Northern District of Illinois
Press releases recorded for this federal judicial district.
Chicago Transportation Department Clerk Arrested for Allegedly Embezzling over $741,000 from City Permit FeesRead the Press Release
CHICAGO — A clerk for the City of Chicago’s Department of Transportation (CDOT) was arrested today for allegedly embezzling more than $741,000 from fees that were paid for certain city permits. The defendant, ANTIONETTE CHENIER, a city clerk since 1990, allegedly diverted the funds from checks that were written by companies that applied for and received city permits to block public ways with dumpsters or moving vans.
Chenier, 50, of Homewood, was charged with embezzlement in a criminal complaint that was unsealed following her arrest this morning. She is scheduled to appear at 3 p.m. today before Magistrate Judge Sheila Finnegan in U.S. District Court.
The arrest and charge follow an investigation by the Chicago Office of the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, and the City of Chicago Office of Inspector General.
From 1993 through 2005, Chenier was assigned to CDOT, and from 2006 through 2008, she was assigned to the city’s Office of Emergency Management and Communication (OEMC) before being transferred back to CDOT. As a clerk, working in CDOT’s City Hall permitting office, she was involved in processing the moving van and dumpster permit fees.
The city charges a $25 daily fee for a residential moving van and between $50 and $200 (or higher) per dumpster, depending on the size, location, and length of time the dumpster will be on a city street. For several years, companies have been able to apply for permits through a website operated by CDOT. Although CDOT issues the permits and collects payment, the checks are often made payable to OEMC, which previously administered the permit process.
According to the complaint affidavit, bank records show that Chenier opened a personal bank account in August 2008 and a business account at the same bank in March 2009 under the name “OEMC Chenier,” and she was the sole signatory on both accounts. Between August 2008 and January 2014, she allegedly deposited several hundred checks, totaling $741,299, payable to OEMC and other city departments into her personal and business accounts.
In January this year, bank officials noticed Chenier’s unusual banking activity and froze her business account, according to the affidavit.
The arrest and complaint 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 FBI; James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago; and Chicago Inspector General Joseph Ferguson.
Embezzlement carries a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorney Steven Block.
A complaint contains merely charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint
Chinatown Civic Leader Pleads Guilty to Theft from Charity and Filing A False Federal Income Tax ReturnRead the Press Release
CHICAGO ― A leader of two Chinatown charitable organizations, GENE LEE, pleaded guilty today to federal charges of theft and filing a false federal income tax return for misappropriating as much as $92,800 from one of the charities, which received federal funds as well as donations, and failing to report and pay taxes on the stolen funds.
Lee, 65, of Chicago, served as chairman of the Chicago Chinatown Summer Fair, which was sponsored and overseen by the Chinese Consolidated Benevolent Association, a charity that received federal funds. He was also president of the Chicago Dragons Athletic Association, which sponsored youth and adult basketball teams, traditional dancing and music, and in 2009 began overseeing the Summer Fair, a single-day event held in July in Chinatown. Between 2007 and 2010, Lee was responsible for soliciting and obtaining donations to the Summer Fair and the Chicago Dragons.
Lee, also a former deputy chief of staff to former Chicago Mayor Richard M. Daley during that time, pleaded guilty to one count each of theft of federal funds and filing a false federal income tax return. He remains free on his own recognizance pending sentencing on Aug. 28 by U.S. District Judge John W. Darrah. Lee faces a maximum sentence of 10 years in prison on the theft count and three years in prison on the tax count, and a maximum fine of $250,000 on each count. His plea agreement provides for an advisory sentencing guidelines range of 18 to 24 months in prison, according to the government’s calculation.
In pleading guilty, Lee admitted that between 2007 and 2010 he took a portion of the donations he solicited for the Summer Fair and used the money for personal expenses. He did so by creating and sending two invoices to donors and sponsors of the Summer Fair, with the second version requesting that all donation checks be made payable to the Chicago Dragons, which facilitated his ability to misappropriate donations to the Summer Fair to his personal use.
Lee admitted that he cashed approximately 161 donation checks, totaling approximately $132,000, at a restaurant and used a portion of these checks for his own use instead of for the benefit of the Summer Fair or the Chicago Dragons. He also used a portion of the cashed checks for legitimate expenses, according to the plea agreement.
In order to hide his theft, Lee admitted that he provided the charity’s accountant with a false expense summary about donations made to the 2008 Summer Fair, including false information that Home Depot and Western Union had donated 3,000 when each company had actually donated $5,000. The false summary also omitted additional donations, including $10,000 from McDonald’s, $5,000 from ComEd, and $3,000 from Nielsen Media. At the same time, Lee maintained a separate spreadsheet of donations that included these contributions to the 2008 Summer Fair.
By the government’s calculations, Lee misappropriated approximately $92,841 and failed to report that amount as income on his federal income tax returns for 2007 through 2010, resulting in a tax loss of approximately $21,177. Lee disagrees with the government’s figures, the plea agreement states.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago. The City of Chicago Office of Inspector General assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Margaret J. Schneider.
Plea Agreement
Six Defendants Indicted in Alleged Conspiracy to Bribe Government Officials in India to Mine Titanium MineralsRead the Press Release
CHICAGO — A federal indictment returned under seal in June 2013 and unsealed today charges six foreign nationals, including a Ukrainian businessman and a government official in India, with participating in an alleged international racketeering conspiracy involving bribes of state and central government officials in India to allow the mining of titanium minerals. Beginning in 2006, the defendants allegedly conspired to pay at least $18.5 million in bribes to secure licenses to mine minerals in the eastern coastal Indian state of Andhra Pradesh. The mining project was expected to generate more than $500 million annually from the sale of titanium products, including sales to unnamed “Company A,” headquartered in Chicago.
One defendant, DMITRY FIRTASH, aka “Dmytro Firtash” and “DF,” 48, a Ukrainian businessman, was arrested March 12 in Vienna, Austria. Firtash was released from custody on March 21 after posting 125 million euros (approximately $174 million) bail, and he pledged to remain in Austria until the end of extradition proceedings.
Five other defendants remain at large: ANDRAS KNOPP, 75, a Hungarian businessman; SUREN GEVORGYAN, 40, of Ukraine; GAJENDRA LAL, 50, an Indian national and permanent resident of the United States who formerly resided in Winston-Salem, N.C.; PERIYASAMY SUNDERALINGAM, aka “Sunder,” 60, of Sri Lanka; and K.V.P. RAMACHANDRA RAO, aka “KVP,” and “Dr. KVP,” 65, a Member of Parliament in India who was an official of the state government of Andhra Pradesh and a close advisor to the nowdeceased chief minister of the State of Andhra Pradesh, Y.S. Rajasekhara Reddy.
“Criminal conspiracies that extend beyond our borders are not beyond our reach,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “We will use all of the tools and resources available to us to ensure the integrity of global business transactions that involve U.S. commerce,” he said.
“Fighting global corruption is part of the fabric of the Department of Justice,” said Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division. “The charges against six foreign nationals announced today send the unmistakable message that we will root out and attack foreign bribery and bring to justice those who improperly influence foreign officials, wherever we find them.”
Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, said: “This case is another example of the FBI’s willingness to aggressively investigate corrupt conduct around the globe. With the assistance of our law enforcement partners, both foreign and domestic, we will continue to pursue those who allegedly bribe foreign officials in return for lucrative business contracts.”
The five-count indictment was returned under seal by a federal grand jury in Chicago on June 20, 2013. All six defendants were charged with one count each of racketeering conspiracy and money laundering conspiracy, and two counts of interstate travel in aid of racketeering. Five defendants, excluding Rao, were charged with one count of conspiracy to violate the federal Foreign Corrupt Practices Act.
As described in the indictment, Firtash controls Group DF, an international conglomerate of companies that was directly and indirectly owned by Group DF Limited, a British Virgin Islands company. Group DF companies include: Ostchem Holding AG, an Austrian company in the business of mining and processing minerals, including titanium; Global Energy Mining and Minerals Limited, a Hungarian company, and Bothli Trade AG, a Swiss company, for which Global Energy Mining and Minerals was the majority shareholder. In April 2006, Bothli Trade and the state government of Andhra Pradesh agreed to set up a joint venture to mine various minerals, including ilmenite, a mineral which may be processed into various titanium-based products such as titanium sponge, a porous form of the mineral that occurs in the processing of titanium ore.
In February 2007, Company A entered into an agreement with Ostchem Holding, through Bothli Trade, to work toward entering into a supply agreement in which Bothli Trade would sell 5 million to 12 million pounds of titanium sponge from the Indian project to Company A on an annual basis. The mining project required licenses and approval of both the Andhra Pradesh state government and the central government of India before the licenses could be issued.
The racketeering conspiracy count alleges that the defendants:
- used U.S. financial institutions to engage in the international transmission of millions of dollars for the purpose of bribing Indian public officials to obtain approval of the necessary licenses for the project;
- used Group DF, including its business reputation and financial resources, to advance, participate in, and finance the project, as well as to fund, transfer, and conceal bribe payments connected with the project; and
- used threats and intimidation to advance the interests of the enterprise’s illegal activities.
According to the indictment, Firtash was the leader of the enterprise and oversaw, directed and guided certain of its illegal activities. Firtash allegedly:
- caused the direct and indirect participation of certain Group DF companies in the project;
- met with Indian government officials, including Chief Minister Reddy, to discuss the project and its progress;
- authorized payment of at least $18.5 million in bribes to both state and central government officials in India to secure the approval of licenses for the project;
- directed his subordinates to create documents to make it falsely appear that money transferred for the purpose of paying these bribes was transferred for legitimate commercial purposes; and
- appointed various subordinates to oversee efforts to obtain the licenses through bribery.
Knopp allegedly supervised the enterprise and, together with Firtash, met with Indian government officials. Knopp also met with Company A representatives to discuss supplying titanium products from the project. Gevorgyan allegedly traveled to Seattle and met with Company A representatives. Gevorgyan also engaged in other activities, including allegedly signing false documents, monitoring bribe payments, and coordinating transfers of money to be used for bribes. Lal, also known as “Gaj,” allegedly engaged in similar activities, reported to Firtash and Knopp on the status of obtaining licenses, and recommended whether, and in what manner, to pay certain bribes to government officials.
Sunderalingam allegedly met with Rao to determine the total amount of bribes and advised others on the results of the meeting, and identified various foreign bank accounts held in the names of nominees outside India that could be used to funnel bribes to Rao. Rao allegedly solicited bribes for himself and others in return for approving licenses for the project, and warned other defendants concerning the threat of a possible law enforcement investigation of the project.
As part of both the racketeering and money laundering conspiracies, the indictment alleges that one or more of the defendants caused funds to be transferred to and from the United States to promote the bribery of public officials in India. The indictment lists 57 transfers of funds between various entities, some controlled by Group DF, in various amounts totaling $10,597,050, beginning April 28, 2006, through July 13, 2010.
The indictment seeks forfeiture from Firtash of his interests in Group DF Limited and its assets, including 14 companies registered in Austria and 18 companies registered in the British Virgin Islands, as well as 127 other companies registered in Cyprus, Germany, Hungary, the Netherlands, Seychelles, Switzerland, the United Kingdom, and one unknown jurisdiction, and all funds in 41 bank accounts in several of those same countries. Further, the indictment seeks forfeiture from all six defendants of more than $10.59 million.
The charges in the indictment carry the following maximum penalties on each count: racketeering conspiracy ― 20 years in prison and a $250,000 fine; money laundering conspiracy ― 20 years and a $500,000 fine, or a fine totaling twice the value of the funds involved in the money laundering; interstate travel in aid of racketeering ― five years and a $250,000 fine; and conspiracy to violate the Foreign Corrupt Practices Act ― 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 case is being investigated by the Chicago Office of the FBI. The government is being represented in court by Assistant U.S. Attorneys Amarjeet Bhachu and Michael Donovan, and Trial Attorney Ryan Rohlfsen, of the Criminal Division’s Fraud Section.
The Justice Department has worked closely with and has received significant assistance from its law enforcement counterparts in Austria, as well as the Hungarian National Police, and greatly appreciates their assistance in this matter. Significant assistance was also provided by the Criminal Division’s Office of International Affairs.
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 proof beyond a reasonable doubt.
Indictment
Chicago Tax Preparer Indicted for Causing More Than 150 Fraudulent Tax Returns Seeking over $1 Million in RefundsRead the Press Release
CHICAGO ― A Chicago tax return preparer was indicted on federal charges alleging that he was responsible for submitting more than 150 false federal individual income tax returns seeking over $1 million in refunds for individuals whom he knew were not entitled to them. The defendant, PHILLIP SMITH, allegedly was paid a portion of the tax refunds his clients received. The case is typical of federal tax prosecutions that occur throughout the year, but it serves as a reminder to taxpayers of the importance of voluntary compliance with their tax obligations as the April 15 filing deadline approaches.
Smith, 51, was charged with 11 counts of wire fraud and two counts of making a false claim to the Internal Revenue Service in an indictment returned yesterday by a federal grand jury. The indictment also seeks forfeiture of approximately $840,706 in fraudulently obtained refunds. Smith will be arraigned on a date to be determined in U.S, District Court.
“One of our top priorities is to maximize revenue by investigating abusive tax return preparers,” said James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago. “IRS Criminal Investigation investigates tax fraud year round, not just at tax time. Taxpayers who might be thinking about cheating with next month’s deadline looming should think twice or they risk literally paying the consequences. We are committed to assuring honest taxpayers that everyone pays their fair share.” Mr. Lee also cautioned that taxpayers should choose carefully when hiring a tax preparer.
According to the indictment, in exchange for fees, Smith fabricated false Forms W-2 that purported to be issued by fictitious companies, knowing that his clients would use them to support false tax returns that would be submitted to the IRS. The bogus W-2s stated false annual wage and tax withholding amounts designed to fraudulently generate significant Earned Income Credits and tax refunds from the IRS. Smith fraudulently obtained employer identification numbers for the fictitious companies from the IRS, which he included on the bogus W-2s.
Between January 2010 and April 2013, Smith allegedly prepared and caused to be submitted to the IRS more than 150 false tax returns seeking more than $1 million in refunds.
In some instances, Smith directed clients to provide the bogus W-2s to reputable tax preparation businesses knowing that the tax preparers would rely on the false information and submit false returns on behalf of his clients, the indictment alleges. In other instances, Smith prepared the false returns and submitted them electronically for his clients, it adds.
At times, Smith posed as the employer during telephone calls with IRS representatives to verify his clients’ purported employment, and he created false employment verification letters and paystubs for his clients to submit to the IRS when it sought additional records, the charges allege.
The indictment details 11 examples of false returns in which Smith caused taxpayers to seek and obtain fraudulent refunds ranging from $5,292 to $9,864.
Each count of wire fraud carries a maximum sentence of 20 years in prison and a $250,000 fine, and each count of making a false claim on the United States carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
Zachary T. Fardon, United States Attorney for the Northern District of Illinois, announced the indictment with Mr. Lee. The government is being represented by Assistant U.S. Attorney Michelle M. Petersen.
The public is reminded that an indictment contains merely charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
17 Defendants Indicted in International ATM Skimming and Money Laundering Scheme; Two Arrested in BulgariaRead the Press Release
CHICAGO — Seventeen defendants are facing federal fraud or related charges for their alleged roles in an international ATM skimming and money laundering scheme involving hundreds of thousands of dollars. Two defendants were arrested in Sofia, Bulgaria, and 13 defendants were arrested yesterday in Chicago and several suburbs by FBI agents following a lengthy international investigation.
The alleged scheme involved using ATM and debit card numbers and the personal identification numbers associated with them, which were fraudulently obtained in Europe, to withdraw money from victims’ accounts using automated teller machines at various locations in the Chicago area. The charges were brought in a 29-count indictment, which was returned by a federal grand jury on March 12 and was unsealed following the arrests and made public today.
“These charges are the result of the hard work of dedicated law enforcement personnel both here and abroad to address a transnational crime problem that can affect virtually anyone with a bank account and carries significant financial consequences. Cooperation with international law enforcement agencies was crucial to the investigation, and we are grateful for the assistance that led to these arrests,” said Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The arrests and charges were announced by Mr. Holley and Zachary T. Fardon, United States Attorney for the Northern District of Illinois. They praised the cooperation of the State Agency National Security and the Supreme Prosecutor’s Office of Cassation in Bulgaria. The investigation is continuing, they said.
Two defendants, RADOSLAV PAVLOV, 36, of Sofia, Bulgaria, also known as “Radi,” charged with wire fraud, and MIHAIL PETROV, 41, of Sofia, charged with wire fraud, money laundering conspiracy and money laundering, were arrested in Sofia. The United States intends to seek their extradition to face the charges in U.S. District Court in Chicago. The indictment alleges that Pavlov, Petrov, and DOMENIKO EVITMOV, 46, of Chicago, who was arrested here, were located outside the United States and fraudulently obtained ATM and debit card numbers and PINs from locations in Europe and elsewhere without the actual account-holders’ knowledge.
Pavlov, Petrov, Evitmov, ALEXANDER SAVOV, 47, of Carol Stream, and others they directed, then transferred the fraudulently obtained information, often by Skype or email, to GHEORGUI MARTOV, also known as “Mitsubishi” and “Mitsu,” 39, of Schiller Park, who allegedly directed the scheme in the Chicago area. Martov gave the information to numerous codefendants to make the fraudulent withdrawals from area ATMs, the charges allege, and the defendants divided the money they obtained.
Martov and his wife, TEMENUGA KOLEVA, aka “Nushka,” 37, also of Schiller Park, were each charged with obstruction of justice for allegedly destroying computer files and internet browsing history during the course of the FBI’s investigation. KOLEVA was also charged with being an accessory after the fact to wire fraud.
Martov, Petrov, and EMIL GOSPODINOV, 44, of Chicago, who owned and operated BG Center Rodina, located 4828 N. Cumberland Ave., in Norridge, a business that transmitted funds via MoneyGram, among other things, were charged with money laundering conspiracy for allegedly transmitting the fraudulently obtained funds from the United States to Bulgaria and elsewhere. After receiving funds from Martov, Gospodinov transmitted the funds to Martov’s alleged co-schemers outside the United States using nominee senders and receivers on the transactions to disguise the true identities of those sending and receiving the funds.
The indictment seeks forfeiture of approximately $200,000 from 15 defendants as alleged proceeds of the fraud, and it also seeks approximately $50,000 from Martov, Petrov and Gospodinov as alleged proceeds of the money laundering.
The indictment alleges that once Martov obtained the ATM and debit card and PIN information he gave it to the following defendants to fraudulently withdraw money from area ATMs: IVAN KOTSELOV, 32, of Schiller Park; GEORGI VANGELOV, aka “Zhoro,” 26, of Schiller Park; SVETOSLAV NEDELCHEV, aka “Svetlyo,” 28, of Chicago; DANIEL YORDANOV, aka “Dani,” 29; DEYAN SLAVCHEV, aka “Dido,” 28, of Schiller Park; KARL POPOVSKI, aka “Kiro Papata,” 23, of Chicago; NIKOLAY TODOROV, aka “Niketsa,” 35, of Schiller Park; MLADEN GUEORGUIEV, 25, of Chicago; NEDISLAV GABOV, 33, of Chicago; and DIMO DESHKOV, 28, of Chicago.
After receiving the fraudulently obtained account data, defendants Kotselov, Vangelov, Nedelchev, Yordanov, Slavchev, Popovski, Todorov, Gueorguiev, and Gabov allegedly encoded the data onto the magnetic strip of blank or recycled cards. Once in possession of the encoded cards, various defendants traveled to Chicago area ATMs to withdraw funds. The defendants, acting at Martov’s direction, made ATM withdrawals shortly before and after midnight in the time zone of the issuing bank in an attempt to circumvent the daily withdrawal limits on the victims’ accounts. The defendants also coordinated ATM transactions to withdraw money before the issuing banks could detect the fraud and deactivate the ATM and debit card numbers.
Martov was charged with 22 counts of wire fraud and four counts of money laundering in addition to the money laundering conspiracy and obstruction counts. Fourteen other defendants were each charged with one or more counts of wire fraud. Gospodinov was charged with four counts of money laundering in addition to the money laundering conspiracy.
Martov, his wife and 11 other defendants were arraigned yesterday and pleaded not guilty to the charges against them before U.S. Magistrate Judge Daniel Martin. Two defendants, Gueorguiev and Gabov were released on bonds, while the other 11 defendants who appeared in court yesterday remain in federal custody pending detention hearings scheduled for tomorrow and Friday. Yordanov is a fugitive and a warrant was issued for his arrest. Todorov is in state custody and will be arraigned on the federal charges on a date to be determined.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. Money laundering conspiracy and each count of money laundering carry a maximum penalty of 20 years in prison and a $500,000 fine, or a fine totaling twice the value of the funds involved in the money laundering. The obstruction of justice count against Martov and Koleva carries a maximum of 20 years in prison and a $250,000 fine, and the accessory count against Koleva carries a maximum of 10 years in prison and a $125,000 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 Scott Edenfield, Matthew Getter, and Timothy Chapman. Assistant U.S. Attorney Matthew Burke guided the investigation before he transferred last week from the U.S. Attorney’s Office in Chicago to the Eastern District of Virginia. The Office of International Affairs of the Justice Department’s Criminal Division provided assistance with this case.
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
CEO of Bankrupt Sentinel Management Group Convicted in $500 Million Fraud Scheme Before Firm’s 2007 CollapseRead the Press Release
CHICAGO ― The chief executive officer of the bankrupt Sentinel Management Group, Inc., was convicted today of defrauding more than 70 customers of over $500 million before the firm collapsed in August 2007. The defendant, ERIC A. BLOOM, misappropriated securities belonging to customers by using them as collateral for a loan that Sentinel obtained from Bank of New York Mellon Corp., which was used, in part, to purchase millions of dollars’ worth of highrisk, illiquid securities not for customers, but for a trading portfolio maintained for the benefit of Sentinel=s officers, including Bloom, members of his family, and corporations controlled by the Bloom family.
A federal jury deliberated less than two hours after a four-week trial in U.S. District Court before returning guilty verdicts on 18 counts of wire fraud and one count of investment adviser fraud. The case is one of the largest financial fraud cases ever prosecuted in Federal Court in Chicago.
Bloom, 49, of Northbrook, remains free on bond while awaiting sentencing, which was not scheduled pending post-trial motions. Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or, alternatively, a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater, and restitution is mandatory. The investment adviser fraud count carries a maximum penalty of five years in prison and a $250,000 fine. The government is also seeking a forfeiture judgment of more than $500 million. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
Sentinel was located in suburban Northbrook and managed short-term cash investments of futures commission merchants, commodity pools, hedge funds, and other customers. Sentinel’s head trader, Charles K. Mosley, 50, of Vernon Hills, pleaded guilty last October to two counts of investment adviser fraud and is awaiting sentencing.
“Sentinel was sinking like the Titanic,” Assistant U.S. Attorney Clifford Histed told the jury in closing arguments. “Sentinel was not a victim of the credit crisis,” he said, adding that the “financial crisis merely exposed the fraud” that had been going on for years.
According to the evidence at trial, Bloom, the president and CEO of Sentinel who was responsible for its day-to-day operations, misled customers four days before Sentinel declared bankruptcy by blaming Sentinel=s financial problems on the “liquidity crisis” and “investor fear and panic” when he knew that the actual reasons for Sentinel=s financial problems were its purchase of high-risk, illiquid securities, excessive use of leverage, and the resulting indebtedness on the Bank of New York loan, which had a balance exceeding $415 million on Aug. 13, 2007. Sentinel declared bankruptcy on Aug. 17, 2007.
Between January 2003 and August 2007, Bloom fraudulently obtained and retained under management more than $1 billion of customers’ funds by falsely representing the risks associated with investing with Sentinel, the use of customers’ funds and securities, the value of customers’ investments, and the profitability of investing with Sentinel. Bloom used customers’ securities invested in Sentinel=s “125 Portfolio” and its “Prime Portfolio” as collateral for its loan with Bank of New York to purchase millions of dollars’ worth of high-risk, illiquid collateralized debt obligations (CDOs).
Bloom lied about customers’ investments and engaged in an undisclosed trading strategy with Sentinel’s own “House Portfolio,” which they traded for the benefit of themselves and Bloom family members. The undisclosed trading strategy included extensive borrowing and a high concentration of CDOs that were inconsistent with the representations Bloom made to customers regarding separate investment portfolios. The undisclosed strategy affected all customers, regardless of the trading portfolio in which they were invested, because Bloom directed employees to use customers’ securities as collateral when Sentinel borrowed money from the Bank of New York and so-called “repo” lenders, and then used the borrowed money to carry out the undisclosed trading strategy. (Under a repurchase agreement, known as a “repo,” a party such as Sentinel, effectively a borrower, sold securities to a counterparty, effectively a lender, with an agreement to repurchase the securities at a later date.)
As part of the fraud scheme, Bloom falsely represented the returns generated by the securities in each Sentinel portfolio to customers. Rather than giving customers the actual returns generated by a particular portfolio, Bloom directed employees on a daily basis to pool the trading results for all of Sentinel’s portfolios and then allocated the returns to the various portfolios as they saw fit. To conceal the scheme, to encourage customers to invest additional funds, and to otherwise lull customers, Bloom on a daily basis caused false and misleading account statements to be created and distributed to customers, including via email. These account statements reported returns earned by customers without disclosing that the returns actually were allocated by Bloom and his employees and were not the result of the market performance of the customers’ particular portfolios. The account statements also listed the purported value of securities being held by each portfolio without disclosing that the securities were being used as collateral for Sentinel’s loan from Bank of New York.
In July and August 2007, Bloom knew that Sentinel was approaching insolvency and that defaulting on the Bank of New York loan was a real possibility, yet he caused Sentinel to take in more than $100 million in customers’ money and continued to conceal Sentinel’s true financial condition from customers.
The verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago. Also assisting in the investigation were the Labor Department=s Employee Benefits Security Administration, the Commodity Futures Trading Commission, and the Securities and Exchange Commission. The CFTC and the SEC filed separate civil enforcement lawsuits following the collapse of Sentinel, which remains in bankruptcy proceedings.
The government is being represented by Assistant U.S. Attorneys Clifford C. Histed and Patrick M. Otlewski.
Suspended Physician Pleads Guilty to Federal Drug Charge; Admits Exchanging Thousands of Prescription Doses for SexRead the Press Release
CHICAGO ― A suspended physician formerly affiliated with three Chicago hospitals pleaded guilty today to a federal charge of illegally distributing a prescription drug in exchange for sex in 2009. The defendant, JOSHUA D. BARON, a pediatric neurologist, also admitted 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, remains free on his own recognizance pending sentencing on June 30 by U.S. District Judge Rebecca Pallmeyer. He faces a maximum sentence of 20 years in prison and a $1 million fine, and his plea agreement provides for an advisory sentencing guidelines range of 108 to 135 months in prison, according to the government’s calculation.
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.
According to his written plea agreement, between 2006 and 2011, Baron dispensed prescriptions for controlled substances outside the usual course of professional practice and without a legitimate medical purpose in exchange for sex and/or money. He admitted posting at least 78 advertisements offering to trade various prescription drugs on the website Craigslist.com, and all of the ads were placed under the sections, “Men Who Would Pay” and “Casual Encounters.”
Through these prescriptions, Baron dispensed to the 16 individuals the following controlled substances and amounts: 1,680 pills Adderall, 1,830 pills of Norco, 180 pills of Percocet, 1,710 pills of Xanax, 270 pills of Vicodin, 180 pills of Demerol, 90 pills of Dilaudid, 120 pills of Focalin, 150 pills of Phentermine, 30 pills of Klonopin, and 15 pills of morphine sulfate.
In January, the Wilmette police conducted an undercover sting that led to Baron=s arrest when he arrived at a specified location, allegedly expecting to trade a prescription for Adderall with a fictitious woman in exchange for sex.
The guilty plea 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 is being represented by Assistant U.S. Attorney Carol Bell.
Plea Agreement
Lake County Man Indicted in Eight Armed Robberies of Retail Stores Across Lake and Northern Cook CountiesRead the Press Release
CHICAGO — A Lake County man is now facing federal charges for allegedly committing eight armed robberies, which netted more than $1,700, over 10 days last August of retail stores across Lake County and northern Cook County. In one of the robberies, shots were fired from the getaway car, but no one was injured. The defendant, LEROY REGAN, initially faced state charges filed in Lake County following his arrest last summer, but he was indicted on federal charges this week after the case was adopted from the state under the umbrella of Project Safe Neighborhoods. A second defendant, JEFFREY VALENTINE, was charged with committing the last of the eight robberies with Regan.
Regan, also known as “Outlaw,” 38, of Grayslake, was charged with eight counts of robbery and eight counts of brandishing or discharging a firearm in a 16-count indictment that was returned by a federal grand jury on Tuesday. Regan, who is federal custody without bond, pleaded not guilty on Wednesday before U.S. District Judge Matthew Kennelly, who set trial for Oct. 20. If convicted of a single gun count, Regan faces a maximum of life imprisonment.
Valentine, aka “Goldie,” 31, of Chicago, who is currently in state custody, was charged with one count of robbery. He is scheduled to be arraigned on April 3 in U.S. District Court.
“I am pleased with the cooperative teamwork of state and federal investigators and prosecutors that resulted in this federal indictment. We are all working toward the same goal of justice and will continue to coordinate so that, in appropriate cases, a state investigation may turn into a federal prosecution,” said Lake County State’s Attorney Mike Nerheim.
According to court records, in each of the robberies, the suspect entered the store wearing a hooded sweatshirt with the hood pulled up over his head and brandishing a handgun. After taking money from the cash register, the robber fled the store.
The indictment alleges that Regan committed the following robberies in August 2013:
- Aug. 5 ― Dollar General store, 1917 Martin Luther King Jr. Dr., North Chicago;
- Aug. 6 ― Family Dollar store, 1701 Martin Luther King Jr. Dr., North Chicago, approximately $131 stolen;
- Aug. 8 ― Citgo gas station, 2135 Green Bay Rd., Waukegan, approximately $300;
- Aug. 8 ― Taco Bell restaurant, 3200 North Lewis Ave., Waukegan, approximately $180. Two customers were shot at from a fleeing vehicle as they attempted to get the license plate of the auto;
- Aug. 11 ― 7-11 store, 37763 North Green bay Rd., Beach Park, approximately $422;
- Aug. 12 ― Thornton’s gas station, 55 Skokie Valley Rd., Highland Park, approximately $145;
- Aug. 14 ― Family Dollar store, 1106 Washington St., Waukegan, approximately $398; and
- Aug. 15 ― 7-11 store, 500 Skokie Blvd., Wilmette, approximately $160 and six to eight cartons of cigarettes. Valentine was charged with this robbery alone.
Regan was arrested in Waukegan on Aug. 17, 2013, following an intensive investigation by the Waukegan and Wilmette police departments. The Highland Park Police Department and the Lake County Sheriff’s Department also assisted in the investigation, which was joined by the Bureau of Alcohol, Tobacco, Firearms and Explosives, leading to the federal charges.
Each count of robbery carries a maximum penalty of 20 years in prison and a $250,000 fine. Each count of brandishing a firearm carries a consecutive, mandatory minimum of seven years (10 years on the charge of discharging a firearm) in prison and a maximum of life on any one count, and conviction on one or more subsequent gun counts carries a mandatory minimum of 25 years consecutive to any other sentence imposed. 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 Carl Vasilko, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives.
The government is being represented by Assistant U.S. Attorney Joseph Thompson.
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.
Former Cook County Official Sentenced to 51 Months in Prison for Steering Contracts in Return for Nearly $35,000 in KickbacksRead the Press Release
CHICAGO ― A Cook County official was sentenced today to 51 months in federal prison for steering four county contracts, each just under $25,000, to four acquaintances and then taking a portion of the contract payments as kickbacks from each of them, totaling $34,700. The defendant, EUGENE MULLINS, who was director of the Cook County Department of Public Affairs and Communications between March 2008 and November 2010, was sentenced after being convicted of three counts of wire fraud and four counts of bribery at trial last September in U.S. District Court.
Mullins, 50, of Chicago, a former Chicago police officer, was also ordered to pay restitution and forfeiture, both in the amount of $34,700. He was ordered to begin serving his sentence on June 19 by U.S. District Judge Amy J. St. Eve.
“Public corruption does not pay and has significant consequences,” Judge St. Eve said in imposing the sentence after finding that Mullins obstructed justice by committing perjury in his testimony at trial.
The four individuals who received county contracts and returned a portion of the payments to Mullins were each charged with misprision of a felony for concealing Mullins’ fraud and kickback scheme. Each of them entered into pretrial diversion agreements and were placed on probation, were ordered to pay full restitution to the county, and testified as government witnesses at Mullins’ trial. They are: Gary Render, Michael L. Peery, and Clifford Borner, all of Chicago, and Kenneth Gregory Demos, of Oak Park.
Evidence at Mullins’ trial showed that between January 2010 and January 2011, he used his county position to submit and cause others to submit false documents to the county to assist the four vendors in obtaining professional and managerial service contracts and payment from the county. Mullins then solicited the individuals who obtained contracts for payments from the proceeds for his own benefit.
Cook County contracts for professional and managerial services under $25,000 required approval only by the county purchasing agent and did not require approval by the county Board of Commissioners. In 2010, Mullins’ public affairs and communications department, as well as other county departments, had access to federal funds and county money to promote awareness and increase response rates by county residents for the 2010 U.S. Census, to promote awareness and assist residents impacted by floods in 2008, and to promote and increase energy efficiency and conservation.
During 2010, Mullins schemed to fraudulently steer the following contracts: a $24,980 disaster grant contract to Render, who paid Mullins $9,000; a $24,985 energy grant contract to Peery, who paid Mullins $12,000; a $24,995 census contract to Borner, who paid Mullins $5,000; and a $24,997 census contract to Demos, who paid Mullins $8,700.
Evidence also showed that Mullins told the individuals who received the contracts that he could arrange for a subcontractor to perform some of the work in exchange for a portion of the county payments they received. In fact, the money that Mullins received from the individuals was not used for any subcontracts. Instead, Mullins used it for his own benefit, while Render, Peery, Borner, and Demos performed little or no work for the county.
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; Anita Alvarez, Cook County State’s Attorney; and Patrick Blanchard, Cook County Inspector General.
The government was represented by Assistant U.S. Attorneys Lindsay Jenkins and Sarah E. Streicker.
Weight-Loss Infomercial Pitch-Man Kevin Trudeau Sentenced to 10 Years in Prison for Criminal ContemptRead the Press Release
CHICAGO ― Author and television pitch-man KEVIN TRUDEAU was sentenced today to 10 years in federal prison for criminal contempt for violating a 2004 federal court order that prohibited him from making deceptive television infomercials that misrepresented the contents of his weight loss cure book. Trudeau was convicted by a jury last November after a week-long trial in U.S. District Court.
Trudeau, 51, formerly of Oak Brook, who has been in custody since he was convicted, was also placed on supervised release for five years following his sentence by U.S. District Judge Ronald Guzman. During supervised release, Trudeau was ordered to cooperate in the collection of civil judgments and abide by court orders.
“Since the age of 25, [Trudeau] has attempted to cheat others for his own personal gain,” Judge Guzman said, adding he has a lengthy “history of refusal to follow court orders to tell the public the truth.”
Trudeau “is an unrepentant, untiring, and uncontrollable huckster who has defrauded the unsuspecting for 30 years. He is the type of person the Court should expect to defraud his fellow inmates while in custody, and to continue to commit fraud into old age. He appears capable of nothing else,” prosecutors argued in a sentencing memo.
Criminal contempt has no statutory maximum sentence. The judge found that Trudeau faced an advisory federal sentencing guidelines range of 235 to 293 months in prison and said that such a sentence would be reasonable, but cited prosecutors’ request for a sentence of at least 10 years in imposing the sentence.
During the sentencing hearing, a man who twice shouted from the gallery was removed by court security officers. The U.S. Marshals Service issued a petty offense citation to Ed Foreman, 80, of Dallas, for allegedly causing a disturbance. He was given a June 9 court date unless he pays a fine and court costs totaling $175 before that date.
According to the evidence at trial, Trudeau appeared in three television infomercials between December 2006 and July 2007 in which he willfully misrepresented the contents of his book The Weight Loss Cure “They” Don’t Want You to Know About. In April 2010, U.S. District Judge Robert Gettleman issued an order to show cause why Trudeau should not be held in criminal contempt of a Sept. 2, 2004, settlement in which Trudeau agreed not to directly or indirectly produce and broadcast any deceptive infomercials that misrepresented the contents of any book, including the weight loss cure book. Federal Trade Commission v. Trudeau, No. 03 C 3904.
Prosecutors cited a litany of blatant lies and misrepresentations made by Trudeau in his infomercials. These included his claims that his book was not a “diet,” when in fact it required at least three weeks of eating 500 calories or less a day, and that a hormone found only in pregnant women that was required to be injected daily could be obtained “anywhere,” when in fact it could be obtained in the United States only through a doctor’s prescription. He also claimed that after finishing the diet, consumers could eat anything they wanted without regaining weight, when in fact the diet required severe food deprivation that lasts for life.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorneys April Perry and Marc Krickbaum.
Former CME Clerk Convicted of Commodities Fraud for Manipulating Trades to Profit More Than $200,000Read the Press Release
CHICAGO — A former clerk for a lean hogs futures trader was convicted of commodities fraud for manipulating trades to profit more than $200,000 for herself to the detriment of public customers, federal law enforcement officials announced today.
The defendant, NICOLE M. GRAZIANO, 33, of Addison and formerly of Roselle, was found guilty of four counts of commodities fraud on Friday following a four-day bench trial before U.S. District Judge James Zagel 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 in delivering his verdict. Graziano faces a maximum penalty of 10 years in prison and a $1 million fine on each count. Judge Zagel set sentencing on June 25.
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 $213,680 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 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 CME Group assisted in the investigation.
The government is being represented by Assistant U.S. Attorneys Christopher R. McFadden and Tiffany McCormick.
Chicago Area Man Convicted of Running West Side Heroin Distribution and Money Laundering ConspiraciesRead the Press Release
CHICAGO — A federal jury deliberated approximately an hour last night and this morning before convicting a Chicago area man on all charges against him for directing a six-year conspiracy to distribute at least a kilogram of heroin on the city’s west side. Attorneys for the defendant, DAVID PRICE, 34, conceded that Price possessed and sold heroin and laundered the cash proceeds by purchasing expensive suburban properties, automobiles, and jewelry, but they denied he conspired to traffic heroin during the week-long trial in U.S, District Court.
The jury’s guilty verdict on the conspiracy count alone means that Price is facing a mandatory minimum of 20 years in prison and a maximum of life in federal prison. U.S. District Judge Harry Leinenweber set sentencing for July 30.
Price, also known as “Shorty,” “Lil Dave,” and “Hot Sauce,” was convicted on 13 counts, including the heroin conspiracy, using a telephone to facilitate a drug-trafficking crime, money laundering conspiracy, nine counts of money laundering totaling approximately $448,000, and being a convicted felon-in-possession of an Uzi-style 9 millimeter semi-automatic pistol that was loaded with a 30-round extended magazine.
Originally from Chicago, Price was living in Brookfield at the time of his arrest in August 2012 and he remains in federal custody without bond. At various times, Price has lived in homes or apartment buildings in Country Club Hills, Darien, Lombard, Bolingbrook, and high-rises in downtown Chicago, which he purchased or rented in the names of other individuals, including his father, with drug proceeds. Evidence at the trial also established that Price bought at least six luxury vehicles, including a Corvette and a motor cycle, and expensive jewelry with drug money. Jurors were shown a $35,000 watch with 1,018 diamonds, totaling approximately 22 karats, which was seized from Price.
The government’s bid to forfeit the watch, vehicles, and properties, as well as $1.1 million in proceeds, remains pending and will be decided later by Judge Leinenweber.
Evidence showed that Price ran the heroin distribution ring from 2005 through 2011, but focused on 2007-08. Price “fronted” wholesale quantities of heroin to be sold at various west side drug spots and rotated sharing the profits with the supervisors of those locations, which included street corners along Augusta at Keeler, Lawler, and Laramie/Leamington; Kostner and Cortez; Iowa and Lamon; and Erie and Kilptarick, among others.
Price and others involved in the conspiracy ― all of whom have been convicted separately ― used an apartment at 5242 West Division, which they referred to as “Up Top,” to mix heroin with the sleeping pill Dormin, and package it for sale in retail packages and bundles. Three co-conspirators testified as government witnesses, including James Brown. The evidence established that Price directed two members of his crew to shoot and kill Brown on Jan. 25, 2008, because Brown owed a drug debt to Price and believed he was cooperating with law enforcement. Brown survived the shooting.
The verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; Carl Vasilko, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms and Explosives; and Chicago Police Superintendent Garry McCarthy.
The government is being represented by Assistant U.S. Attorneys Angel Krull, Erik Hogstrom, and Ryan Fayhee.
Rockford Man Sentenced to 80 Months in Federal Prison for the Robbery of Associated Bank in RockfordRead the Press Release
ROCKFORD — A Rockford man was sentenced today in federal court for bank robbery. TONY WALKER, 56, was sentenced by U.S. District Judge Frederick J. Kapala to 80 months in federal prison, to be followed by 3 years of supervised release, for the robbery of Associated Bank, 600 North Main St., in Rockford, on July 12, 2013. Walker was also ordered to pay restitution to the bank.
Walker pleaded guilty to the charge on Dec. 2, 2013. According to the written plea agreement, Walker admitted that on July 12, 2013, at approximately 3:50 p.m., he entered Associated Bank and approached a bank teller. Walker was carrying a black bag with one of his hands inside the bag. Walker placed the bag on the counter and moved it toward the teller who believed that there was a dangerous weapon in the bag. Walker handed the teller a note which stated “Give me 1,000 dollars and won’t nobody get hurt.” The teller then gave Walker $1,330 in U.S. currency. Walker was arrested on July 15, 2013, and has since been in federal custody.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Chet Epperson, Chief of the Rockford Police Department.
The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.
Pharmaceutical Company to Pay $27.6 Million to Settle Claims of False Billings to Federal and State Health Care ProgramsRead the Press Release
CHICAGO — Pharmaceutical manufacturer Teva Pharmaceuticals USA, Inc. and a subsidiary, IVAX LLC, will pay the United States and the state of Illinois more than $27.6 million to resolve false billing allegations, under the terms of a settlement agreement announced today. The agreement settles claims that Teva and IVAX violated the federal False Claims Act by making payments to Dr. Michael J. Reinstein, a Chicago physician, in return for Reinstein prescribing an anti-psychotic medication to thousands of Medicare and Medicaid patients at dozens of area nursing homes and hospitals.
Within 10 days, Teva will pay the United States nearly $15.5 million and the State of Illinois more than $12.1 million, plus interest from September 2013. The settlement was reached without civil litigation by the Justice Department, the U.S. Attorney’s Office for the Northern District of Illinois, and the Illinois Attorney General’s Office on behalf of the U.S. Department of Health and Human Services and the Illinois Department of Healthcare and Family Services. Teva Pharmaceuticals USA, located in North Wales, Pa., and IVAX LLC, a Florida company, are both subsidiaries of Teva Pharmaceuticals Industries, Ltd., headquartered in Israel.
“Pharmaceutical companies must not be allowed to improperly influence physicians’ decisions in prescribing medication for their patients,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “Instead, those decisions must be made solely on the basis of the patient’s best medical interests,” he said.
“The Department of Justice is committed to ensuring that pharmaceutical manufacturers who pay kickbacks to doctors to influence prescribing decisions are held accountable,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division. “Schemes such as the one alleged in this case undermine the health care system and take advantage of vulnerable patients.”
Illinois Attorney General Lisa Madigan said: “Teva Pharmaceuticals pushed its drug onto thousands of vulnerable patients without regard to their health and at the expense of the state Medicaid program and Illinois taxpayers.”
The settlement involves the promotion of generic clozapine, a rarely used anti-psychotic medication that has serious potential side effects and is generally considered a drug of last resort, particularly for elderly patients. While clozapine has been shown to be effective for treatmentresistant forms of schizophrenia, it is also known to cause numerous side effects, including a potentially deadly decrease in white blood cells, seizures, inflammation of the heart muscle, and increased mortality in elderly patients.
In November 2012, the United States filed a civil False Claims Act lawsuit in U.S. District Court in Chicago against Reinstein, alleging that, since at least August 2003, he schemed to switch his patients to generic clozapine if IVAX agreed to pay him $50,000 under a one-year “consulting agreement” and provide other benefits to him, in violation of the federal Medicare and Medicaid Anti-Kickback Statute.
Reinstein, a psychiatrist in the Chicago area since 1973 with an office in Chicago’s Uptown neighborhood since at least 1999, quickly became the largest prescriber of generic clozapine in the country. The payments and other forms of remuneration from Ivax, and later Teva Pharmaceuticals, including annual renewal of the consulting agreement, travel, meals and entertainment expenses, and tickets to sporting events, continued through at least November 2009. In addition to direct payments to Reinstein, Ivax also provided an all-expenses-paid trip to Miami for Reinstein, his wife, and various employees of Reinstein.
The alleged scheme resulted in the submission of thousands of false claims to Medicare Part D and Illinois Medicaid. The civil case against Reinstein remains pending in Federal Court in Chicago.
Federal law prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs. The law is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.
The settlement with Teva Pharmaceuticals and Ivax was the result of a coordinated effort by the U.S. Attorney’s Office for the Northern District of Illinois, the Civil Fraud Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, the Department of Health and Human Services Office of Inspector General, the Chicago Office of the Federal Bureau of Investigation, and the Illinois Attorney General’s Office.
The settlement agreement is neither an admission of liability by Teva or IVAX, nor a concession by the United States or the State of Illinois that their claims were not well-founded.
Assistant U.S. Attorney Eric S. Pruitt represented the U.S. Attorney’s Office in the settlement negotiations. Assistant Illinois Attorney General Robert Barba represented the Illinois Attorney General’s office.
Settlement Agreement
Former Energy Director for City of Rockford Sentenced on Charges of FraudRead the Press Release
ROCKFORD — The former Energy Director for the City of Rockford was sentenced today in federal court by U.S. District Judge Frederick J. Kapala for mail fraud. MARK E. BIXBY, 58, of Rockton, Ill., was sentenced to 14 months in federal prison, to be followed by 3 years of supervised release, and was ordered to pay restitution in the total amount of $41,618.33 to the two victims. Judge Kapala immediately remanded Bixby to the custody of the U.S. Marshal’s Service to begin serving his sentence.
Bixby pled guilty on November 21, 2013, admitting that between December 2006 and March 2010 he defrauded a heating contractor and window contractor, both of whom did work under the weatherization program for the City’s Energy Division, by causing them to provide funds and benefits to him through false representations and pretenses. According to the written plea agreement, Bixby, as the Energy Director, managed the City of Rockford’s Energy Division. The Energy Division operated the Illinois Home Weatherization Assistance Program in Winnebago and Boone counties. The purpose of the weatherization program was to help low-income residents save energy and money by providing services that included repairing and replacing heating systems, windows, and doors.
According to the plea agreement, the funds and benefits Bixby obtained from the two contractors included the following: (1) use of a new, 2007, two-door, red, convertible Pontiac Solstice; (2) a total of $18,440 in donations to “charities,” which were deposited into bank accounts controlled by Bixby and a family member, and which were used to pay their personal expenses; (3) $2,980 for the “sale” of cemetery plots by Bixby to the heating contractor, for which Bixby never turned over the titles or deeds to the heating contractor; and (4) a $2,000 “loan” from the window contractor, which Bixby never repaid.
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 Winnebago County State’s Attorney’s Office and the Rockford Police Department assisted in the investigation.
The government was represented by Assistant U.S. Attorney Mark T. Karner.
Three Northbrook Family Members Charged with Transporting Stolen Property Following Multi-State “Shopping” SpreeRead the Press Release
CHICAGO — Three members of a suburban Northbrook family were arrested and charged with interstate transportation of stolen property following a purported shopping odyssey that started on Feb. 17 in Oklahoma, continued two days later at malls in Texas, and wound through Louisiana on Feb. 20, before they returned to Northbrook the next day. The defendants, together with a cooperating individual who acted as their “fence,” and others sold merchandise with a retail value of $7.1 million for a combined total of $4.2 million through their eBay online merchant accounts over the last decade, according to a federal criminal complaint announced today.
The defendants, BRANKO BOGDANOV, 58; his wife, LELA BOGDANOV, 52; and their daughter, JULIA BOGDANOV, 34, were arrested by Secret Service agents yesterday afternoon at their residence on Weller Lane in Northbrook. They were each charged with interstate transportation of stolen property in a criminal complaint that was filed in U.S. District Court. All three are scheduled to appear at 11 a.m. today before U.S. Magistrate Judge Michael Mason.
According to the complaint affidavit, loss prevention executives at Barnes and Noble, Inc., and Toys R Us, Inc., recently told Secret Service agents that their stores had sustained a huge loss in merchandise, including American Girl dolls, Furby robotic toys, Lego blocks, baby monitors, and baby carriers. With eBay’s assistance, the retail executives further determined that a particular eBay account sold large quantities of these specific items and that the amount of merchandise sold often matched the quantities of the same item stolen from one of their stores.
Representatives of Barnes and Noble, Toys R Us, and eBay provided substantial assistance to law enforcement in the investigation.
The store officials further obtained information identifying the owner of the eBay account, who resides in a Chicago suburb. They learned that the individual, who is now cooperating with law enforcement, sold $3.4 million in merchandise, with an estimated retail value of $6 million, over the past 10 years, and that the cooperating individual (CI) had purchased the merchandise from a man the CI knew as “Franko Kalath,” an alias linked to Branko Bogdanov.
Secret Service agents corroborated information from the store and eBay officials, and the CI provided them with extensive hand-written notes and receipts indicating a vast variety of items that the CI allegedly purchased from Branko Bogdanov, including toys, electronic equipment, baby supplies, and kitchenware. Agents also seized from the CI numerous items that the CI had purchased from the individual known as “Franko Kalath,” all of which appeared to be new and in their original packaging.
Further investigation revealed that Bogdanov family members share a single PayPal account and that together they had sold $692,278 in merchandise through their individual eBay accounts. Many of the items sold were similar to the items sold by the CI, the complaint alleges.
As background, the complaint affidavit details additional thefts from Barnes and Noble, Toys R Us, and other retailers that occurred between October and December 2012 in Pikesville, Md., Pembroke Pines, Fla., and Murfreesboro, Tenn., where either telephone records, video surveillance, or both allegedly show the Bogdanovs were at or near at the time and date of specific retail thefts.
On Feb. 19, surveillance followed the defendants from store to store at or near the Woodlands and Willowbrook malls in the vicinity of The Woodlands, Tex., north of Houston. During a traffic stop by Houston police, the Bogdanovs gave officers numerous items from their vehicle, and those items later matched merchandise that various stores confirmed were stolen that day, according to the complaint.
The surveillance continued the following day through Louisiana, where additional merchandise was stolen at stores in Baton Rouge and New Orleans, resulting in another traffic stop that night on northbound I-55 near Canton, Miss. The trio arrived back in Northbrook in Feb. 21. A few days later, the CI received messages from “Franko Kalath” with photos showing an array of merchandise that was available for sale, the charges allege.
The complaint describes repeated instances of Lela Bogdanov wearing a long black skirt that appeared larger and fuller when she exited various retail stores than when she entered. The dress, which was seized shortly after she was arrested, has a blue lining capable of containing multiple rectangular objects, and was allegedly used to cart hidden merchandise from stores. At times, surveillance showed items protruding from the skirt when she exited stores, often accompanied by various diversions instigated by one of more of the family members, according to the complaint.
Interstate transportation of stolen property 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 sentencing statutes and the advisory United States Sentencing Guidelines.
The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Frank Benedetto, Special Agent-in-Charge of the Chicago Office of the U.S. Secret Service. Numerous local police departments are also assisting in the investigation.
The government is being represented by Assistant U.S. Attorney Renato Mariotti.
The public is reminded that a complaint contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint
Buffalo Grove Chiropractor and Physician Among Six Indicted in Alleged $2.98 Million Health Care Fraud SchemeRead the Press Release
CHICAGO ― A chiropractor and a physician with offices in Buffalo Grove, their billing manager, and three purported patients were indicted on federal charges for their alleged roles in a $2.98 million health care fraud scheme. Five of the six defendants were also charged with hindering the investigation, federal law enforcement officials announced today. The defendants allegedly schemed over the course of a decade to obtain health insurance payments from various private insurers for patient services that were never rendered.
The chiropractor, IGOR SHER, and the physician, EGUERT NAGAJ, controlled North Suburban Chiropractic Clinic, Ltd., Advanced Arlington Medical Center, Ltd., and Advanced Arlington Sports Medicine Center, Ltd., with all three practices operating from a suite of offices at 329 and 333 West Dundee Rd., in Buffalo Grove. A third defendant, IGOR FILATOV, was the billing manager for all three practices.
Sher, 42, of Palatine; Nagaj, 48, of Buffalo Grove; and Filatov, 61, of Wheeling, were each charged with 16 counts of mail fraud, as well as one count of obstruction of justice against Sher and one count of making false statements against Filatov. The indictment also seeks forfeiture of approximately $2.98 million and four luxury automobiles from Sher, Nagaj, and Filatov, as well as five residences belonging to Sher or Nagaj or entities they controlled in Palatine, Vernon Hills, and Long Grove, in addition to commercial suites adjacent to their current offices in Buffalo Grove.
Also charged in the 21-count indictment, which was returned by a federal grand jury last Thursday, were DIMITRI KONOVOLOV, 48, of Wheeling; MARICELA HERNANDEZ, 35, of Arlington Heights; and VERA SMOLYANSKY, 53, of Wheeling, all of whom purported to be patients and allowed their personal identifying information to be used by Sher, Nagaj, and Filatov in fraudulently obtaining insurance payments. They were each charged with one count of mail fraud and one count of perjury.
All six defendants will be arraigned on dates to be set in U.S. District Court.
According to the indictment, between 2003 and January 2014, the defendants, together with unnamed co-schemers, fraudulently obtained approximately $2.98 million from insurance companies by falsely claiming that certain chiropractic or medical services were provided to patients, knowing that those services were never provided. Filatov, who also purported to be a patient, together with Konovolov, Hernandez, and Smolyansky and others, allegedly allowed their insurance information to be used by Sher and Nagaj to submit false claims for reimbursement.
The insurance companies allegedly defrauded included Blue Cross Blue Shield of Illinois, Aetna Insurance, United Healthcare, and Allstate Fire and Casualty Insurance Company.
Sher and Nagaj allegedly paid Konovolov, Hernandez, Smolyansky and other purported patients a portion of the insurance payments, or arranged to have their yearly insurance deductibles satisfied, for their participation in the scheme. As part of the scheme, Sher and Nagaj also instructed purported patients, including three co-defendants, to lie when asked about the medical or chiropractic services or purpose of the money they received, the indictment alleges.
Sher was charged with obstruction of justice for allegedly instructing others to lie to federal agents conducting the investigation. Filatov was charged with making false statements for allegedly lying to agents. Konovolov, Hernandez, and Smolyansky were each charged with perjury for allegedly lying when they testified before a federal grand jury.
Mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine on each count and mandatory restitution. The obstruction of justice count against Sher carries a maximum of 20 years in prison, and the false statements and perjury counts against other defendants carry a maximum of five years in prison, and each of those counts carry a maximum $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorney Heather McShain.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago, and Tony Gómez, Inspector-in- Charge of the U.S. Postal Inspection Service in Chicago.
An indictment contains merely 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
Two Executives Indicted in Alleged $190 Million Equipment FinancingFraud Scheme That Caused $100 Million Loss to LendersRead the Press Release
CHICAGO — An owner of a bankrupt Palatine company that sold refurbished semiconductor-making machinery and the owner of a Pennsylvania company that sold machine tools were indicted for allegedly engaging in a scheme to fraudulently obtain approximately $190 million from banks and financing companies and, eventually, causing those lenders to lose at least $100 million.
One defendant, MARK ANSTETT, 58, of Lake Forest, was president and co-owner of Equipment Acquisition Resources, Inc., (EAR), of Palatine, which purported to make semiconductor wafers and refurbish machinery used to make semiconductor wafers. His co-defendant, GEORGE FERGUSON, 69, of Carlisle, Pa., was owner and president of the former Machine Tools Direct, Inc., (MTD) of Carlisle. A third individual, Sheldon Player, who hid his involvement and role at EAR and whose wife was a co-owner, was named as an unindicted co-schemer. Player, who lived in Chicago before moving to Hoback Junction, Wyo., died last November.
Anstett and Ferguson were each charged with five counts of wire fraud, four counts of bank fraud, and one count of mail fraud in a 10-count indictment returned by a federal grand jury yesterday and announced today. They will be ordered to appear for arraignment on a date to be determined in U.S. District Court in Chicago.
The indictment also seeks forfeiture of approximately $190 million.
According to the indictment, between 2006 and October 2009, Anstett, Ferguson, Player and others used EAR and MTD to fraudulently obtain approximately $190 million in financing from various lenders based on false representations about EAR’s business operations, financial status, independence from MTD, and need for financing, resulting in losses to those lenders of at least $100 million. The defendants allegedly obtained financing for EAR to purchase equipment from MTD, and arranged sham sales transactions between the two companies, knowing there were no actual sales. Anstett, Ferguson, and Player falsely represented to lenders that EAR and MTD were separate companies engaged in arms-length sales transactions, the indictment alleges. However, after MTD received financing payments from lenders, Ferguson’s company sent most of the proceeds to EAR so that EAR could use the money to make payments on other loans.
In addition to the indictment, the United States today filed a civil lawsuit in Federal Court in Chicago to forfeit a bed and breakfast inn in Hoback Junction, Wyo., where Player lived. According to the civil complaint, MTD transferred fraud proceeds it received from lenders to various EAR bank accounts, which were then transferred to other accounts, including a joint account of Player and his wife and another account Player controlled.
Player allegedly used proceeds of the EAR fraud scheme to pay down mortgages on the bed and breakfast. Between 2006 and May 2008, he used approximately $1.8 million in fraud proceeds to pay off two mortgages, making the property subject to forfeiture, according to the civil suit against the premises.
Each count of mail, wire, and bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The indictment and forfeiture complaint 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 John Lucas, Special Agent-in-Charge of the Federal Deposit Insurance Corp., Office of Inspector General in Chicago.
The government is being represented by Assistant U.S. Attorney Jason Yonan.
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
ComplaintOwner of Elk Grove Village Company Indicted for Allegedly Defrauding 200 Investors of $9 Million Through Stock SalesRead the Press Release
CHICAGO — More than 200 investors in an Elk Grove Village company that purportedly made homeland security and food safety products lost more than $9 million through the offer and sale of stock, according to a federal fraud indictment against the company’s majority owner and chief executive. The defendant, GREGORY WEBB, chairman, chief executive officer, president, and majority shareholder of InfrAegis, Inc., was charged with eight counts of mail fraud and three counts of wire fraud in an 11-count indictment returned by a federal grand jury yesterday and announced today.
Webb, 68, of Dallas and formerly of Arlington Heights, will be arraigned on a date to be determined in U.S. District Court in Chicago.
The indictment also seeks forfeiture of more than $9 million in alleged fraud proceeds.
According to the indictment, between 2007 and October 2013, Webb and InfrAegis obtained more than $9 million from investors through offering and selling stock in the company by making false representations about the solvency and financial condition of InfrAegis, the contracts that it expected to be awarded or had been awarded, and the expected and actual returns on investments in the company. Webb formed InfrAegis in 2003 under the name Intelagents, Inc., and changed its name to InfrAegis in 2005.
Webb allegedly knew that stock-offering materials falsely portrayed InfrAegis as a financially successful company that had both high-level connections in the homeland security market and lucrative contracts for the sale of its products. Between 2007 and 2010, Webb and InfrAegis falsely represented in written materials and investor conference calls that the City of Chicago had agreed to install InfrAegis’ iaMedium ― a kiosk that purportedly could detect the presence of nuclear or biological weapons ― throughout the city and the agreement would result in profits of more than $80 million a year, the indictment alleges. While InfrAegis engaged in some discussions with the city about the installation of iaMediums in 2007 and 2008, there was never any agreement or contract to install the system in Chicago.
In 2009 and 2010, Webb and InfrAegis allegedly falsely represented that the company had a contract with the Washington Metropolitan Area Transit Authority (WMATA) to install iaMediums throughout the Washington, D.C., Metro train system. Again, there was never any agreement or contract beyond initial negotiations, which were terminated when WMATA determined that InfrAegis was not financially responsible.
The indictment alleges that Webb and InfrAegis concealed material facts from prospective and existing investors by failing to disclose that in 2007 and again in 2008, the Illinois Secretary of State’s Securities Department issued orders prohibiting Webb and InfrAegis from selling securities in or from Illinois until further order. Those orders were not lifted until June 2010, when Webb and InfrAegis entered into an agreement with the state requiring them to comply with state securities laws in the offer and sale of securities.
Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The government is being represented by Assistant U.S. Attorneys Margaret Schneider and Kruti Trivedi.
The U.S. Securities and Exchange Commission filed a civil enforcement action against Webb and InfrAegis in 2011 in Federal Court in Chicago.
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
Escrow Company Executive Allegedly Misused Customers’ Funds; Employee Charged Separately with Stealing from CompanyRead the Press Release
CHICAGO — The co-founder and president of a defunct mortgage escrow company was indicted on federal fraud charges for allegedly misappropriating more than $500,000 of customer funds for his own personal use, as well as to pay operating expenses of two other businesses. The defendant, DEREK LURIE, who controlled American Escrow LLC until it collapsed in March 2009, was charged with five counts of mail fraud in an indictment returned by a federal grand jury yesterday and announced today. Lurie also allegedly engaged in a Ponzi-type scheme in which American Escrow made the property tax and insurance payments for some customers ahead of other customers.
Separately, a former American Escrow employee, JACQUELINE CRUZ, was indicted earlier this month for allegedly fraudulently obtaining more than $400,000 from the company.
Lurie, 40, of Highland Park, was ordered to appear for arraignment on March 11 in U.S. District Court. Cruz, 38, formerly of Highland Park and currently residing in Okinawa, Japan, pleaded not guilty on Feb. 19 to three counts of mail fraud, following her indictment on Feb. 5.
According to the Lurie indictment, American Escrow ― which had offices on West Randolph and North May streets in Chicago ― fraudulently obtained and managed more than $5 million of customer escrow funds, and purported that it would hold the money in secured FDICinsured accounts to make timely tax and insurance payments for customers. Instead, between 2003 and March 2009, Lurie used approximately $554,000 for such personal expenses as parking tickets, car payments, and renovating a condominium in Miami, as well as to operate his other business interests, American Tax Reporting, Inc., and Woodland Technologies, Inc., the charges allege.
Lurie allegedly knew that all of the customers’ escrow funds were not FDIC-insured, that American Escrow was operating at a deficit, and that the funds were being used for unauthorized purposes. As a result of the deficit, Lurie made Ponzi-type payments to satisfy earlier customers’ tax and insurance debts with more recent customers’ escrow funds, and concealed the scheme from his customers, the indictment alleges.
Cruz, whose duties included accounting, issuing company checks, and overseeing the payment of customers’ property taxes and private mortgage insurance, allegedly misappropriated approximately $412,000 from American Escrow. Between May 2005 and March 2009, she wrote 122 company checks to herself, knowing that they were unauthorized and she was not entitled to the funds, according to her indictment. It alleges that she either forged Lurie’s signature or signed the check herself.
Both indictments seek forfeiture of the alleged fraud proceeds: $554,000 against Lurie and $412,000 against Cruz.
In both cases, each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictments were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorney Jessica Romero.
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.
Lurie Indictment
Cruz IndictmentPharmacist Sentenced to Seven Years in Prison for Obtaining $1.7 Million from Health Insurers for Drug He Never DispensedRead the Press Release
CHICAGO — A Chicago pharmacist was sentenced to seven years in federal prison after being convicted at trial of collecting more than $1.7 million through false claims he submitted to insurance companies for a drug that he never dispensed and stealing the identities of unsuspecting pharmacy customers to make that money, which he used to finance a lavish lifestyle. The defendant, RONALD KIELAR, also created fake documents to make his false insurance claims appear legitimate.
Kielar, 76, of Mundelein, was a pharmacist at the former Cartagena Pharmacy, located in the 1500 block of West Devon Avenue, which was owned by his ex-wife. He was sentenced to five years in prison on six counts of health care fraud and one count of obstruction of justice, and received a mandatory consecutive sentence of two years on three counts of aggravated identity theft. Kielar, who was convicted on all 10 counts he was charged with at a trial last fall, was ordered to begin serving the 84-month sentence on June 10.
U.S. District Judge Robert M. Dow, Jr., who imposed the sentence on Friday, also ordered Kielar to pay more than $1.725 million in restitution and to forfeit nearly $78,000 in proceeds from the sale of property he owned in Florida.
According to court documents, Kielar used patients’ insurance information, including their names and dates of birth, to bill for the drug Procrit, which stimulates the production of red blood cells. These patients, however, were never prescribed Procrit, Kielar never provided them with the medication, and the patients never authorized the use of their insurance information to submit claims for payment. After he was indicted, Kielar forged prescriptions, patient receipts, and false invoices to make the insurance claims look legitimate. Between November 2004 and August 2010, Kielar submitted 603 false claims and received more than $1.7 million from Blue Cross and Blue Shield of Illinois and the United Food and Commercial Workers Unions and Employers Midwest Health Benefit Fund.
“Each time [Kielar] hit the submit button on the pharmacy’s computer for a Procrit claim, he made a calculated choice: to lie to the victim insurance company who received, processed, and paid on the claim,” Assistant U.S. Attorney Heather McShain wrote in a sentencing memo. Kielar also betrayed a physician who had been his friend for 40 years and whose name and DEA registration number Kielar used without permission, as well as unsuspecting patients whose personal information he used.
Evidence showed that Kielar used proceeds from the fraud scheme to pay salaries to himself and his ex-wife, and then used those funds to pay mortgages on his home in Illinois, as well as properties in Florida and Arizona.
The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago; and John Redmond, Special Agent-in-Charge of the Chicago Office of the U.S. Food and Drug Administration Office of Criminal Investigations.
The government was represented by Assistant U.S. Attorneys Heather McShain and Steven J. Dollear.
Former Sycamore Resident Indicted on Child Pornography ChargesRead the Press Release
ROCKFORD — A former Sycamore, Ill. resident was indicted today by a federal grand jury in Rockford for allegedly transporting and possessing child pornography. MICHAEL PODOLSKY, 26, now of Elkader, Iowa, was charged with two counts of transporting child pornography via the internet, and one count of possessing child pornography that had crossed state lines.
Transporting child pornography carries a mandatory minimum sentence of five years and a maximum of 20 years in prison, while possessing child pornography carries a maximum of 10 years in prison. If convicted, the actual sentence will be determined by a United States District Court Judge, guided by the United States Sentencing Guidelines.
The indictment was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation; and Donald M. Thomas, Chief of the Sycamore Police Department. The government is represented by Assistant United States Attorney Michael D. Love.
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
Former Rockford Physician Charged with FraudRead the Press Release
ROCKFORD — A former Rockford physician was indicted today by a federal grand jury in Rockford on two counts of making false statements in a bankruptcy case and three counts of mail fraud. The indictment alleges that LYNN Y. ZOIOPOULOS (also known as Lynn Shelton-Zoiopoulos, Lynn Y. Shelton, Lynn Yenko, Lynn Yenko Zoiopoulos, Lynn Yenko Shelton-Zoiopoulos, and Lynn Zoiopoulos), 58, now of Chicago, Ill., filed a Chapter 7 Bankruptcy Petition on August 11, 2009. As alleged in the indictment, Zoiopoulos failed to disclose that she had an interest in the estate of her deceased grandmother, and that she fraudulently concealed property from the bankruptcy trustee, creditors, and the United States Trustee. The indictment further alleges that Zoiopoulos made false statements on a bankruptcy schedule and a Statement of Financial Affairs, both of which were filed under penalty of perjury.
According to the indictment, Zoiopoulos was Executor of her deceased grandmother’s estate, in which she and her sister were beneficiaries. It is alleged Zoiopoulos devised a scheme to defraud the estate and her sister, by misappropriating hundreds of thousands of dollars of assets of the estate for her own personal use and benefit. It is further alleged that Zoiopoulos concealed her embezzlement of estate assets by not filing the required inventory, accounting, tax returns, and status reports for the estate, and falsely asserted to the Trustee of her bankruptcy case that the remainder of the estate’s assets were earmarked for her sister. It is also alleged that in carrying out the scheme, Zoiopoulos caused checks representing assets of the estate to be sent to her using the United States mail.
Each charge of mail fraud carries a maximum penalty of up to 20 years in prison, and each count of providing material false statements or documents under penalty of perjury in a bankruptcy case carries a maximum penalty of 5 years in prison. Each count also carries a fine of up to $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater. The judge may also impose a sentence of probation of one to five years, and a term of supervised release of up to three years. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.
Members of the public are reminded that a criminal indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt of the defendant beyond a reasonable doubt.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation.
The government is represented by Assistant U.S. Attorney Michael D. Love.
Indictment
Chicago Woman Sentenced to 13 Years in Federal Prison for Swindling 1,000 Elderly Victims of Cash and Credit CardsRead the Press Release
CHICAGO — A Chicago woman was sentenced today to more than 13 years in federal prison for swindling at least 1,000 elderly victims of cash and credit cards, causing a loss of at least $800,000, over a period of five years. The defendant, TIFFANY HALL, was the mastermind of a scheme that targeted elderly victims, often widowed and living alone, and bilked some of them of their retirement and life savings.
Hall, 30, of Chicago, was sentenced to 159 months in prison and was ordered to pay $328,353 in restitution to more than 70 known, identified victims, by U.S. District Judge Amy J. St. Eve. Hall pleaded guilty to wire fraud and aggravated identity theft in January 2013, and has been in federal custody since she was arrested in early 2011.
Between 2006 and 2011, Hall, whose conduct was described as “ruthless” by Assistant U.S. Attorney Jennie Levin, spent nearly every day contacting victims and obtained cash and/or credit cards. Between 2009 and 2011 alone, Hall stole approximately $300,000 to $400,000 in cash from victims, and she used the stolen money to gamble and to purchase cars, designer bags and shoes, televisions, gift cards, clothes, consumer electronics, and other items. She also used the money to pay bills and expenses for herself and her husband, Lawrence Hall, 33, who was sentenced on Jan. 29 to 10 years in prison for his participation in the fraud scheme.
In pleading guilty, Hall admitted that, in 2006, she began calling victims and falsely telling them that she was a fraud investigator, either with the State of Illinois or a specific bank. She told the victims that their credit cards had been stolen or there was unusual activity on their accounts. After she gained the victims’ trust, she coaxed them to provide her with their credit or debit card numbers and personal identifying information, which she then used to purchase merchandise online and pay expenses for herself and her husband.
Beginning in 2007, Hall began meeting victims in person, asking them to provide her with their actual credit cards. In 2009, Lawrence Hall began recruiting runners to pick up victims’ cards and the Halls paid them in cash or allowed them to use the cards to purchase merchandise for themselves. About the same time, the Halls and their runners also started fleecing victims of their cash in addition to credit and debit cards.
Two other co-defendants were indicted with the Halls. Shana Banks, 30, of Chicago, pleaded guilty and is awaiting sentencing next month. Creassi Harris, 23, of Chicago, has pleaded not guilty and the charges are pending.
The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Chicago Police Superintendent Garry McCarthy.
Two Former Milledgeville Credit Union Employees Plead Guilty to EmbezzlementRead the Press Release
ROCKFORD — Two former employees of Milledgeville Community Credit Union, have pleaded guilty in separate federal cases to embezzling money from Milledgeville Community Credit Union, in Milledgeville, Ill. KIMBERLY KENT, 53, who was also a former Treasurer of Wysox Township, pleaded guilty in federal court today, and KELSEY SELMAN, 37, pleaded guilty on Jan. 28, 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.
In Selman’s written plea agreement, Selman admitted that from 2007 through February 2012, she embezzled approximately $100,975.74 from Milledgeville Community Credit Union. Selman worked as a teller for the credit union handling deposits and withdrawals on accounts, including her own credit union account. According to the plea agreement, Selman repeatedly took money over that period of time, using the credit union’s computer system to apply credits to her personal account that did not have a corresponding deposit. As a result, the credit union’s records falsely reflected that Selman’s cash drawer increased by an amount to offset the deposit into her account. After she credited the money into her account, Selman used the money she embezzled for personal purposes.
Kent and Selman each face a maximum sentence of 30 years’ imprisonment, a term of supervised release of up to 5 years following imprisonment, and a fine of up to $1 million. Each defendant has repaid Milledgeville Community Credit Union for the full amount of the loss. Sentencing for Kent is set for June 2, 2014, at 2:30 p.m. Sentencing for Selman is set for May 7, 2014, at 2:30 p.m.
The guilty pleas 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 Federal Bureau of Investigation.
The government is represented by Assistant U.S. Attorney Scott R. Paccagnini.
Kent Plea Agreement
Selman Plea AgreementKenneth Conley Given 41-month Sentence for MCC Escape, to Be Served Consecutively to 20-Year Term for Bank RobberyRead the Press Release
CHICAGO — A Tinley Park man who escaped from the Metropolitan Correctional Center in the city’s Loop in December 2012 while he was awaiting sentencing for bank robbery, today was sentenced to 41 months in prison for the escape, which he was ordered to serve consecutively to the 20-year sentence he received last year for the bank robbery. The defendant, KENNETH CONLEY, 39, remained at large for approximately two weeks after the escape before he was apprehended in south suburban Palos Hills.
Noting Conley’s extensive criminal history, U.S. District Judge Gary Feinerman called him “incorrigible,” and said Conley “needs to be incapacitated for a lengthy time to protect the public.” The judge ordered the 41-month term to be served consecutively to the maximum 20- years sentence Conley received from a different judge for the bank robbery. Conley faced a maximum sentence of five years in prison for the escape.
Conley was also ordered to pay $1,324 in restitution to the U.S. Bureau of Prisons for damage to the MCC. Conley and another convicted bank robber, Joseph Banks, escaped through the wall of their cell and repelled down the exterior of the high-rise federal detention facility. Banks was apprehended a few days later and is still awaiting sentencing for his earlier trial conviction on four counts of bank robbery.
The sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and U.S. Marshal Darryl McPherson.
Physician Arrested for Allegedly Illegally Dispensing Oxycodone and Falsely Billing Medicare in Undercover ProbeRead the Press Release
CHICAGO — A southwest suburban physician was arrested yesterday on federal charges for allegedly conspiring to illegally dispense a prescription medication and health care fraud, federal law enforcement officials announced today. The defendant, SATHISH NARAYANAPPA BABU, the owner of Anik Life Sciences Medical Corp., allegedly conspired to illegally dispense oxycodone and fraudulently billed Medicare for services he purportedly provided.
Federal agents with the Drug Enforcement Administration, the U.S. Department of Health and Human Services Office of Inspector General, and the FBI yesterday executed federal search and seizure warrants at Bubu’s residence in Bolingbrook and Anik’s offices in Darien in connection with the ongoing investigation of alleged prescription drug diversion and health care fraud. Agents seized more than $100,000 from Anik’s bank accounts. Anik Life Sciences was located in Arlington Heights before relocating to Darien last fall.
Babu, 47, was charged with one count each of conspiracy to illegally dispense a controlled substance and health care fraud in a criminal complaint. He was released on a $100,000 unsecured bond and prohibited from writing any prescriptions or submitting any claims to Medicare by U.S. Magistrate Judge Sheila Finnegan. Babu was ordered to return for a status hearing at 9:15 a.m. next Tuesday in U.S. District Court.
According to the complaint, between November 2012 and December 2013, Babu issued five prescriptions, each for 60 doses of 80mg strength OxyContin, to a patient who was actually an undercover agent, despite never having seen or examined the patient, and Babu permitted unlicensed personnel associated with Anik Life Sciences to issue prescriptions to the patient. During the same period, Babu allegedly submitted false claims to Medicare for services purportedly provided to the patient that were not rendered by Babu or another medical professional licensed in Illinois.
The undercover agent posed as a healthy individual purportedly covered by Medicare and seeking physician services to obtain prescription medication, including oxycodone. The agent further purported to have shoulder pain from a previous injury and to be on disability. On approximately 10 occasions, representatives from Anik Life Sciences, none of whom were licensed as physicians, nurses, or other medical professionals in Illinois, visited the undercover agent in his purported apartment.
Babu allegedly caused unlicensed personnel from Anik Life Sciences to provide purported medical care ― including prescriptions issued under Babu’s name and DEA registration number for controlled substances ― to the undercover agent and then billed Medicare for that purported care. Furthermore, the approximately 300 OxyContin pills that Babu allegedly prescribed to the undercover agent were paid for in large part by Medicare.
The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; Lamont Pugh III, Special Agent-in-Charge of the Chicago Regional Office of the HHS-OIG; and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorney Sarah Streicker.
Conspiracy to illegally dispense oxycodone carries a maximum penalty of 20 years in prison and a $1 million fine, and 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 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.
Complaint
Ottawa, Illinois Man Sentenced to 7½ Years in Federal Prison for Receiving Child PornographyRead the Press Release
CHICAGO — An Ottawa, Ill., man was sentenced yesterday to 7½ years in federal prison for amassing a large collection of child pornography over more than four years. The defendant, JAY ARTHUR WIDEMANN, 57, of Ottawa, pleaded guilty last October to receiving child pornography, admitting that he had collected more than 10,500 illicit images and videos.
Widemann formerly owned an appliance store in Ottawa and there were no allegations or indications of any sexual contact with minors.
Widemann was also ordered to pay $70,000 in restitution ― $10,000 to each of seven identified victims ― and he was placed on supervised release for five years following his prison term by U.S. District Chief Judge Ruben Castillo. Widemann was ordered to surrender on April 2 and must serve at least 85 percent of his sentence before he is eligible for release. There is no parole in the federal prison system.
In imposing the sentence, Judge Castillo said it sends a message that such collections of child pornography must be stopped.
According to court documents, Widemann was charged after the Ottawa Police Department received information from the Dutch National Police in Holland that a computer in Ottawa had been used to download child pornography from a Dutch website with massive collections of child pornography. The internet protocol address of that computer was traced to Widemann’s store in Ottawa. After further investigation, Ottawa police learned that Widemann maintained a large collection of child pornography on his computers at his store and residence, which he had accumulated between 2004 and 2009.
Widemann’s “collection of child pornography contained approximately 10,532 images and videos of child pornography, including acts of penetration, extreme degradation, bestiality, and bondage,” Assistant U.S. Attorney Jennie Levin wrote in a sentencing memo.
The federal 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 sentence was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
Former Cook County Commissioner Moreno Sentenced to 11 Years in Prison for Series of Public Corruption SchemesRead the Press Release
CHICAGO — Former Cook County Commissioner JOSEPH MARIO MORENO was sentenced today to 11 years in federal prison for engaging in a series of public and personal corruption schemes over a span of three years. Moreno pleaded guilty on July 1, 2013, to conspiracy to commit extortion after he was initially charged in late June 2012, about 18 months after he left public office.
Moreno, 61, of Chicago, a lawyer who served more than 16 years as an elected county commissioner until December 2010, was sentenced to 132 months in prison, and he was ordered to forfeit $100,000 and pay a total of more than $138,000 in restitution by U.S. District Judge Gary Feinerman. Moreno was ordered to begin serving his sentence on April 21.
“Mr. Moreno was not a reluctant participant in these schemes; he was an eager participant,” Judge Feinerman said, adding that Moreno “embraced them with gusto and pursued them with vigor.”
Moreno “repeatedly pursued his own interests at the expense of those he was supposed to serve. . . . [H]e extorted a reputable business and corrupted the highest levels of Cook County government, the Town of Cicero, and a private hospital. He also evaded taxes and suborned perjury so he could reduce his child support obligations. And when he was confronted about his crimes, he obstructed justice by providing the government with false invoices in an effort to conceal his criminal conduct,” Assistant U.S. Attorneys Christopher J. Stetler and Megan C. Church wrote in a government sentencing memo.
Notably, they argued, Moreno conceived a motto of governing that captured his corrupt approach to public office: “I don’t want to be a hog. I just want to be a pig. Hogs get slaughtered. Pigs get fat.”
Moreno pleaded guilty to conspiracy to extort an un-named company that was awarded a contract to help improve Cook County Hospital’s revenue cycle into using his friend and codefendant, Ron Garcia, and his business, Chicago Medical Equipment & Supply, Inc., as a minority subcontractor in return for a $100,000 bribe. Garcia forgave a $100,000 mortgage loan to Moreno in exchange for Moreno’s efforts to steer the lucrative sub-contract to Garcia’s company, and Moreno tried to disguise the bribe by claiming that he had repaid the purported loan.
In pleading guilty, Moreno also agreed that he sought to obtain orders of Dermafill bandages from Cook County in return for kickbacks while he and his staffer, co-defendant and former Chicago Ald. Ambrosio Medrano, were Cook County officials; sought to obtain approval for a waste-transfer station in return for kickbacks while a Town of Cicero official; and evaded his federal income taxes between 2007 and 2010 by misreporting the income from his law office.
According to sentencing documents, between 2008 and 2010, Moreno engaged in those schemes, as well as five other schemes to:
- enrich himself through kickbacks in return for passing a “green” resolution while a Cook County Commissioner;
- obtain medical-transcription business from Cook County in return for kickbacks concealed as legal fees;
- obtain orders of Dermafill bandages from a private hospital by bribing a hospital official;
- enrich himself through kickbacks while a Town of Cicero official;
- reduce his child-support obligations by suborning perjury during a court hearing.
Medrano, 60, of Chicago, the former alderman who later worked on Moreno’s county staff, was sentenced last month to a total of 13 years in federal prison after pleading guilty in one case involving Moreno and being convicted at trial last year in a separate corruption case that stemmed from the same FBI undercover investigation.
Garcia, 54, of Homer Glen, and two other co-defendants, Gerald W. Lombardi, 61, of Darien, and his son, Jerry A. Lombardi, 34, of Downers Grove, who were agents of Chasing Lions, LLC, a disabled-veterans-owned business in Lisle that sold the Dermafill bandages, pleaded guilty to their roles in the scheme and are awaiting sentencing. A sixth co-defendant, Stanley Wozniak, 51, of Chicago, is awaiting the disposition of charges.
The Moreno 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.
Kane County Man and Co-Defendant Sentenced to Federal Prison Terms for $6.6 Million Financing Fraud SchemeRead the Press Release
CHICAGO ― Two defendants who engaged in a fraudulent financing scheme involving the offer and sale of investments in four Las Vegas companies were sentenced to 3½ and four years in federal prison, respectively, for defrauding approximately 125 investors of about $6.6 million, including some victims who lost some or all of their retirement or college savings funds.
RODERICK RIEMAN, 69, of St. Charles, who owned and operated Innovative Financial Services, Inc., a former insurance and investment business in St. Charles, was sentenced to four years in prison and ordered to begin serving his sentence on May 27. MICHAEL CROOK, 55, of Los Angeles and formerly of Chicago and Las Vegas, the former president of the Las Vegas companies, which purportedly engaged in interactive kiosks, prepaid debit cards, and restaurant reservation software, was sentenced to 42 months in prison and ordered to begin serving his sentence on June 24.
U.S. District Judge Harry Leinenweber, who sentenced both men yesterday, also ordered each to pay $6.6 million in restitution.
Crook, was president of Z Touch Systems, Inc., Global Payment Solutions, Inc., Bluko Information, Inc., and Smart Restaurant Solutions, Inc., and Rieman, through his company and salesmen working for him, was primarily responsible for making the offers and sales of investments in Crook’s companies. Crook cooperated with the government’s investigation and both defendants pleaded guilty to mail fraud after they were indicted in 2011.
According to court documents, between 2004 and August 2007, Crook and Rieman misrepresented the expected return on investments, the risks associated with the investments, the existence and value of collateral, the use of proceeds, the source of funds used to make promised payments, the status of investments, and the financial condition and business transactions of the companies. They misappropriated a part of the funds raised to make Ponzi-type payments to investors and to benefit companies and individuals other than those directly relating to the particular investment.
For example, the defendants offered and sold investments in interactive kiosks called “ODIEs” (On Demand Interactive Environments), purportedly manufactured and sold by Z Touch. The investments offered an annual return of 18 percent in monthly payments, repayment of principal in 36 months and a security interest in a particular ODIE. Although the defendants offered and sold more than 250 of these investments, only a small number of ODIEs were ever built, none were successfully placed in businesses, and no revenues were generated.
One victim, a retired school teacher, made two separate investments totaling $500,000 of her retirement funds in what Rieman purported were 27 ODIEs and, ultimately, she lost more than $400,000 of her investment.
The government was represented by Assistant United States Attorneys Edward G. Kohler and Kruti Trivedi.
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 Illinois Department of Securities assisted in the investigation.
Two Men Charged with $983,000 Investment Fraud SchemeRead the Press Release
ROCKFORD — A Rockford man and a California man were indicted today by a federal grand jury in Rockford on fraud charges. TODD C. SMITH, 46, of Rockford, was charged with seven counts of mail fraud and ten counts of wire fraud, and TRAVIS OLIVER, 36, of Tremecula, Cal., was charged with eight counts of mail fraud and fifteen counts of wire fraud, in connection with a scheme to defraud investors by falsely representing to investors that their investments in Electus Asset Holdings were guaranteed, fraudulently obtaining more than $983,000 from the investors.
According to the indictment, Oliver was sole managing member of Electus Asset Holdings, and both Oliver and Smith solicited individuals to invest in Electus Asset Holdings, engaging in a scheme from Feb. 13, 2009, to at least March 2012, to defaud investors. The indictment alleges the defendants falsely represented to the investors that their investments would be returned in one year, yielding a guaranteed rate of interest per month, and that the funds could be withdrawn at any time without penalty. However, it is alleged the defendants knew a large portion of the investors’ funds was used to pay personal and other expenses, such as commissions to the defendants, and to make interest and principal payments to other individuals who had invested money with Oliver prior to the formation of Electus Asset Holdings in January 2009, and that the remainder of the investors’ funds was placed in a non-guaranteed investment.
It is further alleged that in order to conceal their false promises and misrepresentations, and prevent the investors from demanding the return of their principal, defendants used funds from new investors to pay interest and principal owed to prior investors. The indictment also charges that defendants mailed monthly statements and IRS 1099-INT forms to investors that falsely stated that the investors had earned interest on their investments, when defendants knew no interest had been earned on the investments.
The indictment alleges that when investors requested the return of their interest and principal, Oliver and Smith made false statements and promises to conceal the fact the investors’ money had been spent or lost in high risk investments, including that the investors’ checks were going to be issued shortly, that their checks were lost in the mail, and that the investors’ money was invested in company that was under investigation by the Federal Trade Commission and its assets had been frozen.
Each count of mail fraud and wire fraud carries a maximum penalty of 20 years in prison, and a maximum fine of $250,000, or an alternate fine totaling twice the loss or twice the gain derived from the offense, whichever is greater. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines, as well as restitution. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Antonio Gomez, Postal Inspector-In-Charge of the Chicago Division of the U.S. Postal Inspection Service. The Illinois Secretary of State Securities Department assisted in the investigation.
The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.
The public is reminded that an indictment is only a charge and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving each defendant’s guilt beyond a reasonable doubt.
Indictment
Local Physician Indicted on Charges of Healthcare FraudRead the Press Release
ROCKFORD — A suspended Rockford physician was indicted today by a federal grand jury on charges of healthcare fraud. CHARLES S. DEHANN, 59, of Belvidere, Ill., was charged with nine counts of engaging in a scheme to defraud Medicare.
The indictment alleges that DeHaan, a physician licensed in Illinois, and president of Housecall Physicians Group of Rockford, S.C., treated numerous patients at Rockford-area assisted living facilities and, as a physician, had access to patients and patient records. The indictment alleges that, from January 2013 through Jan. 24, 2014, in order to enrich himself, DeHaan submitted false claims to Medicare for reimbursement for medical services that DeHaan provided to patients in their homes. As part of the scheme, DeHaan allegedly obtained patient information of Medicare beneficiaries through his affiliation with and privileges granted to him at various Rockford-area assisted living facilities, without the knowledge or consent of the patients. It is also alleged that DeHaan billed for medical services purportedly provided to patients whom DeHaan never actually treated, and billed routine visits with Medicare patients at the highest levels of in-home care when he knew that his visits with these patients typically did not qualify for such billing.
In addition, DeHaan allegedly billed for medical services provided to patients when he knew he did not provide any reimbursable medical service. For instance, on multiple occasions, DeHaan billed Medicare for medical services purportedly provided to patients, when DeHaan’s visit with the patient involved no medical care and instead involved DeHaan’s having sexual contact and attempting to have sexual contact with a patient and making sexual advances toward a patient, according to the indictment.
DeHaan was initially charged with federal healthcare fraud last month when he was arrested on a criminal complaint. He was released on bond and will appear for arraignment on February 12, 2014, at 10:00 a.m. in Federal Court in Rockford, before U.S. Magistrate Iain D. Johnston.
Each count of healthcare fraud carries a maximum potential penalty of up to 10 years in prison, a fine of up to $250,000, and full restitution. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Lamont Pugh, III, Special Agent-in-Charge of the Chicago Regional Office of the U.S. Department of Health and Human Services Office of Inspector General.
The federal case was investigated by the FBI and HHS-OIG, with the assistance of the Illinois Department of Financial and Professional Regulation. The government is being represented by Assistant U.S. Attorney Scott R. Paccagnini.
The public is reminded that an indictment is only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving his guilt beyond a reasonable doubt.
Indictment
Seven Defendants Indicted in Six Armed Robberies of Cell Phone Stores in Chicago Suburbs, Indiana and Downstate IllinoisRead the Press Release
CHICAGO — Seven defendants were indicted on federal charges for their alleged roles in a series of at least six armed robberies of cellular telephone stores last year that extended from suburban Chicago to Indiana and downstate Illinois. Two defendants, ERIC ROGERS and ERIC CURTIS, who allegedly directed a robbery conspiracy, were arrested on federal charges in December following the robbery of a cellular telephone store in suburban Woodridge. The other five defendants, all of whom are in state custody, were charged federally for the first time in this district in a nine-count indictment returned by a federal grand jury yesterday and announced today.
Rogers, 39, of Hazel Crest, and Curtis, 29, of Park Forest, allegedly selected the stores that were robbed, recruited their co-defendants to participate in the robberies, provided them with firearms and other equipment, and paid them to commit armed robbery at their direction. They were each charged with one count of robbery conspiracy, three counts of robbery, and two counts of brandishing firearms, and Curtis alone was charged with being a felon-in-possession of a firearm. Both remain in federal custody without bond.
Also indicted were: MARCUS HARRIS, 20, of Chicago; DANIEL WRIGHT, 28, of Chicago; ANDRE WADLINGTON-ANTHONY, 27, of Harvey; TONY JOHNSON, 20, of Harvey; and LAVELL HUGHES, 41, of Gary, Ind. Four of the five were charged with one count each of robbery and brandishing a firearm, while Wadlington-Anthony was charged with two counts of each of those crimes.
All seven will be arraigned on dates yet to be determined in U.S. District Court.
According to the indictment, the defendants in various combinations, committed the following armed robberies in 2013:
- Jan. 31 – Sprint store, 1323 West Lake St., Addison;
- Feb. 4 – AT&T store, LaPorte, Ind.;
- March 19 – AT&T store, 4155½ North Harlem, Norridge. Court documents allege the loss of approximately 100 phones and tablet computers valued at approximately $54,000 in this robbery;
- April 4 – Sprint store, East Peoria, Ill.;
- April 8 – T-Mobile, 110 South Waukegan Rd., Deerfield; and
- Dec. 14 – T-Mobile, 1001 West 75th St., Woodridge.
The indictment alleges that Rogers and Curtis also conspired with Rogers’ deceased cousin, Ryan Rogers, who, following the March 19 Norridge robbery, drove toward a Chicago police officer attempting to stop his vehicle and was shot and killed.
Each count of robbery carries a maximum penalty of 20 years in prison and a $250,000 fine, and each count of brandishing a firearm carries a consecutive, mandatory minimum of seven years in prison and a maximum of life. Curtis also faces a maximum 10-years sentence on the felon-in-possession charge. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The case was investigated by the FBI’s Safe Streets Task Force, which is comprised of the FBI and the Chicago Police Department. The police departments in Addison, Deerfield, Homewood, Norridge, Woodridge, LaPorte, Ind., and East Peoria, Ill., also assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Christopher Parente.
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
Brothers Sentenced to Life in Prison for Murder in Aid of Racketeering Involving False Identification Document RingRead the Press Release
CHICAGO — Two brothers were sentenced today to life in federal prison for murder in aid of racketeering and related crimes they were convicted of after a seven-week trial in U.S. District Court last year. JULIO and MANUEL LEIJA-SANCHEZ, who operated a lucrative, black-market counterfeit identification document business in Chicago’s Little Village community for at least 15 years, each received the mandatory life sentence from U.S. District Judge Rebecca Pallmeyer. There is no federal parole.
The Leija-Sanchez brothers were convicted together with GERARDO SALAZARRODRIGUEZ, whom they directed to commit an execution-style murder in Mexico of a fledgling competitor. The murder plot was intended to prevent two former employees from starting a competing business and to maintain control over employees of their enterprise, which generated annual revenues of at least $3 million. Salazar-Rodriguez also faces life imprisonment and is scheduled to be sentenced on Feb. 14.
“Julio and Manuel Leija-Sanchez were the kingpins of a decades-long, multimilliondollar international criminal organization and they killed to protect their own pocketbook and the empire they built,” Assistant U.S. Attorney Michelle Nasser said at today’s sentencing hearing.
Evidence at trial showed that Salazar-Rodriguez, at the direction of Julio and Manuel Leija-Sanchez, fired more than a dozen shots in killing one of the victims in his taxi cab near Mexico City in April 2007, and the jury heard transcripts of intercepted telephone conversations in which he boasted to the brothers after the murder. He and Manuel Leija-Sanchez also hunted for a second victim whom they believed was in Mexico at the time but who was actually in federal custody in Chicago. That intended victim, who pleaded guilty to fraudulent identification document charges, cooperated and testified as a government witness at trial.
The case was part of Operation Paper Tiger, an investigation conducted by U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) agents, along with other federal, state, and local law enforcement agencies. In April 2007, the investigation resulted in charges against 24 defendants and the dismantling of the Leija-Sanchez fraudulent document organization that operated in and around the Little Village Discount Mall at West 26th and Albany in Chicago. All but three defendants who remain fugitives were convicted.
Manuel Leija-Sanchez, 46, and Salazar-Rodriguez, 41, were arrested later in Mexico and were extradited to the United States in 2010 and 2011 to stand trial, together with Julio Leija- Sanchez, 38, who was arrested in Chicago in 2007. A third Leija-Sanchez brother, Pedro, 41, was also arrested in Mexico and extradited to the U.S in 2011. He pleaded guilty in 2012 to racketeering conspiracy for operating the fraudulent ID ring with his brothers and was sentenced last March to 20 years in prison.
Evidence at trial showed that the three Leija-Sanchez brothers operated the bustling illegal business between 1993 and 2007. The organization was supervised by an overall leader living in Chicago, and the leadership position rotated among the Leija-Sanchez brothers. The organization sold as many as 100 sets of fraudulent identification documents each day, charging customers approximately $200 per “set,” consisting of a Social Security card and either an immigration “green card” or a state driver’s license.
Manuel and Julio Leija-Sanchez and Salazar-Rodriguez conspired to murder Guillermo Jimenez-Flores, also known as “Montes,” a former member of their organization who became a rival and was shot to death by Salazar-Rodriguez in Mexico. The three trial defendants were also convicted of conspiracy to kill a second victim, Bruno Freddy Ramirez-Camela, who they believed was in Mexico but was actually incarcerated in Chicago.
The sentences 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. Also participating in the investigation were the Chicago Police Department and the Galveston, Tex., Police Department, and the Chicago offices of the U.S. Secret Service, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Government of Mexico and Mexican law enforcement partners also provided significant assistance.
The government is represented by Assistant U.S. Attorneys Michelle Nasser, Andrew Porter and William Ridgway.
Former Commodities Trader Sentenced to 6½ Years in Prison for $5.3 Million Loss to Victims in $10 Million Fraud SchemeRead the Press Release
CHICAGO ― A former Chicago commodities trader was sentenced to 6½ years in federal prison for fraudulently obtaining more than $10 million and misappropriating a substantial portion of the money for his personal commodities futures trading, to make Ponzitype payments to investors, and to benefit himself and his family, resulting in a loss of $5.3 million. The defendant, BRADLEY SCHILLER, used some of the funds to pay for personal and family expenses, including a Range Rover, jewelry, condominium fees, housing rental fees for his mother-in-law, and country club fees.
Schiller, 37, of Chicago, was ordered today to pay $5.33 million in restitution by U.S. District Judge Elaine Bucklo, completing his sentencing that began last month. Schiller was ordered to begin serving his 78-month sentence in mid-April. He pleaded guilty to wire fraud last October.
According to court documents, Schiller represented himself as a successful commodities futures trader and raised more than $10 million between 2007 and 2012 from various victims, including The PrivateBank and Trust Company. Schiller lied to sources and prospective providers of funds about the profitability of his futures trading, the use of money he raised, the risks involved in providing him with money, his financial condition, and the status of the funds. He concealed the fraud scheme by making Ponzi-type payments to victims and by creating and distributing fraudulent documents, including phony commodities brokerage and bank account statements, false financial statements, and false tax forms. During the scheme, Schiller had trading losses of more than $1.5 million and needed to continually raise new funds to repay earlier providers of funds.
In obtaining a $2 million line of credit from The PrivateBank, Schiller falsely represented that he had a net worth of about $2.6 million and an overall balance in his commodities accounts in 2009 of approximately $5.5 million. Schiller knew, however, that he had a negative net worth at the time and his overall balance in his commodities accounts was nearly zero.
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 Commodity Futures Trading Commission provided assistance.
The government was represented by Assistant U.S. Attorney Edward Kohler.
South Suburban Father and Son Indicted for Allegedly Operating $2 Million Synthetic Marijuana Mail Order BusinessRead the Press Release
CHICAGO — A father and son were indicted on federal charges for allegedly operating a nationwide mail order synthetic marijuana business in the south suburbs that netted them approximately $2 million over three years, federal law enforcement officials announced today. Following an undercover investigation, JAMES M. BOLIN and his son, JAMES P. BOLIN, were charged with multiple offenses relating to misbranding and trafficking drugs, and James M. Bolin was also charged with money laundering. Both defendants allegedly defrauded and misled the Food and Drug Administration and the Drug Enforcement Administration regarding the drug status of their purported “herbal” products to avoid regulation of the drugs they sold.
Federal agents seized hundreds of packages of allegedly illegal synthetic cannabinoids, or a version of the psychoactive component of marijuana, as well as $165,247, on June 4, 2013, when they executed a search warrant at James M. Bolin’s former residence in Manhattan, Ill., where he operated a business known as “Herbal City,” “H City,” “Shop HC,” and “Show Off City.” The defendants allegedly advertised the sale of misbranded drugs online and created videos to promote human consumption of their products.
James M. Bolin, also known as “James Matthew,” 49, and his son, James P. Bolin, aka “Jimmy,” 31, both of New Lenox, were each charged with one count of conspiracy to commit misbranding of drugs, four counts of placing misbranded drugs into commerce, five counts of receiving and delivering misbranded drugs, two counts of conspiracy to possess and distribute synthetic marijuana products, six counts of distributing controlled substances or analogues, and one count of attempting to do so. James M. Bolin alone was also charged with seven counts of money laundering.
The 26-count indictment, which also seeks the forfeiture of approximately $2 million in illegal proceeds, was returned by a federal grand jury yesterday. The Bolins will be arraigned on a date yet to be determined in U.S. District Court.
According to the indictment, between January 2010 and June 2013, the defendants conspired to introduce, receive and deliver misbranded drugs into interstate commerce. The Bolins bought and sold products that they and their suppliers ― located in California, Florida, and New York ― falsely referred to as “incense,” “herbal incense,” “herbal potpourri,” and other misleading names, but, in fact, the drugs were falsely labeled, indicating they were not intended for human consumption when they actually were. The packages also failed to bear labels identifying the name and quantity of active ingredients, as well as the name and location of the manufacturer, packer, or distributor, the indictment alleges.
The indictment identifies the following products that the Bolins allegedly bought, marketed, and sold as misbranded drugs: G-20 Herbal Potpourri, Joker Herbal Potpourri, Caution Blitzen Herbal Potpourri, Kronik Kryponite Herbal Potpourri, AK-47 24 Karat Gold Potpourri, ZenBio Sonic Zero Cherry, ZenBio Sonic Zero Blueberry, Hip Hop, Darkness Prince, Out World, Cherry Bomb, Caution Platinum Super Strong Incense, Caution Silver Super Strong Incense, Diablo Botanical Incense, Bizarro, Smoking Santa, Mr. Happy and OMG Next Generation.
The indictment alleges that the defendants used the U.S. Postal Service and commercial carriers to ship and receive their illegal products and leased mailboxes in commercial stores in Frankfort and New Lenox. They allegedly paid at least $1 million to out-of-state suppliers for the misbranded drugs they obtained, while collecting approximately $3 million in revenue from customers between 2010 and June 2013.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Gary Hartwig, Special Agent-in-Charge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) in Chicago; John Redmond, Special Agent-in-Charge of the Food and Drug Administration’s Office of Criminal Investigations in Chicago; Jack Riley, Special Agent-in-Charge of the Chicago office of the Drug Enforcement Administration; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division; and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Illinois State Police also assisted in the investigation, which was conducted under the umbrella of the Organized Crime Drug Enforcement Task Force (OCDETF).
The government is being represented by Assistant U.S. Attorney Matthew Schneider.
Each count in the indictment contain various maximum penalties, ranging from three years in prison on the misbranded drug counts to 20 years in prison on the controlled substance counts and some of the money laundering counts against James M. Bolin. Each count also carries a maximum fine ranging between $250,000 and $1 million. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Former Developer of Condo-Hotels in Chicago and Florida Sentenced to Six Years in Prison for Federal Tax EvasionRead the Press Release
CHICAGO — The former manager of a defunct Chicago-based real estate company that acquired and managed hotels, including the Blake Hotel in Chicago and others in South Florida, was sentenced today to more than six years in federal prison for evading more than $1.7 million in federal income taxes. The defendant, ROBERT D. FALOR, siphoned millions of dollars from the Blake’s operations at the expense of a lender, city and state taxing authorities, union employees, and other creditors and vendors to support a lavish lifestyle that included multimillion dollar homes, luxury cars, boats, and planes.
Falor, 48, of Chicago and formerly of River Woods and Glencoe was “a one-man financial crime wave,” U.S. District Judge Virginia Kendall said in sentencing him to 74 months in prison and ordering him to pay $1,752,948 in restitution to the Internal Revenue Service. Falor has remained in federal custody since he was arrested in 2011. He pleaded guilty in May 2013 to two counts of federal income tax evasion.
Falor was the chief operator and manager of The Falor Companies, Inc. (TFC), which involved his brother and their father and, before it ceased operating in 2006, acquired and managed hotel properties through a complex network of limited liability corporations. Through various ventures before and after 2006, Falor attempted to convert hotels to condo-hotels by selling individual guest rooms to investors as separately titled condominium units, and renting them through a related hotel management company to other guests when the owner was not in residence, with the owner receiving a percentage of the rental fee. The companies operated multiple condo-hotel ventures in the mid-2000s, including the Blake Hotel, located at 500 S. Dearborn St., in Chicago, and the Tides Hotel on Ocean Drive in Miami Beach.
From 2006 through June 2008, the Blake generated hundreds of thousands of dollars per month in revenues. But instead of paying debts to the Blake’s creditors, Falor plundered approximately $5.7 million from the hotel and diverted the cash to himself. Falor also failed to pay state income taxes, as well as city and state hotel occupancy taxes, bringing the total tax loss he caused to more than $4.1 million.
In July 2008, Accelerated Assets, LLC, a Birmingham, Mich., lender foreclosed on a mezzanine loan to renovate the Blake, ousted the Falors, took over management, and assumed its debts, which included occupancy taxes of more than $500,000 to the City of Chicago and more than $1.4 million to the State of Illinois.
Falor’s father, DAVID R. FALOR, 73, who was a principal in TFC, formerly of Chicago and Miami Beach, was extradited last year from Italy. He also pleaded guilty to tax evasion and was sentenced last month to two years in federal prison. David Falor converted $779,000 in payments that were recorded as loans from TFC, but which became taxable income when the companies went out of business and David Falor used the funds for personal expenses.
Robert Falor’s brother, CHRISTOPHER FALOR, a consultant to the condo-hotel projects, is scheduled to be sentenced on March 5 after pleading guilty to mail fraud and tax counts.
Today’s sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
The government is being represented by Assistant U.S. Attorneys Ryan S. Hedges and Barry Jonas.
Defendants convicted of tax offenses remain civilly liable to the Government for any and all back taxes, as well as a civil fraud penalty of up to 75 percent of the underpayment plus interest.
U.S. Indicts Corporate Audit Director on Securities Fraud Charges for Allegedly Profiting $286,000 from Insider TradingRead the Press Release
CHICAGO — A certified public accountant who was involved in the auditing process at a publicly-traded company based in Chicago was indicted on federal fraud charges for allegedly engaging in insider trading of the company’s securities that made him an illegal profit of more than $286,000 in 2012. The defendant, STEVEN M. DOMBROWSKI, who was the director of corporate audit for Allscripts Healthcare Solutions, Inc., was charged with 16 counts of securities fraud in an indictment that was returned by a federal grand jury yesterday and announced today.
At the same time, the U.S. Securities and Exchange Commission announced that it filed a civil enforcement action involving the insider trading allegations against Dombrowski yesterday in U.S. District Court in Chicago.
Dombrowski, 49, of Chicago, will be arraigned on the criminal charges on a date yet to be determined in Federal Court.
According to the indictment, Dombrowski misused material nonpublic information he knew about Allscripts’ performance for the first quarter of 2012 and purchased put options and engaged in short sales of stock through a trading account in his wife’s maiden name that he controlled, which resulted in illegal profits of approximately $286,211. The indictment seeks forfeiture of that amount from Dombrowski.
Dombrowski and the employees he supervised were responsible for auditing and testing the processes and procedures Allscripts used to compute and report its financial performance. Allscripts provides information technology solutions to the healthcare industry and its common stock is traded on the NASDAQ stock market under the symbol MDRX.
Between April 10 and April 28, 2012, a quarterly blackout period was in effect at Allscripts. The blackout prohibited certain employees, including Dombrowski, who were given written notice and who had access to material nonpublic information, from engaging in insider trading 15 days before the end of a quarter and ending after the second full business day following the company’s quarterly earnings announcement.
Dombrowski allegedly learned in April 2012 through his employment that Allscripts first quarter financial results were going to be less favorable than market expectations when they were publicly announced on April 26, 2012. Throughout April, Dombrowski conducted securities transactions that he designed to be profitable if the price of Allscripts stock declined, including purchasing put options and short selling stock, which he knew was prohibited, the indictment alleges. Allscripts stock, in fact, declined when its 2012 first quarter announcement revealed lower sales, less revenue, and lower earnings per share than the first quarter of 2011.
After Allscripts stock declined on and after April 26, 2012, Dombrowski allegedly offset his Allscripts securities positions and profited approximately $286,211 from insider trading, the charges allege.
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 cooperated in the investigation.
The government is being represented by Assistant U.S. Attorneys Clifford C. Histed and Paul H. Tzur.
Each count of securities fraud carries a maximum penalty of 20 years in prison and a $5 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 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
Illinois Hospice Executive Charged with Federal Health Care Fraud for Allegedly Falsely Elevating Level of Patients’ CareRead the Press Release
CHICAGO — An owner of an Illinois hospice company was charged with federal health care fraud for allegedly engaging in an extensive scheme to obtain higher Medicare and Medicaid payments by fraudulently elevating the level of hospice care for patients, many of whom resided at nursing homes he also controlled across the state. 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 ― sometimes for several years ― than the required life expectancy of six months or less.
The defendant, SETH GILLMAN, 46, of Lincolnwood, was charged with one count each of health care fraud and obstructing a federal audit in a criminal complaint that was filed late Friday in U.S. District Court. He is scheduled to appear at 3 p.m. today before Magistrate Judge Geraldine Soat Brown in Federal Court.
Gillman, an attorney, is the corporate agent, administrator, and one-fourth owner of Passages Hospice, LLC, based in west suburban Lisle, and is also the agent and secretary of Asta Healthcare Company, Inc., which operates Asta Care Center nursing homes in Bloomington, Colfax, Elgin, Ford County, Pontiac, Rockford, and Toluca, in Illinois. Passages did not have its own inpatient facility, but instead deployed nurses to visit hospice patients in nursing homes and private residences. As Passages grew, it divided its operations into geographic regions covering Chicago and the western suburbs, Rockford, Bloomington, and Belleville, with different nurses, nursing directors and medical directors for each region.
The charges allege that between August 2008 and January 2012, Gillman trained and caused to be trained Passages nurses to look for signs that allegedly would qualify a hospice patient for general inpatient care (GIP), resulting in higher payments per day, compared to routine care. Gillman allegedly knew that many of Passages’ patients were improperly being placed on GIP, in part as a result of a 2009 review of patient files, a 2009 report by an outside consultant, and a 2010 internal audit. Gillman also knew that some patients were placed on GIP without a medical director’s approval.
In fiscal year 2012, Medicare’s daily reimbursement for GIP was $671.84, while the daily payment for routine care was $151.23. According to claims data, from January 2006 to late 2011, Passages submitted claims for approximately 4,769 patients to Medicare and/or Medicaid and was paid approximately $95 million from Medicare and approximately $30 million from Medicaid. Between July 2008 and late 2011, Passages was paid approximately $23 million by Medicare for claimed GIP services, in addition to Medicaid payments for claimed GIP services submitted on behalf of more than 200 patients.
According to a 69-page affidavit in support of the charges, federal agents have interviewed patients, family members, and more than 30 former and current employees of Passages, including several who reported allegedly fraudulent billing and marketing practices to Medicare and/or law enforcement before they were contacted by agents. Investigators have also reviewed emails, documents, and patient files that were obtained in response to a 2011 civil investigative demand, a January 2012 search warrant, and subpoenas issued in 2013, as well as claims data from Medicare and Medicaid.
Medicare claims data revealed that approximately 22 percent of Passages’ patients between 2006 and late 2011 had more than six months of hospice care, with 28 patients receiving more than 1,000 days of hospice care in that period. By contrast, according to the National Hospice and Palliative Care Organization, only 11.8 percent of all hospice patients in 2009 were on hospice care for longer than six months.
For example, the complaint affidavit cites Patient JW, who was admitted to an Asta nursing home in 2003 following a major stroke, and Passages billed for more than 2,000 days of hospice services. In another example, Passages submitted bills for 1,443 days of hospice care for Patient LJ, who was admitted to an Asta nursing home in 2001. Patient LJ’s son told investigators that his mother appeared in no danger of dying until the last month of her life.
The charges also cite Medicare claims data showing that Passages’ billing for GIP services grew significantly. In 2010, Passages billed approximately 1,161 GIP patient days to Medicare monthly, and the figure rose to 1,430 GIP patient days a month through the first nine months of 2011. The average GIP payments that Passages received per month was $4,437 in the period from mid-2006 to mid-2008, and the monthly payments increased to $946,743 in 2011.
A hospice physician retained by the government reviewed files for 13 Passages patients, 10 of whose admissions exceed six months and extended to as many as 1,598 days over two admission periods. The government’s expert found that nine of the 13 patients were not eligible for Medicare hospice benefits for part or all of their admission and that all of the 503 days of GIP submitted for those patients were improper and excessive.
A woman, identified as Individual E in the affidavit, who helped Gillman and his father start Passages and served as its clinical director for several years until she was fired, told agents that Gillman said if a patient was under Passages’ care, they were sick enough to warrant GIP care. When Individual E confronted Gillman over the GIP eligibility of Patient DB, Gillman allegedly told her to mind her own business because he needed the money, the affidavit states.
The charges further allege that in the fall of 2008 Gillman began paying bonuses, sometimes well in excess of their salary, to Passages’ directors overseeing nurses and certified nursing assistants based on the amount of GIP under their supervision. Gillman also authorized large bonuses to himself and a co-administrator, Individual A, based on the number of patients per day at certain nursing homes in the Belleville region, including $833,375 to himself between March 2009 and April 2011. The bonuses increased as the number of patients on GIP increased and as the number of facilities counted for the bonuses increased, according to the affidavit.
Passages also allegedly had arrangements with approximately eight nursing homes in 2010 in which it paid the nursing homes $250 for every patient who was on GIP per day.
The obstructing a federal audit count alleges that in August and September 2009, Gillman, Individual A, and others oversaw and conducted an effort 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. Several former Passages employees have admitted to agents their involvement in the altering of patient files in the summer of 2009 as well as in another session in 2010, the affidavit states.
The charges were 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.
Health care fraud carries a maximum penalty of 10 years in prison and a $250,000 fine, and obstructing a federal audit carries a maximum 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 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 Physician Arrested on Charge of Healthcare FraudRead the Press Release
ROCKFORD-A local physician whose license was suspended this month was an ested last night on a federal complaint alleging healthcare fraud. Charles S. DeHaan, 59, of Belvidere, IlL, was charged with engaging in a scheme to defraud Medicare. The complaint alleges that as a pali of the scheme, DeHaan operated Housecall Physicians Group of Rockford, S.C., located in Rockford. The charge alleges that DeHaan submitted false claims to Medicare in December 2013.
In supp01t of the charge, the complaint alleges that between 2010 and 2013, DeHaan billed Medicare for medical services that he did not provide to at least five patients. Instead, DeHaan engaged in sexual misconduct with fom of these patients, all women, and offered or provided prescriptions for controlled medications, according to the complaint affidavit.
DeHaan appeared today before United States Magistrate Judge lain D. Johnston who ordered that he be held in custody lmtil a detention hearing is conducted at 2:30p.m. on Tuesday.
The charge of healthcare fraud canies a maximum potential penalty of up to 10 years in prison, a fine of up to $250,000, and full restitution.
The charges were announced by Zacha1y T. Fardon, United States Attomey for the Northem District of Illinois; Robe1t l Holley, Special Agent-in-Charge of the Chicago Office of Federal Bmeau of Investigation; and Lamont Pugh III, Special Agent-in-Charge of the Chicago Regional Office of the U.S. Depa1tment of Health and Human Services Office of Inspector General ("HHS-OIG")
The federal case was investigated by the FBI and HHS-OIG, with the assistance of the Illinois State Police Medicaid Fraud Control Unit. The government was represented in federal comt by Assistant U.S. Attomey John G. McKenzie.
The public is reminded that a complaint is only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to indictment by a federal grand jury and, if indicted, to a fair trial at which the government has the burden of proving his guilt beyond a reasonable doubt.
Complaint
Rockford Man Sentenced to 57 Months in Federal Prison on Drug ChargesRead the Press Release
ROCKFORD — A Rockford, Ill. man was sentenced today in federal court before U.S. District Judge Frederick J. Kapala as the last of seven defendants to be sentenced on related drug trafficking charges. ANGELO TURNER, 30, was sentenced to 57 months in prison without parole, to be followed by 3 years of supervised release, for conspiracy to possess with intent to distribute and distribution of cocaine. Turner pleaded guilty to the charge on Oct. 25, 2013, admitting that as early as May 2012 through Dec. 20, 2012, he conspired with others to distribute cocaine in the Rockford area.
Also charged were Angelo Turner’s brother, JOHN TURNER, 32, and MARQUICE FIELDS, 28, both of Rockford. John Turner pleaded guilty to the conspiracy and was sentenced on Oct. 24, 2013, to 51 months’ imprisonment, to be followed by 3 years’ supervised release. Fields pleaded guilty to using a mobile telephone to facilitate the drug conspiracy and was sentenced on Jan. 13, 2014, to 3 years’ probation.
In a related case, NICHOLAS CLARK, 32, RICHARD CLARK, 40, STEVEN KEENAN, 26, and RICHARD RILL, 48, all of Rockford, were charged and pleaded guilty to conspiracy to possess with intent to distribute and distribution of cocaine from early 2012 through December 2012. Nicholas Clark was sentenced on Aug. 14, 2013, to 120 months’ imprisonment, to be followed by 8 years’ supervised release. Richard Clark was sentenced on Nov. 14, 2013, to 60 months’ imprisonment, to be followed by 4 years’ supervised release. Keenan was sentenced on Sept. 10, 2013, to 60 months’ imprisonment, to be followed by 4 years’ supervised release. Rill was sentenced on Aug. 14, 2013, to 60 months’ imprisonment, to be followed by 5 years’ supervised release. None of the defendants will be eligible for parole.
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; Carl J. Vasilko, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; Richard Meyers, Winnebago County Sheriff; and Chet Epperson, Chief of the Rockford Police Department.
The government was represented by Assistant U.S. Attorney Scott R. Paccagnini.
Man Sentenced to 52 Months in Prison for Swindling Churches and Business Owners Nationwide in Advance-Fee Fraud SchemeRead the Press Release
CHICAGO — A man who victimized small businesses and churches nationwide, including three churches in Chicago, in a so-called “advance-fee” fraud scheme, was sentenced today to more than four years in federal prison after being convicted at trial last summer. Prosecutors said that the defendant, JAMAL E. LAWSON, Sr., “fleeced noble church pastors and hard-working businessmen” of more than $225,000 by repeatedly telling lies about his credentials, experience, and ability to obtain loans on their behalf. Over 18 months in 2009 and 2010, Lawson promised more than $650 million in loans to more than 30 victims and never funded a single loan.
Lawson, 44, of Duluth, Ga., and formerly of Dayton, Ohio, was sentenced to 52 months in prison and ordered to pay $227,252 in restitution by U.S. District Judge James Zagel. Lawson, who was convicted of three counts of mail fraud after a trial last August, was ordered to begin serving his sentence on March 31.
“The victim churches lost money obtained from parishioners, wasted their time and efforts dealing with [Lawson], and missed opportunities to pursue funding through other legitimate sources. In addition, the pastors and business owners suffered losses to their reputations and, in some case, suffered extreme hardships,” the government argued at sentencing.
In return for pledging to obtain loans, Lawson collected advance fees from his victims and used the money for personal expenses, such as travel, clothing, food, and cars, instead of securing the loans as he had promised. Additional churches and small businesses victimized by the scheme were located in Georgia, New Jersey, North Carolina, Ohio, Oregon, and Virginia.
As part of the scheme, Lawson offered to provide loans to pastors of churches and owners of small businesses through one of his companies: Evangel Capital Group LLC and Evangel Capital Partners Ltd., Ascendant Capital Partners LLC and Ascendant Commercial Mortgage, and Destiny Capital Group LLC and Destiny Capital Partners Ltd. Lawson advertised low-interest loans to churches and small businesses and, after receiving a loan application, advised the borrowers that his companies had approved loans in amounts ranging from approximately $300,000 to $206 million and that firm closing dates had been set. Lawson knew that he lacked the ability to fund the loans through his companies and he had not secured funding or closing dates from other outside lenders.
Lawson further told the borrowers that, before any loans would be disbursed, they were required to pay certain advance fees, in amounts ranging from approximately $1,250 to $35,000, that would be used to obtain appraisals, loan documents, title reports, and audited financial statements. Lawson directed the borrowers to pay the advance fees by mailing checks or transferring funds to accounts that he controlled.
Lawson told borrowers that he would refund their application fees if they did not receive the loans, knowing that he never intended to provide the actual loans. In Chicago, he defrauded a former west side branch of a Kankakee, Ill., church of $3,950 in fees for a purported $742,000 mortgage loan; a far south side church of $4,000 in fees to provide a mortgage loan of $1,546,000; and another far south side church of $3,950 in fees for a $3,045,000 mortgage loan.
The sentence 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 was represented by Assistant U.S. Attorneys Christopher R. McFadden and Kathryn Malizia.
Lake County Man Indicted in Alleged $3.2 Million Mortgage Fraud Scheme Involving Properties in Chicago’s Englewood CommunityRead the Press Release
CHICAGO — A Lake County man who operated two real estate–related firms was indicted on federal mortgage fraud charges. The defendant, CONRAD ULZ, allegedly engaged in a scheme to fraudulently obtain 13 residential mortgage loans, totaling approximately $3.2 million, from lenders to purchase properties in Chicago’s Englewood neighborhood. The indictment alleges that Ulz paid buyers to purchase the properties and promised them no out-ofpockets costs, and then made false statements to lenders on their behalf. As a result, the lenders incurred losses totaling more than $3.1 million because the amount of the mortgage loans was not fully recovered through subsequent sale or foreclosure.
Ulz, 73, of Libertyville, who operated Citywide Financial Group and Metro Realty Services, was charged with five counts of wire fraud and three counts of making false statements to financial institutions in an indictment that was returned by a federal grand jury yesterday and announced today. The indictment also seeks forfeiture of at least $3.1 million. Ulz will be arraigned on a date to be determined in U.S. District Court.
According to the indictment, between August 2007 and May 2009, Ulz caused buyers to fraudulently obtain 13 mortgage loans from various lenders for properties on South Sangamon, South Carpenter, South Morgan, South May, and South Ada streets, among others, in Englewood on the city’s south side. The alleged fraud involved false representations in documents, including loan applications and HUD-1 settlement statements concerning sales prices and the buyers’ employment, assets, income, and intention to occupy the property.
Ulz allegedly recruited buyers with good credit, promising to pay them for purchasing the properties, and promising that they would not have to pay any of their own money toward the purchases, including down payments and mortgage payments.
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.
The government is being represented by Assistant U.S. Attorney Renai Rodney.
Each count of wire fraud affecting a financial institution and making false statements on loan applications carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. The Court may impose an alternate fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. 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
Four Chicago and Suburban Men Indicted in Alleged $1.4 Million Automobile Loan Fraud SchemeRead the Press Release
CHICAGO — Four Chicago and area defendants were indicted on federal bank fraud charges for allegedly engaging in a scheme to fraudulently obtain 46 automobile loans totaling approximately $1.4 million without ever intending that the borrowers would purchase the highend luxury cars that they claimed to be buying. As a result, various credit union lenders, Including Great Lakes Credit Union, Pentagon Federal Credit Union, and Sherwin-Williams Credit Union, incurred losses totaling at least $914,000, the charges allege.
One defendant, PRECIOUS W. HOUSE, 47, of Chicago, the president of Rolling Auto, Inc., a Plymouth, Ind., wholesale auto dealership that purported to be selling many of the autos, was arrested today. He pleaded not guilty to five counts of bank fraud and one count making false statements on a loan application, and is scheduled to have a detention hearing at 9:15 a.m. next Tuesday before Magistrate Judge Sidney I. Schenkier in U.S. District Court.
Another defendant, BRIAN K. HUGHES, 41, of Homewood, was arrested Jan. 9 and was ordered detained in federal custody. He was charged with four counts of bank fraud and one count of making false statements on a loan application.
Co-defendants MICHAEL O. TURNER, 44, of Richton Park, who was charged with one count of bank fraud, and KEITH B. FOSTER, 46, of Harvey, who was charged with one count each of bank fraud and making false statements on a loan application, were not arrested and will be arraigned next Tuesday in U.S. District Court.
The six-count indictment was returned by a federal grand jury yesterday and announced today. The indictment also seeks forfeiture of approximately $914,511 from all four defendants.
According to the indictment, between February and November 2013, the defendants fraudulently obtained at least 28 automobile loans of the 46 they fraudulently applied for, and obtained approximately $914,000 of $1.4 million they sought in loan proceeds. They made, and caused others to make, false representations in documents submitted to lenders, including loan applications, vehicle purchase orders, and verifications of employment, concerning the individuals’ income, employment, credit history, intent to use the loan proceeds to purchase automobiles, and the existence of contracts obligating the borrowers to purchase vehicles from House and Rolling Auto.
House, Hughes, and Turner allegedly recruited individuals seeking auto and personal loans and agreed to find loans for them in exchange for a fee of 20 to 30 percent of the loan. Then, they submitted false information in the borrowers’ loan applications, their income, employment, and credit history, as well as their intent to use the loan proceeds to purchase autos from Rolling Auto and other dealerships, and the existence of contracts obligating them to purchase luxury automobiles made by BMW, Chevrolet, Jaguar, Lexus, Mercedes-Benz, Nissan, and Porsche, the indictment alleges.
If the individual borrowers refused to cash checks obtained as part of the scheme, Hughes allegedly threatened them with civil lawsuits and criminal prosecutions. House allegedly deposited the loan proceeds into bank accounts he controlled in Illinois, California, and Georgia.
The indictment was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorney Christopher R. McFadden.
Each count of bank fraud and making false statements on loan applications carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. The Court may impose an alternate fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. 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
Freeport Man Pleads Guilty to Federal Tax FraudRead the Press Release
ROCKFORD — A Freeport, Ill. man pleaded guilty today in federal court before U.S. District Judge Frederick J. Kapala to a federal charge relating to his preparation of fraudulent federal income tax returns. The defendant, JASON BOOTH, 32, admitted that he conspired with others to defraud the United States Department of the Treasury by obtaining payments through fraudulent claims for individual income tax refunds.
According to the written plea agreement, between March 2006 and January 2008, Booth created false returns, knowing that the taxpayers whose names he put on the false returns had not authorized him to use false information in the returns. Some of the taxpayers had authorized Booth to create income tax returns for them, but many did not know Booth. Due to the false information, the income tax returns claimed refunds that were not actually owed to the taxpayers. After creating the false returns, Booth filed them electronically with the IRS. When claimed refunds were approved and disbursed by the IRS, the refunds were wired to bank accounts that had been designated by Booth when he electronically filed the false returns. Some of those accounts were owned by Booth, but several were owned by others that conspired with Booth. The co-conspirators were allowed to keep a portion of each refund in exchange for the use of their accounts for the deposit of the refunds. They delivered the balance of the refunds to Booth. Booth used the co-conspirators accounts because he was not always able to open accounts in his name and because using varied accounts made discovery of his filing false returns less likely. Booth admitted that as a result of the filing of the false federal income tax returns, $159,926.98 was disbursed by the IRS into the accounts he designated.
Booth is scheduled to be sentenced on April 23, 2014, at 2:30 p.m. Booth faces up to 10 years’ imprisonment, up to 3 years of supervised release, and a maximum fine of $250,000. 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 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 Chicago Field Office of Internal Revenue Service - Criminal Investigation Division.
The government is represented by Assistant U.S. Attorney Michael D. Love.
Plea Agreement
Chicago Man Admits Mailing Scores of Threats, Including to Police Officers and Families After Cougar Was Killed in 2008Read the Press Release
CHICAGO — Following a lengthy investigation by the FBI-led Chicago Joint Terrorism Task Force, a Chicago man admitted today in Federal Court that he mailed more than 90 threatening and/or harassing letters to Chicago police officers, other government and law enforcement officials, private individuals, schools, and religious institutions in the Chicago area between November 2003 and December 2012.
The defendant, RICHARD D. HYERCZYK, 54, of Chicago’s Garfield Ridge neighborhood, pleaded guilty to one count of mailing a threatening communication at his arraignment after being charged in a criminal information filed last week in U.S. District Court. Hyerczyk was released on his own recognizance after prosecutors said he had been cooperative in the investigation and was not believed to be a danger to the community or a risk of flight.
Hyerczyk faces a maximum sentence of five years in prison and a $250,000 fine, and his plea agreement anticipates an advisory federal sentencing guideline range of 33 to 41 months in prison. U.S. District Judge Gary Feinerman set sentencing for April 11.
Hyerczyk pleaded guilty to mailing a letter on April 21, 2008, that threatened to kill Chicago Police Department officers and members of their families. That letter followed local news media reports on April 15, 2008, that Chicago police officers had shot and killed a cougar that was located on the city’s north side. Hyerczyk admitted that he drafted letters containing threats to kill and commit violence against CPD officers and members of their families.
The plea agreement details one such letter, which began with the salutation, “Dear Cougar Killers (aka Chicago PIG Police),” and included the following threatening messages: “Prepare to DIE like the Cougar you killed. On May 4th at your St. Jude Memorial March several PIGS will be shot by snipers.”; “BURN down the Daley house in Michigan.”; and “Kill any Police Officer, where ever they are found, like they killed the Cougar.”
Hyerczyk admitted that he drafted a second letter, which contained a title that referenced a severely injured former Chicago police officer by name and referred to the officer as the “PARALIZED [sic] PIG,” and which title contained the phrase “St. Jude Memorial PIG March.” This second letter threatened that: “A police officer will be SHOT DEAD, like they shot the cougar, at the May 4th St. Jude Memorial PIG March.”; “A celebration of DEAD police officers. Ha ha ha ha you are all better off DEAD.”; and “When the PIGS are at the parade, we will be at their homes. You can=t guard every PIGS house...watch your young children.”
After drafting these letters, Hyerczyk printed multiple copies of each and placed them into envelopes bearing first class postage and addressed to, among others: a university in Orland Park; the same university’s office of graduate studies in Chicago; the same university’s English Department in Chicago; and a Chicago Police officer and executive officer of a Fraternal Order of Police lodge in Chicago.
In pleading guilty, Hyerczyk admitted that he mailed these letters knowing and intending that they would be interpreted as threatening by the intended victims, including Chicago Police officers and their families.
The Chicago Joint Terrorism Task Force began investigating the threatening letters in this case after they were first received in 2003. Diligent investigation by agents resulted in a federal search warrant being executed on Hyerczyk’s residence and automobile, as well as for his DNA, in January 2013. The JTTF is composed of special agents of the FBI, officers of the Chicago Police Department, and representatives from an additional 20 federal, state, and local law enforcement agencies.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorneys Christopher Veatch and Steven Dollear.
Plea Agreement
InformationH. Ty Warner Sentenced to Probation After Paying $80 Million in Taxes and Penalties for Tax Evasion on Funds Hidden in Secret Swiss Bank AccountsRead the Press Release
CHICAGO — H. TY WARNER, the creator of Beanie Babies and other plush animal toys was sentenced today to two years’ probation for failing to report more than $24.4 million in income, and evading nearly $5.6 million in federal taxes, from millions of dollars he hid for more than a decade in secret foreign financial accounts at two banks based in Switzerland.
Warner, 69, of west suburban Oak Brook and the Santa Barbara, Calif., area, the sole owner of TY Inc., a Westmont-based company that designs and sells plush toy animals including Beanie Babies, as well as other business interests, was charged with, and pleaded guilty to, a single count of tax evasion last fall.
“Society will be best served to allow [Warner] to continue his good works,” U.S. District Judge Charles Kocoras said in imposing the sentence. Judge Kocoras also ordered Warner to perform at least 500 hours of community service for at least three Chicago high schools and to pay a $100,000 fine.
In addition, Warner has paid more than $53 million in a civil penalty, representing 50 percent of the highest balance of his unreported foreign bank accounts, which at its peak was more than $100 million, as well as approximately $27 million in back taxes and interest.
“It is imperative when an individual brazenly breaks the law and lies repeatedly on tax returns year after year and evades millions of dollars in taxes, that person has to be held accountable. That’s true if you are rich or poor and no one is above the law,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
“When people cheat on their taxes, honest taxpayers suffer the consequences and have to make up the difference. IRS Criminal Investigation is here to ensure that everyone pays their fair share of taxes regardless of their social status,” said James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
In pleading guilty, Warner admitted that between 1996 and 2008, he opened and maintained undeclared bank accounts in Switzerland at both UBS AG and Zuercher Kantonalbank (ZKB). Warner failed to report the income from those accounts, as well as their existence, on his individual income tax returns and amended returns for tax years 1996 through 2007. Between 1999 and 2007, Warner’s unreported gross income from those accounts totaled $24,448,912, while the there are no records of how much he earned for the tax years 1996-98.
Warner also admitted that he failed to report his interest in the foreign bank accounts each year from 1996 to 2008 to the Treasury Department, as required on the Report of Foreign Bank and Financial Accounts (FBAR) form. U.S. taxpayers must report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year, and a deliberate failure to file the FBAR form can result in a civil penalty of up to 50 percent of the high balance in the account each year.
According to court documents, Warner traveled to Zurich in January 1996 to open an undeclared account at UBS and executed a form instructing that any correspondence regarding the account be held at the bank in Switzerland rather than being mailed to him in the United States. Warner has never identified the source of the funds or the purpose behind the secret account, other than to suggest that opening the account was based on the success of Beanie Babies sales. It remains unknown if the initial deposits were diverted pre-tax funds, which, if so, would significantly increase the tax loss.
In 2001, UBS agreed to report certain tax information to the Internal Revenue Service. In 2002, Warner’s UBS banker, Hansreudi Schumacher, left UBS and later counseled his former clients to move their UBS accounts to ZKB because it had no similar agreement with the IRS. In December 2002, Warner traveled to Zurich and transferred approximately $93.63 million from UBS to ZKB, where his new account was managed by Schumacher, who was indicted in Florida in 2008 for conspiracy to defraud the United States and remains a fugitive.
Instead of opening the ZKB account in his own name, Warner opened the account in the name of a purported Liechtenstein entity, the “Molani Foundation,” which effectively concealed his identity as the account holder. From 2002 through tax year 2007, Warner, again, did not report the existence of, or income from, the ZKB account, and he also failed to report the accounts and income on amended tax returns he filed in December 2007 for tax years 2002-05.
In early 2009, UBS entered into a deferred prosecution agreement with the United States, admitting that it helped U.S. taxpayers hide accounts from the IRS. As part of the agreement, UBS provided the government with the identities of, and account statements for, certain U.S. clients. The IRS also announced a voluntary disclosure program for taxpayers to declare secret accounts, but taxpayers whose accounts were already known the government were ineligible for the program.
Despite publicity in 2009 of tax fraud indictments of former UBS employees, including Schumacher, and its U.S. clients, Warner did not attempt to disclose his account at ZKB until late 2009, after he learned that UBS was going to disclose client records and that Schumacher had been indicted. Warner requested eligibility for the voluntary disclosure program a week before the original deadline in September 2009, but the government had learned that he had an undisclosed UBS account in the summer of 2008, according to court documents.
Warner is the second taxpayer convicted and sentenced in Federal Court in Chicago in connection with the investigation of U.S. taxpayer clients of UBS and other overseas banks that hid foreign accounts from the IRS.
Tax evasion carries a maximum penalty of five years in prison and a $250,000 fine. In addition, a defendant convicted of tax offenses faces mandatory costs of prosecution and remains civilly liable to the government for any and all back taxes, as well as a potential civil fraud penalty of up to 75 percent of the underpayment plus interest. Federal tax law requires U.S. taxpayers pay taxes on all income earned worldwide and to report certain foreign financial accounts.
The government was represented at sentencing by Assistant U.S. Attorneys Michelle Petersen and Patrick King.
One Tax Preparer Pleads Guilty and Another Sentenced to Five Years in Prison in Separate Federal Income Tax Fraud CasesRead the Press Release
CHICAGO — A former Chicago tax preparer pleaded guilty to filing nearly 3,200 false federal income tax returns for clients, while in a separate case in Federal Court yesterday, a suburban tax preparer was sentenced to 63 months in prison for fraudulently claiming more than $8 million in tax refunds from the Internal Revenue Service. The unrelated federal prosecutions serve as a reminder to tax preparers and taxpayers alike to comply with the law as the 2013 tax season gets underway.
“With tax season upon us, I want to assure taxpayers that the IRS Criminal Investigation Division is focused on protecting revenue by identifying and investigating abusive tax return preparers. While most return preparers are honest and provide excellent service, a few unscrupulous tax preparers file false returns to defraud their clients and the United States government,” said James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
“Today, we remind dishonest tax preparers: we are watching your activities. These cases should send a loud message to any dishonest return preparers who might be thinking of engaging in criminal activity, and taxpayers should choose carefully when hiring a tax preparer,” Mr. Lee added.
The guilty plea and sentencing were announced by Mr. Lee, 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.
In one case, VERLEAN HOLLINS, who owned Taxes, Etc., Inc., a tax preparation business located in the 2300 block of East 71st Street, between at least 2010 and 2012, pleaded guilty to two counts of aiding and assisting in the preparation of false federal income tax returns. Hollins, 43, of South Holland, who was charged on Dec. 19, faces a maximum sentence of six years in prison and a fine of nearly $800,000 when she is sentenced on April 22 by U.S. District Judge Samuel Der-Yeghiayan.
Hollins admitted that for calendar years 2009 through 2011, she filed a total of 3,193 individual income tax returns for clients, each of which falsely claimed higher 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, although her fee ranged between $25 and $400. 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.
Hollins’ plea agreement anticipates an advisory federal sentencing guidelines range of 46 to 57 months in prison, and she agreed to a fine of $798,250. Each count of assisting in the preparation of a false federal income tax return carries a maximum sentence of three years in prison and a $250,000 fine, or an alternate fine of twice the gain or twice the loss, whichever is greater. In addition, defendants convicted of tax offenses must pay the costs of prosecution and remain liable for any taxes and interest, as well as a civil penalty up to 75 percent of the taxes owed. The Court must impose a reasonable sentence under federal statutes the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorney Kaarina Salovaara.
In a separate case, SHARON ANZALDI, 67, of Elmwood Park, was sentenced to 63 months in federal prison and ordered to pay $851,142 in restitution to the IRS for filing 13 false federal income tax returns for herself, friends, and family that fraudulently claimed refunds totaling more than $8 million and caused the IRS to actually pay more than $1 million in bogus refunds.
Anzaldi, who represented herself and was convicted at trial last summer, is associated with the sovereign citizen movement. She was ordered to begin serving her sentence on Feb. 25 by U.S. District Judge Harry Leinenweber. Evidence at trial showed that in one instance, Anzaldi charged a couple $31,000 for her “services” for filing a fraudulent tax return that they simply went along with and did not really understand. The couple returned the bulk of their fraudulent refund but continue to accrue penalties and interest on the amount they spent before returning the money.
Convicted at trial with Anzaldi were her son, PHILLIP DeSALVO, 42, of Bartlett, who was sentenced to 30 months in prison, and STEVEN LATIN, 51, of Crystal Lake, who was sentenced to 18 months in prison.
The government was represented by Assistant U.S. Attorneys Rachel Cannon and Dylan Smith.
Chicago U.S. Attorney’s Office Collected $78.1 Million in Civil and Criminal Actions in Fiscal Year 2013Read the Press Release
CHICAGO ― The U.S. Attorney's Office for the Northern District of Illinois collected $78.1 million in fiscal year (FY) 2013, Zachary T. Fardon, United States Attorney for the Northern District of Illinois, announced today. These collections included more than $31.8 million in criminal debts, more than $31.8 million in civil actions, and $14.5 million in forfeited assets, resulting in the office’s total collections exceeding well more than twice its budget of approximately $33.8 million in FY 2013. Over the last 10 fiscal years combined, the office has collected more than $915 million on behalf of the United States.
In addition, in FY 2013, a court-appointed special master distributed $50 million in restitution to more than 7,000 victims in a criminal investment fraud case against a defendant who owned properties in Mexico and Panama. This amount was not included in the U.S. Attorney’s Office’s direct collection figures because it was handled by the special master, but it resulted from the office’s prosecution of this defendant.
In addition to the $63.6 million collected through criminal and civil cases, the office collected $14.5 million through asset forfeiture proceedings. The largest amount in this category, approximately $9.2 million in net liquidated proceeds, came from the forfeited assets of Rita Crundwell, the former comptroller of Dixon, Ill., who is serving a sentence of 19 years and five months in prison for embezzling $53 million from the town over two decades. The $9.2 million in forfeiture proceeds was restored to the City of Dixon last month.
Attorney General Eric Holder announced today that the Justice Department collected approximately $8.1 billion in civil and criminal actions in the fiscal year ending Sept. 30, 2013. The more than $8 billion in collections in FY 2013 represents nearly three times the appropriated $2.76 billion budget for the 94 U.S. Attorney’s offices and the main litigating divisions in that same period.
“The department’s enforcement actions help to not only ensure justice is served, but also deliver a valuable return to the American people,” said Attorney General Holder. “It is critical that Congress provide the resources necessary to match the Department’s mounting caseload. As these figures show, supporting our federal prosecutors is a sound investment.”
“This news is more important now than ever,” Mr. Fardon said. “During fiscal year 2013, despite historically challenging circumstances, we collected more than double what we cost. The men and women of this office ― especially in our Civil Division, Financial Litigation Unit, and Asset Forfeiture Section ― have demonstrated once again our commitment to protecting the public and recovering funds for the federal treasury and for victims of federal crime. We seek to keep those we prosecute from profiting from their crimes. In pursuit of that goal, we have provided a substantial net financial benefit to the citizens of our district,” Mr. Fardon added.
During FY 2013, the U.S. Attorney’s Financial Litigation Unit in Chicago collected $31,812,252.86 in criminal actions, including more than $1.8 million in criminal fines; more than $16.7 million in restitution owed to the federal government; and more than $12.9 million in nonfederal restitution owed to victims, including the victims of various financial frauds and Ponzi schemes.
Among the criminal collections was $10.27 million in restitution to the Internal Revenue Service that was paid last August by two business owners who received prison terms for failing to report as income and pay personal and corporate taxes on more than $22 million they diverted from their business and divided equally. Already in In FY 2014, the U.S. Attorney’s Office has collected a $53 million civil penalty on behalf of the IRS from a different business owner who is awaiting sentencing after pleading guilty to failing to report income from a secret foreign bank account.
In civil actions, the office collected $31,817,946.56, including amounts of $12.9 million, $2.93 million, and $2.4 million to settle civil health care fraud cases under the False Claims Act.
Civil collections typically were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal health, safety, civil rights or environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration, and Department of Education.
The U.S. Attorney's Offices, along with the Justice Department’s litigating divisions, are responsible for enforcing and collecting civil and criminal debts owed to the United States and criminal debts owed to federal crime victims. When defendants are convicted and sentenced in criminal cases, judges must impose restitution to victims of certain federal crimes who have suffered a physical injury or financial loss. The U.S. Attorney's Offices are authorized to make efforts to collect criminal debts for 20 years after defendants are released from custody.
While restitution is paid by Courts directly to the victim, criminal fines and felony assessments are paid to the Justice Department's Crime Victims’ Fund, which distributes the funds to state victim compensation and victim assistance programs. Liquidated assets obtained through criminal and civil forfeiture proceedings are deposited into either the Department of Justice Asset Forfeiture Fund or the Department of Treasury Forfeiture Fund and are used to restore funds to crime victims and for a variety of law enforcement purposes.
Former McHenry County Sheriff's Deputy Pleads Guilty to Federal Child Sexual Abuse and Exploitation ChargeRead the Press Release
ROCKFORD — A former McHenry County Sheriff=s Deputy pleaded guilty today in federal court before U.S. District Court Judge Frederick J. Kapala to crossing a state line with intent to engage in a sexual act with a person who had not attained the age of 12 years. The defendant, GREGORY M. PYLE, 38, of Crest Hills, Ill., formerly of Crystal Lake, Ill., admitted that on Dec. 13, 2008, he had custody of a child under 12 years of age, when he drove the child from Crystal Lake, Ill. to Milwaukee, Wisc., with the intention to engage in sexual acts with the child and to produce visual depictions of such acts. Pyle admitted that he stayed overnight in a Milwaukee hotel and engaged in sexual acts with the child that were sadistic, masochistic, and violent. The defendant produced images of the child engaged in these sexual acts and later distributed the images over the Internet.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The Illinois State Police, the McHenry County Sheriff’s Department, and the Illinois Internet Crimes Against Children Taskforce assisted in the investigation.
Pyle’s sentencing hearing is scheduled for April 14, 2014, at 2:30 p.m. Crossing a state line to engage in a sexual act with a minor under 12 carries a mandatory minimum sentence of 30 years and a maximum of life in prison, a period of supervised release following imprisonment of at least five years and up to life, and a maximum fine of $250,000.
The government is being represented by Assistant U.S. Attorney Michael D. Love.
Plea Agreement