. When we started Project Safe Neighborhoods over a decade ago, we had data showing that a large number of those returning offenders were coming home to ― reentering ― the same afflicted neighborhoods you just saw in those six Chicago districts. And we had statistics showing that a significant percentage of exoffenders reentering those neighborhoods would commit another violent offense within three years of getting out of prison.
The PSN Task Force wanted to find a path to stop that pattern of violence.
And so we designed monthly “Parolee Forums” or “offender notification meetings,” and we have been holding those meetings for over a decade. In fact, our meetings ― parolee forums in Chicago ― have become the model for similar forums now held in major cities across the country.
What do these forums look like? They occur monthly and rotate among the neighborhoods I showed you. Typically, 20-30 recently released parolees moving back into the host neighborhood attend each meeting. The goal of the forums is offer those attendees the chance to make an informed choice.
At the outset, they hear from the local CPD commander, a senior federal prosecutor, a senior Cook County prosecutor, and an ATF agent about what will happen to them if they reoffend. The emphasis is on guns. Often, these are young men coming out of their initial stint in prison and they don’t fully appreciate that because they are now a convicted felon, just by picking up a gun, they would be committing a felony that carries a substantial sanction. We explain that to them, not in a heavy-handed way, but in an honest way. We tell them the truth about the tragic stories we see every day when it comes to felons in possession of firearms.
That’s the heavy part. There’s also a more uplifting part. At the forums, we have social services providers, who are terrific and talk to the attendees about how they can help. For example, City Colleges of Chicago often participates and talks about GED classes and even college course opportunities. Other social services organizations offer help and expertise with things that range from getting a haircut, to how to prepare a resume and find a job. And at some point during the forums, a successful ex-offender addresses the attendees, encouraging them that, while difficult, it is possible to make the right choices and put their lives back on track.
I’ve attended these meetings. They are compelling. They are emotional. And they work.
Early on in the PSN program, we recognized the importance of seeking an impartial, arms-length academic examination. And so we partnered with top academic researchers at the University of Chicago, Andrew Papachristos and Tracy Meares, who are now at Yale but still part of our PSN team here. The analytical work done by Professors Papachristos and Meares has fortified the success of this program. They have found that ex-offenders who participate in the forums are 30 percent less like to commit a new offense than those who don’t. Thirty percent: that is moving the needle.
So our reentry and violence prevention efforts are a real success story and one that we are continuing. In fact, right now, we are expanding those efforts into the juvenile offender arena.
It may not surprise you, given what you’ve seen today, to hear me say that research shows when it comes to predicting violent behavior and social problems later in life, an important inflection point is around 13- or 14-years of age. Kids carrying guns or committing acts of violence at that age are much more likely to later repeat those acts of violence and to end up incarcerated.
So last year, the PSN Task Force applied for federal grant money to launch a new initiative, which we have called our “Youth Outreach Forum.” DOJ awarded us that grant, and this month we launched in Chicago. In partnership with the Chicago Police Department, Chicago Public Schools, the Cook County Juvenile Probation Department and other agencies and social service providers, we are taking the success of our parolee forums and applying that model to at-risk youth.
The specific target audience is juvenile probation or parolees who committed gun or violent offenses. And the goal is to provide those kids with long-term intensive mentoring and wraparound services to address their needs and prevent recidivism.
We are initially focused on two CPD districts ― the 7th and 11th, which is Englewood, Garfield Park, and lower Humboldt Park. The forums are designed to educate the kids about law enforcement, to humanize law enforcement, and to give the kids options and incentives to reassimilate into school and connect with community organizations and activities. Alternatives to the gang route. We are working also with a not-for-profit organization, Youth Guidance, who will selectively provide intensive mentoring through their program, Becoming a Man (BAM).
I am proud that we in Chicago are once again at the cutting edge, leading these efforts related to violence prevention. I believe these initiatives are deeply important to our long-term success in fighting violent crime, and I am committed to continuing them as long as it takes to help those unfairly afflicted neighborhoods.
I hope that gives you some sense as to who we are and what we are doing at the U.S. Attorney’s Office when it comes to violent crime in Chicago. We are and will be vigorous in investigating and prosecuting the most violent criminals in Chicago. But we cannot arrest our way out of the gang problem. From a law-enforcement perspective, that’s why I think it’s so important that we continue our violence prevention and parolee reentry efforts. We have to attack this problem at its roots. I don’t want to prosecute violent offenders if instead we can stop them from taking that act of violence in the first instance.
I am deeply honored to get to work with the state, CPD leadership, and leadership from the federal agencies. I believe we have a passionate and like-minded group, committed to taking a comprehensive approach to tamp down on violence. We are working hard, we are working thoughtfully, and we are working together. And we are all in this for the long haul.
That said, law enforcement is a piece of the puzzle but only a piece. And so now I’m at the point in my remarks when I turn to you, and I make an ask. I ask each of you to think about this problem, and how you can own it. You, your company, your law firm, your community organization, your church, your neighborhood.
[Resume slide presentation.]
These are not war zones. They are not separate and discrete from our city. They are our city. They are our neighborhoods with wonderful, law-abiding, decent Chicagoans; citizens, colleagues, neighbors who, like you and me, deserve to feel safe and to be safe at in the neighborhood they call home.
That’s my problem, and it’s your problem. It belongs to all of us, as any social justice issue does. The challenges before us are daunting but they are finite. We can work together to make change real. We have to. Kids are dying. Let’s get to work.
I appreciate you being here with me today. I’m happy to take any questions.
Former Owner of Commercial Mortgage and Finance Company SentencedRead the Press Release
ROCKFORD — ANTHONY F. D’AGOSTINO, 79, the former owner, CEO and President of Commercial Mortgage and Finance Co., in Rockford, was sentenced today by U.S. District Judge Frederick J. Kapala for seventeen counts of mail fraud, one count of wire fraud, and one count of securities fraud. Judge Kapala sentenced D’Agostino to 90 months in federal prison for each count of wire and mail fraud and 60 months in prison for securities fraud, to run concurrent, followed by 3 years of supervised release. Judge Kapala also ordered D’Agostino to pay $49,350,615.95 in restitution. D’Agostino was ordered to surrender on July 14, 2014.
After a six-day bench trial in September 2013, Judge Kapala found D’Agostino guilty on January 17, 2014, of mail fraud, wire fraud, and securities fraud. According to the decision, D’Agostino raised capital for his business by selling instruments known as Promissory Notes and Certificates of Participation to investors. The evidence showed that D’Agostino concealed from the investors the fact that Commercial Mortgage had a negative net worth that steadily increased during the years that D’Agostino owned the company. Specifically, by year-end 2003, when Commercial Mortgage’s net worth had fallen to -$12,860,653 and it had been six years since Commercial Mortgage had made a profit, it became clear to D’Agostino that Commercial might not recover and D’Agostino engaged in a scheme to defraud investors by utilizing Commercial Mortgage’s long-standing good will and reputation in order to obtain and retain money from investors. From the end of 2003 through October 8, 2008, D’Agostino’s fraud scheme exposed the investors to losses of more than $20 million.
Judge Kapala found that D’Agostino made specific false statements to several of the investors. Specifically, defendant told Commercial Mortgage customers that Commercial Mortgage was “doing well,” “doing great,” “very fine,” or “wonderful.” According to the decision, D’Agostino made these statements about Commercial Mortgage’s financial circumstances and the statements were false.
The sentence was announced today 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 Illinois Secretary of State Jesse White.
The government is being represented by Assistant U.S. Attorneys Scott A. Verseman and Scott R. Paccagnini.
Man Posing as A Highly Decorated Navy Seal Charged with Defrauding Mchenry County CharityRead the Press Release
ROCKFORD — A California man was indicted today by a federal grand jury in Rockford on fraud charges. WILLIAM J. BURLEY, 34, of Yucaipa, Cal., was charged with three counts of wire fraud in connection with a scheme to defraud International Aid Services – USA, Inc. (“IAS America”), a non-profit charity formed in Idaho and based in Crystal Lake, Ill., and International Aid Services (“IAS”), a charitable international non-governmental organization headquartered in Stockholm, Sweden, of $30,000.
According to the indictment, four IAS employees were assaulted in Somalia, and three of the employees were then kidnaped. Burley, the indictment alleges, claimed he was an experienced operative who would assist IAS in negotiating with the Somalia captors and in rescuing the captured IAS employees. The indictment charges that in order to induce IAS and IAS America into hiring the defendant and his company, Burley falsely claimed to have been a highly decorated Navy SEAL, to have graduated from the Universities of Delaware and Maryland, to have attended numerous training facilities, to have been a consultant for the Navy, Department of Defense, and State Department, and to have been a law enforcement officer.
According to the indictment, as a result of the defendant’s false and fraudulent pretenses, representations, and promises, he received a total of $30,000 in the form of three wire transfers sent from the Crystal Lake Bank and Trust to the Bank of America in Redlands, California. One wire for $5,000 was sent on Aug. 20, 2012, and two wires for a total of $25,000 were sent on Aug. 30, 2012.
Each count of wire fraud carries a maximum penalty of 20 years in prison, and a maximum fine of $250,000, or an alternate fine totaling twice the loss or twice the gain derived from the offense, whichever is greater. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines, as well as restitution. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation. The government is being represented by Assistant U.S. Attorney John G. McKenzie.
The public is reminded that an indictment is only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving the defendant’s guilt beyond a reasonable doubt.
South Loop Condo Developer and Two Attorneys Among Six Defendants Indicted in $22.8 Million Mortgage Fraud SchemeRead the Press Release
CHICAGO — A south loop condominium developer and two attorneys are among six defendants facing federal charges for allegedly engaging in a $22.8 million mortgage loan fraud scheme, federal law enforcement officials announced today. The defendants allegedly caused buyers to fraudulently obtain approximately 60 mortgages from various lenders to purchase condominiums at Vision on State, a 250-unit building located at 1255 South State St.
Real estate developer WARREN N. BARR, III, was a member of 13th & State, LLC, which obtained a $55.7 million loan in 2005 to finance the development and construction of Vision on State between 2004 and 2008. Barr, 62, of Riverside, was charged with nine counts of bank fraud and four counts of making false statements on loan applications in a 13-count indictment that was returned by a federal grand jury last Thursday.
Also indicted were: ROBERT D. LATTAS, 37, of Oak Brook, an attorney who represented 13th & State at condo closings, seven counts of bank fraud and three counts of making false statements; JEFFREY A. BUDZIK, 37, of Miami Beach and formerly of Chicago, an attorney who represented individuals purchasing condos at Vision on State, one count of bank fraud; ASIF A. ASLAM, 43, of Irvine, Calif., and formerly of Lincolnwood, six counts of bank fraud and one count of making false statements; LEONARDO V. SANDERS, 51, of Chicago, who similar to Aslam recruited individuals to purchase condos and then lease them to renters, two counts of bank fraud and one count making false statements; and JAMES J. CARROLL, 63, of Naperville, who was chief financial officer and a member of 13th & State, one count of bank fraud.
The indictment also seeks forfeiture of $22,872,527 from Barr, Lattas, Aslam, and Sanders.
Barr is believed to be living temporarily in Saudi Arabia and a warrant was issued for his arrest. The other five defendants are scheduled to be arraigned at 10 a.m. Wednesday, or on other dates to be determined, in U.S. District Court.
Between March 2007 and July 2012, the defendants allegedly caused buyers to obtain mortgages to purchase condos at Vision on State by making false statements to lenders in loan applications, real estate contracts, and HUD-1 settlement statements about the sales price of the units, the buyers’ employment, income, financial condition, assets, liabilities, sources of down payment, and intention to occupy the condos, and the funds that 13th & State was providing such as the buyers’ down payments, buyers’ incentives, and commissions.
According to the indictment, Barr, Lattas, and Carroll determined the minimum prices that 13th & State should receive for the condos and facilitated the sale of those units at inflated prices, knowing the difference between the two prices, or “the spread,” would be paid to Aslam, Sanders and others to recruit buyers with incentives that were not disclosed in loan documents.
All six defendants allegedly caused false documents to be prepared that concealed from lenders that funds represented as the buyers’ down payments were actually provided by 13th & State, so that the buyers were contributing little or no equity, and that the purchase prices were inflated. Aslam and Sanders allegedly received funds from Barr and others at Barr’s direction, and, knowing this was not disclosed to lenders, kept some of the funds for themselves and used some of the funds to pay condo buyers’ assessments and closing costs.
The indictment also alleges that Barr purchased a condo at Vision on State and that he, Lattas, and Carroll knew that loan documents contained false information about the sales price and the source of Barr’s down payment, as well as false information about his assets and liabilities.
The lenders allegedly defrauded include AmTrust Bank, Bank of America, First Tennessee Bank, JP Morgan Chase Bank, and Wells Fargo.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Michael P. Stephens, Acting Inspector General for the Federal Housing Finance Agency.
The government is being represented by Assistant U.S. Attorney Christopher R. McFadden.
Each count of bank fraud and making false statements on loan applications carries a maximum penalty of 30 years in prison and a $1 million fine, or an alternate fine of twice the loss or twice the gain, whichever is greater, and restitution is mandatory. 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
South Holland Man Sentenced to Nearly 17 Years in Prison for Illegally Trafficking Hundreds of Guns from Indiana to ChicagoRead the Press Release
CHICAGO ― A south suburban man was sentenced to nearly 17 years in federal prison for buying hundreds of high-powered firearms at guns shows in Indiana and illegally transporting them to Chicago where he sold them without a federal firearms dealer license. The defendant, DAVID LEWISBEY, was sentenced late yesterday in U.S. District Court.
After a two-week trial last September, Lewisbey, 24, of South Holland, was convicted of dealing firearms without a federal license, two counts of illegally transporting firearms across state lines, and two counts interstate travel to sell guns without a license.
“This case is a perfect example of where the guns come from . . . and into the hands of gangbangers who then shoot them and kill and wound people,” U.S. District Judge Ronald Guzman said before imposing a 200-month sentence.
“During one of the deadliest years in Chicago’s history, the defendant was pumping numerous unregistered and untraceable firearms into the most violent neighborhoods in Chicago. The defendant ran his business on the side streets and back alleys of Chicago’s neighborhoods. No background checks, no receipts, no written record,” Assistant U.S. Attorneys Bethany Biesenthal and Christopher Parente argued in a sentencing memo.
Evidence at the trial showed that between January 2008 and September 2012, Lewisbey, who had no criminal record that disqualified him from buying firearms, routinely traveled to various gun shows in Indiana and purchased duffle bags full of guns that he brought back to Chicago. A government witness testified that he personally observed Lewisbey buy more than 100 firearms, as well as dozens of high-capacity magazines, at Indiana gun shows.
During just one 48-hour period, on April 22-23, 2012, Lewisbey bought 43 guns in Indiana and brought them to Chicago, where he delivered them to co-defendant LEVAINE TANKSLEY, who with two other co-defendants, sold them to an individual who was cooperating with ATF agents. All of those guns were recovered by law enforcement.
Last month, Judge Guzman sentenced Tanksley, 29, of Chicago, to more than 11 years in prison, and CHARLES LEMLE, 28, of Chicago to 10 years in prison. MICHAEL HALL, 29, of Chicago, who cooperated with the government and testified against Lewsibey is awaiting sentencing. Tanksley, Lemle, and Hall each pleaded guilty to illegally possessing firearms as previously convicted felons.
Lewisbey’s sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The Chicago Office of the Federal Bureau of Investigation, the Chicago Police Department, and the Illinois State Police assisted in the investigation, which was conducted with the Chicago High Intensity Drug Trafficking Task Force (HIDTA).
Two Defendants Arrested and Charged in Alleged Mortgage Fraud Scheme Involving Federal Undercover InvestigationRead the Press Release
CHICAGO — A West suburban man and a Chicago woman were arrested on federal charges for allegedly engaging in a bank fraud scheme purporting to involve the fraudulent sale of two two-flat apartment buildings in Chicago, federal law enforcement officials announced today. The charges followed a federal undercover investigation of fraudulent mortgage loan transactions.
GEORGE DRAVILAS, 36, of Medinah, and BRIDGET HUTCHERSON, 40, of Chicago, were each charged with bank fraud in a criminal complaint filed yesterday and unsealed following their arrests yesterday. Hutcherson was released on her own recognizance while Dravilas remains in federal custody pending a detention hearing at 3 p.m. Friday before U.S. Magistrate Judge Maria Valdez in U.S. District Court.
According to the complaint affidavit by an agent with the U.S. Department of Housing and Urban Development’s Office of Inspector General, a cooperating individual (CI-1) who was arrested in January 2013 identified Dravilas as someone he had worked with to conduct fraudulent mortgage transactions. The FBI initiated an undercover investigation in which CI-1 posed as a mortgage broker who was engaged in fraud and was seeking assistance in structuring fraudulent mortgage loan transactions. Two additional cooperating individuals, including a licensed real estate appraiser, two undercover law enforcement agents who posed as straw buyers of the two properties, and a bank also participated in the investigation.
The complaint alleges that Dravilas agreed to prepare underlying documents to be submitted as part of the fraudulent mortgage loan applications to the bank for the purchase of two residential properties by straw buyers who would receive a share of the seller’s loan proceeds. The two-flats were located in the 6300 block of South Parnell Avenue and the 6600 block of South Sangamon Street in Chicago. Although Dravilas claimed not to own the properties, he allegedly supplied real estate purchase contracts, title commitments, fraudulent and inflated lease rental agreements, money to obtain fraudulently inflated appraisals, and letters extending and renewing the real estate purchase contracts, the charges allege.
Dravilas allegedly schemed to sell both apartment buildings for a fraudulently inflated sales price of $275,000 each, while purporting to kickback $100,000 on each transaction to each of the undercover straw buyers, while keeping a fee for himself and the cooperating individuals.
Hutcherson allegedly received $600 to supply one of the cooperating individuals with fraudulent W-2s, check stubs, and earnings statements in the names of the straw buyers to be used in support of the mortgage loan applications.
The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General in Chicago. HUD-OIG and FBI agents conducted the investigation through the South Suburban Financial Crimes Task Force, which includes the Cook County Sheriff’s Police Department, the Internal Revenue Service Criminal Investigation Division, the U.S. Postal Inspection Service, and the U.S. Postal Service Office of Inspector General.
The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.
Bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that a complaint 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
Retired Chicago Official Arrested on Federal Bribery Charge for Taking Cash and Personal Benefits to Steer $124 Million in City Contracts to Redflex for Red Light Camera ProgramRead the Press Release
CHICAGO — A retired City of Chicago official who managed the city’s red light camera program for nearly a decade was arrested today for allegedly accepting cash and personal benefits totaling hundreds of thousands of dollars to steer $124 million in city contracts to Redflex Traffic Systems, Inc., to establish, operate and expand the program. The defendant, JOHN BILLS, allegedly received cash bribes, other forms of payment, and an Arizona condominium, all funneled from Redflex through unnamed Individual A, Bills’ one-time friend who received $2 million in salary, bonuses, and commissions as a consultant to Redflex.
Bills, 52, of Chicago, was charged with one count of federal program bribery in a criminal complaint that was filed yesterday and unsealed today. Bills was scheduled to appear at 3 p.m. before U.S. Magistrate Judge Maria Valdez in Federal Court.
Between 2003, when the city awarded Phoenix-based Redflex its initial contract, and 2011, Bills allegedly received from Individual A cash and checks directly and indirectly for his benefit, including to repay loans, for his retirement party, and catering for another party. Individual A also purchased for Bills a Glendale, Ariz., condominium for $177,000, which Bills, often with friends and family, visited 22 times between May 2008 and 2012.
Bills, who retired in 2011 as managing deputy commissioner of the city’s transportation department after 32 years with the city, managed the city’s red light program and served as a member of the city’s contract evaluation committee.
According to an FBI affidavit supporting the charges, in October 2003, the city awarded a contract to Redflex for the installation, maintenance and operation of the city’s first Digital Automated Red Light Enforcement Program (DARLEP), which used cameras to automatically record and ticket drivers who ran red lights. Between 2004 and 2008, the city paid Redflex approximately $25 million under this contract, and Redflex installed and maintained 136 camera systems in Chicago intersections, and assisted in reviewing and processing violations. Bills, then assistant transportation commissioner, was a voting member of the city’s request for proposal (RFP) evaluation committee that recommended awarding the contract to Redflex after a one-month trial run of competing systems by Redflex and another finalist. In February 2008, the city awarded a new, non-competitive contract to Redflex to operate and maintain the previously installed 136 camera systems, and paid Redflex approximately $33 million under that contract.
Also in February 2008, following the competitive RFP process, the city awarded a new DARLEP contract to Redflex that was similar to the first. Bills was an advisory member of this RFP evaluation committee. The city paid Redflex approximately $66 million under this contract, which resulted in approximately 248 red light cameras being installed, bringing the total number of Redflex cameras to 384 and the total amount the city has paid Redflex to approximately $124 million.
By 2010, Chicago had the largest red light camera program in the United States, representing 20 percent of the total camera systems that Redflex operated nationwide. For Redflex, a subsidiary of Australian-based Redflex Holdings Ltd., the Chicago contract was its most important because of the revenue it generated and the name recognition it gave the company, according to the affidavit.
The complaint affidavit is supported by information from Confidential Source 1 (CS1), a former Redflex employee who initially provided Bills in 2002 with an unsolicited proposal to install red light cameras in Chicago. Frequent communications between CS1 and Bills led CS1 to understand that Bills was trying to determine if he could get money from Redflex in return for the company getting the red light camera contract. Shortly after a Jan. 3, 2003, pre-bid meeting that CS1 attended with other vendors, Bills asked CS1 to get him and his friends a hotel room in Los Angeles. CS1 paid for Bills’ hotel room with the approval of CS1’s superiors, believing that it would influence Bills to help Redflex get the Chicago contract. As CS1 anticipated, Bills did not offer and did not reimburse CS1 for the hotel room and instead thanked CS1, who submitted a voucher and was reimbursed by Redflex.
Between February and May 2003, during a pilot phase with Redflex and a competing vendor, Redflex paid for drinks and meals for Bills. Upon Bills’ recommendation, Redflex hired Company A as a subcontractor. In May 2003, before the city contract was awarded, Bills made comments to remind CS1 that Bills was being courted by the competing vendor. After Bills and CS1 strategized to ensure a favorable result, on May 27, 2003, the evaluation committee and city transportation commissioner recommended that Redflex be awarded the DARLEP contract, which went into effect in October 2003.
At a celebratory dinner in June 2003, Bills allegedly told CS1 words to the effect of, “It’s time to make good,” which CS1 understood to mean that Bills wanted and expected to be paid for helping Redflex win the Chicago contract. Bills allegedly floated alternative suggestions for funneling benefits to him, including suggesting that Redflex could pay him through the newly created Chicago customer liaison position. During the summer and fall of 2003 Redflex hired Individual A to fill that position and negotiated his compensation structure. In addition to salary and bonuses, Redflex payments to Individual A included commissions totaling more than $1.34 million between 2008 and 2011.
Before Bills retired, he allegedly made it known to CS1 and other Redflex employees that he wanted a job with Redflex. After it was decided that Redflex could not hire him directly, Redflex arranged for Bills to get a job with Company B, which was funded by Redflex. That job lasted through the early spring of 2012.
The affidavit alleges that between late 2003 and November 2012, Individual A and Bills used several different methods to transfer funds to Bills. In 2008, Individual A purchased the Glendale, Ariz., condominium for Bills’ use. In addition, checks written on Individual A’s bank account were used to repay debts Bills had accumulated and also to pay for personal expenses of Bills and his family. Individual A also withdrew large amounts of cash, totaling more than $643,000 between 2006 and 2011, which temporally correspond to Bills’ repayment of loans as well as Bills’ payment of numerous personal expenditures, including purchasing a $12,500 used Mercedes-Benz, with cash. Although some of Bills’ cash expenditures do not correspond to specific withdrawals by Individual A, Bills’ financial records reflect no withdrawals of cash by him to support the personal expenditures. In fact, records reflect very little cash on-hand by Bills during this time period.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; 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 Carrie Hamilton and Laurie Barsella.
Federal program bribery carries a maximum penalty of 10 years in prison and a $250,000 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 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
Veteran Federal Prosecutor Julie B. Porter Takes Helm of U.S. Attorney’s Office’s Criminal DivisionRead the Press Release
CHICAGO ― Julie B. Porter, a 10-year veteran of the U.S. Attorney’s Office who has supervised financial fraud and child exploitation cases and participated in significant trials involving corporate fraud and public corruption, has become the chief of the office’s criminal division, Zachary T. Fardon, United States Attorney for the Northern District of Illinois, announced today.
Ms. Porter succeeds Manish S. Shah, who served as criminal chief for two years and was confirmed on April 30 by the U.S. Senate to be a judge on the U.S. District Court bench in Chicago. Prior to Ms. Porter’s appointment, which took effect on Friday, she was chief of the office’s financial fraud section.
“Julie is a great lawyer, a wonderful human being, and a prosecutor with deep understanding and real love for this office and what we do,” Mr. Fardon said.
The chief of the criminal division is third in the chain of command overseeing criminal prosecutions, following the U.S. Attorney and the First Assistant. Just over 120 of the office’s 152 attorneys are assigned to the criminal division, while the remaining attorneys are assigned to the civil division and the western division in Rockford.
Ms. Porter, 41, joined the U.S. Attorney’s Office in 2004. In 2009, she received a Justice Department award for being a leader and role model as a federal prosecutor from the Director of the Executive Office for United States Attorneys. Ms. Porter played a key role as a member of the prosecution teams in the corporate fraud trial of Conrad Black and other executives of the Hollinger International newspaper publishing company, and in multiple public corruption cases involving the City of Chicago’s Hired Truck program and Operation Board Games.
Ms. Porter is a graduate of Williams College and the University of Michigan Law School. In 2007, she was recognized in the “40 under 40” feature in Crain’s Chicago Business.
Bolingbrook Man Charged with Attempting to Illegally Export Thermal Imaging Camera to PakistanRead the Press Release
CHICAGO — A Bolingbrook man was indicted on federal charges alleging that he violated U.S. export laws by attempting to ship a thermal imaging camera from his company in Schaumburg to a company in Pakistan without obtaining a license from the U.S. Commerce Department, federal law enforcement officials announced today.
The case involves 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. As a controlled material, a license was required from the Commerce Department’s Bureau of Industry and Security to export the camera to certain countries, including Pakistan.
The defendant, BILAL AHMED, 33, was charged with one count of violating the International Emergency Economic Powers Act (IEEPA) and one count of attempted smuggling of goods in violation of U.S. export regulations in a two-count indictment returned by a federal grand jury yesterday. Ahmed was initially charged in a criminal complaint and arrested on March 14, and he was subsequently released on a $100,000 secured bond.
No date has been set yet for Ahmed to be arraigned in U.S. District Court in Chicago.
According to the complaint affidavit and the indictment, Ahmed was the owner, president, and registered agent of Trexim Corp., which used the address of a virtual office in Schaumburg. Between November 2013 and February of this year, Ahmed corresponded via email with a company in California and negotiated the purchase of a FLIR HRC-U camera for approximately $102,000, which he paid with two checks in February. Ahmed took delivery of the camera on Feb. 27 at a commercial shipping store in Bolingbrook.
On March 7, Ahmed allegedly took the camera, packaged in two boxes, to a different commercial shipper located in Elk Grove Village and left the packages to be shipped to a company in Pakistan. The waybill included a handwritten note containing the letters “NLR,” meaning “no license required.” A search of U.S. State and Commerce Department databases showed there were no licenses applied for or obtained by Ahmed, Trexim or any other related individual or company names for the export of a FLIR HRC-U camera from the U.S. to Pakistan, the indictment alleges.
The indictment 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 Ronald B. Orzel, Special Agent-in-Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Chicago Field Office. The Justice Department’s National Security Division is providing assistance in the case.
Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine, while attempted smuggling of goods carries a maximum penalty of 10 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 Bethany Biesenthal.
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
Federal Fugitive for over 23 Years Sentenced to 6 ½ Years in Prison for Drug TraffickingRead the Press Release
ROCKFORD — A former Freeport, Ill. man was sentenced today in federal court by U.S. District Judge Frederick J. Kapala on a federal drug trafficking charge. The defendant, ROBERTO ALVARADO, 61, was sentenced to 78 months in federal prison, to be followed by 5 years of supervised release. Judge Kapala ordered that at the end of his prison term, Alvarado, a citizen of Mexico, surrender to officials with Immigration and Customs Enforcement for deportation.
Alvarado had been arrested on Dec. 1, 1989, on a drug trafficking charge by FBI Special Agents. On Dec. 15, 1989, he was released on a $20,000 bond pending trial. However, Alvarado failed to appear for a court appearance on Sept. 18, 1990, and fled from Illinois. His bond was forfeited and the assets he had posted for bond were turned over to the United States. An arrest warrant was also issued for him. On June 28, 2013, Alvarado was a passenger in a car that was stopped in Montana by a State Police Trooper for speeding. The Trooper was able to identify Alvarado as being wanted by the FBI and took him into custody. Alvarado appeared before a federal magistrate who ordered that Alvarado be detained and transported to Rockford.
Once in Rockford, Magistrate Judge P. Michael Mahoney ordered that Alvarado be detained pending trial. Alvarado pled guilty to the drug trafficking charge on Dec. 4, 2013. In his plea agreement, Alvarado admitted that on Dec. 1, 1989, in Rock Falls, he had attempted to possess with the intent to distribute 1,414 grams of cocaine. At sentencing today, Judge Kapala noted the amount of time that Alvarado had spent as a fugitive and found it to be an aggravating factor in imposing the sentence.
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 government was represented by Assistant U.S. Attorney John G. McKenzie.
Former Burnham Village Clerk Charged with Stealing at Least $650,000 from Revenue Payments and Filing False Tax ReturnRead the Press Release
CHICAGO — The former longtime elected clerk for the Village of Burnham was charged today with stealing more than $650,862 from her office at the south suburb’s village hall and using most of the cash to gamble at casinos. The defendant, NANCY DOBROWSKI, was charged with one count each of wire fraud and filing a false federal income tax return in a criminal information filed in U.S. District Court.
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. Through her attorney, Dobrowski authorized the government to disclose that she will plead guilty to the charges. No date has been set yet for Dobrowski to be arraigned in Federal Court.
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.
Between at least 2004 and May 2013, Dobrowski allegedly 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, according to the charges.
As part of the fraud scheme, Dobrowski allegedly 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, the charges allege.
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, the information alleges.
Dobrowski allegedly 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 was also charged with filing a false federal income tax return for 2012, when she reported total income of $309,181, knowing that her total income was substantially greater than that because she failed to report the cash she misappropriated from the village in 2012 as income.
Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine or an alternate fine totaling twice the gross loss or gain, whichever is greater. Filing a false federal income tax return carries a maximum penalty of three years in prison, a $250,000 fine, and mandatory costs of prosecution. Restitution is mandatory and defendants convicted of tax offenses remain liable for back taxes, interest, and a civil penalty of up to 75 percent of the amount owed.
The indictment 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.
The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Real Estate Investment Partner Indicted for Allegedly Cheating at Least 50 Mostly Chicago Area Investors of $10 MillionRead the Press Release
CHICAGO — A former Chicago area real estate investment partner was indicted on federal charges alleging that he fraudulently obtained more than $10 million from more than 50 investors, many of whom lived in the Chicago area, and misused the funds he obtained from them as well as lenders. The defendant, MATTHEW STOEN, was a founder of Stone Rose, LP, and effectively was its managing general partner.
Stoen, 35, of Wayzata, Minn., and formerly of St. Charles and Chicago, was charged with four counts of mail fraud and two counts of wire fraud in an indictment returned by a federal grand jury on Wednesday and announced today. He will be arraigned on a date to be determined in U.S. District Court in Chicago.
The indictment also seeks forfeiture of more than $10 million in alleged fraud proceeds.
According to the indictment, Stoen falsely represented to investors and lenders his personal background and financial condition, including claiming that he was the beneficiary of a trust fund, which he knew was false. He allegedly carried out a financing fraud scheme to benefit himself by fraudulently raising millions of dollars through the offer and sale of limited partnership interests and through loans. Stoen fraudulently obtained and retained these funds by making false representations regarding the intended use of the funds raised for Stone Rose, the terms of Stone Rose’s real estate transactions, Stone Rose’s financial condition, his personal financial condition, and his interest in Stone Rose real estate transactions. Stoen misappropriated Stone Rose funds for his own benefit, and concealed his scheme by creating and distributing to investors a false and misleading financial review of Stone Rose, the indictment states.
Stoen allegedly represented to investors and lenders that funds invested in Stone Rose would be used for real estate investment projects in the Kansas City area as well as certain Stone Rose fees and expenses, knowing that he intended to misappropriate a portion of the funds for other purposes, including for his own use and benefit.
Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, 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 Kenneth Yeadon.
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 Man Sentenced to More Than 15 Years in Federal Prison for 20 Armed Robberies of Stores in Chicago and Suburbs in 2010Read the Press Release
CHICAGO ― A Chicago man who committed 20 armed robberies of stores and businesses during a five-month period in 2010, was sentenced today to more than 15 years in federal prison. The defendant, CARLOS OCHOA, had admitted committing 15 robberies in Chicago, three in Berwyn, and one each in Aurora and Indian Head Park, sometimes for as little as $25, between July and November 2010.
Ochoa, 50, pleaded guilty last September to three counts of interstate robbery and one count of using a firearm during a violent crime. In pleading guilty, he admitted committing 17 additional armed robberies. U.S. District Judge Charles Norgle sentenced Ochoa to 130 months in prison for the robberies, consecutive to 60 months for using a gun, for a total of 190 months in prison. Ochoa was also ordered to pay restitution totaling $21,847 representing the net proceeds from all 20 robberies.
Three victims of Ochoa’s robberies testified about the lasting impact of the trauma they experienced before Judge Norgle imposed the sentence.
“For five months, [Ochoa] and his co-defendant went on a crime spree terrorizing individuals at their places of employment by pointing a gun, racking the slide of the gun, and making it clear to the victims that they would shoot them if they did not comply with their demands,” Assistant United States Attorneys Maribel Fernandez-Harvath, argued at sentencing.
Ochoa’s co-defendant, Juan Sanchez, who briefly escaped from state custody in late 2011, died of natural causes in January 2012 after he was indicted in the case.
Ochoa admitted that he and Sanchez conspired to rob various retail stores and businesses in Chicago and its suburbs. They identified stores to rob with a firearm, wore sunglasses and hats, and conducted surveillance inside the stores and businesses before the robberies.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Chicago, Aurora, Berwyn, and Indian Head Park police departments, as well as the Cook County State’s Attorney’s Office, also participated in the investigation.
McHugh Construction to Pay $12 Million to Settle Contract Fraud Claims by U.S. and Illinois on Seven Area Public Works ProjectsRead the Press Release
CHICAGO — A Chicago-based construction company will pay the United States and the State of Illinois $12 million to resolve allegations of fraud on government programs designed to benefit women- and minority-owned sub-contractors under the terms of a civil settlement agreement announced today. The contractor, James McHugh Construction Co., Inc., allegedly failed to abide by federal and state requirements for the participation of disadvantaged businesses in contracts to perform seven public construction projects. The work on area roads, highways, and transit lines was funded by the federal and state governments between 2004 and 2011.
The federal and state governments claimed that McHugh violated the federal and Illinois False Claims Acts by making false statements and claims for payment to government agencies regarding McHugh’s compliance with federal and state requirements to include disadvantaged businesses in the construction projects.
As a result of the $12 million settlement, the federal government will receive $7.2 million and the state government will receive $4.8 million. In a separate administrative settlement and compliance agreement, McHugh agreed to implement a corporate compliance program, appoint a compliance officer, and be subject to an independent monitor for three years, in exchange for the federal, state, and City of Chicago transportation agencies and contracting authorities’ agreement not to bar McHugh from future government contracts. This allows McHugh to continue pursuing and performing public works projects while ensuring that it remains compliant with disadvantaged business regulations.
“It was more costly in the long run for McHugh to avoid its obligations to hire womenand minority-owned businesses than it would have been simply to comply with the requirements and retain disadvantaged businesses to actually participate in these public construction projects,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “It’s important that McHugh and other companies realize that compliance with these requirements is both a good business decision and the right thing to do,” he added.
“Our investigation revealed that McHugh Construction falsely used subcontractors to help secure bids for major construction projects funded by and for Illinois taxpayers,” Illinois Attorney General Lisa Madigan said. “The company used women-owned businesses to submit false claims to the state and federal governments for millions of dollars when in fact, those businesses never completed the level of work required by law.”
Mr. Fardon and Attorney General Madigan announced the settlement with Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Michelle McVicker, Special Agent-in-Charge of the U.S. Department of Transportation 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 settlement arose from a lawsuit that was filed under seal in 2008 by Ryan Keiser, who was a project manager for Perdel Contracting Corp. and Accurate Steel Installers, Inc. (ASI), at three of the McHugh construction sites. The lawsuit, which was unsealed today, was filed under the qui tam or whistleblower provisions of the federal and state False Claims Acts. United States, et al., ex rel. James McHugh Construction Co., et al., No. 08 C 2443 (N.D. Ill.).
The similar federal and state statutes permit private individuals to sue for false claims on behalf of the government and to share in any recovery. Mr. Keiser will receive 17 percent of the $12 million settlement or $2,040,000 ― $1,224,000 from the United States share, and $816,000 from Illinois’ portion of the settlement.
The settlement covers McHugh’s contracts on the following projects: the Washington/Monroe Viaducts over Interstate 90/94 for the Chicago Department of Transportation (CDOT) in 2005; the Red Line Howard Station for the Chicago Transit Authority in 2006; the North Avenue Bridge for CDOT in 2006; the Brown Line for the CTA in 2006; the Eastbound Interstate 88/Fox River Bridge for the Illinois State Toll Highway Authority in 2007; the Westbound Interstate 88/Fox River Bridge for the toll highway authority in 2008; and the Wacker Drive Viaduct Reconstruction from Randolph to Monroe streets for CDOT in 2010.
The federal and state governments contended that in bids for these contacts, in the final contracts, and in claims for payment, McHugh falsely stated that Perdel and ASI, which were both certified as “disadvantaged business enterprises” (DBE) owned by Elizabeth Perino, would perform or had performed work on the projects in satisfaction of federal and state DBE participation requirements in the contracts. The governments contended that contrary to McHugh’s statements, Perdel and ASI often functioned merely as “pass-throughs,” performing little, if any, work that would qualify for participation credit under federal and state DBE requirements. Perino, who owned Perdel and ASI in Lockport, was charged with federal mail fraud in 2011, and the case remains pending.
According to the settlement agreement, the governments also contended that Perdel and ASI’s contracted work for McHugh often exceeded the companies’ capacity and experience. Although their projects with McHugh were substantially greater in size and scope than they had previously performed, Perdel and ASI’s expertise to perform larger and more complex projects did not change correspondingly. Rather than Perdel and ASI performing, managing, or supervising the work that McHugh represented they would, McHugh frequently managed union workers they each hired. In some cases, McHugh directed Perdel and ASI as to which union crews to hire.
McHugh, not Perdel or ASI, also selected certain suppliers on each of the contracts, determined the quantity and quality of those materials, negotiated the price, and often drafted a purchase order for Perdel or ASI to put on their letterhead, the governments contended. That kind of conduct violates federal and state provisions that are designed to give a share of the actual work of government-funded construction projects to minority- and women-owned businesses.
The settlement is neither an admission of liability by McHugh nor a concession by the state and federal governments that their contentions are not well founded, and McHugh expressly denies the claims.
The settlement was reached on behalf of the U.S. Department of Transportation, the Illinois Department of Transportation, the Illinois State Toll Highway Authority, and the Regional Transportation Authority.
The separate three-year administrative monitoring settlement and compliance agreement was reached between McHugh and the Federal Transit Administration, the Federal Highway Administration, the U.S. and Illinois Transportation Departments and their procurement officers, and the City of Chicago. In exchange for the government entities’ agreement not to pursue any suspension or debarment action against McHugh for the covered conduct, McHugh agreed to implement a corporate compliance program and appoint a compliance officer who is knowledgeable about DBE programs. The company also agreed to retain an independent monitor to evaluate McHugh’s performance and submit periodic reports to the government agencies and officials, and to make six presentations to those agencies and officials to discuss and promote compliant policies and procedures for working with DBE firms.
Assistant U.S. Attorney Donald Lorenzen represented the U.S. Attorney’s Office in the case. Assistant Illinois Attorney General Kate Pomper Costello represented the Illinois Attorney General’s office.
Settlement Agreement
Settlement and Compliance AgreementChicago Man Sentenced to 27 Months in Prison for Threatening Police Officers and Others Before and After 2008 Cougar KillingRead the Press Release
CHICAGO — A Chicago man was sentenced today to more than two years in federal prison for mailing more than 90 threatening and/or harassing letters to Chicago police officers, other government and law enforcement officials, private individuals, schools, and religious institutions in the Chicago area between November 2003 and December 2012. The defendant, RICHARD HYERCZYK, had pleaded guilty in January to one count of mailing a threatening communication.
Hyerczyk, 54, of Chicago’s Garfield Ridge neighborhood, was ordered to begin a 27- month prison term on July 29, followed by three years on supervised release, and he was fined $10,000 by U.S. District Judge Gary Feinerman. In imposing the sentence, the judge cited the “cold-blooded nature of the threats and the fear, harm, and apprehension that was created by these threats.”
When he was charged in January, prosecutors said Hyerczyk had been cooperative in the investigation and was not believed to be a danger to the community or a risk of flight. The prosecution followed a lengthy investigation by the FBI-led Chicago Joint Terrorism Task Force.
In pleading guilty, Hyerczyk admitted mailing a letter on April 21, 2008, that threatened to kill Chicago Police Department officers and members of their families. That letter followed local news media reports on April 15, 2008, that Chicago police officers had shot and killed a cougar that was located on the city’s north side. Hyerczyk admitted that he drafted letters containing threats to kill and commit violence against CPD officers and members of their families.
The plea agreement detailed one such letter, which began with the salutation, “Dear Cougar Killers (aka Chicago PIG Police),” and included the following threatening messages: “Prepare to DIE like the Cougar you killed. On May 4th at your St. Jude Memorial March several PIGS will be shot by snipers.”; “BURN down the Daley house in Michigan.”; and “Kill any Police Officer, where ever they are found, like they killed the Cougar.”
Hyerczyk admitted that he drafted a second letter, which contained a title that referenced a severely injured former Chicago police officer by name and referred to the officer as the “PARALIZED [sic] PIG,” and which title contained the phrase “St. Jude Memorial PIG March.” This second letter threatened that: “A police officer will be SHOT DEAD, like they shot the cougar, at the May 4th St. Jude Memorial PIG March.”; “A celebration of DEAD police officers. Ha ha ha ha you are all better off DEAD.”; and “When the PIGS are at the parade, we will be at their homes. You can=t guard every PIGS house...watch your young children.”
After drafting these letters, Hyerczyk printed multiple copies of each and placed them into envelopes bearing first class postage and addressed to, among others: a university in Orland Park; the same university’s office of graduate studies in Chicago; the same university’s English Department in Chicago; and a Chicago Police officer and executive officer of a Fraternal Order of Police lodge in Chicago.
Hyerczyk admitted that he mailed these letters knowing and intending that they would be interpreted as threatening by the intended victims, including Chicago Police officers and their families.
The Chicago Joint Terrorism Task Force began investigating the threatening letters in this case after they were first received in 2003. The investigation resulted in a federal search warrant being executed on Hyerczyk’s residence and automobile, as well as for his DNA, in January 2013. The JTTF is composed 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 sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorneys Christopher Veatch and Steven Dollear.
Area Man Sentenced to Nine Years in Prison for Conspiracy to Illegally Traffic Firearms from Missouri to IllinoisRead the Press Release
CHICAGO — A former Crest Hill man was sentenced to more than nine years in federal prison for illegally trafficking and possessing five firearms that his sister illegally bought in Missouri and shipped to him in Illinois. The defendant, RICHARD CARRINO, a previously convicted felon who was barred from possessing guns, obliterated the serial numbers on at least three of the guns that he sold to an undercover ATF agent who was posing as a convicted felon and could not obtain guns on his own.
Carrino, 29, also known as “R.J.,” was sentenced to 110 months in prison by U.S. District Judge Rebecca Pallmeyer who imposed the sentence yesterday in Federal Court in Chicago.
“Carrino’s conduct reflects a complete lack of respect for the laws and rules of society, particularly with respect to keeping handguns out of the hands of felons,” Assistant U.S. Attorney Christopher McFadden argued at sentencing.
Carrino’s sister, ANGELA MARIE CARRINO, 25, of O’Fallon, Mo., is scheduled to be sentenced on May 23 after also pleading guilty in the case.
Both defendants pleaded guilty to conspiracy to deliver firearms to a person who did not live in the same state, to sell firearms to a convicted felon, and to make false statements in records kept by a federally licensed gun dealership, and Richard Carrino also pleaded guilty to being a felon-in-possession of firearms.
Both defendants admitted that they conspired between November 2012 and February 2013 to have Angela Marie Carrino make illegal “straw purchases” of firearms from licensed dealers in Missouri, and illegally transfer them to her brother, a convicted felon who lived in Illinois. They discussed types of guns to obtain and Richard Carrino sent his sister money to make the purchases. She falsely certified that she was the actual buyer of the firearms and then shipped at least five firearms from Missouri to her brother in Illinois. Richard Carrino, in turn, sold or transferred three of the firearms to an undercover agent, believing that the individual was a convicted felon.
Three of the firearms – two .45 caliber semi-automatic Hi-Point pistols and a 9- millimeter semi-automatic Hi-Point model C-9 handgun – were obtained by ATF agents during the investigation.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl Vasilko, Special Agent-in-Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives in Chicago.
River Forest Man Guilty of Sending Threats to Kill Chicago Politicians, Local Police, and Texas and California Oil ExecutivesRead the Press Release
CHICAGO — A federal jury today convicted a River Forest man of mailing and emailing threatening communications to kill Chicago area politicians, River Forest police officers, as well as oil executives in Texas and California. The defendant, RONALD HADDAD, Jr., 38, was found guilty of all 30 counts against him ― 28 counts of mailing threats and two counts of emailing threats.
The jury deliberated less than four hours this afternoon following a trial that began last Tuesday in U.S. District Court.
U.S. District Judge Virginia Kendall set sentencing for July 21. Haddad faces a maximum sentence of five years in prison and a $250,000 fine on each count. The Court must impose a reasonable sentence under federal statues and the advisory United States Sentencing Guidelines.
Haddad remains in federal custody without bond while awaiting sentencing. He has been in custody most of the time since he was arrested and charged in 2009, and during that time he underwent several mental competency evaluations.
The evidence at trial showed that Haddad sent multiple threatening communications in three waves starting in Dec. 2007, again in June and July 2008, and again in January 2009. The first group of letters, addressed to individuals such as former Chicago Mayor Richard M. Daley and former Chicago Ald. Bernard Stone, contained white powder. The letters in June and July 2008 contained a brown substance, and the letters and packages in January 2009 contained an oily substance or shotgun shells that appeared to be rigged to explode. None of the substances or shells proved to be harmful but witnesses who opened the letters and packages testified that they were fearful when they opened them.
The guilty verdicts 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 Chicago Police Superintendent Garry F. McCarthy. The government was represented by Assistant U.S. Attorneys Joseph Thompson and William Ridgway.
Niles-Based Education Firms and Executives Indicted in Alleged $33 Million Fraud; Bribes Allegedly Paid to Four School OfficialsRead the Press Release
CHICAGO — The federal government and more than 200 public school districts in 19 states, including Illinois, were defrauded of more than $33 million by two Niles–based companies and two of their executives, who purported to provide government-funded tutoring services to low-income students, according to a federal indictment announced today. The father and son executives were also charged with paying bribes to three school officials in Texas and one state education official in New Mexico, who were also indicted for accepting bribes, in exchange for recruiting students and steering federal and state funds from school districts.
Indicted were BRILLIANCE ACADEMY, INC., which contracted with school districts to provide “supplemental educational services” (SES) under the 2001 No Child Left Behind Act by tutoring students on-site at schools; its wholly-owned subsidiary, BABBAGE NET SCHOOL, INC., which contracted to tutor students through laptop computers provided to students; JOWHAR SOULTANALI, director of operations for Brilliance and Babbage; and his son, KABIR KASSAM, president of both companies, which Soultanali and Kassam now own.
Soultanali, 58, of Morton Grove, and Kassam, 34, of Wheeling, allegedly obtained between $8 million and $13.6 million for themselves and their families from the more than $33 million they fraudulently obtained from school districts around the country.
Soultanali and Babbage were each charged with five counts of mail fraud and three counts of federal program bribery, while Kassam and Brilliance were each charged with five counts of mail fraud and two counts of federal program bribery in a 12-count indictment returned by a federal grand jury last Thursday.
The indictment also seeks forfeiture from Soultanali, Kassam, Brilliance, and Babbage of more than $33 million, including approximately $1.77 million that was seized from the companies’ bank accounts in 2010 or relinquished by Babbage in 2011, as well as Soultanali’s and Kassam’s residences, and three additional condominiums, five luxury automobiles, six whole life insurance policies, and various items of diamond jewelry purchased in 2009.
Also indicted on one count each of federal program bribery were: ARTURO MARTINEZ, 52, of Rio Rancho, N.M., who was an educational administrator with the New Mexico Public Education Department; CEDRIC PETERSEN, 61, of San Antonio, who was the SES coordinator and assistant principal at Fox Tech High School in San Antonio; ARMANDO RODRIGUEZ, 54, of Corpus Christi, Tex., who was the SES coordinator at Miller High School in Corpus Christi; and BRIAN HARRIS, 33, of San Antonio, who was the SES coordinator at Sam Houston High School in San Antonio.
All eight defendants – six individuals and two companies – will be arraigned on dates to be determined in U.S. District Court in Chicago.
Between July 2008 and February 2012, Soultanali, Kassam, Brilliance and Babbage allegedly defrauded the United States and hundreds of public school districts nationwide by misrepresenting the nature and quality of the tutoring services the companies provided, instead providing substandard supplemental educational materials to students, falsely inflating invoices the companies submitted to school districts for purported tutoring services, and creating and distributing false student progress and improvement reports.
According to the indictment, on behalf of Brilliance and Babbage, Soultanali and Kassam were approved as SES providers in Illinois, Colorado, Georgia, Hawaii, Idaho, Indiana, Louisiana, Maine, Minnesota, Montana, New Mexico, New York, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Virginia, and Washington during the 2008-09 and 2009-10 school years. Those school years are the focus of the charges.
Each of the four indicted school officials allegedly received an unspecified amount of money from Soultanali, Kassam, Brilliance and Babbage, sometimes through the companies’ senior regional manager who oversaw Babbage’s activities in Texas and New Mexico. Petersen allegedly also received Caribbean cruise vacations. Martinez, who oversaw New Mexico’s SES program, was in charge of approving and auditing the state’s SES providers, and oversaw New Mexico’s migrant education program, allegedly also received meals and services at a gentlemen’s club.
In order to receive payment for tutoring services, Brilliance and Babbage were required to compile the number of hours spent tutoring eligible school children and submit a bill to each local school district those children attended. Local districts then paid the defendants from federal and other funds, including funds disbursed pursuant to the No Child Left Behind Act. Under the 2001 law, if a school was considered failing after being identified for “school improvement,” school districts were required to make “supplemental educational services,” or tutoring, available to eligible children from a provider with a demonstrated record of effectiveness. The provider was to be selected by students’ parents and approved by the state educational agency. The law required local educational agencies to spend a portion of their federal funding to pay for supplemental educational services, with a maximum allotment per pupil.
In marketing materials and state provider applications, Soultanali and Kassam allegedly falsely represented that:
- Babbage pre-tested enrolled students by administering to them the Basic Achievement Skills Inventory test, which measured students’ academic proficiency in various subjects;
- after reviewing the results of students’ BASI exams, Brilliance and Babbage created tutoring programs customized to address students’ academic needs;
- Brilliance provided students with customized tutoring workbooks, and Babbage provided students with customized laptop computer tutoring programs;
- once students began tutoring, Babbage provided ongoing progress reports to students’ schools and parents; and
- once students completed tutoring, Brilliance and Babbage post-tested students with the BASI exam to determine whether the tutoring had increased students’ academic proficiency, and provided student improvement results to schools.
In fact, the indictment alleges that Babbage and Kassam intentionally failed to properly pre-test students with assessment exams and, instead, administered partial assessment exams, and in some cases, no assessment exams at all; and intentionally failed to review the results of students’ assessment exams before providing them with purportedly customized tutoring materials. Instead, they provided tutoring programs that were not configured to students’ academic needs, and in many cases, were generic tutoring programs configured at or below students’ grade level.
The charges allege that Babbage and the companies’ executive director falsified students’ progress reports, and intentionally failed to post-test tutored students to determine whether the tutoring had improved their academic proficiency. Kassam directed an employee to configure a computer program to ensure that students’ post-test scores were always higher than their purported pre-test scores.
As part of the fraud scheme, the defendants also allegedly engaged in fraudulent billing, including creating inflated invoices based on false attendance records, spreadsheets, and a computer program that contained false tutoring time summaries. When questioned by school districts, Soultanali allegedly lied and said that overbilling had occurred as the result of mistake.
Each count of federal program bribery carries a maximum sentence of 10 years in prison and a $250,000 fine, while each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine or an alternate fine totaling twice the gross gain or loss, whichever is greater. Brilliance and Babbage face a maximum penalty of five years’ probation and a $250,000 fine on each count or an alternate fine totaling twice the gross gain or loss, whichever is greater. If convicted, 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; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas D. Utz, Jr., Special Agent-in-Charge of the U.S. Department of Education Office of Inspector General. The Chicago Public Schools Office of Inspector General also assisted in the investigation.
The government is being represented by Assistant U.S. Attorneys Rachel Cannon and Barry Jonas.
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
Former Illinois State Rep. Keith Farnham Charged with Possession of Child PornogrphyRead the Press Release
CHICAGO ― Former Illinois State Rep. KEITH FARNHAM was charged today with possession of child pornography in a criminal complaint filed in U.S. District Court in Chicago. Farnham allegedly possessed two videos depicting child pornography on a computer that was seized from his state office in Elgin in March.
Farnham, 66, of Elgin, was not arrested and no date has been set yet for him to appear voluntarily for an initial appearance in Federal Court.
On March 13, agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) executed a federal search warrant at Farnham’s office and residence in Elgin. Several computers and electronic storage devices were recovered that contained child pornography images, including the two charged videos, according to the complaint affidavit. The office computer that contained the videos was labeled “PROPERTY OF THE STATE OF ILLINOIS HOUSE OF REPRESENTATIVES.”
Farnham resigned his seat in the Illinois General Assembly on March 19.
According to the complaint, 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. After agents linked the email account to Farnham they obtained and reviewed instant message chats that occurred between last June and January this year. Excerpts of those chats are detailed in the affidavit.
Possession of child pornography carries a maximum sentence of 10 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The complaint 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
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
Suburban Investment Advisor Indicted for Allegedly Defrauding at Least 10 Investors of $2.9 MillionRead the Press Release
CHICAGO — A west suburban investment advisor was indicted on federal charges alleging that he fraudulently obtained approximately $2.9 million from at least 10 investors and misused the funds in a Ponzi-type scheme. The defendant, JOSEPH HENNESSY, co-owned and co-operated the now-defunct Resource Planning Group, Inc., formerly a registered investment advisor with the U.S. Securities and Exchange Commission.
Hennessy, 53, of Western Springs, was charged with seven counts of wire fraud in an indictment returned by a federal grand jury on Wednesday and announced today. He is scheduled to be arraigned next Wednesday in U.S. District Court in Chicago.
The indictment also seeks forfeiture of at least $2.9 million in alleged fraud proceeds.
According to the indictment, Hennessy and Resource Planning Group formed and operated the Midwest Opportunity Fund, a private equity fund that purported to invest in small to medium-sized companies based in the Midwest. Between 2007 and 2012, Hennessy allegedly made false statements to investors and used their investments to return principal and pay interest to earlier investors, all of which he concealed and intentionally failed to disclose to both new and existing investors. In fraudulently obtaining and retaining these funds, Hennessy falsely represented the use of the funds, the repayment of the investors’ principal, the expected return on investments ―which he claimed would yield between 10 and 15 percent a year ― the risks involved in the investment, and the status of the investments, the indictment adds.
Hennessy also falsely represented that he personally guaranteed investments in the fund, knowing that he did not have sufficient assets to repay investors, and he misappropriated funds from the individual retirement accounts of certain clients to pay existing investors in the Midwest Opportunity Fund, the indictment alleges.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, 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; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. They thanked the U.S. Securities and Exchange Commission for its assistance. The government is being represented by Assistant U.S. Attorney Sunil Harjani.
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
Longtime Gang Member Sentenced to 24 Years in Federal Prison for Supervising Sales of 39 Kilos of Heroin on City’s West SideRead the Press Release
CHICAGO ― A longtime member of the Traveling Vice Lords street gang who managed a heroin distribution spot between 2008 and 2010 at the corner of North St. Louis Avenue and West Ohio Street on the city’s west side was sentenced to 24 years in federal prison, federal law enforcement officials announced today. The defendant, TIMOTHY ALLISON, was responsible for supervising the distribution of 39 kilograms of heroin, a federal judge determined before imposing the sentence.
Allison, also known as “Shaw,” 34, pleaded guilty to conspiracy to distribute heroin in March 2012, and he has seven prior felony convictions, including aggravated unlawful use of a weapon. U.S. District Judge John W. Darrah imposed the 24-year sentence on Wednesday.
According to court documents, Allison was involved in around-the-clock retail sales of heroin averaging around $10,000 a day, both at St. Louis and Ohio, as well as at a second corner nearby at West Chicago and North Christiana avenues.
Allison was among 31 federal and 65 state defendants who were arrested in November 2010 following a Chicago Police and FBI investigation, code-named Operation Blue Knight, of drug trafficking by TVL members and associates in the area of Kedzie Avenue and Ohio Street, known as “KO.” A lead defendant in a related federal case, Jason Austin, also known as “J Rock,” is scheduled to be sentenced on June 10.
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 Chicago Police Superintendent Garry F. McCarthy. The investigation was led by the FBI-Chicago Police Joint Task Force on Gangs and the Chicago Police Department’s Gang Investigations Division, and was conducted under the umbrella of the U.S. Organized Crime Drug Enforcement Task Force (OCDETF). The Cook County State’s Attorney’s Office, the U.S. Marshals Service, and the High Intensity Drug Trafficking Area Task Force (HIDTA) also participated in the investigation.
The government is being represented by Assistant United States Attorneys Maribel Fernandez-Harvath and Matthew Madden.
Three Chicago Men Indicted for Their Alleged Roles in A Series of Armed Robberies of 10 Retail Businesses in Chicago and SuburbsRead the Press Release
CHICAGO — Three Chicago men are facing federal charges for their alleged roles in a series of armed robberies of various retail businesses in Chicago and several suburbs late last year and early this year, federal law enforcement officials announced today. The indictments charge nine armed robberies and an attempted armed robbery of gas stations, convenience stores, jewelry stores, and others businesses in Chicago, Arlington Heights, Berwyn, Glenview, Hometown, Lincolnwood, North Chicago, Skokie, and Wilmette between October 2013 and February this year.
Two defendants, TYREE CRAIG, 29, and JACOBI PICKETT, 21, were charged together in a 13-count indictment returned by a federal grand jury yesterday. They were each charged with one count of robbery conspiracy, eight counts of robbery, two counts of brandishing a firearm during a violent crime, and Pickett alone was charged with being a felon-in-possession of a firearm.
Craig was also charged with JARRYL WILLIAMS, 42, in a separate four-count federal indictment involving the Jan. 10 armed robbery, involving four suspects, of James and Williams Jewelers, located at 7020 West Cermak Rd., in Berwyn. Craig and Williams were each charged with one count of robbery conspiracy, attempted robbery, and brandishing a firearm. Williams, who was shot by a store security officer, was also charged with being a felon-in-possession of a firearm with a partially obliterated serial number.
Craig and Williams have each pleaded not guilty to the charges involving the Berwyn attempted robbery. Craig and Pickett are scheduled to be arraigned on May 1 in U.S. District Court. Craig and Williams were initially arrested previously on related state charges but were later transferred to federal custody, where they remain. Pickett has been in federal custody since he was arrested in March on a criminal complaint.
According to the Craig and Pickett indictment returned yesterday, both defendants allegedly participated in the following robberies:
Dunkin Donuts, 3910 West Touhy Ave., Lincolnwood, on Oct. 20, 2013;
Phillips 66 gas station, 1234 Sheridan Rd., North Chicago, on Oct. 21, 2013;
Shell gas station, 9600 Crawford Ave., Skokie, on Oct. 21, 2013;
Shell gas station, 3 East Algonquin Rd., Arlington Heights, on Oct. 31, 2013;
Marathon gas station, 242 Waukegan Rd., Glenview, on Oct. 31, 2013;
Shell gas station, 5055 Touhy Ave., Skokie, on Nov. 30, 2013; and
Seven-Eleven, 500 Skokie Blvd., Wilmette, on Nov. 30, 2013.
Craig alone was also charged with the Dec. 13, 2013, robbery of Ted’s Jewelers, 5334 South Archer Ave., Chicago, while Pickett alone was charged with the Feb. 19, 2014, robbery of EZ Pawn store, 4080 Southwest Hwy., Hometown, in which jewelry valued at approximately $73,000 was stolen.
According to court documents, the charges stem from an FBI investigation of a series of similar armed robberies and attempted robberies last fall and winter of retail stores and businesses in Chicago, as well as northern and western suburbs. Typically, one or more participants entered each business and brandished a black semi-automatic handgun while demanding money or jewelry, and, in some instances Newport cigarettes. The participant or participants attempted to disguise their appearance but video surveillance provided a similar pattern of clothing and appearance.
The investigation is continuing.
Each count of robbery and robbery conspiracy carries a maximum penalty of 20 years in prison and a $250,000 fine, and each count of brandishing a firearm carries a consecutive, mandatory minimum of seven years in prison and a maximum of life. Williams and Picket also faces a maximum 10-year sentence on the felon-in-possession charges. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictments 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 case was investigated by the FBI’s Safe Streets Task Force, which is comprised of the FBI and the Chicago Police Department. The police departments in Chicago, Arlington Heights, Berwyn, Glenview, Hometown, Lincolnwood, North Chicago, Skokie, and Wilmette also assisted in the investigation, as well as the Illinois State Police.
The government is being represented by Assistant U.S. Attorneys Lindsay Jenkins and Angel Krull.
The public is reminded that indictments 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.
Craig/Pickett Indict.
Craig/Williams Indict.Freeport Man Sentenced to 51 Months in Federal Prison for Tax FraudRead the Press Release
ROCKFORD — A Freeport, Ill. man was sentenced yesterday in federal court by U.S. District Judge Frederick J. Kapala on a federal charge relating to his preparation of fraudulent federal income tax returns. The defendant, JASON BOOTH, 32, was sentenced to 51 months in federal prison, to be followed by 3 years of supervised release, and was ordered to pay restitution of $159,926.98 to the IRS, and $90,200.00 to the Iowa Department of Revenue, for a total of $250,126.98.
Booth pled guilty to the charge on Jan. 16, 2014, admitting that he conspired with others to defraud the U.S. Department of the Treasury by obtaining payments through fraudulent claims for individual income tax refunds. According to the written plea agreement, between March 2006 and January 2008, Booth created false returns, knowing that the taxpayers whose names he put on the false returns had not authorized him to use false information in the returns. Some of the taxpayers had authorized Booth to create income tax returns for them, but many did not know Booth. Due to the false information, the income tax returns claimed refunds that were not actually owed to the taxpayers. After creating the false returns, Booth filed them electronically with the IRS. When claimed refunds were approved and disbursed by the IRS, the refunds were wired to bank accounts that had been designated by Booth when he electronically filed the false returns. Some of those accounts were owned by Booth, but several were owned by others that conspired with Booth. The co-conspirators were allowed to keep a portion of each refund in exchange for the use of their accounts for the deposit of the refunds. They delivered the balance of the refunds to Booth. Booth used the co-conspirators accounts because he was not always able to open accounts in his name and because using varied accounts made discovery of his filing false returns less likely. Booth admitted that as a result of the filing of the false federal income tax returns, $159,926.98 was disbursed by the IRS into the accounts he designated.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-In-Charge of the Chicago Field Office of Internal Revenue Service - Criminal Investigation Division.
The government was represented by Assistant U.S. Attorney Michael D. Love.
Dutch Man to Plead Guilty to Selling Illegal Drugs for Bitcoins Worth Millions on Shuttered Silk Road WebsiteRead the Press Release
CHICAGO — A Dutch man who allegedly used the shuttered Silk Road underground website to sell illegal drugs for bitcoins worth millions of dollars has agreed to plead guilty to a federal drug conspiracy charge filed against him today. The defendant, CORNELIS JAN SLOMP, through his attorney, authorized the government to disclose that he will plead guilty to conspiracy to import and distribute various controlled substances when he is arraigned on the charge that was brought in a criminal information filed in U.S. District Court.
Slomp, also known as “SuperTrips,” 22, of Woerden, the Netherlands, was charged following an undercover investigation led by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).
He was charged with distributing worldwide approximately 104 kilograms of powder 3,4-methylenedioxy-N-methylamphetamine, also known as MDMA; 566,000 ecstasy pills containing MDMA; four kilograms of cocaine; three kilograms of Benzodiazepine; and substantial quantities of amphetamine, lysergic acid diethylamide (LSD), and marijuana, in addition to allowing substantial quantities of methamphetamine, ketamine, and Xanax to be distributed through his SuperTrips vendor account from March 2012 through August 2013.
Slomp was arrested on Aug. 27, 2013, at the Miami International Airport where he arrived on a flight from Europe. Court documents allege that Slomp was intending to meet with alleged co-conspirators in Florida and to spin-off his entire U.S. Silk Road operations and customers to one of his co-conspirators, as well as to retrieve from that individual Slomp’s share of the illegal drug proceeds that the individual generated as Slomp’s largest wholesale re-distributor in the U.S. of fronted illegal drugs.
Slomp was arrested based on a warrant and criminal complaint filed in Federal Court in Chicago and, after he was transferred here to face prosecution, he did not contest detention and was ordered to remain in federal custody.
Upon conviction, he faces a mandatory minimum of five years and a maximum of 40 years in prison and a $5 million fine, and the Court must impose a reasonable sentence. The government is also seeking forfeiture of approximately $3,030,000 in alleged proceeds from Slomps’ drug trafficking. The government seized the equivalent of that amount in bitcoins, a digital currency, and exchanged it for cash.
“Illegal drug-trafficking is not new but drug-trafficking using a sophisticated underground computer network designed to protect anonymity of buyers and sellers presents new challenges to law enforcement that we are prepared to meet,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
“In the global black market for all things illegal, Slomp allegedly was a prolific vendor on Silk Road,” said Gary Hartwig, Special Agent-in-Charge of HSI in Chicago. “HSI will remain vigilant against criminals who traffic contraband and illicit goods across our nation’s borders. Those who mistakenly believe the anonymity of the Internet ― even on the Deep Web ― shields them from scrutiny are finding out they can’t evade detection in cyberspace.”
Messrs. Fardon and Hartwig commended U.S. Customs and Border Protection and U.S. Postal Inspection Service agents in Chicago for their assistance in the investigation. The HSI office in Miami, the HSI Attaché Office in The Hague, and the Justice Department’s Office of International Affairs also provided assistance with this case.
According to court documents, Slomp used Silk Road to sell illegal drugs and received approximately 385,000 in bitcoins from more than 10,000 transactions as payment. From January 2011 until it was shut down by law enforcement in October 2013, Silk Road allowed vendors and buyers to exchange goods and services online. It was dedicated to the sale of illegal drugs and other illicit, black market goods using bitcoins and was designed to facilitate illegal commerce by ensuring anonymity among its users. The underground website operated on a special worldwide network of computers that concealed the true Internet Protocol (IP) addresses of the users. Each communication, wrapped in a layer of encryption, bounced through numerous relays within the network so the end recipient had no way of tracing the communication back to its true originating IP address.
During the undercover investigation, HSI agents surreptitiously entered the website and observed a vendor who had offered various controlled substances for sale for about 18 months. In April 2012, U.S. Customs and Border Protection officers at Chicago’s O’Hare International Airport seized an envelope mailed from the Netherlands that tested positive for MDMA concealed inside an empty DVD case. During the investigation, agents collected more than 100 similar envelopes in Chicago, each mailed from the Netherlands or Germany, containing various controlled substances. The investigation resulted in identifying Slomp as the alleged Silk Road vendor who was responsible for mailing the envelopes seized in Chicago.
The charge describes 11 unnamed co-conspirators in Europe and the U.S. who allegedly assisted Slomp in supplying, manufacturing, selling, packaging, shipping, and distributing various illegal drugs. Two of these individuals in the Netherlands allegedly manufactured hundreds of thousands of ecstasy pills of different colors, most of which bore a question mark, which was Slomp’s unique identifying logo.
In August 2012, Slomp and Individual J in Florida allegedly agreed that Slomp would front wholesale quantities of illegal drugs on credit and they would divide the proceeds in half after Individual J resold the drugs to Silk Road customers under the vendor names “UnderGroundSyndicate” and “BTCMaster.” Slomp allegedly imported a half-kilogram of fronted MDMA every week for a year to Individual J, as well as substantial quantities of other illegal drugs.
The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.
The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Information
Ten Defendants Charged in Separate Federal Cases Alleging A Total of More Than $1.27 Million in Social Security FraudRead the Press Release
CHICAGO ― Ten Chicago and area defendants were charged in separate federal criminal cases with stealing a total of more than $1.27 million from the federal government by fraudulently obtaining Social Security benefits. Six of the defendants allegedly engaged in the fraud by using false identities. These individuals either applied for Social Security benefits under multiple names or worked under one name and applied for benefits using another name, according to the charges. Other defendants allegedly continued to receive benefits from the account of a beneficiary who they knew was deceased and no longer entitled to receive payments. The cases were announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and William Cotter, Special Agent-in-Charge of the Chicago Office of the Social Security Administration Office of Inspector General.
In the false identity cases, the charges allege that those six defendants obtained Social Security benefits by claiming they were disabled or otherwise unable to maintain employment while simultaneously working and earning wages using a different identity.
SSA administers the payment of benefits from the United States to qualified individuals under various programs, including the Old-Age and Survivors Insurance (OASI) program, the disability insurance program, and the supplemental security income program (SSI). The OASI program provides monthly cash benefits to retired individuals and to the surviving family members of individuals who had worked and were insured under the Social Security Act based on contributions from earnings. The SSI program provides monthly cash benefits to aged, disabled, and blind individuals who have assets and income levels that fall below certain levels.
The criminal cases were filed this month in U.S. District Court in Chicago. Eight defendants were indicted by a federal grand jury and two were charged in criminal informations, each on one felony count of theft of government funds. Seven defendants pleaded not guilty at their arraignments in U.S. District Court and the remaining three are scheduled to be arraigned this week.
“Stealing from the Social Security trust fund hurts the millions of hardworking Americans who contribute to the Social Security system,” Mr. Fardon said. “We will vigorously pursue those who abuse the system, so that we can protect those who legitimately need it.”
Each defendant faces a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, restitution is mandatory and the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The public is reminded that indictments and informations 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.
The defendant and the total fraud amount alleged in each case follow:
DAVID BAILOG, also known as “David Conti” and “David Bailey,” 45, of Chicago
Loss amount: $43,422
(Assistant U.S. Attorney Christopher Parente)SHARIA BRYANT, a/k/a “Sharia Bailey,” 64, of Chicago
Loss amount: $69,241
(Special Assistant U.S. Attorney Bill Thomas)IMOGENE DAVIS, a/k/a “Imogene Neely,” 63, of Chicago
Loss amount: $91,566
(AUSA Timothy Storino)RONNIE DAVIS, a/k/a “Ronnie Wofford,” 67, of Chicago
Loss amount: $101,872
(AUSA Derek Owens)SHERRI MARSHALL, a/k/a “Sherri Williams,” 49, of Chicago
Loss amount: $43,189
(AUSA Kelly Greening)PATRICIA McQUEEN, 58, of Chicago
Loss amount: $203,505
(SAUSA Thomas)BETSY MINOR, 63, of Oak Lawn
Loss amount: $369,188
(SAUSA Thomas)SIMONIA PATTERSON, 39, of Chicago
Loss amount: $130,929
(SAUSA Thomas)LEIN SCOTT, a/k/a “Barry Scott,” 64, of Chicago
Loss amount: $126,919
(AUSA Ryan Fayhee)SHIRLEY SIMMONS, 50, of Chicago
Loss amount: $95,247
(SAUSA Thomas)Riverdale Marina Re-Developer Arrested on Federal Charges for Allegedly Defrauding the Village of $370,000 in Public FundsRead the Press Release
CHICAGO — A Chicago real estate developer was arrested today on federal charges alleging that he defrauded the south suburban Village of Riverdale of public funds provided for the redevelopment of the now closed-Riverdale Marina. The defendant, JOHN THOMAS, allegedly fraudulently obtained approximately $370,000 for himself from $900,000 in Tax Increment Financing (TIF) payments in 2012 and used the public funds to repay personal loans and debts, legal fees, rent and other personal expenses.
Thomas, 51, of Chicago, was charged with three counts of wire fraud in a federal grand jury indictment that was returned Wednesday and unsealed today after his arrest. He is expected to be arraigned later today in U.S. District Court.
Thomas owned and controlled Nosmo Kings LLC, which had offices at 215 West Ontario St., in Chicago, and at the Riverdale Marina, 13100 South Halsted St., in Riverdale, which consisted of boat docks and a restaurant on 11 acres along the Little Calumet River.
Between February and April 2012, Riverdale paid Thomas’s company $900,000 in TIF funds for three phases of construction and reimbursement based on false supporting documents. Thomas used a portion of the money for legitimate renovations costs while fraudulently using approximately $370,000 for his personal benefit. The indictment seeks forfeiture of at least $370,000.
According to the indictment, Nosmo Kings entered into a TIF agreement with Riverdale in February 2012. Riverdale’s TIF program allowed taxpayer funds to be used to redevelop certain property in the village. Under the agreement, Riverdale agreed to reimburse Nosmo Kings’ expenses up to $1.2 million as long as the total renovation costs equaled or exceeded approximately $5.25 million. The TIF funds were to be disbursed in four phases, each capped at $300,000, after Nosmo Kings paid for and completed each phase of construction. To obtain TIF funds, Thomas was required to submit certain documents identifying completed construction expenses, including invoices from and checks paid to vendors.
In early 2012, Thomas allegedly created and submitted fake invoices for non-existent companies and for companies that never performed work at the marina in order to fraudulently obtain reimbursement from the village. The indictment alleges he submitted numerous false documents supporting reimbursement for expenses that he had not incurred. These included $132,000 and $8,815 in payments to contractors for construction work; $22,994 for an insurance policy that was later cancelled for non-payment; and $56,000 and $67,000 for construction supplies using the same supporting invoices and receipts to double-bill the village.
The indictment alleges that Thomas claimed $25,750 for construction supplies from a company that was actually a currency exchange he owed money, and he submitted other fraudulent documents to obtain payment of tens of thousands of dollars to law firms and an individual attorney for personal legal fees for himself and one of his employees. Thomas used other TIF funds to pay his apartment rent, the charges allege.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The arrest and indictment were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The government is being represented by Assistant U.S. Attorney Sunil Harjani.
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
Two Former Cook County Board of Review Analysts Sentenced to Prison for Accepting A Bribe to Arrange Property Tax ReductionsRead the Press Release
CHICAGO ― Two former analysts for the Cook County Board of Review were sentenced today for accepting $1,500 to facilitate reducing by more than $10,000 the property taxes on three residential properties. THOMAS HAWKINS was sentenced to 24 months in prison and JOHN RACASI was sentenced to 18 months in prison after they were convicted of federal conspiracy, bribery, and fraud charges. They were captured scheming with others to facilitate reducing property tax assessments in exchange for bribes in undercover recordings that were played at their week-long trial last October in U.S. District Court.
Hawkins, 50, and Racasi, 53, half-brothers and both of Chicago, were analysts on the staff of one of the three Board of Review commissioners in September 2008, when they accepted the $1,500 bribe payment. Each of the three commissioners has analysts who handle residential property tax appeals and at least two of the three commissioners’ analysts must agree in order to reduce the Cook County Assessor’s property tax assessments.
“Offenses like [these], betray the citizens who pay property taxes in Cook County and who expect the process in place for assessing property values and appealing those property tax assessments to operate fairly and legitimately,” Assistant U.S. Attorneys Margaret J. Schneider and Michael T. Donovan, argued at sentencing.
According to the evidence at trial, Ali Haleem, a former Chicago police officer who began cooperating with the FBI in July 2008 and is awaiting sentencing on other federal charges, was introduced to Hawkins, who, in turn, introduced him to Racasi. Haleem recorded numerous meetings and telephone conversations with both defendants in which they discussed facilitating property tax assessment reductions in exchange for bribes.
In September 2008, Haleem, Hawkins and Racasi discussed the specifics of the bribe Haleem would pay for reducing tax assessments on properties in Chicago, Burbank, and Tinley Park. On Sept. 11, 2008, Hawkins and Racasi agreed to reduce the assessed values on properties Haleem owned in Chicago and Burbank, as well as a property in Tinley Park owned by another individual, for three years beginning with the 2008 tax year. Hawkins and Racasi provided Haleem with analysis sheets for these properties, which could be used to calculate the tax savings that a property owner would realize over the three-year period. In return for the $1,500 bribe, Hawkins and Racasi promised Haleem a total tax savings for the three properties over the threeyear period of at least approximately $10,000. The payment was made on Sept. 17, 2008, when Haleem met with Hawkins and Racasi and handed the money to Racasi. Hawkins assured Haleem that Racasi would later provide Hawkins with his share of the money.
Hawkins and Racasi also facilitated a reduction in property tax assessments on 11 condominium units in Chicago, expecting to receive bribe payments that Haleem would collect from the property owners once the reductions were verified.
The sentences 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 FBI=s Chicago City Public Corruption Task Force led the investigation with assistance from the Chicago Police Department’s Internal Affairs Division, which is a task force member.
Des Plaines Man Sentenced to 50 Years in Prison for Sexually Exploiting 11 Children and Producing Child PornographyRead the Press Release
CHICAGO ― A former Des Plaines man was sentenced to 50 years in federal prison for sexually molesting nine children and producing child pornography with seven of those victims, as well as creating pornographic images of two other victims whom he sexually exploited. The defendant, BOBBY CRUZ, 34, pleaded guilty last September to one count of interstate travel to engage in sex with a minor and two counts of producing child pornography, resolving separate federal cases that were brought in both the Northern and Central Districts of Illinois. He has remained in federal custody since he was arrested in November 2011.
In an emotional sentencing hearing yesterday afternoon, two victims and a parent of six other victims told U.S. District Judge Robert M. Dow, Jr., about the traumatic damage that Cruz inflicted upon their lives.
“The harm to the victims is incalculable,” Judge Dow said in imposing the maximum sentence under the terms of Cruz’s plea agreement. The “victims are the most vulnerable in society” and Cruz’s crimes were “brazen beyond belief,” the judge added.
Cruz sexually exploited boys and girls, who were between the ages of 2 and 11 when the abuse began, to produce child pornography. None of the victims were random and all were children that Cruz had access to being around. Cruz was ordered to remain under court supervision for life, and he must serve at least 85 percent of his sentence. There is no parole in the federal prison system.
“The defendant has imposed a life sentence on each one of these victims,” Assistant U.S. Attorney Jennie Levin argued in seeking the 50-year sentence.
“No amount of prison time seems sufficient for the unspeakable trauma Cruz inflicted on his innocent victims,” said Gary J. Hartwig, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) in Chicago. The sentence was announced by Mr. Hartwig and Zachary T. Fardon, United States Attorney for the Northern District of Illinois,
The investigation of Cruz began just before he was arrested when Cruz traded images of child pornography with an undercover law enforcement officer. Ultimately, agents seized 300 videos and images of homemade child pornography from Cruz’s residence, along with 1,130 additional videos and images that he possessed.
The investigation was part of Operation Predator, a nationwide HSI initiative to protect children from sexual predators, including those who travel abroad for sex with minors, Internet child pornographers, criminal alien sex offenders, and child sex traffickers. The Des Plaines Police Department and the Cook County State’s Attorney’s Office assisted in the investigation.
Federal Tax Prosecutions Serve as Reminder to Taxpayers to Comply with Tax Obligations on Eve of April 15 DeadlineRead the Press Release
CHICAGO ― Seven Chicago and suburban residents, among others, are facing federal prosecution for alleged federal income tax crimes in various separate cases filed recently. Two defendants were arrested by IRS agents today after they were indicted in an alleged scheme to use stolen identities to fraudulently claim and obtain tax refunds based on fictitious returns. Other defendants include Dolton and Lockport businessmen and a retired Chicago police officer and his wife.
“The IRS Criminal Investigation Division is focused on ensuring that taxpayers pay their fair share,” said James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago. “Tax fraud does not know a season ― IRS special agents pursue criminals year round, not only at filing deadlines. Taxpayers who might be thinking about cheating should think twice or they will risk the consequences,” he said.
“Federal tax prosecutions occur throughout the year but at this time of year it is especially prudent to remind taxpayers of the importance of voluntary compliance with their tax obligations,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
In addition to criminal penalties, including incarceration, fines, and the costs of prosecution, convicted defendants remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed, Mr. Fardon noted. And those making false claims against the government may be required to pay restitution or may be sued civilly for an amount greater than the fraudulent claims, he added.
In the case involving today’s arrests, three defendants were indicted in an alleged scheme to fraudulently claim tax refunds in excess of $350,000, and fraudulently obtaining approximately $180,000, after filing 173 fictitious returns. WILLIS PATTON, 43, of Woodridge, and STEVIE SHELTON, 54, of Chicago, were arrested today, while KENYA BOND, 35, of Chicago, will be arraigned on a date to be determined in U.S. District Court. Each of them was charged with six counts of wire fraud, while Patton and Bond were also charged with two counts each of making false claims, and Shelton was charged with two counts of theft of government funds in a 10-count indictment that was returned by a federal grand jury on April 2 and unsealed today.
According to the indictment, Bond misappropriated the names, social security numbers, and dates of birth of 29 patients of the suburban Woodridge dentist’s office where she worked, and provided the identity information to Patton for a fee. Patton used that information, as well as identifying information obtained from other unspecified sources, to file 173 fictitious tax returns for 2011 that contained false information about income, tax withholdings, and supporting documents. Patton directed the IRS to send electronic tax refunds to bank accounts controlled by Shelton and other individuals, the indictment alleges. In fact, Patton allegedly controlled these bank accounts and recruited Shelton and others to open and maintain them in their names for Patton to obtain tax refunds.
For the 2011 tax year, Patton allegedly received approximately $180,000 in false tax refunds, including $67,000 that was electronically transferred into accounts maintained by Shelton. Patton and Shelton were both ordered to remain in federal custody pending a detention hearing at 2 p.m. Thursday before Magistrate Judge Geraldine Soat Brown in U.S. District Court.
Each count of wire fraud carries a maximum sentence of 20 years in prison, each count of making a false claim carries a maximum of five years, and each count of theft of government funds carries a maximum of 10 years, and all counts carry a maximum fine of $250,000. The government is being represented by Assistant U.S. Attorney Jessica Romero.
In other recent cases:
- VICTOR SHAW, 53, of Dolton, was charged in a criminal information filed Friday with six misdemeanor counts of failing to file federal income tax returns for each year between 2007 and 2012. He will be arraigned on a date to be determined in U.S. District Court. Each count of failing to file an income tax return, a misdemeanor, carries a maximum sentence of a year in prison and $100,000 fine. (AUSA Maureen Merin.)
- RONALD MUHAMMAD, 63, who retired as a Chicago police officer in 2007, and his, wife, WILHELMENIA MUHAMMAD, 64, a retired Social Security Administration employee, both of Chicago, were each indicted on four counts of tax evasion and four counts of failing to file a federal income tax return in a 12-count indictment that was returned by a federal grand jury last Thursday. Between 2007 and 2010, the couple allegedly failed to file tax returns and evaded paying taxes on hundreds of thousands of dollars in income from pension payments and wages, including Ronald’s earnings at the Chicago Park District after he retired from the police department. Among the couple’s other wages and retirement earnings, Ronald allegedly withdrew the following amounts in police pension and annuity payments: $537,514 in 2008, $514,043 in 2009, and $149,490 in 2010.
According to the indictment, either or both of the Muhammads responded to various letters from the IRS by saying they viewed a letter as a “fraudulent document that had no legal basis,” or the IRS “has no jurisdiction over our personal affairs,” as well as claiming at times that they were exempt from federal withholding.
The Muhammads are scheduled to be arraigned at 9 a.m. Wednesday in U.S. District Court. Each count of tax evasion carries a maximum sentence of five years in prison and a $250,000 fine, and each count of failing to file an income tax return, a misdemeanor, carries a maximum sentence of a year in prison and $100,000 fine. (AUSA Bethany Biesenthal.) - PAUL WEST, 61, of Lockport and formerly of Frankfort, also known as “Thomas Wilson,” and “Tom Wilson,” was indicted last Thursday on two counts of filing a false federal income tax return and three counts of failing to file a federal income tax return. West, who was in the business of selling materials for recycling, including scrap cardboard, had gross income in excess of $450,000 in 2007, and more than $200,000 in 2011, and allegedly under-reported his income for both years, reporting that he owed little or no taxes, according to the indictment. It further alleges that he had gross income in excess of $250,000 in 2008, $150,000 in 2009, and 200,000 in 2010, and failed to file federal income tax returns for those years.
West will be arraigned on a date to be determined in U.S. District Court. Each count of filing a false income tax return carries a maximum sentence of three years in prison and a $250,000 fine, and each count of failing to file an income tax return, a misdemeanor, carries a maximum sentence of a year in prison and $100,000 fine. (AUSA Kaarina Salovaara.)
In each case, if convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that criminal charges are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
High-Level Sinaloa Cartel Member’s Guilty Plea Unsealed; Zambada-Niebla’s Cooperation with U.S. RevealedRead the Press Release
CHICAGO — A high-level member of the Sinaloa Cartel in Mexico pleaded guilty a year ago to participating in a vast narcotics trafficking conspiracy and is cooperating with the United States, federal law enforcement officials announced today. A written plea agreement with the defendant, JESUS VICENTE ZAMBADA-NIEBLA, was made public today in U.S. District Court for the Northern District of Illinois.
Zambada-Niebla, 39, pleaded guilty on April 3, 2013, before U.S. District Chief Judge Ruben Castillo. Zambada-Niebla was arrested in Mexico in 2009, and he was extradited to the United States in February 2010.
Zambada-Niebla remains in U.S. custody and no sentencing date has been set. Under the plea agreement, he faces a maximum sentence of life in prison¸ a mandatory minimum sentence of 10 years, and a maximum fine of $4 million. If the government determines at the time of sentencing that Zambada-Niebla has continued to provide full and truthful cooperation, as required by the plea agreement, the government will move to depart below the anticipated advisory federal sentencing guideline of life imprisonment. In addition, Zambada-Niebla agreed not to contest a forfeiture judgment of more than $1.37 billion.
“This guilty plea is a testament to the tireless determination of the leadership and special agents of DEA’s Chicago office to hold accountable those individuals at the highest levels of the drug trafficking cartels who are responsible for flooding Chicago with cocaine and heroin and reaping the profits,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. Mr. Fardon announced the guilty plea with Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration.
Zambada-Niebla pleaded guilty to one count of conspiracy to possess with intent to distribute multiple kilograms of cocaine and heroin between 2005 and 2008. More specifically, the plea agreement describes the distribution of multiple tons of cocaine, often involving hundreds of kilograms at a time on a monthly, if not weekly, basis between 2005 and 2008. The guilty plea means that there will be no trial for Zambada-Niebla, whose case was severed from that of his co-defendants. Among his co-defendants are his father, Ismael Zambada-Garcia, also known as “Mayo,” and Joaquin Guzman-Loera, also known as “Chapo,” both alleged leaders of the Sinaloa Cartel. Zambada-Garcia is a fugitive believed to be in Mexico, and Guzman-Loera is in Mexican custody after being arrested this past February.
Zambada-Niebla admitted that between May 2005 and December 2008, he was a highlevel member of the Sinaloa Cartel and was responsible for many aspects of its drug trafficking operations, “both independently and as a trusted lieutenant for his father,” for whom he acted as a surrogate and logistical coordinator, the plea agreement states. Zambada-Niebla admitted he was aware that his father was among the leaders of the Sinaloa Cartel since the 1970s and their principal livelihood was derived from their sale of narcotics in the United States.
Zambada-Niebla admitted that he participated in coordinating the importation of multiton quantities of cocaine from Central and South American countries, including Colombia and Panama, into the interior of Mexico, and facilitated the transportation and storage of these shipments within Mexico. The cartel used various means of transportation, including private aircraft, submarines and other submersible and semi-submersible vessels, container ships, go-fast boats, fishing vessels, buses, rail cars, tractor-trailers, and automobiles.
Zambada-Niebla “subsequently assisted in coordinating the delivery of cocaine to wholesale distributors in Mexico, knowing that these distributors would in turn smuggle multiton quantities of cocaine, generally in shipments of hundreds of kilograms at a time, as well as on at least one occasion, multi-kilogram quantities of heroin, from Mexico across the United States border, and then into and throughout the United States, including Chicago,” according to the plea agreement.
On most occasions, the Sinaloa Cartel supplied this cocaine and heroin to wholesalers on consignment, including to cooperating co-defendants Pedro and Margarito Flores, whom Zambada-Niebla knew distributed multi-ton quantities of cocaine and multi-kilogram quantities of heroin in Chicago, and in turn sent payment to Zambada-Niebla and other cartel leaders. Zambada-Niebla also admitted being aware of, and directly participating in, transporting large quantities of narcotics cash proceeds from the U.S. to Mexico.
Zambada-Niebla also admitted that he and his father, as well as other members of the Sinaloa Cartel, “were protected by the ubiquitous presence of weapons,” and that he had “constant bodyguards who possessed numerous military-caliber weapons.” Zambada-Niebla also admitted that he was aware that the cartel used violence and made credible threats of violence to rival cartels and to law enforcement in Mexico to facilitate its business.
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 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 offices 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 Zambada-Niebla’s extradition.
Assistant U.S. Attorneys Thomas D. Shakeshaft and Michael J. Ferrara are representing the government.
Plea Agreement
Former Markham Deputy Police Chief Sentenced to Five Years in Prison for Lying to FBI About Raping Woman in Police CustodyRead the Press Release
CHICAGO — The former deputy police chief in south suburban Markham was sentenced today to the maximum of five years in federal prison after a judge ruled that he sexually assaulted a woman in police custody in 2010. The defendant, TONY D. DEBOIS, pleaded guilty last September to lying to FBI agents in 2012 about having had sex in his office, but he contended at a lengthy sentencing hearing last month that the woman he had sex with was not the victim, and the sex was consensual.
“It is a case about lying about a rape that occurred under the most egregious circumstances that law enforcement could imagine,” Assistant U.S. Attorney April Perry argued today before the sentence was imposed by U.S. District Judge Joan Lefkow.
“The seriousness should not be underestimated,” Judge Lefkow said, adding that she found Debois’ conduct “revolting.”
Debois, 42, of Frankfort, was also placed on supervised release for three years following his sentence, which he was ordered to begin serving on June 10.
Judge Lefkow ruled today that the government established that Debois raped the 21-yearold highly vulnerable victim by a “considerable” preponderance of the evidence presented at the hearing last month, including the victim’s testimony, which the judge said was corroborated by other factors. The victim and a man were arrested by Markham police officers on Sept. 23, 2010, after the man was suspected of engaging in a counterfeit currency transaction. The victim, who had no prior contact with law enforcement, was handcuffed, taken to the Markham Police Department, and placed in a holding cell for about 30 minutes. One of the arresting officers then took her to Debois’ tactical office, where, according to Judge Lefkow’s ruling, “he insinuated she could escape further trouble if she engaged in sex with him.” The judge found that Debois’ conduct was rape and that he later obstructed justice to avoid punishment for the sexual assault.
DeBois served as deputy chief in Markham between 2008 and 2011 and also served as the department’s head of internal affairs until 2011, when he became Markham’s inspector general until 2012. DeBois began his law enforcement career with the former Chicago Housing Authority Police Department in the 1990s, and he was a police officer in south suburban Harvey from 1999 to 2007, when he joined the Markham department.
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. They thanked the Illinois State Police and the Cook County State’s Attorney’s Office for their extensive cooperation in the investigation.
The government was represented by Ms. Perry and Assistant U.S. Attorney Patrick Pope.