Northern District of Illinois

CHICAGO ― A former suburban chiropractor and his wife, who was a fitness instructor and personal trainer, were sentenced to federal prison terms for engaging in a $1 million health insurance fraud scheme that continued for a year after they were indicted in 2011. WENDY CARR, 43, was sentenced today to 28 months in prison, a week after her husband, ANDREW CARR, 45, both of Lake in the Hills, was sentenced to eight years in prison.

Andrew Carr worked as a chiropractor at Premier Health in Palatine, Community Physical Medicine and Rehabilitation in Mundelein, Allied Health in Mundelein, Edgewater Rehabilitation and Wellness Center in Lake in the Hills, and Fusion Health and Fitness in Lakemoor.

“They pretended to be the victim patients’ friends, convinced the victim patients to take their fitness classes, and convinced the victim patients to get treatment from [Andrew Carr] when the classes caused physical pain or injury,” Assistant U.S. Attorney Shoba Pillay argued at sentencing.

Between 2005 and June 2011, Andrew Carr submitted health insurance claim forms for at least 376 patients to six different private health care insurers, knowing that more than $4.2 million worth of claims were for services that were not provided, and as a result, he fraudulently obtained payments totaling approximately $865,697.

Between January 2009, when Wendy Carr joined the scheme, and June 2011, she processed the insurance claims, knowing that nearly $1.6 million worth of claims were for services that were not provided, and, as a result, the couple fraudulently obtained payments during that time totaling approximately $328,964.

After the couple were indicted in June 2011, they submitted an additional 596 fraudulent claims totaling more than $475,000 for 51 additional patients over another year and, as a result, fraudulently obtained an additional $164,168. Each pleaded guilty to health care fraud earlier this year.

Andrew Carr was ordered to pay restitution totaling $1,029,865, and Wendy Carr was ordered to pay $493,132 in restitution by U.S. District Judge Robert M. Dow, Jr., who imposed the sentences in Federal Court. The restitution was ordered to be paid to the victim insurance companies ― Aetna, Inc., Allied Insurance, Blue Cross Blue Shield of Illinois, CIGNA, Professional Benefit Administrators, Inc., and United Healthcare, some of which provided coverage through union health and welfare funds they administered in the Chicago area.

Andrew Carr, who was sentenced on Aug. 25, has been in federal custody for approximately two years. Wendy Carr, was sentenced today and was ordered to begin serving her 28-month sentence on June 25, 2015, to be followed by six months of home detention.

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; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago; and Donna J. Seermon, Acting Regional Director in Chicago of the U.S. Department of Labor’s Employee Benefits Security Administration.

CHICAGO ― A middle school teacher in northwest suburban Buffalo Grove was arrested this morning on federal charges for allegedly receiving child pornography and persuading a minor to produce pornographic images of himself. The defendant, JOHN C. VASTIS, also known as “Pete,” 51, of Lakemoor, which straddles Lake and McHenry counties, was arrested at his home early this morning by agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations at the same time they executed a federal search warrant.

Vastis is a teacher at the Meridian Middle School in Aptakisic-Tripp District 102 in Buffalo Grove. There are no allegations of any sexual exploitation of any students. School district officials are cooperating with the investigation.

Vastis was charged with two counts of producing child pornography and one count of receiving child pornography. He appeared before Magistrate Judge Jeffrey Cole and was ordered to remain in federal custody pending a detention hearing, which was scheduled for 9 a.m. Tuesday in U.S. District Court.

Anyone with information about this matter is encouraged to call HSI’s toll-free tip line at 1-866-DHS-2ICE (1-866-347-2423) or go to http://www.ice.gov/predator/# for further information. Callers may remain anonymous.. Callers may remain anonymous.

According to the complaint, on Aug. 15, HSI agents and local police executed a state search warrant at the residence of a 17-year-old youth who was suspected of possessing and distributing child pornography. The youth, identified as “Minor A,” told agents that he began communicating via Skype and text messages with an adult he identified as “Pete” when he was 16-years-old in September 2013. Agents later identified “Pete” as Vastis, the charges allege. Agents then analyzed data from Minor A’s computer and cell phone and recovered more than 3,200 lines of chat messages between Minor A and “Pete.” Excerpts of those chats are detailed in the complaint affidavit.

The sexual exploitation of a minor charges allege that on Jan. 18 and March 3, 2014, Vastis persuaded, induced, and enticed Minor A to produce pornographic images of himself and send them to Vastis. He was also charged with receiving a video containing child pornography on July 13.

Each count of producing child pornography carries a mandatory minimum sentence of 15 years and a maximum of 30 years in prison, while receiving child pornography carries a mandatory minimum of five years and a maximum of 20 years, and each count carries a $250,000 maximum fine. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The arrest and charges were 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 Lakemoor Police Department, together with state and local HSI task force officers and the Lake County State’s Attorney’s Office, are assisting in the investigation. The Buffalo Grove Police Department is also cooperating with the investigation. The government is being represented by Assistant U.S. Attorney John Kness.

The investigation is being conducted under HSI’s Operation Predator, an international initiative to protect children from sexual predators. Since its launch in 2003, HSI has arrested more than 10,000 individuals for crimes against children, including the production and distribution of online child pornography, traveling overseas for sex with minors, and sex trafficking of children. In fiscal year 2013, more than 2,000 individuals were arrested by HSI special agents under this initiative.

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

Complaint

CHICAGO — A former Cook County employee who managed a $10.3 million federal grant to assist county residents who were impacted by floods in 2008 was arrested today on federal charges for allegedly engaging in a fraud scheme with several contractors and swindling at least $330,000 from the program. A vendor who allegedly kicked-back more than $100,000 was indicted together with the former county official.

BARRY CROALL, 45, of Montgomery, Ill., was a county program manager who oversaw disbursement of the grant funds for Cook County’s Department of Homeland Security and Emergency Management. He was charged with two counts of wire fraud and one count of federal program theft in a five-count indictment that was returned by a federal grand jury yesterday and unsealed today following his arrest.

Croall was scheduled to be arraigned at 3:30 p.m. today before U.S. District Judge Andrea Wood in Courtroom 1725 in the Dirksen United States Courthouse.

RONALD FORD, 57, of Country Club Hills, who operated Strategic Management Services S.M.S. LLC, was charged with one count each of conspiracy and federal program theft. He was not arrested and is scheduled to be arraigned at 11 a.m. tomorrow before Judge Wood.

According to the indictment, between April 2010 and January 2011, Croall arranged for Strategic Management Services, a nonprofit corporation, and three other companies to perform services that were eligible to be paid for with grant funds. Croall allegedly arranged for the businesses to submit false documents inflating the amount of compensation they were entitled to and then obtained portions of the grant payments they received as kick-backs.

Croall allegedly used the funds for his own personal use, including mortgage payments for rental properties he owned in Yorkville through his company, Dove US; the purchase of a condominium unit in Yorkville; credit card payments; homeowner association fees; and an automobile. The indictment seeks forfeiture of at least $330,000 and the Yorkville condo.

The indictment alleges that Croall arranged for Strategic Management Services and Companies A and B to perform certain work on homes eligible for payment under the grant, including damage assessments, inspections, coordination of contractor visits, and related work. Strategic Management and Company A submitted invoices indicating that they had performed work at specified rates on approximately 900 and 500 homes, respectively, but the invoices allegedly overstated the number of homes and the amount of work that was performed.

As part of the scheme, Croall allegedly directed Strategic Management and other companies to submit their invoices to a nonprofit corporation, rather than to Cook County, for payment. Strategic Management and Companies A and B submitted a series of invoices in 2010, totaling approximately $741,000, to the nonprofit corporation, and the county then paid funds from the grant to the nonprofit corporation, based in part on Croall’s approval. Croall also allegedly arranged for Company C to install 1,000 appliances in eligible homes and to pay a commission to Company A as part of the scheme.

Croall then allegedly devised ways to obtain funds from the various vendors, including being employed by Company B as an independent contractor for a two-year term at $72,000 a year. Ford allegedly kicked-back at least $108,000 in cash to Croall.

The arrest and indictment were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Patrick Blanchard, Cook County Inspector General.

The government is being represented by Assistant U.S. Attorney Lindsay Jenkins.

Each count of wire fraud carries a maximum penalty 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, and restitution is mandatory. Each count of federal program theft 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 public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

CHICAGO — A Chicago man who purported to be building a $912 million hotel and convention center complex near O’Hare International Airport was indicted today on federal charges for allegedly exploiting a U.S. visa program to fraudulently raise approximately $160 million from some 290 Chinese nationals who invested in the project while seeking U.S. residency.

The defendant, ANSHOO SETHI, 30, of Chicago, was charged with eight counts of wire fraud and two counts of making false statements in a 10-count indictment returned today by a federal grand jury.  He was the founder and a managing member of A Chicago Convention Center, LLC, which purported to be building the hotel and convention center on nearly three acres of land located at 8201 West Higgins Rd., east of the airport.  Sethi, who was also the managing member of the Intercontinental Regional Center Trust of Chicago, LLC, will be arraigned on a date yet to be determined in U.S. District Court.

The indictment seeks forfeiture of at least $11 million in administrative fees that Sethi allegedly collected from Chinese investors and expended as part of the fraud scheme.  Sethi misappropriated at least $320,000 of the fees to purchase luxury goods for himself, his family, and friends, and for an unrelated civil lawsuit settlement, to fund a cosmetic surgery business, and for other personal expenses, the indictment alleges.

The U.S. Securities and Exchange Commission sued Sethi over the purported project in early 2013 and the case was settled earlier this year.  Approximately $147 million, which had been escrowed by Sethi and frozen by the SEC, was returned to Chinese investors.

The indictment alleges that between January 2011 and February 2013, Sethi defrauded investors and deceived the U.S. Department of Homeland Security’s U.S. Citizenship and Immigration Services (USCIS) in its review of visa applications through false statements and representations about the participation of established hotel brands in the project; the appraised value of the project site; government financing; the City of Chicago’s provision of Tax Increment Financing; the development of the project; and the use of the investors’ administrative fee.

According to the indictment, foreign nationals may obtain an EB-5 visa, qualifying them for U.S. residency, if they invested $1 million, or if they invested at least $500,000 in a domestic project in a high unemployment or rural area and their investment would create or preserve at least 10 jobs for U.S. workers.  In addition, EB-5 visas were set aside to be granted to foreign investors in Regional Centers that promoted economic development, such as Sethi’s Intercontinental Regional Center Trust of Chicago.  The USCIS granted Sethi’s application for Regional Center status in June 2011.

Sethi solicited Chinese nationals who were interested in obtaining EB-5 visas to invest $500,000 each plus a $41,500 administrative fee in A Chicago Convention Center and the Intercontinental Regional Center, representing that the $500,000 would be used for construction of the complex and the $41,500 would be used for administrative and marketing expenses, the indictment alleges.  Each Chinese national who invested $541,500 in the project also applied for an EB-5 visa with USCIS, but no EB-5 visas were actually granted to investors through the convention center project.

A Private Offering Memorandum stated that each investment interest constituted approximately 0.025 percent ownership of the project, and it projected raising $249 million through investor contributions.  Additional funding for the project would be obtained through a contribution of the three-acre site on Higgins Road, which Sethi allegedly represented had a greatly inflated appraised value of $177 million, approximately $339 million in government bond financing, and various government tax credits and grants, the memorandum stated.

To raise investment funds, Sethi used employees and foreign sales agents and provided them with numerous documents and marketing materials to distribute to investors in China.  Sethi also made presentations regarding the project directly to investors in China, according to the indictment.

A Private Offering Memorandum stated that each investment interest constituted approximately 0.025 percent ownership of the project, and it projected raising $249 million through investor contributions.  Additional funding for the project would be obtained through a contribution of the three-acre site on Higgins Road, which Sethi allegedly represented had a greatly inflated appraised value of $177 million, approximately $339 million in government bond financing, and various government tax credits and grants, the memorandum stated.

To raise investment funds, Sethi used employees and foreign sales agents and provided them with numerous documents and marketing materials to distribute to investors in China. Sethi also made presentations regarding the project directly to investors in China, according to the indictment.

The indictment further alleges that Sethi falsely represented that the project had executed franchise agreements with established hotel brands, namely Hyatt, Starwood, and Intercontinental Hotel Group, to operate at least three separate hotels at the complex, knowing at the time that no such agreements existed.

Sethi also allegedly falsely represented that that the State of Illinois and the federal government were investing funds and providing tax credits for the project, including circulating a forged letter stating that the project qualified for financing through the Illinois Finance Authority. He also falsely represented that the City of Chicago had agreed to provide approximately $97 million through Tax Increment Financing, and he distributed a fake agreement and a fake city ordinance as evidence that the project had been approved for TIF financing, the indictment alleges.

Sethi further falsely represented that the $41,500 administrative fee was fully refundable if the investors’ EB-5 visas were not approved, even though he knew that he had spent nearly all of the administrative fees collected and did not have the resources to repay the investors.

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 SEC and the USICS assisted in the investigation.

The government is being represented by Assistant U.S. Attorney Sunil Harjani.

Each count of wire fraud carries a maximum penalty 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, and restitution is mandatory. Each count of making false statements carries a maximum sentence of five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

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

Indictment

CHICAGO ― More than 100 assorted pistols, revolvers, rifles, and shotguns have been seized and 14 Chicago area defendants are facing federal firearms charges as a result of an investigation that ended yesterday and was led by the Bureau of Alcohol, Tobacco, Firearms and Explosives. ATF agents, together with Chicago police and other state and local law enforcement partners, executed arrest and search warrants yesterday and seized 17 firearms from a residence in Gary, Ind. The investigation, which began in January, relied in part on three confidential informants, including one who posed as a broker for an individual who sold firearms overseas.

Nine defendants were arrested yesterday while three others were already in state custody. Nine separate criminal complaints were unsealed charging 12 defendants with being felons-in-possession of firearms, one with dealing firearms without a federal license, and one with illegal possession of a machine gun with an obliterated serial number. Those arrested yesterday remain in federal custody pending detention hearings, which Magistrate Judge Jeffrey Cole scheduled for Thursday and Friday in U.S. District Court.

This investigation is the culmination of ATF’s 2014 Firearms Trafficking and Violent Crime Strategy, also known as the “Chicago Initiative,” a four-month mission involving concentrated resources and efforts to attack violent crime associated with illegal firearms and narcotics. During the broader initiative, and including yesterday’s developments, ATF agents arrested 90 state and federal defendants, executed 25 search warrants, and seized more than 270 firearms, as well as seized more than four kilograms of marijuana, more than a kilogram of heroin, and nearly a kilogram each of powder cocaine and crack cocaine.

“This investigation, coupled with our enhanced efforts over the last four months, makes a difference by reducing the potential for violence that is associated with the illegal possession and sale of firearms,” said Carl J. Vasilko, Special Agent-in-Charge of ATF’s Chicago Field Division.

“Every gun we take out of the hands of individuals who allegedly possess and sell them illegally helps reduce the risk of violent crimes occurring with those weapons,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.

Chicago Police Superintendent Garry McCarthy said: “You have heard me say it repeatedly and I will say it again, we have too many illegal guns flooding our streets. But every little bit helps, and certainly this mission and confiscating as many weapons as we did will keep our communities safer.”

The Illinois State Police, the Cook County Sheriff’s Department, the Lake County, Ind., Sheriff’s Department, and task force officers from the Indiana State Police, and the Gary, Ind., Police Department also assisted in the investigation.

According to the complaints, in March of this year, one of the confidential informants (CI-3) identified an individual known as “Batman,” who agents later identified as JOHN THOMAS, as one of CI-3’s sources of illegally obtained firearms. CI-3 and Thomas had previously agreed that CI-3 would pay Thomas approximately $100 for every handgun and $150 for every long gun purchase that Thomas arranged for CI-3. Thomas allegedly arranged firearms transactions between CI-3 and other defendants, including ANTHONY LOGAN, who in turn allegedly arranged additional firearms transactions between CI-3 and other defendants. CI-3 also allegedly purchased firearms directly from STEVE THOMAS and WESLEY PICKETT. During these controlled purchases with the defendants, CI-3 posed as a firearms broker for an individual who sold firearms overseas. The complaint affidavits together detail 45 firearms that CI-3 purchased during the investigation. All of those guns were among a total of 108 firearms that were purchased or seized during the investigation.

Details of the nine complaints follow:

JOHN THOMAS, aka “Batman,” 38, and DANIEL BINGMON, aka “Tiny,” 36, both of Chicago, were each charged with being a felon-in-possession of a 20-gauge shotgun. At the direction of ATF agents, CI-3 allegedly purchased a total of five firearms from Thomas and Bingmon on April 30 and May 8;

ANTHONY LOGAN, aka “Snake,” 29, of Chicago, was charged with being a felon-in-possession, and DANIEL JONES, 23, of Chicago, was charged with selling firearms without a federal license. Between April 10 and June 27, CI-3 allegedly purchased a total of 17 firearms, including six handguns and 11 long guns, from Logan and Jones;

LARRY McINTOSH, aka “Ten,” 38, of Gary, Ind., and CHARLES HAWKINS, 31, of Richton Park, were charged with being a felon-in-possession of various firearms. Between June 2 and July 2, McIntosh allegedly possessed nine firearms that he sold to CI-3, and Hawkins allegedly possessed three of those firearms that he delivered to CI-3 on McIntosh’s behalf;

TYRECE McCLINTON, 24, and RODEARL McELROY, 21, both of Chicago, were each charged with being a felon-in-possession of a firearm. McClinton, McElroy, and John Thomas allegedly sold a .38 caliber pistol to CI-3 on May 13;

TRAISON WATSON, 22, of Country Club Hills, was charged with illegally possessing and transferring a machine gun with an obliterated serial number. CI-3 allegedly purchased two firearms, including the machine gun and a 7.62 caliber rifle, from Watson and John Thomas on May 16. The machine gun had been modified from its original configuration as a 9 mm pistol making it capable of firing more than one shot with a single pull of the trigger, according to the complaint affidavit;

STEPHEN CARLOS, aka “Steve-O,” 26, of Chicago, was charged with being a felon-in-possession of a 12-gauge shotgun. CI-3 allegedly purchased a gun from Carlos and Logan on April 30, and two firearms from Carlos, Logan, and Jones on June 4;

STEVE THOMAS, 38, of Chicago, was charged with being a felon-in-possession of a firearm. Steve Thomas allegedly sold CI-3 four firearms between May 19 and July 8;

WESLEY PICKETT, 25, of Dolton, was charged with being a felon-in-possession of a firearm. Pickett allegedly sold CI-3 four firearms between March 20 and July 1; and

KENNETH SMITH, 30, and RICO SMITH, 38, both of Chicago, were each charged with being a felon-in-possession of a firearm. Both Smiths and Logan allegedly sold a .40 caliber pistol to CI-3 on May 20.

Being a felon-in-possession of a firearm carries a maximum sentence of 10 years in prison and a $250,000 fine. Dealing firearms without a federal license carries a maximum sentence of five years in prison and a $250,000 fine, and illegal possession of a machine gun with an obliterated serial number carries a maximum 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. Attorneys Nicole Kim and Lela Johnson.

Criminal complaints are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Complaint

CHICAGO ― Three southwest suburban defendants were indicted on federal fraud charges for allegedly scheming to swindle hundreds of thousands of dollars from a not-for-profit network that coordinated organ and tissue donations in Illinois and northwest Indiana, federal law enforcement officials announced today.

The indictment seeks forfeiture of $652,298 in alleged proceeds of the fraud scheme.

One defendant, SHARI L. HANSEN, 41, of Bolingbrook, was the auditing coordinator for the organization and was responsible for reviewing and approving invoices from physicians who contracted to engage in organ and tissue procurement. Co-defendants, ERIC V. MURFF, 37, of Plainfield, and DEBRA A. SCHULTZ, 43, of Lockport, allegedly received the proceeds of false invoices and shared the funds with Hansen.

All three defendants will be arraigned on a date yet to be determined in U.S. District Court. Hansen was charged with six counts of wire fraud, and Murff and Schultz were each charged with three counts of wire fraud, in a six-count indictment that was returned yesterday by a federal grand jury.

According to the indictment, between March 2008 and April 2010, the defendants allegedly schemed to submit false invoices to the donor network, identified as Organization A, seeking payment to physicians for organ and tissue procurement work that they knew was not performed. Each false invoice claimed that either Murff or Individual A, both of whom were not physicians, purportedly performed the organ or tissue procurement specified. Hansen allegedly authorized the fraudulent payments to be made.

Murff and Schultz deposited checks from Organization A, which were payable to Murff and Individual A, into accounts they controlled and then transferred a portion of the funds to Hansen, the charges allege.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The government is being represented by Assistant U.S. Attorney Paul Tzur.

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

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

Indictment

CHICAGO ― Two suburban men are facing federal gun charges for allegedly illegally possessing 40 firearms, and one of them was also charged with selling firearms without a federal license between 2010 and 2011, federal law enforcement officials announced today.

One defendant, WALTER FREEMAN, also known as “Charlie” and “Cha-Lay,” 35, whose last known residence was in Lisle, was charged with one count each of being a felon-inpossession of firearms, possession of stolen firearms, and dealing firearms without a federal license. Co-defendant, TIMOTHY VANA, 53, of Forest Park, was charged with one count each of being a felon-in-possession of firearms and possession of stolen firearms.

Both defendants are scheduled to be arraigned at 11 a.m. Wednesday before Magistrate Judge Susan Cox in U.S. District Court. They were charged together in a three-count indictment returned by a federal grand jury last Thursday.

According to the indictment, between October 2010 and July 2011, Freeman and Vana illegally possessed 40 assorted firearms, both as previously convicted felons and because they had reason to believe that those same firearms were stolen. Freeman was also charged with engaging in the business of dealing firearms without a federal license during the same time period. The firearms included various 9 and 25 mm, and .22, .38, and .45 caliber pistols.

Being a felon-in-possession of firearms and possessing stolen firearms each carry a maximum of 10 years in prison, and dealing firearms without a federal license carries a maximum sentence of five years in prison, and each count carries 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 indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Carl J. Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The Cook County Sheriff’s Police and the Illinois State Police assisted in the investigation. The government is being represented by Assistant U.S. Attorney Jennie Levin.

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.

Indictment

CHICAGO — A former chief executive officer of Chicago’s first red light camera vendor, Redflex Traffic Systems, Inc., and the company’s customer liaison with the city, were indicted today on federal corruption charges together with a retired city official who managed the red light camera program for nearly a decade, after he alone was charged initially in May.

A federal grand jury returned a 23-count indictment alleging that Redflex officials, including KAREN FINLEY, its former CEO, provided the retired city official, JOHN BILLS, with approximately $570,000 cash and other personal benefits in exchange for Bills’ providing inside information and assisting Redflex in obtaining, keeping, and expanding its Chicago contracts that grew to $124 million. Finley and other officials of Phoenix-based Redflex arranged to funnel the cash and benefits to Bills through his friend, MARTIN O’MALLEY, by hiring O’Malley as an independent contractor who passed much of his $2 million compensation on to Bills, the indictment alleges.

Finley, 54, of Cave Creek, Ariz., who was Redflex’s chief executive from late 2005 through February 2013 and its vice president of operations from 2001 until she became CEO, was charged with nine counts of mail fraud, three counts of wire fraud, three counts of federal program bribery, and one count of conspiracy to commit federal program bribery. O’Malley, 73, of south suburban Worth, who was an independent contractor for Redflex between 2003 and 2012, was charged with one count of conspiracy to commit federal program bribery.

Bills, 53, of Chicago, who was arrested in May on a criminal complaint and released on his own recognizance, was indicted on nine counts of mail fraud, three counts of wire fraud, three counts of federal program bribery, three counts of filing a false federal income tax return, and one count each of extortion and conspiracy to commit federal program bribery. A city employee for 32 years, Bills served as a member of the red light camera contract evaluation committee and retired as managing deputy commissioner of the city’s transportation department on June 30, 2011.

All three will be arraigned on a date yet to be determined in U.S. District Court in Chicago.

The indictment also seeks forfeiture from all three defendants of approximately $613,400 as well as the proceeds from the sale of a condominium in Gilbert, Ariz.

Between late 2002 and late 2012, Bills and Finley allegedly schemed to defraud the city of money and Bills’ honest services by providing Bills with cash, checks, and other personal benefits directly and indirectly, including meals, hotel stays, rental cars, and golf outings. In May 2008, O’Malley purchased the condominium for Bills, which Bills visited nearly two dozen times with friends and family until the fall of 2012.

“When public officials peddle influence for profit, the consequences are severe, and when corporate executives enable that corruption, the same rule applies. We will attack alleged public corruption from every angle,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.

“Rooting out public corruption remains one of the FBI's highest priorities,” said Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. “Today's indictment underscores our commitment to work in a collaborative effort to promote honest and ethical government at all levels and to prosecute those who allegedly violated the public’s trust,” he added.

“IRS Criminal Investigation ensures that all Americans, including public officials, are held to the same standard and that everyone pays their fair share of taxes,” said James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.

“The alleged confluence of corrupt local officials and corrupt corporate officers demands a counterweight of local and federal agencies working to redeem the frayed confidence of the public,” said Joseph Ferguson Inspector General for the City of Chicago. “The Office of Inspector General is therefore grateful for the continuing leadership, dedication and collaboration of our federal partners in this matter.”

The investigation is continuing, the officials said.

According to the indictment and the complaint affidavit against Bills, 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 more than 100 red light cameras 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 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, resulting in the installation of nearly 250 additional red light cameras.

By 2010, Chicago had the largest red light camera program in the United States, representing approximately 20 percent of the total camera systems that Redflex, a subsidiary of Australian-based Redflex Holdings Ltd., operated nationwide.

According to the indictment, Individual A, Redflex’s former vice president of sales and marketing, made a presentation to Bills regarding Redflex’s red light cameras in late 2002. Shortly after a Jan. 3, 2003, pre-bid meeting that Individual A attended with other vendors, Bills asked Individual A to get him a hotel room in Los Angeles. Individual A paid for the room and sought and received reimbursement from Redflex.

In February 2003, after Redflex and a competitor were selected for a pilot phase, Finley, Individual A, and others from Redflex met Bills at the John Hancock Center and Bills provided information in an effort to give Redflex an advantage over its competitor, the charges allege. Before the pilot phase, Bills recommended that Redflex hire Company A as a subcontractor. In May 2003, before the city contract was awarded, Bills, Individual A and, at times, Individual B, who was then Redflex’s CEO, allegedly strategized to ensure a favorable result for Redflex. On May 27, 2003, the evaluation committee and city transportation commissioner recommended that Redflex be awarded the DARLEP contract, effective in October 2003.

At a celebratory dinner in June 2003 in Los Angeles, Bills allegedly told Individual A words to the effect of, “It’s time to make good,” which Individual A understood to mean that Bills wanted and expected to be paid for helping Redflex win and maintain the Chicago contract. Bills allegedly discussed how much money he wanted based on the size of the contract, and suggested to Individual A alternative ways to funnel benefits to him, including paying him through the newly created Chicago customer liaison position.

Individual A relayed Bills’ demand to Finley and Individual B. In May 2003, Finley allegedly directed placing an advertisement in a Chicago newspaper for an account manager for Redflex’s Chicago contract, and Bills allegedly told O’Malley to look for and respond to the ad. O’Malley interviewed with Finley and Individual B and was hired in the summer of 2003. Bills allegedly indicated to O’Malley that he was working with Redflex on O’Malley’s employment contract and that O’Malley would give him a portion of the commissions that O’Malley received.

The indictment alleges that from 2003 through November 2012, O’Malley and Bills used several different methods, at Bills’ direction, to transfer funds to Bills, including: from 2004 through 2012, O’Malley withdrew more than $600,000 in cash and O’Malley gave Bills approximately $570,000 in cash; from 2008 to 2010, O’Malley wrote Bills checks totaling approximately $17,900, which Bills used to pay personal debts and expenses; and from 2007 to 2011, O’Malley wrote checks totaling approximately $5,500 to a political organization.

Also at Bills’ request, the indictment alleges that Redflex agents, including Individual A and O’Malley, paid for at least $20,000 worth of personal expenses for Bills, including hotels rooms, meals, golf games, and computers, with the approval of Finley and Individual B, and expensed these purchases through Redflex from 2003 through 2011. Neither Finley nor Bills reported the flow of benefits on financial disclosure or economic interest forms they each submitted in connection with the contracts and Bill’s employment, the charges allege.

Before Bills retired, he allegedly made it known to Individual A and other Redflex employees that he wanted a job with Redflex. Instead, Finley, Individual A and others arranged for Bills to get a job with Nonprofit Corporation A, and Redflex increased its monthly funding to Nonprofit Corporation A to help pay for Bills’ salary. That job lasted through the early spring of 2012.

The tax charges against Bills allege that he failed to report the income he received from O’Malley on his federal income tax returns for 2008, 2009 and 2011.

Each count of mail and wire fraud and extortion carries a maximum sentence of 20 years in prison; federal program bribery carries a maximum of 10 years in prison; and conspiracy carries a maximum of five years in prison, and each count carries a $250,000 maximum fine, while the mail and wire fraud counts also carry an alternate maximum fine of twice the gain, or twice the loss, whichever is greater. The tax counts against Bills each carry a maximum of three years in prison and a $250,000 fine. Defendants convicted of tax offenses must pay the costs of prosecution and remain civilly liable for any back taxes, as well as a potential civil fraud penalty of up to 75 percent of the underpayment plus interest. 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.

The government is being represented by Assistant U.S. Attorneys Carrie Hamilton and Laurie Barsella.

Indictment

CHICAGO — A former executive of a bank in Bahrain pleaded guilty today to federal income tax fraud, admitting that he filed three false tax returns and failed to file a fourth return, resulting in a tax loss to the United States of more than $1.3 million over four years. The defendant, AAMIR H. KHAN, pleaded guilty to one count of filing a false individual federal income tax return at his arraignment in U.S, District Court after he was charged in a single-count information filed late last month. He also agreed to pay the United States a $724,000 civil penalty for failing to report funds he held in foreign bank accounts.

Khan, 48, of Doha, Qatar, and formerly of Naperville, was the managing director – head of private equity for Unicorn Investment Bank BSC in Manama, Bahrain. A dual citizen of the United States and Pakistan, Khan voluntarily returned to the U.S. to resolve the tax charges. He was released on a $200,000 secured bond pending sentencing on Nov. 24 before U.S. District Judge Thomas M. Durkin.

Khan faces a maximum sentence of three years in prison and a $250,000 fine, and his plea agreement contemplates an advisory United States Sentencing Guidelines range of 30 to 37 months in prison. Khan made a partial restitution payment today of $300,000, and he remains liable for the total amount of back taxes and interest, as well as mandatory costs of prosecution.

As part of his guilty plea, Khan also agreed to pay the U.S. Treasury a civil penalty of $724,574, which represents 50 percent of the highest cumulative balance of five foreign bank accounts he maintained in the Middle East. The penalty resolves Khan’s civil liability for failing to file annual reports of Foreign Bank and Financial Accounts for the years 2007 through 2012.

In pleading guilty, Khan admitted that he caused a federal tax loss of just under $1.32 million by filing false tax returns for 2006-08 and failing to file a tax return for 2009. Khan did not provide accurate information to an accountant who prepared his returns. He reported that he had earned only slightly more than $100,000 on each of the three returns he filed, when, in fact, his wages and compensation totaled approximately $518,394 in 2006; $801,390 in 2007; and $2,029,331 in 2008. Khan’s gross income was approximately $1,238,604 in 2009 when he failed to file a tax return.

The guilty plea 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.

Federal tax law requires that U.S. taxpayers pay taxes on all income earned worldwide and to report certain foreign financial accounts.

The government is being represented by Assistant U.S. Attorney Patrick King.

Plea Agreement

ROCKFORD — A Dakota, Ill. man was sentenced yesterday afternoon to federal prison for conducting a scheme to defraud more than 3,600 victims out of more than $120,000 in charitable donations. Federal Judge Frederick J. Kapala sentenced CLIFFORD J. EDWARDS, JR., 34, (formerly of Dakota and Loves Park, Ill.) to 56 months in federal prison, to be followed by 3 years on supervised release. In addition, Edwards was sentenced to pay restitution of $122,468 to the victims of his scheme.

Edwards was indicted for mail fraud on June 18, 2013, and pleaded guilty to one count of mail fraud on May 1, 2014. In pleading guilty, Edwards admitted to establishing and operating two alleged charities – Helping Out, LLC and Smiles for Kids Foundations. According to his guilty plea, Edwards established call centers for the two charities and hired employees to make unsolicited telemarketing type telephone calls. Edwards admitted that he and his employees would falsely tell victims that donations they contributed would be used to benefit children with cancer and under-privileged children. In pleading guilty, Edwards admitted that instead of using the monies he raised for children, he kept all of the funds and used them for his own personal expenses and to operate his two phony charitable organizations. The scheme to defraud lasted for 3 years, between June 2010 and June 2013.

The case was investigated by the United States Postal Inspection Service in Chicago.

The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Tony Gomez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

The government was represented by Assistant U.S. Attorney John G. McKenzie.

CHICAGO — The alleged patriarch of a Gangster Disciples street gang faction that operates in the two square blocks surrounding the 4500 block of West Jackson Boulevard on the city’s west side was arrested today and charged, together with 34 other defendants, with possessing and distributing heroin and crack cocaine at two open air drug spots. JOHNNY HERNDON allegedly supplied and directed a drug trafficking organization that sold heroin, crack, and other narcotics since the early 1990s, and used the proceeds to accumulate more than 30 real estate properties, mostly multi-unit rentals, valued at more than $1.6 million, over the last two decades.

In addition to Herndon, also known as “Goo,” Chicago police officers and ATF and IRS agents began arresting 20 federal and 15 state defendants early this morning. Three firearms, approximately $10,000, and more than a half-kilogram of heroin were seized this morning during the arrests. Another 13 firearms and hundreds of grams of heroin, crack cocaine, cocaine, and marijuana were seized during the investigation. Police and federal agents also executed 10 search warrants at several defendants’ residences and alleged stash houses.

Herndon’s drug territory is particularly lucrative due to the heavy traffic of drug customers and proximity to the Eisenhower Expressway, and his organization used violence, guns, and threats to control and protect this territory, according to federal charges unsealed today.

In two instances during the investigation, in March and June of this year, CHRISTOPHER HARRIS, allegedly the day-to-day manager of Herndon’s organization who was also arrested today, was intercepted in recorded conversations directing that guns be brought to him. The second instance occurred on June 7 when law enforcement believes that Harris allegedly was looking for guns and mobilizing the Herndon organization to respond immediately after the shooting death that night of a Gangster Disciples member in the 4400 block of West Jackson. Law enforcement quickly located Harris before there was any retaliation, and he was charged federally today with being a felon-in-possession of a firearm for allegedly possessing a .357 caliber revolver that night.

Controlling two “drug spots” ― in the 300 block of South Kilbourn Avenue and the 4400 block of West Congress Avenue ― Herndon’s organization allegedly sold 540 quarter-gram rocks of crack cocaine daily for $10 each, or 135 grams of crack for $5,400 a day on average. The retail side of the organization alone sold more than four kilograms of crack and generated approximately $162,000 in revenue in an average 30-day month, the charges allege.

Since 1993, Herndon, 55, who lives in a converted three-flat in the 4500 block of West Jackson, allegedly spent more than $1 million to purchase 31 properties in Chicago and the area, including Gary, Ind.. The properties were purchased with drug proceeds and proceeds from the sale of other appreciated properties that were purchased with drug proceeds that were then re3 invested to purchase additional properties. All of the properties were purchased outright, with no mortgage, and many have been rehabbed. The rental properties, including some Section 8 subsidized units, generate more than $20,000 a month in rental receipts for Herndon, the charges allege.

The federal defendants were charged with various narcotics offenses in an 11-count criminal complaint that was filed yesterday in U.S. District Court and unsealed following the arrests. The federal defendants began appearing this morning before U.S. Magistrate Judge Michael Mason in U.S. District Court. The state defendants were charged with possession or delivery of a controlled substance in separate complaints and will appear later in state court.

“Today’s takedown is another step in law enforcement’s Job One, and that is to build upon our decades’ long effort to wipe out drug gangs and gang factions that unfairly impact certain Chicago neighborhoods and make life dangerous for many fellow citizens,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “The U.S. Attorney’s Office remains committed to working with Cook County and our local and federal partners to fight gangs and violent crime until those neighborhoods are safe,” he added.

Mr. Fardon and Ms. Alvarez announced the charges with Garry F. McCarthy, Superintendent of the Chicago Police Department; Carl J. Vasilko, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division. The investigation was conducted through the U.S. Organized Crime Drug Enforcement Task Force (OCDETF), and the Chicago High Intensity Drug Trafficking Task Force (HIDTA) assisted in the investigation.

“Today’s action is a vivid display of the partnership between ATF and CPD and our commitment to eradicating violent drug and gun crimes in Chicago. As a result of our efforts, we have disrupted a violent drug trafficking organization on Chicago’s west side in a very short period of time,” Mr. Vasilko said.

“This investigation is a powerful and perfect testament of the good that can come when our agencies work together,” said Superintendent McCarthy. “I am extremely proud of not only our officers, but all the law enforcement personnel who contributed to bringing these alleged gang members to justice and making our streets a safer place.”

According to a 178-page affidavit in support of the federal arrests and search warrants, the investigation, which included extensive wiretaps, use of confidential sources, and surveillance, revealed that Herndon supplied crack cocaine to Harris, 34. If Herndon did not have crack, Harris obtained powder cocaine from other alleged suppliers, including EDUARDO ZAMUDIO, 27, and ROBERT RUSSELL, 48, and then converted it into crack. Harris, in turn, supplied the crack to JONATHAN GREEN, 27; FABIAN REDMOND, 28; JONATHAN O’LEARY, 30; and ANTWAION EDWARDS, 39, who allegedly were the drug spot managers. The managers oversaw the spot workers, including MARCUS LONGSTREET, 29; MANUEL MEEKS, 41; CAUIRENCE HERNDON, 34; DESHAWN RICHARDSON, 21; ANDREW JONES, 31; and PATRICIA NEAL, 35.

Johnny Herndon and other leaders of his organization also allegedly sold wholesale quantities of heroin and crack to other Gangster Disciples members, including KESHAW EUELL, 40, who controlled drug spots in the blocks surrounding their area. ROBERT SMITH, 59, was allegedly Herndon’s lead wholesale distributor of crack, selling up to several hundred grams at a time to various wholesale customers in Chicago and Indiana, including DARRYL JONES, 48; MILDRED SMITH, 59; and HARRY SMITH, 30. Another defendant, DARVEN MARION, 46, allegedly a Black Soul street gang member who had a close relationship with Herndon and Harris, was another wholesale supplier to Robert Smith.

Twelve federal defendants ― Johnny Herndon, Harris, Green, Redmond, O’Leary, Edwards, Longstreet, Meeks, Cauirence Herndon, Richardson, Jones, and Neal ― were charged with conspiracy to possess and distribute crack cocaine. 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.

Harris alone faces an additional maximum sentence of 10 years in prison on the felon-inpossession charge. The remaining federal defendants were charged with various drug distribution counts that carry maximum penalties of either 20 years in prison and a $1 million fine, or a mandatory minimum of five years and a maximum of 40 years and a $5 million fine.

The state defendants are: JOSE ESCALARA, 43; LANORIS HOLMAN, 48; DERRICK HUGHES, 53, of Bellwood; ARTURO LARA, 54, of Schaumburg; SAMMIE LOCKHART, 58; PAMERA LONG, 42; CHARLES MARKESE, 57; RUSSELL MORAVEC, 49; DEANGELO PERCY, 34; EARL SMITH, 28; SHAWN SMITH, 46; SHAUNTAH LANGFORD, 32; GENE McCAULLEY, 34; JERROLD SANDERS, 44; and MICHEAL STOKES, 29, all of Chicago unless otherwise noted.

Assistant United States Attorneys Christopher Grohman and Rajnath Laud are representing the government in the federal cases. Assistant State’s Attorney Rita O’Connor 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.

Complaint

CHICAGO ― A former physician who was affiliated with three Chicago hospitals was sentenced today to nearly six years in federal prison for illegally distributing prescription drugs in exchange for sex and cash. The defendant, JOSHUA D. BARON, a pediatric neurologist, pleaded guilty in March, admitting that he provided approximately 149 prescriptions for controlled substance medications, totaling thousands of doses, to 16 individuals in exchange for sex between 2006 and 2011. These individuals were never patients of Baron, they never visited his office as a patient, and he never asked them about medical issues, took their medical history, conducted an examination, or attempted to diagnose them.

Baron, 40, of Forest Park and formerly of Oak Park, was ordered to begin serving his 70- month sentence on Sept. 12 by U.S. District Judge Rebecca Pallmeyer. The judge also placed Baron on supervised release for 10 years after his sentence and ordered him to pay a $1,000 fine and perform 1,000 hours of community service.

Between late 2006 and early 2011, Baron dispensed prescriptions for controlled substances to individuals outside of the usual course of professional practice and without a legitimate medical purpose. He posted at least 78 advertisements offering to trade various prescription drugs, including Adderall, Norco, Percocet, Xanax, Vicodin, Ativan, Ritalin, Darvocet, OxyContin, and Klonopin, on an online website, and all of the ads were placed through one of three email addresses he used under the sections, “Men Who Would Pay” and “Casual Encounters.” Through these prescriptions, Baron traded thousands of doses of various medications to 16 individuals, mostly for sexual favors and, in some instances, cash.

Baron was initially charged by the state in January 2011 after an undercover investigation by the Wilmette Police Department. He was charged federally in October 2011 following a broader investigation by the U.S. Drug Enforcement Administration and the Chicago Police Department.

Baron was licensed in Illinois in May 2006 and, until January 2011, treated patients at Rush University Medical Center, John H. Stroger, Jr., Hospital of Cook County, and St. Anthony=s Hospital, all in Chicago. He voluntarily surrendered his medical license and his DEA registration in 2011.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Jack Riley, Special Agent-in-Charge of the DEA=s Chicago Field Division. The Wilmette Police Department, the Chicago Police Department Organized Crime Division=s narcotics and gang section, and the Illinois Department of Financial and Professional Regulation assisted in the investigation.

The government was represented by Assistant U.S. Attorneys Carol Bell and Matthew Schneider.

CHICAGO — A Chicago man was sentenced today to 30 years in federal prison for forced sex-trafficking of two minor and two young adult women. The defendant, CARL BRANDON SMITH, forced his victims to engage in commercial sex acts, used physical violence, and threatened to kill them if they ever left him between 2010 and early 2012.

Smith, also known as “Moo,” 27, pleaded guilty in January 2103 to transporting a minor from Wisconsin to Illinois for prostitution. He targeted young and vulnerable women and girls, ages 17 through 21. He psychologically manipulated them, convinced them that he was their boyfriend who loved them, and then forced them to earn their keep by working as prostitutes.

One victim spoke in court today, describing the physical and emotional impact that Smith’s crimes had on her. Addressing the defendant, she said she has moved on in her life, but she will remain permanently scarred.

“You were a violent pimp. . . . The pain, fear, and harm you’ve inflicted on these women is devastating,” U.S. District Judge Amy J. St. Eve said in imposing the sentence. Smith must serve at least 85 percent of his sentence and the judge placed him on five years’ supervised release after he is imprisoned. Smith was also ordered to pay approximately $239,000 in restitution to be allocated among the four victims based on a formula that takes into account the number of days each was prostituted, how many men they were forced to have sex on average each day, and the rate that Smith advertised their services.

“He did unspeakable things to his victims,” Assistant U.S Attorney Christopher Grohman argued at sentencing, adding in a written memo that the government could not “put into words the magnitude of harm or the life-altering consequences Smith caused his victims through his mosaic of cruelty.”

After the victims started in Smith’s employ, he kept them “in line” using a regime of verbal threats, drugs, physical beatings, and forcible sex acts. For just under two years, he “caused incalculable physical and psychological damage to his victims, in some cases scarring them physically and emotionally for life,” AUSA Grohman argued.

According to court documents, Smith met one victim in December 2010 and began contacting her via phone, text, and social media, asking her to move to Chicago, intending that she be his “girlfriend” and also engage in prostitution. In February 2011, Smith drove from Chicago to the victim’s residence in Wisconsin, and then drove her from Wisconsin to his apartment in Chicago, knowing that she was under 18 at the time.

Once in Chicago, Smith “dated” the victims for approximately a week before she began working as a prostitute under his employ between February and July 2011. Acting as her pimp, Smith advertised the victim for commercial sex on internet sites, and instructed her to have sex with customers in his apartment and in area motels, with Smith collecting the money she earned. The DuPage County Sheriff’s Office, the Naperville and Aurora police departments, and the Cook County Human Trafficking Task Force assisted in the investigation. The government was represented by Assistant U.S. Attorney Christopher Grohman.

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

CHICAGO — A former west suburban Lyons police officer was sentenced today to five years in federal prison for illegally extorting more than $48,000 from targets of criminal investigations he was supposedly conducting during 2013. The defendant, JIMMY J. RODGERS, who was a 14-year veteran of the Lyons Police Department, was sentenced after pleading guilty in May to extortion.

Rodgers, 44, of Chicago, was assigned to a U.S. Food and Drug Administration, Office of Criminal Investigations, task force and his duties included investigating the sale of contraband and counterfeit cigarettes. In the course of his work, he set up six fake transactions with criminals, detained them, hand-cuffed them, stole their goods and funds for his own benefit, threatened them, and then lied and concealed the scam.

Rodgers, 44, of Chicago, was assigned to a U.S. Food and Drug Administration, Office of Criminal Investigations, task force and his duties included investigating the sale of contraband and counterfeit cigarettes. In the course of his work, he set up six fake transactions with criminals, detained them, hand-cuffed them, stole their goods and funds for his own benefit, threatened them, and then lied and concealed the scam.

“The temptation for police officers to extort illegal operations is great. People need to know they will go to jail for this conduct,” U.S. District Judge Thomas M. Durkin said in imposing the 60-month sentence. “The sentence here should serve as a reminder that the penalty for shaking people down is not a slap on the wrist.”

Rodgers was also fined $48,980 and was ordered to begin serving his sentence on Nov. 7. Rodgers was arrested last September and pleaded guilty in May.

According to court records, Rodgers recruited cooperating sources to assist in setting up transactions in which the source would sell contraband cigarettes to potential targets of the investigation. Rodgers agreed to pay the sources a fee for each transaction the sources conducted. Rodgers’ extortion was discovered by the FBI when one of the confidential sources reported the conduct after realizing that none of the targets were arrested, the transactions were not recorded, and Rodgers had begun paying him in cash from proceeds of the transactions instead of with checks from the Lyons Police Department as Rodgers had arranged previously.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Federal Bureau of Investigation. The Lyons Police Department and FDA’s Office of Criminal Investigations assisted in the investigation.

The government was represented by Assistant U.S. Attorney Sunil Harjani.

CHICAGO — A former commercial real estate businessman was sentenced today to eight years in federal prison for soliciting the murder of a Texas businessman whom he owed an $8 million judgment. The defendant, DANIEL DVORKIN, was convicted of solicitation of murder and five counts of using a telephone and a car to commit a murder-for-hire following a week-long jury trial in August 2013 in U.S. District Court.

Dvorkin, 76, formerly of Lombard, was arrested in July 2012 and has been in federal custody since he was convicted last year. U.S. District Judge Edmond Chang imposed the sentence in Federal Court.

Dvorkin “was a calm, cool, collected businessman who negotiated the price of a hit man as though he were closing a real estate deal, who showed only real concern for his bank account over the life of [the victim],” Assistant U.S. Attorneys Heather K. McShain and Jeff Perconte argued in a government sentencing memo.

According to the evidence at trial, the victim obtained an $8 million judgment in February 2012 against Dvorkin and two of his businesses, and the judgment became collectible in May 2012 after the parties failed to settle through mediation. In April 2012, Dvorkin contacted an individual, who reported to local police and later to the FBI that Dvorkin had solicited him to hire a hit man to kill the victim over the $8 million judgment. The individual who Dvorkin solicited began cooperating with law enforcement and recorded a series of conversations and meetings with Dvorkin in furtherance of the murder-for-hire plot. Investigators feared that Dvorkin, after balking at the price being negotiated with the cooperating individual, had found a cheaper hit man who was not identified, and approached Dvorkin, who was later arrested in July 2012.

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 Oakbrook Terrace Police Department assisted in the investigation.

CHICAGO ― A Grundy County gun dealer was indicted on federal firearms charges alleging that he illegally sold 11 firearms from either his store or his residence to an undercover law enforcement officer posing as a felon, as well as to a convicted felon who was cooperating with law enforcement, federal law enforcement officials announced today.

The defendant, PATRICK SEAN KEIRAN, 40, of Elwood, Ill., in Will County, has been a federally licensed firearms dealer since April 2013 and operated American Choice Firearms and Ammo in Gardner, Ill., in Grundy County.

A federal grand jury returned a six-count indictment yesterday charging Keiran with one count of selling firearms to an individual he had reason to believe was a convicted felon, one count of selling firearms to an individual who did not display a valid Firearm Owner’s Identification (FOID) Card, and four counts of selling firearms without recording the name, age, and residence of the purchaser.

Keiran will be arraigned on a date to be determined in U.S. District Court in Chicago. He was initially charged in a criminal complaint and arrested on July 2, and was released on bond. His gun store was closed at that time and the Bureau of Alcohol, Tobacco, Firearms, and Explosives removed the firearms and ammunition remaining in the store at that time.

According to the charges, between May 29 and June 20, 2014, Keiran illegally sold 11 firearms ― eight 9mm handguns, two .22 caliber rifles, and a .38 caliber revolver. ATF agents began investigating Keiran in May after receiving information from a confidential source that he was selling firearms to prohibited persons and falsifying ATF paperwork in an attempt to fraudulently legitimize the prohibited sales, according to the complaint. The charges allege that Keiran initially conducted the illegal sales with an undercover agent at his store and later conducted additional illegal sales with the agent and a cooperating individual at his residence.

The indictment 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 Will County Sheriff’s Police Department, the Will County Metropolitan Area Narcotics Squad (MANS), and the Grundy County Sheriff’s Department assisted in the investigation.

Keiran faces five counts of illegally selling firearms that each carry a maximum sentence of five years in prison, and a sixth count that carries a maximum penalty of 10 years in prison, and all six counts carry a maximum fine of $250,000. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

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

Indictment

Complaint

CHICAGO — A federal law enforcement officer was indicted on witness tampering charges for allegedly attempting to thwart an investigation of a sham marriage that she arranged a decade earlier. The defendant, ENKHCHIMEG ULZIIBAYAR EDWARDS, was charged with two counts of witness tampering in a federal grand jury indictment that was returned yesterday and announced today.

Edwards, also known as “Eni Edwards, 36, of Carpentersville, a U.S. Customs and Border Protection officer at O’Hare International Airport, will be arraigned on a later date to be determined in U.S. District Court.

The charges resulted from an investigation by the U.S. Department of State, Diplomatic Security Service Chicago Field Office. The U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the Department of Homeland Security’s Office of Inspector General assisted in the investigation.

According to the indictment, Edwards arranged for Individual A, a Mongolian citizen, to marry a friend of hers, Individual B, who was a U.S. citizen. Edwards arranged the marriage so Individual A could apply for and obtain U.S. citizenship through marrying Individual B. In July 2003, Individuals A and B were married in Las Vegas. Shortly after they were married, the couple applied for Individual A to become a naturalized U.S. citizen. After the U.S. Citizenship and Immigration Services requested additional information, Individual B failed to provide the requested information and stopped pursuing U.S. citizenship for Individual A. After the naturalization petition was rejected, Individuals A and B divorced in May 2004.

By January 2013, federal law enforcement authorities were conducting an investigation of the role that Edwards played in the marriage of Individuals A and B. On Jan. 8, 2013, and again the following day, Edwards allegedly engaged in witness tampering by attempting to corruptly persuade Individual B, with intent to hinder, delay, and prevent Individual B from communicating information to law enforcement relating to a federal crime.

Each count of witness tampering carries a maximum penalty of 20 years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Scott F. Collins, Acting Special Agent-in-Charge of the U.S. Department of State, Diplomatic Security Service Chicago Field Office.

The government is being represented by Assistant U.S. Attorney Peter S. Salib.

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 — Six defendants are facing federal fraud charges involving separate schemes to obtain a total of more than $2.7 million through fraudulent statements in loan applications submitted to banks, mortgage lenders, several community colleges, the U.S. Department of Education, and the Small Business Administration since 2006. Five of the defendants were indicted together yesterday for scheming to fraudulently obtain more than $2.4 million. The sixth defendant, who alone was arrested today, was indicted separately for allegedly scheming to fraudulently obtain an additional $300,000 in mortgage fraud and student loan fraud. Both indictments stem from the same investigation of fraudulent loan applications.

In an alleged mortgage fraud scheme, three of the five defendants ― ANTHONY TRICE, then president of Fifty One 06 Property Management and Acquisitions, Inc., JERROD L. WEATHERSBY, a director and vice president of the defunct company, and NOREEN B. MIAN, then a licensed loan officer for Exclusive Bancorp., Inc., in Lincolnwood ― were charged with scheming with others between 2006 and 2011 to fraudulently obtain more than $2.1 million in mortgage loans for 14 properties in Chicago and suburban Burnham and Park Forest. According to the indictment, Trice, 34,of Chicago; Weathersby, 36, of Harvey; and Mian, 34, of Chicago, prepared and submitted false documents and made false statements to lenders about the buyers’ qualifications for the loans. Trice also allegedly made false statements in requests for loan modifications related to two of the properties.

In an alleged student loan fraud scheme between 2010 and 2012, Trice and Weathersby, together with WARREN K. TAYLOR, 35, and DAVID N. EDWARDS, 37, both of Chicago, were charged with fraudulently seeking to obtain approximately $240,000, and successfully obtaining approximately $135,000 by submitting at least 40 fraudulent applications for admission and federal student aid from Harper College, Elgin Community College, and Joliet Junior College. According to the indictment, the defendants knew that the applicants — some of whose identities were acquired by Trice and Weathersby in connection with an earlier credit card fraud scheme — had not agreed to be enrolled in college, were ineligible for financial aid, and did not intend to use the financial aid funds for educational purposes. The defendants allegedly caused the financial aid checks to be sent to certain addresses in Chicago and Park Forest, and that they then cashed the checks and used the proceeds for themselves and others.

In an alleged credit card fraud scheme between 2006 and 2008, Trice and Weathersby were charged with obtaining individuals’ personal identifying information by promising to help them improve their credit ratings and obtain money. According to the indictment, Trice and Weathersby then made false statements in applications for lines of credit and credit card accounts and, without the consent of the applicants, withdrew more than $145,000 from the lines of credit and credit card accounts. During the same time, they also allegedly fraudulently obtained a $35,000 bank loan, which was guaranteed by the Small Business Administration, and used the proceeds for personal purposes.

Trice was charged with six counts of mail fraud, five counts of wire fraud, three counts of bank fraud, and one count each of making false statements on loan applications, student loan fraud, and aggravated identity theft. Weathersby was charged with one count each of wire fraud and aggravated identity theft. Taylor was charged with four counts of mail fraud and one count each of aggravated identity theft and student loan fraud. Mian was charged with two counts of wire fraud and one count of making false loan application statements, and Edwards was charged with one count each of mail fraud and student loan fraud.

The indictment also seeks forfeiture of more than $2.41 million from Trice, Taylor, Mian, and Edwards. All five defendants will be arraigned on later date to be determined in U.S. District Court and an arrest warrant was issued for Edwards alone.

In a separate indictment, DERREK L. CAMPBELL, II, 34, of Chicago, was charged with two counts of making false loan application statements and one count each of wire fraud and student loan fraud for allegedly obtaining more than $300,000 through false statements to mortgage lenders between 2009 and 2013 in connection with purchasing two properties in 2009, obtaining federal student aid in 2011, and seeking a loan modification on one of the properties in 2013. The indictment also seeks forfeiture of $302,420.

Campbell was arrested today and was scheduled to be arraigned this afternoon in Federal Court.

Each count of bank fraud, wire fraud affecting a financial institution, and making false loan application statements carries a maximum sentence of 30 years in prison and a $1 million fine; each count of mail fraud carries a maximum sentence of 20 years in prison and a $250,000 fine, and student loan fraud carries a maximum of five years in prison and a $250,000 fine. Aggravated identity theft carries a mandatory sentence of two years in prison consecutive to any other sentence and a $250,000 fine.

The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, together with officials of the U.S. Department of Education Office of Inspector General, the U.S. Small Business Administration, and the Federal Housing Finance Agency.

The government is represented by Assistant U.S. Attorney Christopher R. McFadden.

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.

Trice Complaint

Campbell Complaint

CHICAGO — The former owner of an area home building company that went bankrupt in 2008, leaving unfinished a commercial and residential property development in northwest suburban Algonquin, was sentenced today to 15 months in federal prison for bank fraud related to the collapse of the project, known as Riverside Square.

The defendant, BRUCE HAWKINS, 64, of Denver and formerly of Algonquin, who owned Aspen Homebuilders, Inc., was also ordered to pay $1,017,183 in restitution by U.S. District Judge Robert M. Dow, Jr. Hawkins, who pleaded guilty in January, was ordered to surrender to begin serving his sentence on Oct. 14.

“It is important that developers and general contractors know that if they commit fraud in the financing of their projects, their conduct will be met with serious consequences,” Assistant U.S. Attorney Sunil Harjani argued in a government sentencing memo. “It is important that developers know they will go to jail if they lie in bank documents in order to steal funds from financial institutions.”

Hawkins admitted defrauding Amcore Bank of more than $1 million from the proceeds of $13.5 million line of credit to finance the project. In September 2006, acting through Riverside Square, LLC, Hawkins obtained the bank loan to finance the construction of Riverside Square, located at 1100 West Algonquin Rd. Between January 2007 and June 2008, Hawkins fraudulently obtained slightly more than $1 million in loan proceeds from the bank by submitting false contractor statements, waiver of liens, and contract invoices that requested funds purportedly for village permits, construction work, and consulting work for the development.

To obtain funds from the bank loan, Hawkins submitted false contractor statements to the bank in which he verified that subcontractors and his company were owed funds for work performed on Riverside Square. Hawkins submitted, and caused the submission of, false lien waivers and invoices for work performed to the title company, which was designated by Amcore Bank to keep and disburse funds for the project. After these documents were submitted, the bank authorized the title company to disburse funds to Hawkins and the subcontractors.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and John Lucas, Special Agent-in-Charge of the Federal Deposit Insurance Corporation Office of Inspector General in Chicago.

ROCKFORD — Thirteen Rockford area residents are facing federal gun and/or narcotics charges, federal and local law enforcement officials announced today. The indictments stem from a year-long investigation into firearms and cocaine trafficking in the Rockford area led by the Bureau of Alcohol, Tobacco, Firearms and Explosives and the Rockford Police Department. ATF agents, together with local police and other authorities, began executing arrest warrants this morning.

Zachary T. Fardon, United States Attorney for the Northern District of Illinois, praised the teamwork of the ATF and Rockford Police Department. Mr. Fardon announced the charges with Carl J. Vasilko, Special Agent-in-Charge of ATF in Chicago, and Chet Epperson, Rockford Police Chief. Also participating in the investigation and arrests were the Belvidere Police Department, Winnebago County Sheriff’s Office and the Illinois State Police.

Ten of the thirteen defendants were arrested today; one defendant was already in custody; and one defendant was previously arraigned. Those arrested today will appear before U.S. Magistrate Judge Iain D. Johnston and will remain in federal custody pending detention hearings.

Everardo Rodriguez, 28, Oscar Pina, 38, and Gabriel Rodriguez, 38, are each charged separately with selling cocaine. Mallek Sanchez, 28, is charged alone with selling cocaine, being a felon in possession of a firearm, and possessing a firearm with an obliterated serial number. Teovonni Cunningham, 29, Darrell Reed, 26, and Michael Schaffer, 31, are all charged together with conspiring to possess and sell stolen firearms. Cunningham is also charged with possession of 21 stolen firearms and numerous rounds of stolen ammunition, with being a felon in possession of those stolen firearms and ammunition, and with selling one of the stolen firearms and the stolen ammunition. Reed is also charged with possessing and selling four of the stolen firearms.

Daniel Guajardo, 24, is charged separately with being a felon in possession of a firearm and possession of a short-barreled shotgun. Jose G. Pagan, 37, is charged alone with being a felon in possession of a firearm and possessing a firearm with an obliterated serial number. Mario A. Guerra, 33, and Rosario Pillado, 21, are each charged separately with being a felon in possession of a firearm. Sergio Cazares, 20, and Jose M. Martinez, 26, are each charged separately with possessing a firearm with an obliterated serial number.

All of the defendants are Rockford residents, except for Darrell Reed who is a resident of Byron, Ill., and Mallek Sanchez, who is a resident of Belvidere, Ill.

Each drug distribution charge carries a maximum sentence of 20 years in prison and a $1 million fine. Each charge of a felon possessing a firearm, of possessing or selling a stolen firearm, or of possessing of a short-barreled firearm carries a maximum sentence of 10 years in prison and a maximum fine of $250,000. Each charge of possessing a firearm that has an obliterated serial number carries a maximum sentence of 5 years in prison and a maximum fine of $250,000. The charge of conspiring to possess and sell stolen firearms carries a maximum sentence of 5 years in prison and a maximum fine of $250,000. Upon conviction, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant United States Attorney John G. McKenzie.

The public is reminded that an indictment contains only a charge and is not evidence of guilt. Each defendant is presumed innocent and is entitled to a fair trial at which the government will have the burden of proving guilt beyond a reasonable doubt.

CHICAGO — A registered nurse who operates a suburban health care provider that sends physicians to patients’ homes was arrested today on a federal health care fraud charge. The defendant, DIANA JOCELYN GUMILA, who manages Suburban Home Physicians, doing business as Doctor At Home, was charged with health care fraud in a criminal complaint that was unsealed upon her arrest. The complaint alleges a scheme to defraud Medicare by falsely certifying patients as being confined to their homes and requiring home health services; falsely increasing, or “upcoding,” claims for services; over-scheduling and double-billing patient visits, submitting false claims for providing extensive oversight of patients’ home health services, and billing for tests that were not medically necessary.

Gumila, 45, a licensed registered nurse in Illinois since 1991, was scheduled to appear at 3 p.m. today before U.S. Magistrate Judge Young Kim in U.S. District Court.

Simultaneous with Gumila’s arrest, agents from the FBI, the U.S. Department of Health and Human Services Office of Inspector General, and other law enforcement agencies executed search warrants at the offices of Doctor At Home and an affiliated business, Xpress Mobile Imaging, both located in the 800 block of East Higgins Road in Schaumburg, as well as at Gumila’s residence in Streamwood. A warrant was also executed to seize alleged fraud proceeds in a bank account maintained by Suburban Home Physicians.

The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Lamont Pugh III, Special Agent-in-Charge of the Chicago Regional Office of the HHS-OIG. The Railroad Retirement Board Office of Inspector General is also participating in the investigation.

According to a 69-page affidavit in support of the arrest, search and seizure warrants, Doctor At Home sends physicians and physician’s assistants, who are accompanied and driven by a medical assistant, to visit patients in their homes. Doctor At Home gets many of its patients from home health agencies, which refer patients to Doctor At Home so that a physician will sign a form ordering the home health agency to provide nursing services to the patient.

According to Medicare claims data, from 2013 through May 2014, more than 300 home health agencies have submitted Medicare claims stating that they were ordered by just four Doctor At Home physicians to provide home health services to approximately 4,000 patients. Those home health agencies were paid more than $20 million as a result of their claims.

The affidavit alleges that most of Doctor At Home’s visits were billed to Medicare as if they were complicated, with the average payment for most visits approximately $120. As a result of alleged double-billing, over-billing, and certifying patients for home health services who were not confined to the home, Doctor At Home assisted home health agencies in falsely billing Medicare, allegedly causing Medicare to pay more than $1,000 a month on many patients simply so a nurse can visit once a week and conduct a basic check of the patient’s condition.

“Doctor At Home’s practices and processes regularly cause Medicare to pay more than $1,250 a month for basic maintenance of many patients who do not need such services,” the complaint alleges.

The affidavit states that agents have interviewed one current and seven former employees of Doctor at Home, including a current physician’s assistant who contacted law enforcement in January this year. Investigators have also reviewed an audio recording provided by a former Doctor At Home physician of an October 2013 meeting she had with Gumila, as well as emails and documents, claims data, and patient files, and have conducted interviews with patients of Doctor At Home and their primary care physicians whose statements contradict Doctor At Home’s billing and patient records.

In the recorded meeting, the doctor, identified as “Physician D,” who began working for Doctor At Home only a few weeks earlier, told Gumila that several patients did not qualify for certain services. Gumila responded by telling Physician D that she was an “artist” who should “paint the picture” of each patient in a way that Medicare would accept, the affidavit states.

Gumila allegedly overruled at least one physician and manipulated the certification of many patients as being confined to the home and requiring home health services. In doing so, she assisted home health agencies in billing Medicare for ineligible patients and medical services in exchange for Doctor At Home receiving patient referrals from the home health agencies. As part of the scheme, Doctor At Home allegedly scheduled patient visits on a monthly basis rather than based on patient need and billed Medicare as if the visits were complicated when they were actually routine and short in duration. Doctor At Home also frequently double-billed the same visit as a “patient visit” and also as a “wellness visit.” Doctor At Home also claimed that physicians and physician’s assistants provided extensive oversight of patients’ home health services when, in fact, employees in the Philippines prepared those oversight claims in part by counting routine visits toward oversight.

The complaint also alleges that Doctor At Home has billed Medicare for thousands of eye-movement tests that some providers believe were medically unnecessary, and it has referred thousands of echocardiograms and ultrasound tests to Xpress Mobile Imaging, which has several business ties to Doctor At Home.

Health care fraud carries a maximum penalty of 10 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 government is being represented by Assistant U.S. Attorney Stephen Chahn Lee.

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

The 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: www.stopmedicarefraud.gov.

Complaint

ROCKFORD — A former Chicago, Ill. man was sentenced on July 22, 2014, in federal court on drug conspiracy charges.  ROBERT PRESLEY, 34, also known as “Munchie,” was sentenced to 440 months in federal prison, to be followed by 5 years of supervised release.  After a nine-day jury trial in the U.S. District Court in Rockford, Presley was convicted on June 14, 2012, of conspiracy to distribute at least one kilogram of heroin, one count of possessing a firearm in furtherance of a drug-trafficking crime, and two counts of being a felon in possession of a firearm.

According to the indictment and evidence at trial, Steven McDowell, 38, formerly of Rockford, also known as “Ty,” was the leader of an illegal drug trafficking operation in Rockford. Beginning as early as April 2010, and continuing into December 2010, the conspirators obtained large amounts of heroin from Chicago, transported the heroin to Rockford where it was diluted for resale and packaged in smaller zip lock bags or baggies for individual use, then grouped into packs.  Presley’s role was to obtain raw heroin from Chicago and to assist in the distribution.  The defendants used runners to distribute street-level quantities of heroin at numerous locations in Rockford.  McDowell and other co-conspirators rented cars that were used to deliver heroin to their street-level dealers, and used cell phones to notify runners where to go to distribute heroin to a customer or for when a runner needed to be resupplied or have money picked up.  Some of the co-conspirators, including Presley, used or possessed firearms for protection during their operations.

Two other men were also convicted on June 14, 2012, after the jury trial, and previously sentenced for their roles in the drug conspiracy:

STEVEN T. McDOWELL was convicted of one count of conspiracy to distribute at least one kilogram of heroin, and six counts of distribution of heroin, and was sentenced on Feb. 7, 2013, to 315 months in federal prison for his role in the conspiracy.  McDowell was also ordered to serve 5 years of supervised release following his imprisonment.

JEREMY COOPER, 26, formerly of Chicago, also known as “J.D.,” was convicted of one count of conspiracy to distribute at least one kilogram of heroin, three counts of distribution of heroin, one count of possession with intent to distribute heroin, and one count of being a felon in possession of a firearm.  Cooper was sentenced on Sept. 18, 2012, to 270 months in federal prison, and 5 years of supervised release following his imprisonment.

In addition, two other men pled guilty to their involvement in the conspiracy:

MURRAY STEVE HARRIS, JR., 38, formerly of Chicago, also known as “M,” pled guilty on Jan. 19, 2012, to conspiracy to distribute at least one kilogram of heroin, and was sentenced on April 19, 2012, to 130 months in federal prison, to be followed by 5 years of supervised release following his imprisonment.

NORMAN BREEDLOVE, 48, formerly of Rockford, also known as “Way,” pled guilty on May 24, 2012, to one count of conspiracy to distribute at least one kilogram of heroin, and one count of possessing a firearm in furtherance of a drug trafficking crime, and is awaiting sentencing.

The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Richard Meyers, Winnebago County Sheriff; and Chet Epperson, Chief of the Rockford Police Department.

The government was represented by Assistant U.S. Attorney Mark T. Karner.

CHICAGO ― Three Chicago men are facing federal prison sentences ranging from 20 to 51 months for their roles in a seven-year fraud scheme that caused client banks of their ATM servicing business to lose more than $1.7 million. The last of the three defendants was sentenced today while the other two were sentenced last month.

The defendants, JAMES CARLSON, JOSEPH CABELLO, and THOMAS O’MALLEY, owned and operated ATS Uptime, Inc., from approximately 1999 through 2013, with offices in Chicago and Oswego. ATS had about a dozen clients and serviced approximately 800 ATMs, which included replenishing cash, collecting deposits, and maintain the banking machines.

Carlson, 46, was the president of ATS and beginning in the summer of 2010 was primarily responsible for the company’s vault, and loading cash into and repairing ATMs, including some he owned personally. As the fraud scheme was collapsing, Carlson voluntarily reported it to the FBI in September 2013 and cooperated extensively with the investigation, including recording conversations with Cabello and O’Malley. Carlson was sentenced today to 20 months in prison, beginning Sept. 19, and ordered to pay $658,572 in restitution.

“You cannot steal millions of dollars and not pay a substantial price,” U.S. District Judge Ronald Guzman said today in noting Carlson’s cooperation but rejecting his request for probation.

O’Malley, 42, was the chief financial officer, office manager, bookkeeper, and at times, responsible for the vault in Chicago. He was sentenced last month to 33 months in prison, beginning July 30, and ordered to pay $1,758,572 in restitution.

Cabello, 41, who personally owned some of the ATMs serviced by ATS, ran the Oswego office and was responsible for servicing ATMs. He was sentenced last month to 51 months in prison and ordered to pay $1,758,572 in restitution.

All three men pleaded guilty to one count of wire fraud after they were charged in September 2013.

According to court records, in 2005, Carlson discovered that approximately $200,000 of funds belonging to clients was missing. Around the same time, O’Malley said that he needed to use clients’ funds from the vault to pay for some of ATS’ moving expenses, and Carlson instructed Cabello and O’Malley to return the client funds and was assured they would be returned. In October 2010, shortly after Carlson began working in ATS’ Chicago vault, Carlson learned that ATS was missing approximately $1.1 million and did not have enough money to repay all of its clients. Prior to that time, Cabello and O’Malley had access to the cash in ATS’ Chicago vault.

O’Malley admitted that he stole at least $200,000 of clients’ funds for business purposes and his own personal use. Cabello admitted that he used clients’ funds for his own ATMs, and did not keep track of the amount he took or the amount he repaid.

Between 2007 and 2012, O’Malley and Cabello, and after October 2010, Carlson, used funds belonging to certain clients, which were stored in the vault, to fill ATMs that belonged to other clients, and to repay money owed to other clients, without authorization from the owners of those funds to use their money in that manner. As part of the fraud scheme, the defendants emailed account balance statements to their clients, falsely representing the amount of cash that ATS actually had on hand for them, both because of their thefts and commingling of client funds. They also deceived bank auditors into believing that ATS was properly handling client funds by moving the cash they had available from one owner to another.

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 government was represented by Assistant U.S. Attorney Jacqueline Stern.

CHICAGO ― Seven defendants are facing federal charges here for their alleged participation in a drug and firearms trafficking operation between south suburban Harvey and Marion, Ohio, federal law enforcement officials announced today. At least 19 assorted firearms, many of them stolen from gun owners in central Ohio, were seized during the course of the investigation, which was led by the Bureau of Alcohol, Tobacco, Firearms and Explosives.

One defendant was arrested today and one yesterday in Ohio, two were arrested last week (one here and one in Ohio), and three others are in state custody in Ohio. They were charged in three separate criminal complaints filed last week in U.S. District Court in Chicago, with the last complaint unsealed today.

One defendant, AUBREY BURKS, 22, of Harvey, allegedly led the trafficking operation. According to one of the complaints, five defendants conspired with Burks between January and April this year to distribute heroin and crack cocaine, some of which they obtained in the Chicago area, to drug customers in and around Marion, located approximately 50 miles north of Columbus. At times, Burks and five other defendants accepted firearms from their drug customers as payment. The defendants transported, or arranged for the transportation, of guns from Marion to Harvey, where they stored them at various residences. The defendants obtained drugs in the Chicago area by exchanging firearms for narcotics, or selling firearms for money they used to buy drugs, which they later sold to customers in Ohio, the charges allege.

Burks was charged alone in one complaint with being a felon-in-possession of firearms for allegedly possessing six firearms that were seized by Harvey police on Jan. 30, 2014, from a residence in Harvey. He was arrested last week in Ohio and is being transferred in custody to Chicago for prosecution.

Five defendants were charged together in a second complaint with conspiring with each other and Burks to possess and distribute heroin and crack cocaine, as well as to violate multiple federal firearms statutes, including dealing firearms without a federal license. They are: KIERRE WATERFORD, 24, also known as “Finess” and “Vaness;” KEVIN JACKSON, 23, aka “Ray-Ray” and “New York;” Burks’ brother, OMAR BURKS, 24, aka “T-O;” ANTHONY JACKSON, 20, aka “Smookie” and “B-D;” and DANIEL MURPHY, 28, all of whom have residential ties to Harvey and/or Marion.

Murphy was arrested today and Anthony Jackson was arrested yesterday, both in Ohio, while Waterford, Kevin Jackson, and Omar Burks are in state custody in Ohio.

The seventh defendant, ANTHONY GALVAN, 19, of Harvey, aka, “Ant,” was charged alone in a third complaint with selling firearms without a federal license. Galvan allegedly sold six firearms to an undercover police officer in a vehicle parked in front of his residence in Harvey during five transactions between Jan. 14 and Feb. 20, 2014. Galvan was arrested last week and remains in federal custody in Chicago without bond.

The arrests and charges were 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. Also assisting in the investigation were the Chicago Police Department and the CPD/ATF Firearms Trafficking Task Force, the Illinois State Police, the Harvey Police Department, the Marion Metro Drug Enforcement Unit (MARMET), the Marion Police Department, the Marion County Sheriff’s Office, the Ohio State Police, the Columbus Field Division of ATF, the U.S. Attorney’s Offices for the Northern and Southern District of Ohio, and 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 the felon-in-possession count against Aubrey Burks carries a maximum sentence of 10 years in prison. The drug distribution conspiracy against five defendants carries a maximum penalty of 20 years in prison and a $1 million 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 Sharon Fairley.

The public is reminded that a complaint 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.

Burks Complaint

Galvan Complaint

Waterford Complaint

CHICAGO ― A former North Chicago school board member was sentenced today to 10 years in federal prison for receiving at least $566,000 in kickbacks from three co-defendants who controlled several different transportation companies that received more than $21 million in student bus contracts over nearly a decade.

The defendant, GLORIA HARPER, 63, formerly of North Chicago, pleaded guilty last October to one count each of wire fraud and filing a false federal income tax return. Harper admitted that between 2001 and 2010 she schemed to deprive the approximately 4,000-student North Chicago Community Unit School District 187 (NCSD) of her honest services. Harper instigated and orchestrated the fraud scheme with four co-defendants, including Alice Sherrod, the district’s former transportation director. The three co-defendants funneled kickbacks totaling at least $800,000 to Harper and Sherrod and made more than $9.6 million in profits.

“This was a serious, serious offense that took advantage of an impoverished school district and the ultimate victims were the school children of North Chicago,” U.S. District Judge Sharon Johnson Coleman said in imposing the sentence today after a hearing that began last week. Judge Coleman ordered Harper to serve her sentence consecutive to a 30-month federal sentence that Harper received in 2012 in Louisiana for defrauding the federal E-Rate program that funds education technology. The judge also ordered Harper to pay approximately $7.2 million in restitution.

“The North Chicago School District has one of the highest low-income populations in the state. But rather than looking out for the interests of the district’s taxpayers and the children who depended on the schools for education, Harper selfishly used her position to enrich herself, and then filed false tax returns,” Assistant U.S. Attorney Matthew Getter argued at sentencing.

Sherrod, 62, of Berwyn and formerly of Gurnee; Tommie Boddie, 69, of Harvest, Ala., and formerly of Wadsworth; Derrick Eubanks, 50, of Lake Villa; and Barrett White, 55, of Matteson, have also pleaded guilty and are awaiting sentencing.

Harper, who was a member of the NCSD board from 1999 to May 2009, and Sherrod, who was District 187's transportation director from 2001 to July 2010, used their positions to enrich themselves secretly by soliciting and accepting gifts and cash from their three codefendants in exchange for favorable official action regarding student transportation contracts. Initially, Harper and Sherrod received kickbacks of approximately $4,000 to $5,000 a month but, by 2003, they were collecting approximately $20,000 a month.

From the late 1990s until mid-2003, the NCSD contracted with various companies to provide student transportation, including T&M Transportation, which was owned in part and controlled by Boddie, and Eubanks Transportation, which was owned in part and controlled by Eubanks. In 2001, Harper and Sherrod met with Boddie and agreed they would arrange for the NCSD to increase the number of students that T&M transported in exchange for kickback payments.

In May 2003, Harper suggested to Boddie and Eubanks that they join together to form one company ― Safety First Transportation, Inc., which won the NCSD’s transportation contract in 2003, and Harper, Sherrod, Boddie, and Eubanks agreed that they would split the profits from the contract. After an IRS audit of Safety First in 2006-2007, White, who had been acting as the “bagman” for the kickbacks, began receiving funds from Safety First as both an employee and a contractor, even though he provided little service other than being the bagman.

In April 2008, the defendants agreed to set up a new company, Quality Trans, LLC, to replace Safety First and to assume its contracts with the school district. All five agreed to continue splitting profits from Quality Trans, and Boddie, Eubanks and White continued making cash payments to Harper and Sherrod.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago. The North Chicago School District cooperated with the investigation.

CHICAGO — A former clerk for a lean hogs futures trader was sentenced today to eight months in prison after being convicted in March of commodities fraud for manipulating trades to profit more than $200,000 for herself to the detriment of public customers.

The defendant, NICOLE M. GRAZIANO, 33, of Addison and formerly of Roselle, was also ordered to pay $212,000 in restitution to various clearing firms on behalf of victim investors. U.S. District Judge James Zagel, who found Graziano guilty of four counts of commodities fraud in March after a bench trial, imposed the sentence in Federal Court.

Graziano’s scheme resulted in an “almost unbelievable success rate” of 90 to 100 percent of winning trades for her own account, which would have been impossible in an ordinary market setting, Judge Zagel said when he delivered his verdict.

According to the evidence, Graziano, who was a clerk for a member broker at the Chicago Mercantile Exchange, now CME Group, secretly inserted order tickets for her own personal orders into the decks of tickets submitted by public customers. She provided the tickets and trade cards to brokers to execute during the closing bracket of trading in lean hogs futures contracts. Using her position as a clerk, Graziano fraudulently allocated favorable prices to her own trades (giving herself low prices for buy orders and high prices for sell orders), and reaped profits to the detriment of public customers. Between September 2009 and August 2010, Graziano submitted at least 89 fraudulent trade cards to the appropriate clearing firms, resulting in approximately $212,000 in illegal profits to her during the closing bracket.

Judge Zagel said that the scheme damaged “the legitimacy of the exchange itself” and hurt customers because she took away benefits that could have gone to them for her own advantage.

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 CME Group assisted in the investigation.

The government was represented by Assistant U.S. Attorneys Christopher R. McFadden and Tiffany McCormick.

CHICAGO — A Skokie couple was arrested today after they and their home health care company were indicted on federal health care fraud charges for allegedly bilking Medicare of more than $800,000 for physician services that were never provided to patients. The couple and their company were also charged with conspiring to pay another defendant $11,000 in illegal kickbacks for patient referrals.

The couple, JOHN YOUSEFZAI, and his wife, ARMANOUHI ARZOMANIAN, owned and operated MEDICOSE HOME HEALTH CARE SERVICE, Inc., which employed physicians and provided in-home medical services to patients. The couple operated Medicose from their home in Skokie, where federal agents executed a search warrant today.

Yousefzai, 66, and Arzomanian, 56, neither of whom is a licensed medical professional, were each charged with five counts of health care fraud, one count of conspiracy, and two counts of paying kickbacks for referrals of Medicare patients to Medicose, which was charged with five counts of health care fraud.

Also arrested today was WILSON NARSA, 52, of Chicago, who worked for a non-profit organization that provided services to the elderly and disabled. He was charged with conspiracy and two counts of receiving kickbacks for referring Medicare patients to Medicose.

The three individual defendants and Medicose pleaded not guilty at their arraignment this afternoon in U.S. District Court. Yousefzai and Arzomanian were each released on a $50,000 secured bond, and Narsa was released on his own recognizance. A status hearing was scheduled for Aug. 12 before U.S. District Judge Harry Leinenweber.

The defendants were charged in a 10-count indictment that was returned by a federal grand jury on July 1 and unsealed today following the arrests. The indictment also seeks forfeiture from the couple of at least $800,000 and a residence they own in Wilmette, as well as at least $11,000 from Narsa.

According to the indictment, Medicose employed four physicians licensed in Illinois. Between May 2008 and January 2014, Medicose sought more than $2.1 million in reimbursement from Medicare for physician home visits, and Medicare paid Medicose more than $1.4 million. Of that amount, Medicose, Yousefzai, and Arzomanian allegedly submitted more than $1.3 million in fraudulent claims to Medicare for physician services that were not actually provided. As a result, the couple and Medicose caused Medicare to lose more than $800,000. Those three defendants caused the fraud proceeds to be disbursed from Medicose’s corporate bank accounts for the couple’s personal benefit, the indictment alleges.

Between December 2010 and August 2013, all four defendants allegedly conspired to have Medicose pay kickbacks to Narsa and others, including at least $11,000 to Narsa, to induce Medicare patient referrals and increase the patient census at Medicose, which, in turn, enriched Medicose and its owners.

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 government is being represented by Assistant U.S. Attorney William Ridgway.

Each count of health care fraud carries a maximum penalty of 10 years in prison and a $250,000 fine or a fine totaling twice the gain or loss, whichever is greater, while conspiracy and each count of violating the anti-kickback statute carry a maximum sentence of five years in prison and a $250,000 fine, and restitution is mandatory. Medicose faces a maximum corporate penalty of each count of five years’ probation and a $500,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The public is reminded that 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.

Indictment

ROCKFORD — A former employee of Milledgeville Community Credit Union was sentenced by U.S. District Judge Frederick J. Kapala for embezzling money from Milledgeville Community Credit Union, in Milledgeville, Ill. KIMBERLY KENT, 53, who was also a former Treasurer of Wysox Township, was sentenced to 8 months in prison, to be followed by 2 years of supervised release requiring her to serve the first 6 months of supervision under home confinement, and a $5,000 fine. Kent was also ordered to pay restitution in the amount of $10,176.72 to Milledgeville Community Credit Union and $5,278.75 to Wysox Township, in addition to restitution in the amount of $231,823.15 that Kent already paid. Restitution included investigative costs incurred by the Credit Union and Township.

Kent pleaded guilty to the charge on February 24, 2014. According to Kent’s written plea agreement, from October 2005 through February 2012, Kent embezzled approximately $219,600 from Milledgeville Community Credit Union, where she was the manager and responsible for supervising other employees. Kent was also responsible for her own cash drawer and for handling various transactions on accounts, including the deposit and withdrawal of funds to and from customers’ accounts. As stated in the plea agreement, to conceal her embezzlement, Kent created fictitious loans using the names of family members and fictitious certificates of deposit. In 2009, Kent was elected treasurer of Wysox Township. Kent admitted that in August 2010, in her capacity as treasurer of Wysox Township, she used funds from Wysox Township’s account at Milledgeville Community Credit Union to cover her embezzlement. Kent used the money she embezzled for personal purposes. The deposits of the credit union were insured by the National Credit Union Administration Board.

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 Federal Bureau of Investigation.

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

CHICAGO — Two California men were indicted on federal charges for allegedly damaging and interfering with the operations of a mink farm in Morris, Ill., last August. Property belonging to the mink farm, about 60 miles southwest of Chicago, was damaged and approximately 2,000 minks were released from captivity on Aug. 14, 2013. The defendants also allegedly conspired to damage and interfere with the operations of a fox farm in Roanoke, Ill., northeast of Peoria, around the same time.

One defendant, TYLER LANG, was arrested today by FBI agents in El Segundo, Calif. He was scheduled to appear this afternoon in Federal Court in Los Angeles before facing further court proceedings in U.S. District Court in Chicago. The second defendant, KEVIN JOHNSON, is in state custody in Woodford County, Illinois, and both defendants are scheduled to be arraigned in Federal Court in Chicago on July 29.

Johnson, 27, also known as “Kevin Olliff,” and Lang, 25, whose last known residences were in Los Angeles, were both charged with one count each of conspiracy and interstate travel to damage and interfere with the operations of an animal enterprise. The two-count indictment was returned by a federal grand jury in Chicago on Tuesday and it was unsealed following Lang’s arrest.

According to the indictment, the Morris mink farm and the Roanoke fox farm were in the business of breeding, raising, and selling the animals to fur manufacturers.

Between Aug. 5 and Aug. 15, 2013, Johnson and Lang allegedly conspired to travel throughout the United States, including through Illinois, Iowa, and Wisconsin, for the purpose of damaging and interfering with the operations of animal enterprises, including the mink and fox farms. On Aug. 14, 2013, they allegedly traveled interstate and damaged real and personal property (including animals and records) and interfered with the operations of the mink farm in Morris, located in Grundy County. The indictment alleges the offenses resulted in economic damage exceeding $10,000.

In addition to the release of approximately 2,000 minks from their cages, portions of the fence surrounding the farm were removed allowing the minks to escape from the property. A barn was painted with the words “Liberation is Love,” and a caustic substance was poured or sprayed on two farm vehicles, damaging the paint.

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

Indictment

CHICAGO — A high-ranking leader of the Latin Kings street gang was sentenced today to 35 years in federal prison after being convicted of racketeering conspiracy and related charges involving narcotics trafficking and violence that plagued the Little Village neighborhood on the city’s west side. The defendant, JUAN AMAYA, 38, was convicted by a jury in March of this year after a trial in U.S. District Court.

In 2008, Amaya was the leader, or “Regional Inca,” of the Almighty Latin King Nation’s 26th Street Region, encompassing Little Village, the gang’s most important stronghold. Amaya was “in charge of over 1,000 soldiers ― many of whom were simply boys sent off to kill or be killed” under rules and policies he oversaw, the government argued in seeking a sentence of 40 years imprisonment.

Amaya was held responsible for participating in a conspiracy to commit murder, according to findings by U.S. District Judge Rebecca Pallmeyer, who imposed the sentence in Federal Court. Amaya must serve at least 85 percent of the sentence.

Last week, Nedal Issa, who was the Inca of the Latin Kings’ Cicero Section of the 26th Street Region and who pleaded guilty, cooperated, and testified as a government witness, was sentenced to nearly 17 years in prison by U.S. District Judge Charles Norgle. Amaya’s sentencing marks the last significant event in cases since 2008 that resulted in federal convictions of, and lengthy sentences for, Augustin Zambrano, the Latin Kings’ leader or “Corona;” Vicente Garcia, the gang’s “Supreme Regional Inca;” Fernando King, who preceded Garcia as second-incommand; and more than two dozen other top-ranking leaders.

“These sentences hold these defendants accountable for the barbaric enterprise known as the Latin Kings and for their roles in murder, attempted murder, shootings, beatings, drug trafficking, and other crimes,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “I want to thank our local, state and federal law enforcement partners for their brave and outstanding work resulting in a major impact on this gang enterprise,” Mr. Fardon added.

The evidence at Amaya’s trial showed that by 2008, just a couple of years after he was released on parole from a 24-year sentence for a 1992 murder conviction, Amaya was promoted to Regional Inca of the Little Village Region, reporting only to Garcia and Zambrano and effectively running the gang at their behest. During his tenure, Amaya discussed 25 shootings committed by his underlings while expressing pride at the consistency of violence. All told, hundreds of shootings resulting from Latin Kings conduct occurred in Little Village during the period of Amaya’s prominence, according to the government.

Amaya was indicted separately in 2012 following the 2008 and 2009 indictments of more than 30 top leaders of the Latin Kings. All have been convicted and sentenced except for a few defendants who remain fugitives. From its origin and base in the west side Little Village neighborhood, the Latin Kings spread throughout Chicago and Illinois and established branches in other states, where local leaders acted with some autonomy but adhered to the rules and hierarchy of the Chicago gang, according to trial evidence and court records.

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 Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Chicago Police Department, the U.S. Immigration and Customs Enforcement (ICE) Office of Homeland Security Investigations (HSI) in Chicago, the Cook County Sheriff’s Police, and the Joliet Metropolitan Area Narcotics Squad also had significant roles in the investigation, which was conducted through the federal High Intensity Drug-Trafficking Area (HIDTA) Task Force and under the umbrella of the Organized Crime Drug Enforcement Task Force (OCDETF).

In late 2006, ATF agents led an investigation that resulted in federal drug trafficking and firearms charges against 38 Latin Kings members and associates. In 2008, the FBI led an investigation that resulted in state and federal charges against 40 Latin Kings members and associates, including Zambrano and numerous co-defendants. In total, nearly 100 Latin Kings members and associates have faced state or federal charges since 2006. The convictions resulted from a sustained, coordinated effort by federal law enforcement agencies, working together with the Chicago Police Department and other state and local partners, to dismantle the hierarchy of the Latin Kings and other highly-organized, often violent Chicago street gangs.

Zambrano was the highest-ranking Latin King to be convicted and sentenced since Gustavo “Gino” Colon, who also holds the title of “Corona,” was sentenced to life in prison in 2000.

The government was represented by Assistant U.S. Attorneys Andrew Porter, Nancy DePodesta and Tiffany McCormick.

CHICAGO — A Chicago man was arrested today on federal charges for allegedly impersonating an employee of the U.S. Marshals Service on two occasions last year. The defendant, ROBERT P. ROZYCKI, was arrested without incident by deputy U.S. Marshals.

Rozycki, 37, was charged with two felony counts of impersonating a U.S. Marshals Service employee in an indictment that was returned by a federal grand jury yesterday and unsealed following his arrest. He is scheduled to be arraigned at 1:30 p.m. today before U.S. Magistrate Judge Michael Mason in Courtroom 2266 in the Dirksen Federal Courthouse.

The indictment charges Rozycki with falsely assuming the identity of and pretending to be a U.S. Marshals Service employee on March 3 and May 18, 2013.

Each count of impersonating a federal law enforcement officer carries a maximum penalty of three 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 indictment were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Darryl McPherson, United States Marshal for the Northern District of Illinois.

The government is being represented by Assistant U.S. Attorney Kathryn Malizia.

The public is reminded that an indictment 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.

Indictment

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

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

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.

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

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.

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

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

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.

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.

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

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 — 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 — 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 ― 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

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

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

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.

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

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.