Northern District of Illinois
Press releases recorded for this federal judicial district.
Rockford Man Sentenced to 113 Months in Federal Prison for the Robbery of Rockford Area Banks and Credit UnionRead the Press Release
ROCKFORD — A Rockford, Ill. man was sentenced today in federal court before U.S. District Judge Frederick J. Kapala to 113 months in prison without parole, to be followed by 3 years of supervised release, for robbing two Rockford area banks and a credit union. DELANIO BENFORD, 34, pled guilty on March 22, 2013, to the robbery of: Associated Bank, 3333 N. Rockton Ave., on June 22, 2010; PNC Bank, 6709 E. Riverside Blvd., on July 15, 2010; and Members Alliance Credit Union, 6951 Olde Creek Rd., on July 28, 2010 and Sept. 11, 2010. Benford was also ordered to pay restitution of $38,771 to the banks and credit union. Benford will not be eligible for parole.
Two other individuals have also pled guilty and been sentenced in related cases:
Prince Williams, 27, of Rockford, pled guilty on April, 19, 2012, to six counts of bank/credit union robbery and one count of armed bank robbery, all in Rockford, including: First Northern Credit Union, 2235 12th St., Rockford, on May 3, 2010; National City Bank (now PNC Bank), 1551 Sandy Hollow Rd., on June 10, 2010, while armed with a handgun; Associated Bank, 3333 N. Rockton Ave., on June 22, 2010; PNC Bank, 6709 E. Riverside Blvd., on July 15, 2010; Harris, N.A., 1275 Bennington Rd., on July 22, 2010; and Members Alliance Credit Union, 6951 Olde Creek Rd., on July 28, 2010, and on Sept. 11, 2010, while using and carrying a firearm during a crime of violence. Williams was sentenced by Judge Kapala on Dec. 4, 2013, to 128 months in federal prison without parole, 5 years of supervised release following imprisonment, and ordered to pay restitution of $56,644.35 to the banks and credit unions.
Michael Buck, 28, also of Rockford, pled guilty on Oct. 3, 2013, to the robbery of Members Alliance Credit Union on Sept. 11, 2013, and was sentenced by U.S. District Judge Philip G. Reinhard to 125 months in federal prison without parole, 3 years of supervised release following his release from prison, and ordered pay restitution of $12,180 to Members Alliance.
The sentencing today 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 Rockford Police Department and Rockton Police Department assisted in the investigation.
The government was represented by Assistant U.S. Attorney Joseph C. Pedersen.
Three Defendants Indicted for Allegedly Swindling 54 Victims of $220,000 in Fees in Mortgage “Rescue” Fraud SchemeRead the Press Release
CHICAGO ― Three defendants who operated Washington National Trust, which was not licensed in Illinois as either a trust or a mortgage company, are facing federal fraud charges for allegedly swindling approximately $220,000 from at least 54 homeowners after falsely promising to save their homes from foreclosure and lower their monthly mortgage payments. The alleged mortgage “rescue” fraud scheme primarily preyed upon Hispanic victims in and around Aurora since late 2011.
One defendant, CARLOS RAYAS, 39, of Aurora, whose loan originator license was revoked by state regulators, was arrested today. He pleaded not guilty before U.S. Magistrate Judge Sheila Finnegan and was released on his own recognizance. A status hearing was set for Jan. 10 in U.S. District Court.
Arrest warrants were issued for MELVIN T. BELL, 37, also known as “Alex Crown,” “Minister Bey,” “Sovereign King Bey,” “King Bey,” and “S.K. Bey,” and MONICA HERNANDEZ, 43, Rayas’ cousin and a former licensed real estate broker. Both Bell and Hernandez were last known to reside in Oswego.
Bell and Hernandez were each charged with four counts of mail fraud, and Rayas was charged with two counts of mail fraud, in an indictment that was returned last week by a federal grand jury and unsealed today. The indictment also seeks forfeiture of approximately $220,000.
According to the indictment, the defendants marketed the official-sounding Washington National Trust as a business providing a financial assistance program for homeowners that was operated and controlled by wealthy Native Americans and was exempt from state and federal laws. In exchange for fees ranging between $5,000 and $10,000 per property, the defendants claimed that Washington National Trust would lower the homeowners’ existing mortgage payments by half and defeat any foreclosure. All three defendants knew, however, that Washington National Trust was not licensed to conduct loan originations and modifications in Illinois and could not lower mortgage payments or defeat foreclosure.
Bell, Hernandez, and Rayas allegedly falsely promised that Washington National Trust would pay off and acquire homeowners’ mortgages, and once that happened, the homeowners would owe only half the original mortgage to Washington National Trust, due over five years and free of any interest and property taxes. To effect this so-called “mortgage rescue,” the defendants had homeowners sign documents and deeds purportedly appointing Washington National Trust as trustee and transferring title of their homes to the business, the indictment alleges. As part of the scheme, the defendants recorded fraudulent documents and deeds in Kane, Kendall and other counties to delay foreclosure and to make it appear that their business was the homeowners’ trustee, the charges add.
The indictment also alleges that the defendants falsely promised that the fees paid by homeowners would go toward reducing their principal balance after Washington National Trust acquired the loan from the lender. Instead, Bell and Hernandez used the fees to pay for marketing and operating the business, including making payments to Rayas and others who referred homeowners to them, as well as for various personal expenses, including meals, travel, and merchandise.
All three defendants allegedly concealed from homeowners that the Kane County Circuit Court had issued orders in September and October 2012 barring Washington National Trust from further filing and recording deeds. They also allegedly concealed that the Illinois Department of Financial and Professional Regulation had issued orders in December 2012 and February 2013, first, to Washington National Trust to stop using the word “trust” and, later, to all three defendants to stop engaging in unlawful residential mortgage activity.
The charges were 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 Illinois State Police also participated in the investigation.
The government is being represented by Assistant U.S. Attorney Jessica Romero.
Each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or an alternative fine totaling twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
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
Beloit Wisconsin Woman Charged with Mail FraudRead the Press Release
ROCKFORD — The former shipping manager for American Extrusion International (“AEI”), was indicted today on federal mail fraud charges. REVA K. VERA, 57, of Beloit, Wis. was charged with two counts of mail fraud.
According to the indictment, Vera, as the shipping manager, was responsible for authorizing payments to vendors who provided shipping services to AEI. The indictment alleges that from May 4, 2012 to Oct. 9, 2013, Vera defrauded AEI out of at least $352,743.23. The indictment alleges that Vera created fictitious invoices from Val Tech, Inc. and TQL for shipping services that those companies had purportedly performed for AEI when in fact, Val Tech, Inc. and TQL provided no such shipping services for AEI. According to the indictment, Vera submitted the fictitious invoices to AEI’s accounts payable department causing checks to be issued by AEI payable to Val Tech, Inc. or TQL in the amounts of the invoices. The indictment further alleges that after AEI’s accounts payable department generated the checks for the fictitious invoices submitted by Vera, AEI mailed the checks payable to Val Tech, Inc. to an address of Vera’s relative in Beloit, Wis., and the checks payable to TQL to a post office box in Loves Park, Ill. belonging to Vera. According to the indictment, as part of the scheme to defraud AEI, Vera obtained $85,993 in checks from AEI payable to Val Tech, Inc., and $266,810.23 in checks from AEI payable to TQL that she either cashed or deposited into her personal bank account.
Each count of mail fraud carries a maximum penalty of 20 years in prison, a maximum fine of $250,000 fine, or an alternate fine totaling twice the loss or twice the gain derived from the offense, whichever is greater, and restitution. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.
Vera appeared today at the federal courthouse in Rockford for an arraignment and initial appearance conducted by U.S. Magistrate Judge P. Michael Mahoney. Vera was released on bond and is scheduled to appear for a status hearing before Magistrate Judge Mahoney on Jan. 27, 2014 at 11 a.m.
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 South Beloit Police Department assisted in the investigation.
The government is represented by Assistant U.S. Attorney Joseph C. Pedersen.
An indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Two Chicago Real Estate Executives Indicted on Federal Fraud Charges Involving City Tif Notes and Bank LoansRead the Press Release
CHICAGO — Two executives of a prominent Chicago real estate development company were indicted today on federal fraud charges alleging that they lied about and concealed unpaid property taxes, the double-pledging of public financing notes issued by the City of Chicago, and the company’s default on those notes so they could secure credit extensions and payments from the city at a time when they knew their firm was having serious financial difficulties. The defendants, LAURANCE H. FREED, and CAROLINE WALTERS, are, respectively, the president and vice president/treasurer of Joseph Freed and Associates LLC (JFA), best known for its role in the development of Block 37 in Chicago’s Loop.
The charges involve, in part, two Tax Increment Financing (TIF) notes that the City of Chicago agreed to issue in November 2002 to finance redevelopment of the former Goldblatt’s department store in the 4700 block of North Broadway in the city’s Uptown neighborhood. Freed was manager of a limited liability company, formed by JFA, called Uptown Goldblatts Venture LLC, which received a $4.3 million TIF redevelopment area note and a $2.4 million TIF project note from the city to help finance the project.
Freed, 51, of Chicago, and Walters, 53, of Palatine, were each charged with seven counts of bank fraud, one count of mail fraud, and five counts of making false statements to banks in a 14-count indictment returned today by a federal grand jury. The indictment also seeks forfeiture of $2,995,295 in alleged fraud proceeds from both defendants, who will be arraigned at a later date in U.S. District Court.
The indictment alleges three victims: the City of Chicago, Cole Taylor Bank, and a consortium of banks consisting of Bank of America (as successor to the former LaSalle Bank National Association), Associated Bank, Northern Trust, and Wachovia Bank.
According to the indictment, between March 2008 and February 2011 ― when JFA was in the midst of a severe liquidity crisis that jeopardized its ability to pay operating expenses and Freed and Walters knew the possibility that JFA’s inability to make required payments threatened the company’s future ― both defendants made false statements to the city and the banks to obtain funds. Freed and Walters allegedly made false statements:
- to the bank consortium to prevent default on a $105 million line of credit and to obtain a loan modification that would have provided JFA with at least $10 million in additional funds;
- to Cole Taylor Bank regarding the defendants’ intent to persuade the bank consortium to release its claim on the TIF notes as collateral; and
- to the City of Chicago to obtain nearly $1.75 million in payments from the TIF notes, knowing that the bank consortium and Cole Taylor were entitled to those payments.
As background, the indictment details various financial agreements involving JFA and its related entities, including:
- Uptown Goldblatts’ November 2002 TIF agreement with the city contained several conditions guaranteeing that Uptown Goldblatts would not default on its obligations, and, if the conditions were violated, the city would not be obligated to make TIF payments. The city began paying annual principal and interest on the notes after receiving an annual sworn statement from JFA certifying that it was in compliance with the conditions;
- Also in November 2002, Freed, on behalf of Uptown Goldblatts, entered into an agreement with Cole Taylor Bank for a $15 million loan in exchange for Uptown Goldblatts’ assignment to the bank of its rights in the TIF project note. Uptown Goldblatts would receive the annual proceeds from the note so long as it was not in default to the bank, but if it was in default, the bank would be entitled to the proceeds. The loan agreement also forbid Uptown Goldblatts from pledging the TIF note as collateral for any other loan and specified that doing so would constitute default to Cole Taylor Bank. The loan amount was later reduced from $15 million to $9 million; and
- In May 2006, a JFA associated entity, DDL LLC and Freed Illinois Holdings LLC, entered into agreements with the bank consortium, now led by Bank of America, for a revolving line of credit up to $150 million. In exchange, Freed’s entities pledged properties known as Evanston Plaza and West Town Center as collateral, and Freed personally guaranteed the loan for up to $50 million. In November 2007, Uptown Goldblatts entered into a security agreement with the bank consortium, pledging both TIF notes and their proceeds as collateral for the line of credit. Uptown Goldblatts warranted that the notes were free of any other outside interests, despite knowing that the project note had been previously pledged to Cole Taylor. The security agreement, signed by Freed, further provided that Uptown Goldblatts would direct all payments from the TIF notes to a Bank of America lockbox.
Freed and Walters allegedly made false statements to the bank consortium and Cole Taylor Bank about the collateral, as well as to the city about default and misappropriation of the TIF funds. These included concealing from the bank consortium Uptown Goldblatts’ prior pledge of the project note to Cole Taylor Bank, and making false statements and omissions to the consortium while trying to obtain a loan modification of at least $10 million and to prevent default on a $105 million line of credit. Between December 2008 and July 2009, Freed and Walters made four presentations to the bank consortium, allegedly knowing they contained multiple false statements and that Cole Taylor Bank had a superior interest in the TIF project note. Both defendants also made false statements about the Evanston Plaza and West Town Center developments, including concealing that JFA owed unpaid property taxes in April 2009 of at least $1.325 million on Evanston Plaza and at least $590,000 on West Town Center, the indictment alleges.
In December 2008, 2009, and 2010, Freed signed allegedly false affidavits to obtain TIF payments from the city, knowing instead that the bank consortium and Cole Taylor Bank were entitled to the payments. The indictment alleges he also falsely swore that no default condition existed, despite knowing that the double pledge of the project note as collateral to Cole Taylor Bank and the bank consortium had triggered Uptown Goldblatts’ default to the city. Further, Freed and Walters allegedly took steps to ensure that the TIF payments would be delivered directly to JFA and bypass the lockbox to prevent Bank of America from keeping the payments.
Each count of the indictment 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 was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Joseph Ferguson, Inspector General for the City of Chicago.
The government is being represented by Assistant U.S. Attorney Renato Mariotti.
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
U.S. Jury Convicts Bolingbrook Man of Sex Trafficking Four Victims, Including A MinorRead the Press Release
CHICAGO — A federal jury today convicted a Bolingbrook man of running a sex trafficking ring between at least late 2009 and November 2010 that forced into prostitution at least four victims, including a minor who was 17 at the time. The defendant, McKENZIE CARSON, was found guilty on one count of sex trafficking a minor by force, fraud, and coercion, and three counts of sex trafficking by force, fraud, and coercion. The jury deliberated less than two hours following a trial that began Dec. 2 in U.S. District Court.
All four victims testified in the trial, which showed that Carson, 41, also known as “Casino” and “Joe Taylor,” was a pimp who chose vulnerable, young victims, including the minor who he knew was only 17, and used violence and threats of violence to exploit them sexually.
“This was not a business relationship, but a relationship between predator and prey,” Assistant U.S. Attorney Bethany Biesenthal said in her closing argument. In her rebuttal argument, Assistant U.S. Attorney Jennie Levin told jurors “the victims bared their souls and told you they were frightened for their lives.”
Carson has remained in federal custody without bond since he was arrested on Jan. 3, 2012. He faces a mandatory minimum sentence of 15 years in prison and a maximum of life imprisonment on each count. No sentencing date was immediately set but U.S. District Judge Elaine Bucklo scheduled a status hearing for May 2, 2014.
The evidence showed that Carson recruited his victims and forced them to engage in commercial sex acts. He used fraud to recruit and groom his victims, sometimes concealing that he was a pimp, and used drugs to control them. He frequently provided them with heroin and exercised control over how much and when each victim was allowed to use drugs.
Carson also used threats and physical beatings to enforce rules that left him with a control over his victims. When they broke the rules or disobeyed him, he threatened them or beat them, or raped them. He required his victims to commit commercial sex acts and to give him the money they made. The evidence included numerous photographs of Carson’s victims that he used to solicit their services on the Internet, as well as the advertisements that he posted to promote his prostitution business.
The guilty verdict was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of investigation. FBI special agents led a multi-agency task force that included the Cook County Sheriff’s Office, the DuPage Metropolitan Enforcement Group, and the Alsip, Bolingbrook, Channahon, Downers Grove, Joliet, Lansing, Marseilles, Naperville, Oswego, Romeoville, Shorewood, and Westmont police departments. The government was represented by Assistant U.S. Attorneys Jennie Levin and Bethany Biesenthal.
Rockford Man Sentenced to 10 Years in Federal Prison for Illegally Possessing an Assault RifleRead the Press Release
ROCKFORD — A Rockford, Ill. man was sentenced today in federal court by U.S. District Judge Frederick J. Kapala to illegally possessing a firearm as a convicted felon. ROBERT J. GRAY, 34, was sentenced to 10 years in federal prison, to be followed by 3 years of supervised release. Gray pled guilty on May 3, 2013 admitting that on May 8, 2012, having previously been convicted of a felony, he possessed at his home an SKS Norinco semi-automatic assault rifle with an obliterated serial number and sixteen rounds of ammunition. Gray also possessed at his home $372,993 in U.S. currency, diamond jewelry, six cell phones, a digital scale, a pocket scale, a heat sealer and bags, and plastic grocery bags filled with rubber bands.
The defendant was originally charged in state court and was transferred to federal court where he was charged under tough federal firearms laws as part of the Project Safe Neighborhoods program. Project Safe Neighborhoods is an intensive, cooperative effort between local, state, and federal law enforcement to attack gun crimes. The cornerstone of the program is that every defendant committing an offense involving a gun will be reviewed for possible federal prosecution in order to obtain the harshest penalties for the worst offenders. Additional information about Project Safe Neighborhoods may be found at: www.psn.gov.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Constance Hester, Acting Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Joseph Bruscato, Winnebago County State’s Attorney; and Richard Meyers, Winnebago County Sheriff.
The government was represented by Assistant U.S. Attorney Scott R. Paccagnini.
Rockford Man Sentenced to 10 Years 3 Months in Federal Prison for Drug Trafficking and Firearm Related ChargesRead the Press Release
ROCKFORD — A Rockford, Ill. man was sentenced today in federal court by U.S. District Judge Frederick J. Kapala to possessing with the intent to distribute crack cocaine, to illegally possessing a firearm as a convicted felon, and to possessing a firearm in furtherance of a drug trafficking crime. ERIC LAMONT KELLY, 29, was sentenced to a total of 10 years and 3 months in federal prison, to be followed by 5 years of supervised release. Kelly pled guilty on September 5, 2013, admitting that on April 6, 2012, he had possessed 18.4 grams of crack cocaine, with the intent to distribute it, along with a 9 mm pistol after having previously been convicted of a felony. He also admitted that he possessed the pistol in furtherance of his drug trafficking crime.
In his plea agreement, Kelly admitted that on April 6, 2012, when police officers attempted to execute a search warrant at Kelly’s house in Rockford, he tried to hide the crack cocaine and firearm by throwing the items down a heating duct. Police officers recovered the crack cocaine and firearm, along with digital scales, drug packaging materials, and the proceeds from the sale of drugs.
The defendant was originally charged in state court and was transferred to federal court where he was charged under tough federal firearms laws as part of the Project Safe Neighborhoods program. Project Safe Neighborhoods is an intensive, cooperative effort between local, state, and federal law enforcement to attack gun crimes. The cornerstone of the program is that every defendant committing an offense involving a gun will be reviewed for possible federal prosecution in order to obtain the harshest penalties for the worst offenders. Additional information about Project Safe Neighborhoods may be found at: www.psn.gov.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Constance Hester, Acting Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Joseph Bruscato, Winnebago County State’s Attorney; and Chet Epperson, Chief of the Rockford Police Department.
The government was represented by Assistant U.S. Attorney John G. McKenzie.
Government Intervenes in False Claims Lawsuit Against IPC the Hospitalist Company, Alleging Overbilling of Physician ServicesRead the Press Release
CHICAGO ― The United States has intervened in a civil lawsuit against Californiabased IPC The Hospitalist Company, Inc., and its subsidiaries (IPC), alleging that IPC submitted false claims to federal health care programs, the U.S. Attorney’s Office and the Justice Department announced today. The lawsuit, which was unsealed Friday in U.S. District Court in Chicago, alleges that IPC violated state and federal False Claims Acts by knowingly engaging in systematic overbilling for hospital evaluation and management services billed to Medicare, Medicaid, and other federal health benefit programs.
IPC, based in North Hollywood, Calif., is one of the largest providers of hospitalist services in the United States, employing physicians and other health care providers who work in more than 1,300 facilities in 28 states. Hospitalists are physicians who work only in hospitals and other long-term care facilities, overseeing and coordinating inpatient care for patients from admission to discharge.
The lawsuit alleges that IPC physicians sought payment for higher and more expensive levels of medical service than were actually performed ― a practice commonly referred to as “upcoding.” Specifically, the lawsuit alleges that IPC encouraged its physicians to bill at the highest levels regardless of the level of service provided, trained physicians to use higher level codes and encouraged physicians with lower billing levels to “catch up” to their peers.
“We continue to be vigilant in our enforcement efforts to ensure that health care programs funded by the taxpayers pay only for appropriate costs,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.
The lawsuit was filed under seal in 2009 by Dr. Bijan Oughatiyan, of Dallas, who worked as a hospitalist for IPC in San Antonio from 2003 to 2008, under the qui tam or whistleblower provisions of the False Claims Act. The federal law and similar state statutes permit private individuals to sue for false claims on behalf of the government and to share in any recovery. The Act also allows the government to intervene or take over the lawsuit, as it has done in this case, and to recover three times its damages plus civil penalties ranging from $5,500 to $11,000 for each false claim submitted.
The government investigated Dr. Oughatiyan’s allegations and filed a notice of intervention, asking at the same time that the complaint be unsealed. Chief U.S. District Judge Ruben Castillo last week ordered the case unsealed and granted the government’s request for 120 days to file its own complaint against IPC and related defendants, announced Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
According to Dr. Oughatiyan’s 2009 complaint, more than half of IPC’s revenues ― more than $125 million in 2008 alone ― came from government medical insurers, including Medicare and Medicaid. “IPC’s upcoding scheme has caused those Government health insurers to overpay millions of dollars to IPC, and has adversely impacted patient care,” the suit states.
The lawsuit alleges that IPC directed and encouraged its physicians to engage in systematic overbilling of the codes submitted to Medicare, Medicaid, and other health benefit programs for evaluation and management procedures such as admission, subsequent hospital visits, and discharge of patients. Based on IPC=s regular and detailed monitoring of the codes billed by individual physicians, the lawsuit alleges that IPC was aware that its physicians were using the highest level billing codes (those which require the most work and are reimbursed at the highest amounts) at rates far in excess of what would normally be expected. It further alleges that IPC knew and/or should have known that its physicians could not have actually been performing the services at the levels for which claims were submitted.
This intervention illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.
The matter is being jointly handled by the U.S. Attorney’s Office for the Northern District of Illinois and the Civil Frauds Section of the Commercial Litigation Branch of the Justice Department’s Civil Division, with assistance from the U.S. Department of Health and Human Service’s Office of Inspection General, the Office of Personal Management’s Office of Inspector General, and the Railroad Retirement Board’s Office of Inspector General. The government is being represented by Assistant U.S. Attorney Eric Pruitt and DOJ Senior Trial Counsel Elizabeth Rinaldo.
The case is captioned United States ex rel. Oughatiyan v. IPC The Hospitalist Company, Inc., et al., No. 09 C 5418 (N.D. Ill.). The claims asserted against IPC are allegations only, and there has been no determination of liability. In a civil case, the government has the burden of proving the allegations by a preponderance of the evidence.
Rockford Tax Preparer Pleads Guilty to Filing False Personal Income Tax ReturnRead the Press Release
ROCKFORD — A Rockford, Ill. woman pleaded guilty today in federal court before U.S. District Judge Philip G. Reinhard to federal income tax fraud. ANNA MARTINEZ, 44, admitted that in 2007 she filed a false income tax return with the United States Internal Revenue Service.
According to the written plea agreement, during calendar years 2006 – 2008 Martinez was the owner and sole proprietor of Community Tax Service, a tax preparation business, in Rockford, Illinois, which was her only source of income. Martinez admitted in the plea agreement that she filed her U.S. Individual Income Tax Return Form 1040 with schedules and attachments for the calendar year 2007, which she verified by written declaration made under the penalties of perjury, and failed to disclose approximately $236,524 of receipts of Community Tax Service for 2007. Martinez also admitted that she failed to report receipts or sales received by Community Tax Services of $68,026 on her individual income tax return for 2006, and $79,594 for 2008, for a total of at least $384,144 for tax years 2006 – 2008, knowing that she failed to pay approximately $72,156 in taxes to the IRS.
Sentencing for Martinez is scheduled for Wednesday, May 7, 2014, at 11:00 a.m. Martinez faces a maximum sentence of up to 3 years in prison, up to one year of supervised release following imprisonment, and a maximum fine of up to $250,000. Martinez must also pay restitution to the Internal Revenue Service and the costs of prosecution. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-In-Charge of the Chicago Field Office of Internal Revenue Service - Criminal Investigation Division.
The government is represented by Assistant U.S. Attorney Scott R. Paccagnini.
Plea Agreement
Ranking Midlothian Police Officer Charged with Federal Civil Rights Violations Involving Alleged Use of Excessive ForceRead the Press Release
CHICAGO ― A south suburban Midlothian police officer was indicted on federal civil rights charges alleging that he used excessive force against two different victims in separate beating incidents in 2010 and 2011. The defendant, STEVEN G. ZAMIAR, was indicted on two counts of violating the victims’ civil right to be free from the use of unreasonable force by a law enforcement officer. The two-count indictment was returned by a federal grand jury yesterday and was announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
Zamiar, 46, of Midlothian, joined the Midlothian Police Department in 2000. He was a detective sergeant at the time of the alleged beating in 2010 and was deputy chief when the alleged beating occurred in 2011. He was later demoted to lieutenant, and was placed on paid administrative leave this past September. He will be arraigned on a date yet to be scheduled in U.S. District Court.
According to the indictment, on Sept. 6, 2010, when he was a detective sergeant, Zamiar used excessive force, resulting in bodily injury, against Victim A. On Nov. 24, 2011, when he was deputy chief of the Midlothian Police Department, Zamiar allegedly used excessive force, resulting in bodily injury, against Victim B. During the November 2011 incident, Zamiar allegedly used, attempted to use, and threatened to use a dangerous weapon.
Each count 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 Patrick Otlewski.
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
Nine Defendants, Including Title Company Owners and Lawyers, Indicted in Two Separate Mortgage Fraud SchemesRead the Press Release
CHICAGO — A couple who owned a now-defunct suburban title company, a disbarred attorney, and an attorney are among nine defendants who have been indicted in two separate mortgage fraud cases, federal law enforcement officials announced today. Seven defendants were charged together in one case, and two in the second case, together alleging schemes to fraudulently obtain at least four residential mortgage loans totaling more than $1 million from lenders.
Both indictments allege that the mortgages were obtained to finance the purchase of properties on Chicago’s south side, using fraudulent means such as straw purchasers, short sales, inflated prices, and unqualified buyers, while the defendants allegedly profited. As a result, the lenders incurred losses because the mortgages were not fully recovered through subsequent sale or foreclosure.
Seven defendants were charged in an indictment that was unsealed on Monday following the arrest of HARVEY WRIGHT, 46, of Chicago, a disbarred South Holland attorney, and PRECIOUS HOUSE, 47, of Chicago. Also indicted, but not arrested, were DAVID GUEL, 60, and his wife, MARY GLEASON, 48, both of Blue Island; MUNTAZER ALI SAIYED, also known as “Monty Saiyed,” 37, of Bartlett; SAGED ANSARI, 32, of Hanover Park; and AZEEM SYED, 30, of Bolingbrook. All seven were charged with two counts of wire fraud and House, Syed, Saiyed, and Ansari were also charged with one count each of identity theft. The indictment seeks forfeiture of more than $800,000.
Guel and Gleason owned and operated the former U.S. Worldwide Title Services LLC, a title company located in Downers Grove.
All seven defendants pleaded not guilty yesterday or Monday in U.S. District Court and were released on bond. A status hearing was scheduled for Jan. 13.
According to the indictment, between September 2008 and March 2009, the defendants caused two fraudulent mortgage loans to be issued by lenders for properties at 4823 South Racine Ave., and 6738 South Marshfield Ave. The alleged fraud involved false representations in documents, including real estate contracts, loan applications, title commitments, and HUD-1 settlement statements concerning sales prices, the true disbursement of the loan proceeds at closing, the buyer’s assets, employment, and income.
The defendants allegedly used straw buyers who had no intention of residing in the property and making mortgage payments, as well as stolen identities of individuals who did not know that their identities were being used to purchase property. Guel, Gleason, Wright, and House allegedly conducted “double closings” at Worldwide Title in which a single property was sold twice through a short sale of the property from an owner to a buyer, who only temporarily took ownership before immediately re-selling to a second buyer at an inflated sales price using a fraudulently obtained mortgage to finance the purchase.
House allegedly facilitated the double closings by recruiting individuals to pose as the first and second buyers and arranging for them to use stolen identities provided by Syed, Saiyed, and Ansari, in connection with the transactions, the indictment alleges.
Guel, Gleason, and Wright allegedly prepared fraudulent documents stating that the properties had been transferred into a trust approximately a year before the double closing to conceal from the lender that the property was being sold twice, including on the same day. These three defendants and House allegedly obtained loan proceeds for their own personal benefit.
This case is part of Operation Mad House, an undercover investigation designed to combat mortgage and real estate fraud in the Chicago area with a focus on professionals in the real estate industry. Since 2009, more than 50 defendants have been convicted, including title company operators, mortgage brokers, licensed appraisers, and attorneys.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Holley, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General in Chicago; and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
The government is being represented by Assistant U.S. Attorneys Sunil Harjani and Kathryn Malizia.
In an unrelated case, GEORGE KOUVELIS, 39, of Bloomingdale, who bought and sold residential properties, and KARIM DURE, 39, of Chicago, an Evanston attorney, were each charged with two counts of wire fraud in an indictment that was unsealed on Nov. 14 after Kouvelis was arrested. Kouvelis and Dure, who was not arrested, both pleaded not guilty and were released on bond. Their next court date is Jan. 6. The indictment seeks forfeiture of $521,250.
According to the indictment, between November 2008 and March 2009, Kouvelis and Dure caused a buyer to obtain two fraudulent mortgage loans to purchase Kouvelis’ properties at 5804 South Princeton Ave., and 5563 South Shields Ave. The defendants allegedly made false representations in documents, including real estate contracts, loan applications, and HUD-1 settlement statements concerning inflated sales prices, money paid to the buyer for purchasing the properties, the buyer’s assets, liabilities, and source of down payment.
The indictment alleges that Kouvelis fraudulently obtained mortgage loan proceeds through false closing documents, which concealed that the buyer was being paid to purchase the properties; concealed that the funds being used for down payments were provided by another individual; inflated purchase prices; and concealed that the buyer was contributing little or no equity to the transactions. Dure allegedly represented the buyer knowing that the loans were being funded based on false information about the buyer’s qualifications, including a will submitted by the buyer and a letter that Dure submitted to the lender verifying that the buyer had received $200,000 from his grandfather’s estate.
Mr. Fardon announced the Kouvelis / Dure charges with Mr. McLaughlin, Mr. Holley, and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The government is being represented by Assistant U.S. Attorney Jason Yonan.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The identity theft count against defendants House, Syed, Saiyed, and Ansari carries a maximum of 15 years in prison and a $250,000 fine. If convicted, the Court may impose an alternate fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. The Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
The public is reminded that indictments contain only charges and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Since 2008, several hundred defendants have been charged in Federal Court in Chicago and Rockford with engaging in various mortgage fraud schemes involving more than 1,000 properties and more than $300 million in potential losses, signifying the high priority that federal law enforcement officials give mortgage fraud in an effort to deter others from engaging in crimes relating to residential and commercial real estate.
Today’s announcement is part of efforts underway by the Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has facilitated increased investigation and prosecution of financial crimes; enhanced coordination and cooperation among federal, state and local authorities; addressed discrimination in the lending and financial markets, and conducted outreach to the 6 public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit stopfraud.gov.
Kouvelis Indictment
Guel IndictmentAlgonquin Man Pleads Guilty to Possessing Child PornographyRead the Press Release
ROCKFORD — An Algonquin, Ill. man pleaded guilty today in federal court before U.S. District Court Judge Philip G. Reinhard to possessing child pornography that had crossed state lines. JOHN CARLSON, 38, admitted that in August 2011 he possessed images of children engaged in sexually explicit conduct. Carlson’s sentencing hearing is scheduled for May 9, 2014, at 11:00 a.m.
Carlson faces a maximum sentence of 10 years in federal prison, a term of supervised release following imprisonment of at least 5 years and up to life, and a fine of up to $250,000. The Court must impose a reasonable sentence guided by the advisory United States Sentencing Guidelines.
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 Algonquin Police Department assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Michael D. Love.
Plea Agreement
Realty Company Owner and Chicago Police Lieutenant Indicted in Connection with Alleged Fraudulent Bank LoanRead the Press Release
CHICAGO — An owner of Chicago realty business who formerly was also the chief executive of a failed Chicago bank was arrested today on federal bank fraud charges involving an alleged scheme to illegally provide a $650,000 mortgage for the purchase of a south side apartment building. A Chicago police lieutenant who allegedly played a role in the scheme was charged in the same indictment with federal income tax fraud.
ROBERT MICHAEL, 62, of Chicago, an owner of Michael Realty and a former shareholder, chief executive officer, and senior lender at the failed Citizens Bank, was arrested today by agents with the Internal Revenue Service Criminal Investigation Division. He was charged with one count each of bank fraud, making false statements to a bank, and money laundering in an indictment that was returned by a federal grand jury on Nov. 14 and unsealed today following his arrest. The indictment also seeks forfeiture of at least $634,000 from Michael.
Michael pleaded not guilty before U.S. Magistrate Judge Daniel Martin and was released on a $10,000 personal recognizance bond.
Also indicted but not arrested was ERROLL DAVIS, 52, of Chicago, a Chicago police lieutenant who was charged with one count of filing a false federal income tax return. Davis will be arraigned at a later date in Federal Court. The tax charge is not directly related to Davis’ employment as a police officer.
The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division.
According to the indictment, between March and November 2008, Michael schemed with Individual A, the owner and president of The Prime Time Group, Inc., and the Regal Theater LLC, to fraudulently obtain approximately $634,000 from Citizens Bank, knowing that the mortgage loan to fund Davis’ purchase of a 12-unit apartment building at 1665 East 79th St., in Chicago, was the result of false statements to the bank.
In March 2008, Individual A, through her companies, purchased the New Regal Theater property, which included the theater, two adjacent parking lots, and the apartment building. Michael allegedly caused Citizens Bank to loan $2.1 million to Individual A and the Prime Time Group to purchase the theater property, but as the loan officer on the transaction, he excluded the apartment building from the collateral securing the loan to evade the bank’s legal lending limits.
By November 2008, Individual A and the Prime Time Group owed approximately $40,000 to Citizens Bank on past due mortgage payments for the theater property, and more than $240,000 to Michael’s company, 300 West Sibley, LLC, on the lease for a nightclub in Dolton. Because of its legal lending limit, the bank was unable to loan additional funds to Individual A.
To allow Individual A to obtain subsequent financing that would be secured by the apartment building, Michael allegedly caused Citizens Bank to loan approximately $650,000 to Davis, whom Individual A referred to Michael for Davis’ purchase of the apartment building. Michael allegedly knew that the purpose of this transaction was to generate cash for Individual A to use to pay rent owed to Michael’s company on the nightclub property and to pay past due mortgage payments and other expenses related to the theater property.
Michael and Individual A allegedly prepared a fraudulent real estate contract for the purchase of the apartment building, purporting that the purchase price was $900,000 and that Davis had paid $90,000 in earnest money. Michael, Individual A, and Davis allegedly made other false statements, including creating false apartment leases, to induce Citizens Bank to issue a mortgage to Davis. Ultimately, Michael approved a wire transfer of $639,000 to fund the apartment transaction, and caused the title company to issue a check for $634,046, representing proceeds of the transaction, the indictment alleges. The money laundering count charges that $200,000 in proceeds from the fraudulent loan were paid to Michael Realty.
Bank fraud and making false statements to a bank each carry a maximum penalty of 30 years in prison and a $1 million fine, while money laundering carries a maximum penalty of 10 years in prison and a $250,000 fine. The tax count against Davis carries a maximum penalty of three years in prison and a $250,000 fine. In addition to criminal penalties, including mandatory costs of prosecution, defendants convicted of tax offenses remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorneys Megan Church and Joel Hammerman.
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
Former Energy Director for City of Rockford Pleads Guilty to FraudRead the Press Release
ROCKFORD — The former Energy Director for the City of Rockford pleaded guilty today in federal court, before U.S. District Judge Frederick J. Kapala, to one count of mail fraud. MARK E. BIXBY, 58, of Rockton, Ill. admitted that between December 2006 and March 2010 he defrauded a heating contractor and window contractor, both of whom did work for the City’s Energy Division, out of at least $53,101.33 in funds and benefits.
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.
In court today, Bixby admitted that he defrauded a heating contractor and a window contractor, both of whom did work under the weatherization program, by causing them to provide funds and benefits to him through false representations and pretenses. 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.
Bixby is scheduled to be sentenced on March 3, 2014, at 2:30 p.m. Mail fraud carries a maximum penalty of 20 years in prison, 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, and restitution. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; and 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 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 Winnebago County State’s Attorney’s Office and the Rockford Police Department assisted in the investigation.
Plea Agreement
Former Crestwood Water Officials Sentenced for Concealing Village’s Use of Well in Drinking Water SupplyRead the Press Release
CHICAGO — Two former water department officials for the southwest suburban Village of Crestwood were each sentenced today to two years’ probation for lying repeatedly to environmental regulators for more than 20 years about using a water well to supplement the village’s drinking water supply. The defendants, FRANK SCACCIA, a retired certified water operator, and THERESA NEUBAUER, former water department clerk and supervisor and, later, Crestwood’s police chief, effectively thwarted the government from implementing the federal Safe Drinking Water Act’s notice and testing requirements designed to ensure the safety of municipal water supplies.
In addition to probation, Scaccia, 61, of Crestwood, was ordered to serve the first six months in home confinement. He pleaded guilty on April 11 this year to making false statements. Neubauer, 56, of Crestwood, was fined $2,000 and ordered to perform 200 hours of community service. She was convicted by a jury on April 29 of 11 counts of making false statements after a week-long trial.
U.S. District Judge Joan Gottschall cited Scaccia’s serious health condition in imposing his sentence. She said the case involved a “breach of the public trust for years,” which had as its purpose “the perpetual re-election of the mayor.”
Both defendants concealed the village’s use of its well from the government and the citizens of Crestwood to save money. By doing so, the village didn’t properly monitor for contaminants that could have been introduced to Crestwood’s water supply, avoided having to fix its leaking water distribution system, or paying the neighboring Village of Alsip more money for water drawn from Lake Michigan.
“Providing safe drinking water is one of the most fundamental and important functions of local government. Those who operate municipal water systems are now on notice that defeating the Safe Drinking Water Act in exchange for selfish political and personal objectives is an extremely serious crime that will be dealt with through vigorous federal prosecution,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
“Public servants swear an oath to protect the citizens of their community,” said Randall Ashe, Special Agent-in-Charge of the U.S. Environmental Protection Agency’s Criminal Enforcement Program in Illinois. “Rather than protecting the citizens of Crestwood, Scaccia and Neubauer engaged in a very lengthy scheme to deny Crestwood citizens their basic right to know the source of their drinking water, and to deceive them into thinking that their drinking water was properly tested for dangerous contaminants. As a result, Crestwood residents will never fully know what contaminants from the well they ingested. This case demonstrates that anyone who violates the public trust to assure the distribution of safe, potable and properly tested drinking water will face the consequences in court.”
According to court records and the evidence at trial, since at least 1973, the substantial majority of Crestwood’s drinking water came from Lake Michigan and was purchased from neighboring Alsip, which, in turn, had purchased the water from the City of Chicago after it was treated and tested pursuant to state and federal environmental regulations. Since 1982, Crestwood regularly supplemented the Lake Michigan water with water drawn from an underground aquifer through a well located on Playfield Drive, known as Well #1. Crestwood found it necessary to supplement the Lake Michigan water with water pumped from Well #1, in part, because of substantial leakage in its water distribution system, which Crestwood officials failed to adequately repair.
Between 1987 and 2008, Scaccia, Neubauer were among of a small circle of trusted village employees ― directed by Crestwood’s longtime former mayor, Chester Stranczek, who was not charged ― who concealed that Crestwood was supplementing its Lake Michigan water with water drawn from Well #1. Scaccia was responsible for ensuring that water distributed by Crestwood met all federal and state regulations, including filing annual Consumer Confidence Reports (CCRs); obtaining the raw data that was used to complete the Monthly Operation and Chemical Analysis Reports (MORs); transmitting raw data for the MORs to Neubauer so that she could complete them and submit them to the IEPA; and serving as a point of contact for IEPA with respect to drinking water compliance issues. Neubauer prepared the CCRs for signature by Stranczek, arranged for the CCRs to be issued to Crestwood’s water customers, prepared MORs for distribution to the IEPA based upon information obtained from Scaccia, and distributed completed MORs to IEPA. All the while, Neubauer and Scaccia knew that water pumped from Well #1 was being distributed to the village’s water customers. Neubauer also helped prepare and submit various false reports stating that Well #1 was on standby status and that the sole source of Crestwood’s drinking water was Lake Michigan water purchased from Alsip.
Under the federal Safe Drinking Water Act of 1974, the U.S. EPA created regulations to ensure the safety of drinking water distributed by public water systems by requiring testing and establishing maximum contaminant levels for various contaminants. The EPA delegated the primary responsibility for enforcement to the Illinois EPA, which established its own state regulations that implemented the federal statute and regulations.
Because the City of Chicago tested and treated Lake Michigan water for contaminants, Crestwood, like other municipalities that purchased water directly or indirectly from Chicago, was excused from monitoring its Lake Michigan water for certain contaminants. Due to Crestwood’s use of Well #1, an unmonitored and unreported water source, the village should have periodically tested its drinking water for organic contaminants, inorganic contaminants, and radiological contaminants beginning in the 1970s.
Crestwood was also required to submit an Annual Water Use Audit form, known as an LMO-2 form, to the Illinois Department of Natural Resources and, previously, to the Illinois Department of Transportation. This form required Crestwood to report the amount of water it had drawn from Lake Michigan and from Well #1, and to account for the amount of water distributed and lost by its water system annually. From at least 1982 to 2008, Crestwood officials filed LMO-2 forms that neither reported the amount of water drawn from Well #1, nor accurately accounted for the amount of water distributed and lost by its water system.
The government was represented by Assistant U.S. Attorneys Erika Csicsila and Timothy Chapman, and Special Assistant U.S. Attorney Crissy Pellegrin, criminal enforcement counsel for the U.S. EPA Region V.
Texas Honey Broker Sentenced to Three Years in Prison for Avoiding $37.9 Million in Tariffs on Chinese-Origin HoneyRead the Press Release
CHICAGO — A Texas honey broker was sentenced today to three years in federal prison for illegally brokering the sale of hundreds of container loads of Chinese-origin honey, which was misrepresented as originating from India or Malaysia, to avoid anti-dumping duties when it entered the United States. The defendant, JUN YANG, pleaded guilty in March to facilitating illegal honey imports by falsely declaring that the honey originated in countries other than China to avoid $37.9 million in anti-dumping duties.
Yang, 40, of Houston, operated National Honey, Inc., which did business as National Commodities Company in Houston, and brokered the sale of honey between overseas honey suppliers and domestic customers. He was ordered to begin serving his sentence on Jan. 15, 2014, by U.S. District Judge Charles Kocoras, who cited the “inescapable harm” to the U.S. honey industry in imposing the sentence.
Yang has already paid financial penalties totaling $2.89 million to the government, including a maximum fine of $250,000, mandatory restitution of $97,625, and agreed restitution of $2,542,659.
“This is a significant sentence against a perpetrator of one of the largest food fraud schemes uncovered in U.S. history,” said Gary Hartwig, Special Agent-in-Charge of HSI Chicago. “Unbeknownst to Yang, he was dealing with an undercover HSI agent who was one step ahead of his illegal activities. Together with our partners at Customs and Border Protection, we will continue to protect American industries from deceptive import practices, while facilitating the lawful flow of goods across our borders that is so critical to the U.S. economy.”
According to court documents, Yang caused transportation companies to deliver to U.S. honey processors and distributors 778 container loads of honey, which were falsely declared at the time of importation as being from Malaysia or India, knowing that all or some of the honey had actually originated in China. As a result, the honey, which had an aggregate declared value of nearly $23 million when it entered the country, avoided anti-dumping duties and honey assessments totaling more than $37.9 million.
In addition, Yang admitted that he sold purported Vietnamese honey that tested positive for the presence of Chloramphenicol, an antibiotic not allowed in honey or other food products. After learning of the unfavorable test results, Yang obtained new test results that purported to show that the honey was not adulterated, and he instructed the undercover agent to destroy the unfavorable test results. This adulterated honey was seized by the government.
The sentence was announced by Mr. Hartwig and Zachary T. Fardon, United States Attorney for the Northern District of Illinois.
Yang was among a group of individuals and companies who were charged in February of this year in the second phase of an investigation led by agents of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). See:
Two Companies and Five Individuals Charged With Roles in Illegal Honey Imports; Avoided $180 Million in AntiDumping DutiesIn December 2001, the Commerce Department determined that Chinese-origin honey was being sold in the United States at less than fair market value, and imposed anti-dumping duties. The duties were as high as 221 percent of the declared value, and later were assessed against the entered net weight, currently at $2.63 per net kilogram, in addition to a “honey assessment fee” of one cent per pound of all honey. In October 2002, the Food and Drug Administration issued an import alert for honey containing the antibiotic Chloramphenicol, a broad spectrum antibiotic that is used to treat serious infections in humans, but which is not approved for use in honey. Honey containing certain antibiotics is deemed “adulterated” within the meaning of federal food and drug safety laws.
In 2008, federal authorities began investigating allegations involving circumventing antidumping duties through illegal imports, including transshipment and mislabeling, on the “supply side” of the honey industry. The second phase of the investigation involved the illegal buying, processing, and trading of honey that illegally entered the U.S. on the “demand side” of the industry.
The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.
Former St. Louis Executive of Chicago Area Company Sentenced to Four Years in Prison for $3.9 Million Invoicing Fraud SchemeRead the Press Release
CHICAGO – A former vice president of a company that was based in west suburban Downers Grove was sentenced today to four years in federal prison for a fraudulent invoicing scheme in which he obtained more than 100 company checks totaling more than $3.9 million and stole the money for himself. The defendant, STEVEN M. BRAZILE, used a portion of the stolen funds to operate a classic car business. He had pleaded guilty to interstate transportation of fraudulently obtained securities last July in U.S. District Court.
Brazile, 52, of St. Louis, was a vice president in the victim company’s St. Louis office where he managed the information technology functions in that office. Brazile was also ordered to pay $3,902,880 in restitution and forfeiture and to begin serving his 48-month sentence on Jan. 7, 2014, by U.S. District Judge Elaine Bucklo.
Brazile also agreed to forfeiture of approximately $375,000 in funds that were seized or will be turned over from various bank and brokerage accounts, as well as 24 automobiles including classic cars, approximately $180,000 in proceeds from the sale of several classic automobiles, and a commercial property he owned in St. Louis.
Brazile, who had authority to approve company payments to vendors up to $100,000, admitted that between December 2006 and December 2009 he approved false invoices purporting to be from vendors for goods and services that were never provided to the corporation. He caused the company to issue approximately 104 checks totaling slightly more than $3.9 million. Brazile took those checks and stole the proceeds by depositing them into a bank account he controlled in the name Steve’s Classic Cars, a business he owned to buy and restore classic automobiles.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Federal Bureau of Investigation. The government was represented by Assistant U.S. Attorney Sarah E. Streicker.
The case falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement, who working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: StopFraud.gov.
Cicero Gear Manufacturing Firm Pleads Guilty to Violating Federal Clean Water Act and Agrees to Pay $1.5 Million FineRead the Press Release
CHICAGO — A suburban Cicero gear manufacturing company pleaded guilty today to illegally discharging industrial wastewater into the public sewer system and agreed to pay a $1.5 million fine. The defendant company, BRAD FOOTE GEAR WORKS, INC., began cooperating and taking remedial water treatment measures after federal environmental agents executed a search warrant in February 2011.
Brad Foote Gear Works pleaded guilty to one count of violating the federal Clean Water Act on at least 300 separate days between April 2007 and February 2011. The company, which manufactures precision gear parts for wind turbines, among other things, admitted illegally discharging spent acid wastewater and spent alkaline wastewater, industrial rinse waters, acidic solutions, oil, grease, and metal-bearing wastewater into the Metropolitan Water Reclamation District of Greater Chicago sewer system without a permit. The wastewater was received at the MWRDGC’s Stickney Water Reclamation Plant in southwest Chicago, where it was treated and discharged into the Chicago Sanitary and Ship Canal.
The company, located at 1309 South Cicero Ave., in Cicero, entered the guilty plea at its arraignment in U.S. District Court after being charged in September. U.S. District Judge Robert M. Dow, Jr., set sentencing for Feb. 19, 2014.
Under the terms of a plea agreement, which remains subject to court approval, Brad Foote will pay a $1.5 million fine in three $500,000 installments over three years. The fine is based on a mandatory minimum fine of $5,000 per day of violation, for a total of $1.5 million. The company faces a statutory maximum penalty of five years’ probation and a maximum fine of $500,000, twice the gross gain or loss, or $50,000 per violation, whichever is greater. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Randall Ashe, Special Agent-in-Charge of the Environmental Protection Agency’s Office of Criminal Enforcement in Chicago.
“To protect public health and our nation’s waterways, it is critical that industries treat their wastes safely and legally before sending them into the public sewers,” Mr. Ashe said. “For years, the defendant knowingly broke the law by allowing untreated industrial waste ― including corrosive liquids ― to be discharged into the public sewer system without a permit. Today’s guilty plea shows that those who engage in such conduct will be prosecuted.”
Following the search of its premises in February 2011, the company began cooperating and implementing protocols to ensure the proper discharge and disposal of industrial wastewater from its facility. As a result, the government did not seek a court-imposed corporate compliance agreement.
According to the plea agreement, Brad Foote’s manufacturing operations included a nital etch line, in which finished parts were dipped into a series of tanks containing caustic cleaners, rinse waters, and nitric acid and hydrochloric acid solutions. The etching acids and caustic cleaners of the nital etch line generally exhibited impermissibly low acidic solutions and impermissibly high alkaline solutions and, over time, those solutions and rinse waters became “spent,” meaning they lost their effectiveness and needed to be replaced.
Beginning in 2004, the company’s then chief executive officer and the manager of the nital etch line created a piping system that allowed untreated wastewater to be discharged into the public sewer system. The discharged wastewater from acid and alkaline tanks generally exhibited a pH of less than 2.0 or greater than 10.5. A second source of illegal discharge involved the company’s “Superfinish” process that used chemicals and abrasive sand-like material to smooth and polish gear parts. As a significant industrial user, Brad Foote was required to have a valid discharge authorization permit to discharge these wastewaters into the sewer system. Brad Foote knew that it did not have, and never applied for, a discharge authorization permit.
The government is being represented by Assistant U.S. Attorney Peter Flanagan. The case was investigated by the EPA’s Criminal Investigation Division.
Plea Agreement
Weight-Loss Infomercial Pitch-Man Kevin Trudeau Convicted of Criminal ContemptRead the Press Release
CHICAGO ― Author and television pitch-man KEVIN TRUDEAU was convicted today of 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. A federal jury deliberated approximately an hour after a week-long trial in U.S. District Court.
Trudeau, 50, of Oak Brook, had his bond revoked and he was ordered taken into custody by U.S. District Judge Ronald Guzman, who set a schedule for post-trial motions but no sentencing date.
Criminal contempt has no statutory maximum sentence. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The guilty verdict 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.
According to the evidence at trial, Trudeau appeared in three television infomercials between December 2006 and November 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.
In closing arguments today, prosecutors listed 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 government was represented by Assistant U.S. Attorneys April Perry and Marc Krickbaum.
Joliet Settles U.S. Housing Discrimination Case, Preserves Affordable Housing for Low-Income Residents for 20 YearsRead the Press Release
CHICAGO ― The United States and the City of Joliet have settled housing discrimination litigation that will preserve affordable housing for low-income residents in the southwest suburb for at least the next 20 years, the United States Attorney’s Office and the Justice Department’s Civil Rights Division announced.
The agreement, which was approved today by U.S. District Judge Charles Norgle, resolves the claims of the United States in two lawsuits in which the government contended that Joliet had discriminated against African-Americans in violation of the Fair Housing Act when it attempted to condemn a federally subsidized affordable housing development. The development, known as Evergreen Terrace, contains 356 units of affordable housing that are currently operated by a private owner pursuant to a 20-year contract with the U.S. Department of Housing and Urban Development. The agreement ensures that if Joliet acquires the property through condemnation or otherwise, any displaced resident will be able to remain in affordable housing in Joliet, and at least 115 low-income housing units will continue to be available for families at the property or, subject to HUD approval, elsewhere in Joliet.
“This settlement guarantees that the United States will attain its major goal in this litigation, namely to preserve the affordable housing rights of low-income residents in Joliet and those at Evergreen Terrace in particular,” said Zachary T. Fardon, United States Attorney for the Northern District of Illinois. “Local governments that try to reduce affordable housing opportunities without providing meaningful alternatives risk running afoul of anti-discrimination laws. As a result of this settlement, the low-income residents of Evergreen Terrace will be able to either stay at Evergreen Terrace or move to suitable alternative housing in Joliet,” he said.
“The United States is committed to ensuring that individuals and families, regardless of their race or income, have an opportunity to live in the community of their choosing,” said Jocelyn Samuels, Acting Assistant Attorney General for Civil Rights. “This settlement ensures that, if the city prevails in its eminent domain action, Evergreen Terrace residents will be protected from forced to leave the city and low-income housing opportunities will be preserved in the city.”
Under today’s settlement, if the city acquires the property, consisting of eight buildings on North Broadway and North Bluff streets, it will still be bound by certain restrictions designed to protect residents and preserve affordable housing within the City of Joliet. Among other things, the agreement:
- ensures that tenants who wish to remain in Joliet will not be displaced unless and until Joliet finds suitable housing in the city that will also accept the residents’ federal housing subsidies. The city will also provide relocation counseling to displaced residents through a HUD-approved organization and will provide all assistance required by the Uniform Relocation Act;
- requires the city to preserve at least 115 of the low-income housing units for the next 20 years. The housing units would remain at the property initially, but the city could seek to transfer the subsidy to another development in Joliet pursuant to HUD’s program requirements for such transfers. No such transfer could be carried out until the replacement housing is ready for occupancy, and current and former Evergreen Terrace residents would have first priority for residency;
- provides that to the extent any other housing is developed at the property, it would include the minimum number of affordable units required by the Low Income Housing Tax Credit Program;
- requires the city to construct and maintain a community center to provide services to current and former Evergreen Terrace residents and other low- and moderate-income residents of the city;
- maintains most of the Evergreen Terrace site for use as a public purpose for at least twenty years;
- restores to the city HUD funding under HUD’s Community Development Block Grant and HOME Investment Trust Funds program that HUD had previously withheld because of its conclusion that the city was not complying with the Fair Housing Act and other applicable civil rights laws; and
- ends HUD’s participation in the ongoing trial in the condemnation lawsuit. (City of Joliet v. Mid-City National Bank of Chicago, et al., No. 05 C 6746, and United States v. City of Joliet, No. 11 C 5305.)
The current property owners of Evergreen Terrace and four current tenants had also challenged the city’s condemnation action, and today’s agreement does not resolve their claims. The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status. Fair housing enforcement is a priority of the Civil Rights Division. More information about the Civil Rights Division and the laws it enforces is available at justice.gov/crt. Individuals who believe that they may have been victims of housing discrimination can call the housing Discrimination Tip Line at 1-800-896-7743, email the Justice Department at [email protected], or contact the U.S. Department of Housing and Urban Development at 1-800-669-9777.
The government was represented by Assistant U.S. Attorneys Patrick Johnson and Ernest Ling, together with trial attorneys from the Justice Department’s Civil Rights Division.
Peru, Ill., Physician Indicted on Federal Charges for Allegedly Illegally Dispensing Presecription MedicationsRead the Press Release
CHICAGO — A LaSalle County physician was taken into federal custody this morning after being indicted on federal charges alleging that he illegally dispensed prescription narcotics to three patients in 2012 and 2013. The defendant, Dr. CONSTANTINO PERALES, was charged with 17 counts of illegally dispensing Oxycodone and/or Alprazolam in an indictment returned by a federal grand jury on Wednesday and made public today.
Perales, 62, of Peru, Ill., was expected to appear at 2 p.m. today before U.S. Magistrate Judge Sidney I. Schenkier in Federal Court in Chicago. Perales has been in state custody on related charges, which were dismissed today by LaSalle County prosecutors. Perales’ Illinois medical license was suspended, and he surrendered his DEA registration, after federal and local authorities executed a search warrant at his office and he was arrested on state charges in August.
According to the indictment, Perales dispensed Oxycodone and/or Alprazolam outside the scope of professional practice and without a legitimate medical purpose to three different patients on 17 occasions between May 2012 and August 2013.
Each count carries a maximum penalty of 20 years in prison and a $1 million fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The arrest and charge were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, Jack Riley, Special Agent-in-Charge of the Drug Enforcement Administration; Lamont Pugh, III, Special Agent-in-Charge of the U.S. Department of Health and Human Services Office of Inspector General in Chicago; and the Peru Police Department.
The government is being represented by Assistant U.S. Attorney Lela Johnson.
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
Chicago Man Sentenced to More Than 13 Years in Federal Prison for Transporting and Possessing Child PornographyRead the Press Release
CHICAGO — A Chicago man who collected thousands of images and hundreds of videos of child pornography was taken into federal custody after he was sentenced yesterday to 13 years and 4 months in federal prison for transporting and possessing child pornography using his home computers. The defendant, JONATHAN SAINZ, 28, had pleaded guilty in June of this year. He was charged in October 2011 after federal agents searched his residence earlier that year.
Sainz was sentenced to 160 months in prison, followed by five years of supervised release, by U.S. District Judge Samuel Der-Yeghiayan. He must serve at least 85 percent of his federal sentence before he is eligible for release and there is no parole in the federal prison system. 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.
Sainz was also ordered to pay $8,387 in restitution to a specific child pornography victim, whose image he possessed and who was identified by the National Center for Missing and Exploited Children (NCMEC) as a result of previous unrelated investigations.
According to court records, in December 2010, an undercover law enforcement agent engaged in an online chat with Sainz, during which the agent downloaded approximately eight videos and 44 images of child pornography from files made available for sharing by Sainz. FBI agents subsequently linked the internet account used during the chat to Sainz’s residence. Ultimately, Sainz was found to possess approximately 3,820 images and 222 videos of child pornography on his home computers. The images and videos included depictions of extremely young children, including toddlers, being sexually assaulted.
The investigation was conducted by the FBI’s Child Exploitation Task Force. The task force is part of a nationwide effort known as the Innocence Lost National Initiative targeting those involved in the commercial sexual exploitation of children in the United States. In Chicago, the CETF is comprised of FBI special agents and officers and investigators from the Chicago Police Department, the Cook County Sheriff's Office, and the Cook County State’s Attorney’s Office.
The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorney Bolling W. Haxall.
Four Defendants Indicted in Alleged $10 Million Bank Fraud Scheme Involing the Sale of 26 Gas Stations in Four StatesRead the Press Release
CHICAGO — Four defendants were indicted on federal charges for their alleged roles in a scheme to fraudulently obtain more than $10 million in loan proceeds from a suburban bank through the sales of 26 gas stations in Illinois, Iowa, Nebraska and Wisconsin. Two defendants, CHARNPAL GHUMAN and AGA KHAN, co-owned the gas stations and sold them to purchasers financed by the bank loans and guaranteed in part by the Small Business Administration. They allegedly recruited purchasers and arranged the loans through a bank loan officer, AKASH BRAHMBHATT, based on false financial representations, including false tax returns prepared by SHITAL MEHTA, an accountant, both of whom also were indicted.
A fifth defendant, Khan’s brother, SHABBIR KHAN, was charged separately with tax offenses arising from the bank fraud investigation.
A 23-count indictment returned by a federal grand jury earlier this month was unsealed yesterday following the arrests of Ghuman, 34, of North Barrington, who was charged with 19 counts of bank fraud, three counts of bank bribery, and one count of filing a false federal income tax return, and Khan, 33, of Schaumburg, who was charged with four counts of bank fraud. Both men pleaded not guilty at their arraignment today and remain in federal custody pending a detention hearing at 10:30 a.m. Monday before U.S. Magistrate Judge Daniel Martin in Federal Court.
The indictment seeks forfeiture of approximately $10 million from Ghuman and Khan, as well as $198,180 in proceeds from the sale of Ghuman’s 2005 Porsche Carrera GT Coupe, which was allegedly purchased with fraud proceeds.
Brahmbhatt, 39, formerly of Naperville and currently living in Texas, and Mehta, 47, of Elk Grove Village, were each charged with one count of bank fraud. They were not arrested and will be arraigned on a date to be determined in U.S. District Court.
The arrests and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Robert J. Shields, Jr., Acting 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, together with officials of the Small Business Administration Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General.
According to the indictment, American Enterprise Bank, based in Buffalo Grove, was authorized to process SBA loans on its own if the loan satisfied SBA qualifications and rules, including a requirement that SBA loans could not be used to finance 100 percent of a business investment.
Between 2006 and 2009, the defendants allegedly engaged in the scheme, which involved the sales of 26 gas stations, including stations in the Illinois towns of Macomb, Mendota, New Boston, Rock Island, and Silvis, as well as three states.
As part of the scheme, Ghuman and Khan allegedly recruited purchasers of their gas stations who did not qualify for SBA loans and arranged for loans to be made in whole or in part in the name of the purchaser’s relative or friend who had acceptable credit, even though Ghuman, Khan, and Brahmbhatt knew that this straw purchaser would have no role in the gas station or repayment of the loans. In addition, the same three defendants caused false information and documents to be submitted to the bank, including false information about employment, income, assets, and liabilities; false tax returns allegedly prepared by Mehta; and false information about the purchasers’ contributions of equity.
Ghuman and Khan allegedly gave gifts to Brahmbhatt, including cars, in exchange for his alleged assistance in processing the fraudulent loans. The loan proceeds were paid to Ghuman and Khan as payment for gas stations owned by various business entities they controlled.
Ghuman alone was charged with filing a false federal income tax return for 2006, when he reported total and adjusted gross income of $203,583, and the total tax was $37,260, allegedly knowing that the actual amounts substantially exceeded those figures.
Shabbir Khan, 31, of Schaumburg, was charged separately yesterday with two misdemeanor counts of failing to file federal income tax returns for 2008 and 2009. He allegedly had gross income in 2008 in excess of $55,000 from his employment at a cell phone store and from broker’s fees paid to him by American Enterprise Bank as commissions on the loans, and gross income in excess of $30,000 in 2009 from his cell phone store employment.
Each count of bank fraud and bank bribery carries a maximum penalty of 30 years in prison and a $1 million fine. The tax count against Ghuman alone carries a maximum penalty of three years in prison and a $250,000 fine. The tax charges against Shabbir Khan each carry a maximum penalty of a year in prison and a $100,000 fine. In addition to criminal penalties, including mandatory costs of prosecution, defendants convicted of tax offenses remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorney Sheri Mecklenburg.
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.
Ghuman et al Indictment
Kahn InformationFormer Cook County Forest Preserve District Engineer Charged with Accepting $10,000 in Kickbacks from Two District ContractsRead the Press Release
CHICAGO — Two facilities of the Forest Preserve District of Cook County, which were spruced up in 2011, became part of an FBI sting investigation that resulted in federal charges against a former assistant engineer for allegedly taking $10,000 in kickbacks from two contracts he steered to a contractor who was cooperating with law enforcement. The defendant, JOSEPH MOLLICA, was indicted yesterday on two counts of federal bribery, law enforcement officials announced today.
Mollica, 52, of Elmwood Park, will be arraigned next Wednesday in U.S. District Court. He was released on his own recognizance after he was arrested on Oct. 3 and charged initially in a criminal complaint. Mollica was an assistant engineer for the Forest Preserve District for more than 20 years until last week, and he and others had authority to influence and award contracts for work under $25,000.
Together, the indictment and complaint allege that on Oct. 14, 2011, Mollica accepted a $6,000 kickback from a $24,900 contract to refinish and refurbish the Forest Preserve District’s headquarters building, where he worked, located at 536 N. Harlem Ave., in River Forest. On Dec. 16, 2011, he allegedly accepted a $4,000 kickback from a $16,500 contract to power wash and stain the building and boardwalk and do caulking at the Sand Ridge Nature Center in Calumet City.
The indictment seeks forfeiture of $10,000 in alleged kickback payments.
In both instances, a cooperating individual, a construction company owner who recorded conversations and meetings with Mollica in which the contracts were arranged and the kickbacks were paid, appeared to perform the work properly and completely, according to the complaint affidavit of an FBI agent. The kickback payments occurred after the Forest Preserve District paid the cooperating individual for the work that was performed.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
Each count of federal bribery carries a maximum penalty of 10 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorney Christopher Hotaling.
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
ComplaintCary Business Owner Sentenced to over 5 Years in Federal Prison for International Fraud SchemeRead the Press Release
ROCKFORD – A Cary, Ill. business owner was sentenced today in federal court by U.S. District Judge Frederick J. Kapala to 63 months in federal prison for conducting a three and half year, multi-million dollar, international fraud scheme. Judge Kapala also ordered that CLARE THOMAS ANDERSON, 45, serve 3 years of supervised release following his release from prison, and pay restitution of $6,191,155 to the companies he victimized. Anderson, who owned and operated multiple businesses in Cary, Ill., and Florida, pled guilty to a federal wire fraud charge on April 5, 2012.
According to the written plea agreement, Anderson owned and operated the following businesses: Certifibre, LLC; Anderson International Global, LLC, which had an assumed name of Worldwide Paper Company, Inc.; American Surplus Supply; Southernmost Exports, LLC, Southernmost Holdings, LTD; and Sea Consulting, LLC. Through these businesses, Anderson contracted to sell wood pulp and other raw materials to manufacturers, brokers and suppliers, which were usually located in foreign countries.
Anderson obtained payments from his customers before the shipments arrived at their destinations. Often, the customers obtained Letters of Credit from their banks in order to pay for the shipments in advance. Anderson admitted that he obtained these payments by creating and presenting fraudulent documents to his customers. These documents falsely represented the quantity and quality of materials that had been shipped.
Anderson further admitted that, instead of shipping the wood pulp or other raw materials he had agreed to sell, he frequently shipped worthless scrap material to his foreign customers. When the customers called him to complain, Anderson falsely told them that the scrap materials were intended for other customers in different countries.
Anderson also admitted that on some occasions, instead of shipping the agreed upon amounts of wood pulp or other raw materials, he shipped substantially smaller amounts. When the customers called and complained about the short shipments, Anderson falsely told them that the short shipments were caused by clerical errors.
Anderson often failed to pay his own suppliers for the materials he had shipped. In addition, Anderson usually failed to pay the freight shipping charges. Anderson also admitted that he spent the fraudulently obtained funds on his own personal expenses. On a few occasions Anderson refunded some money to his victims in order to avoid detection of his scheme. Anderson paid these refunds only after the victims contacted, or threatened to contact, federal law enforcement officials. Anderson admitted that he obtained the funds used to pay these refunds by defrauding additional customers.
The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-In-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorney Scott A. Verseman.
Belgian Man Charged with Attempting to Illegally Export Aluminum Tubes to Malaysian Front for Individual in IranRead the Press Release
CHICAGO — A Belgian businessman is scheduled to be arraigned tomorrow on federal charges alleging that he violated U.S. laws by attempting to export aluminum tubes that were controlled for nuclear nonproliferation purposes from a company in Schaumburg, through Belgium, to a company in Kuala Lumpur, Malaysia, without obtaining a license from the U.S. Commerce Department, federal law enforcement officials announced today. The case follows a lengthy undercover investigation in which the Schaumburg company, which was cooperating with law enforcement, actually shipped different non-controlled aluminum tubes to the defendant’s business in Belgium before they were allegedly illegally transshipped to Malaysia.
Court documents allege that the Malaysian business is a front company operated by an individual who is located at times in Iran.
The case involves 7075 T6 aluminum tubing with an outside diameter of 4.125 inches and an ultimate tensile strength of 572 MPa (megapascals), which is used in the aerospace industry, among other applications. As a controlled material, a license was required from the Commerce Department’s Bureau of Industry and Security to export the 7075 aluminum from the U.S. to Malaysia, but not to Belgium.
The defendant, NICHOLAS KAIGA, 36, of Brussels and London, was charged with one count of violating the International Emergency Economic Powers Act (IEEPA) and two counts of making false statements on U.S. export forms in a three-count indictment returned by a federal grand jury last Thursday. Kaiga has been in federal custody since he was arrested on June 25 in New York City, approximately a week after he arrived there. A criminal complaint filed at the time of his arrest was unsealed when he was indicted last week.
Kaiga will be arraigned at 11 a.m. tomorrow before U.S. Magistrate Judge Maria Valdez in U.S. District Court in Chicago.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Gary Hartwig, Special Agent-in-Charge of Homeland Security Investigations in Chicago; Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Ronald B. Orzel, Special Agent-in-Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Chicago Field Office. The Justice Department’s National Security Division is providing assistance in the case.
According to the complaint affidavit and the indictment, the Schaumburg company, identified as “Company A” in court documents began cooperating with law enforcement in December 2007. The cooperation began after a person identified as “Individual A,” who was at times located in Iran, attempted to purchase 7075 aluminum from Company A, to be shipped to a company in the United Arab Emirates, but was denied an export license. In late 2009, an undercover agent began posing as an employee of Company A.
Between November 2009 and February 2012, the indictment alleges that Kaiga, who was managing director of a Belgian company, Industrial Metals and Commodities, attempted to export 7075 aluminum from Company A to Company B in Malaysia without an export license. The complaint affidavit alleges that Company B was a front for Individual A in Iran. The false statements charges allege that Kaiga lied on Commerce Department export declaration forms, which stated that the ultimate destination and recipient of the 7075 aluminum were in Belgium.
In November 2011, material that was purported to be 7075 aluminum, but was actually substituted with a different aluminum by Company A in cooperation with law enforcement, was picked up from Company A by a freight forwarding company designated by Kaiga’s Belgian company. The material arrived in the Belgian port of Antwerp on Dec. 1, 2011, and two months later it was shipped by a freight forwarding company to Individual A’s front company in Malaysia.
Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine, while making false statements to government agencies carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorneys Raj Laud and Nancy DePodesta.
An indictment contains merely charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
ComplaintTwo Men Charged with Swindling Victims of Thousands of Dollars in Advance Fees While Failing to Modify Home LoansRead the Press Release
CHICAGO ― Two men who operated various businesses at multiple Chicago area locations since at least 2009 are facing federal fraud charges for allegedly charging thousands of dollars in advance fees, purportedly to help individuals modify their existing home mortgage loans, but then failing to provide the services they promised. The charges allege that the defendants defrauded a handful of known victims, but federal law enforcement officials believe there could be hundreds of potential victims and are appealing for information from anyone with knowledge of the alleged scheme.
The defendants, EVERETT POPE, also known as “Jonathan Pincuss,” 38, of Bolingbrook, and COLBI ANDRY, aka “Richard Lockwell” and “Rich Ingram,” 38, of Chicago, were each charged with wire fraud in a criminal complaint that was filed last week in U.S. District Court. Both men were released on $10,000 unsecured bonds and have a preliminary hearing set for Nov. 13 before U.S. Magistrate Judge Michael Mason in Federal Court.
The business entities that they allegedly used were: EAC Financial LLC; Emergency Debt Relief Center; Dimond Financial LLC; D Financial; The Andry Group, LLC; Family First Home Solutions LLC; The Law Group; Certified Forensic Loan Auditors, LLC; and Integrity Mortgage and Insurance Co., all of which were located, often at retail business sites, in Chicago or south suburban Monee or Matteson.
Anyone who suspects that he or she might be a victim and has not already received a victim survey from the U.S. Attorney's Office should submit their name and address to [email protected]. Persons without internet access may call a toll-free number ― (866) 364-2621 ― and leave a message with the spelling of their name and an address, and a form will be mailed to them.
According to the complaint, Pope and Andry frequently convinced customers who were not experiencing financial hardship that they were eligible for loan modifications. Then, they demanded up-front fees from victims, usually ranging between $2,000 and $3,000. For many of their victims, loan modifications were never completed or were completed with terms that were less favorable and without the customers’ agreement.
To perpetuate the alleged scheme, Pope and Andry have used aliases to conceal their true identities, and they have frequently changed business names to make it more difficult for dissatisfied customers to locate them. As part of the scheme, Pope and Andry falsely represented to victims that their loan modification would be overseen by an attorney, the charges allege. At times, Pope allegedly identified himself as “attorney Jonathan Pincuss.”
After the City of Chicago and the Illinois Attorney General’s Office filed separate civil lawsuits in 2010 and 2011, respectively, against Pope, Andry, and certain business entities that were known at that time, the complaint alleges that the defendants ceased operating under those business names and started up new business entities while continuing to defraud customers.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorney Sharon Fairley.
Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or an alternative fine totaling twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
A complaint contains only charges and is not evidence of guilt. The defendants presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: StopFraud.gov.
Complaint
Operators and Employee of Schaumburg Home Visiting Physician Group Among Three Indicted in $12 Million Medicare Fraud SchemeRead the Press Release
CHICAGO ― The administrator, medical director, and an employee of a Schaumburgbased in-home visiting physician group were indicted on federal charges for their alleged roles in a $12 million health care fraud scheme, federal law enforcement officials announced today. The defendants operated or were employed by a home visiting physician practice, Medicall Physicians Group, Ltd., that allegedly billed Medicare for patient services that were never provided. The defendants allegedly fraudulently obtained approximately $4.7 million in Medicare payments from January 2007 to December 2011.
A 10-count indictment that was returned by a federal grand jury last Wednesday was unsealed today following the arrest of RICK E. BROWN, 56, of Rockford, the president of Home Care America, Inc., which controlled the daily operations of Medicall. Brown pleaded not guilty and was released on a $10,000 unsecured bond at his arraignment today before U.S. Magistrate Judge Mary Rowland in Federal Court in Chicago.
Also indicted were Dr. ROGER A. LUCERO, 62, of Elmhurst, a physician and the medical director of Medicall, and MARY C. TALAGA, 53, of Elmwood Park, a Medicall and Home Care America employee who submitted claims to Medicare on behalf of Medicall and the medical professionals who were employed by Medicall. Lucero and Talaga were not arrested and will be arraigned on dates yet to be determined.
Brown and Lucero were each charged with one count of conspiracy to commit health care fraud and multiple counts of health care fraud. All three defendants were charged with three counts each of making false statements relating to health care matters. The indictment also seeks forfeiture of more than $4.49 million from Brown and Lucero.
According to the indictment, Brown and Lucero operated Medicall, and Talaga submitted the company’s bills to Medicare, totaling more than $12 million. Brown instructed employees to bill Medicare for patient oversight and other services that were never provided, and Lucero created backdated records in an effort to conceal the fraudulent billings, the indictment alleges. Talaga allegedly billed Medicare for these services, even though she knew they were not documented, a practice that required her to fabricate the information submitted to Medicare.
The arrest and charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois; Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; Robert J. Shields Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Lamont Pugh III, Special Agent-in- Charge of the Chicago Regional Office of the U.S. Department of Health and Human Services Office of Inspector General.
Health care fraud conspiracy and each count of health care fraud each carry a maximum penalty of 10 years in prison and a $250,000 fine, while each count of making false statements relating to health care matters carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, restitution is mandatory and the court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
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.
The investigation was conducted jointly by the FBI and HHS-OIG and brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office. The case is being prosecuted by Trial Attorney Brooke Harper of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in Chicago and eight other cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: stopmedicarefraud.gov.
Indictment
Two Former Cook County Board of Review Analysts Convicted of Accepting $1,500 Bribe to Facilitate $10,000 Property Tax ReductionRead the Press Release
CHICAGO ― Two former analysts for the Cook County Board of Review were convicted today on federal conspiracy, bribery, and fraud charges for accepting $1,500 to facilitate reducing by more than $10,000 the property taxes on three residential properties identified by an individual who was cooperating with federal agents. The defendants, THOMAS HAWKINS and JOHN RACASI, were captured scheming with others to facilitate reducing property tax assessments in exchange for bribes in undercover recordings that were played at their week-long trial in U.S. District Court. The jury deliberated for a couple of hours Friday before finding both defendants guilty on all counts this morning.
Hawkins was an analyst since December 2004, and Racasi was an analyst since March 2006, and both were on the staff of one of the three Board of Review commissioners in September 2008, when they accepted the $1,500 bribe payment. Each of the three commissioners has analysts who handle residential property tax appeals and at least two of the three commissioners’ analysts must agree in order to reduce the Cook County Assessor’s property tax assessments.
Hawkins, 49, and Racasi, 52, half-brothers and both of Chicago, were convicted of one count each of conspiracy to commit bribery, bribery, mail fraud, and mail fraud conspiracy. They remain free on bond while awaiting sentencing, which U.S. District Judge John Tharp set for 2 p.m. on Feb. 25, 2014.
Mail fraud and mail fraud conspiracy each carry a maximum sentence of 20 years in prison; bribery carries a maximum of 10 years; and conspiracy to commit bribery carries a maximum of five years in prison, and each count carries a $250,000 maximum fine. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The guilty verdicts were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The FBI=s Chicago City Public Corruption Task Force led the investigation with assistance from the Chicago Police Department’s Internal Affairs Division, which is a task force member.
According to the evidence at trial, Ali Haleem, a former Chicago police officer who began cooperating with the FBI in July 2008 and is awaiting sentencing on other federal charges, was introduced to Hawkins, who, in turn, introduced him to Racasi. Haleem recorded numerous meetings and telephone conversations with both defendants in which they discussed facilitating property tax assessment reductions in exchange for bribes.
In September 2008, Haleem, Hawkins and Racasi discussed the specifics of the bribe Haleem would pay for reducing tax assessments on properties in Chicago, Burbank, and Tinley Park. On Sept. 11, 2008, Hawkins and Racasi agreed to reduce the assessed values on properties Haleem owned in Chicago and Burbank, as well as a property in Tinley Park owned by another individual, for three years beginning with the 2008 tax year. Hawkins and Racasi provided Haleem with analysis sheets for these properties, which could be used to calculate the tax savings that a property owner would realize over the three-year period. In return for the $1,500 bribe, Hawkins and Racasi promised Haleem a total tax savings for the three properties over the threeyear period of at least approximately $10,000. The payment was made on Sept. 17, 2008, when Haleem met with Hawkins and Racasi and handed the money to Racasi. Hawkins assured Haleem that Racasi would later provide Hawkins with his share of the money.
Hawkins and Racasi also facilitated a reduction in property tax assessments on 10 condominium units in Chicago, expecting to receive bribe payments that Haleem would collect from the property owners once the reductions were verified.
The government is being represented by Assistant U.S. Attorneys Margaret J. Schneider and Michael T. Donovan.
Investment Advisor and Real Estate Developer Charged with Causing $5.5 Million Loss to 25 Investors in $9 Million Fraud SchemeRead the Press Release
CHICAGO ― A former securities broker and his associate in a real estate business that converted apartments into condominiums were indicted for allegedly fraudulently raising more than $9 million from approximately 25 investors and misappropriating a substantial portion of the money, resulting in a loss of at least $5.5 million. The defendants, MARCIN MALARZ and ARTHUR LIN, allegedly used the investors’ funds for their own personal use, as well as to make Ponzi-type payments to certain investors.
Malarz, 39, formerly of Lake Forest, and Lin, 48, of Palatine, were each charged with three counts of wire fraud in an indictment returned yesterday by a federal grand jury. Lin will be arraigned on date to be determined in U.S. District Court, while Malarz is a fugitive and is believed to be living in Poland.
According to the charges, Lin was a branch office manager of a securities broker-dealer in Itasca and also an officer of Malarz Equity Investments LLC (MEI), which was managed by Malarz and sold condominiums after purchasing apartment buildings and converting the units. Lin recruited investors for Malarz and MEI from his securities firm’s client pool. In some cases, Lin allegedly convinced his clients to take out home equity loans or liquidate their brokerage investments to generate money to invest with MEI.
Between November 2005 and April 2010, Malarz and Lin fraudulently offered and sold investments in promissory notes and obtained loans personally secured by Malarz, while making false representations about the risks involved in investing and lending money to MEI, the charges allege. Specifically, they made false representations about: the solvency and financial condition of MEI and Malarz; the expected and actual returns on investments and loans, the ways the investors’ funds would be used; and Malarz’s ability to personally guarantee the investments and loans, according to the indictment.
Malarz allegedly misappropriated approximately $2 million for his personal use, including funds to pay outside business expenses, travel and living expenses, such as credit card and home mortgage bills, furniture, clothing, and a Mercedes automobile.
Malarz and Lin allegedly paid hundreds of thousands of dollars from investors’ funds to Lin’s wife, often in amounts approximating 10 percent of the funds that Lin brought to MEI. Lin used these funds to pay personal expenses, including credit card and home equity loan payments.
The indictment seeks forfeiture of alleged fraud proceeds totaling at least $5.5 million as well as Lin’s residence in Palatine and additional homes in Palatine and Barrington.
The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Securities and Exchange Commission, which filed its own civil enforcement action against the defendants, provided assistance
The government is being represented by Assistant U.S. Attorney Rachel Cannon.
Each count of wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or an alternative fine totaling twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
An indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.
Indictment
Four Men Sentenced for Fraud Involving Sports MemorabiliaRead the Press Release
ROCKFORD – Three men were sentenced today in federal court by U.S. District Judge Philip G. Reinhard on separate fraud schemes involving the sports memorabilia business and the purchase and sale of equipment and uniforms used by professional and collegiate athletes: BERNARD GERNAY, 39, a resident of Howell, N.J., involved in the business operations of Pro Sports Investments, Inc., a New Jersey business, and JARROD OLDRIDGE, 39, a resident of Las Vegas, involved in business operations of JO Sports, Inc., a Nevada business, were each sentenced to 6 months in federal prison; and BRADLEY HORNE, 41, a Sunset, S.C. resident, involved in the business operations of Authentic Sports Memorabilia, Inc., a South Carolina business, was sentenced to 3 months in federal prison. In addition, each defendant was also ordered to serve 3 years of supervised release following release from prison, and restitution for each defendant will be determined within 60 days of sentencing.
All three men pled guilty to mail fraud charges on Nov. 21, 2011. According to the plea agreements, each case involved the sale, consignment, or auction of jerseys, in which each defendant falsely and fraudulently represented to buyers that the jerseys were “game used,” when they were not. Jerseys worn by professional and collegiate athletes during a game are usually known as “game used” or “game worn,” and are commonly bought and sold by collectors and others. The value of game used jerseys varies based on the popularity of the player that used the jersey and how long it had been since the player had actively played the sport. The value of a jersey was greater if it was game used. The fraud charges also involved the defendants selling what were represented to be game used jerseys to other persons knowing the jerseys were intended to then be sold to sports trading card companies. As stated in the charges, to increase the value and price of packages of sports trading cards, manufacturers frequently purchase game used jerseys, cut the jerseys into small pieces, and insert the pieces into card packages. When game used jerseys were purchased for this purpose, the manufacturers often required that the seller provide a "certificate of authenticity" that the jerseys were authentic game used jerseys.
Gernay, Oldridge and Horne each admitted the jerseys they sold were altered to appear game worn, such as replacing the name and number on a jersey from one player to another more noteworthy player, changing the shape of the jerseys, and adding patches or other identifiable marks on the jerseys. Even though jerseys were not game used, the three men sold the jerseys to other persons they knew intended to re-sell, consign, and auction the jerseys, or to sports trading card companies and others, by falsely representing the jerseys were game used.
A fourth man, Bradley Wells, 32, of St. Petersburg, Fla., was charged in an indictment on Oct. 25, 2011, with a similar fraud scheme between 2005 and 2009 under the name Authentic Sports, Inc., Historic Auctions, LLC, and his own name, to market and sell fraudulent sports memorabilia represented as “game used.” Wells pled guilty to mail fraud on Sept. 6, 2012, and was sentenced on Oct. 16, 2013, to 6 months in federal prison, to be followed by 3 years of supervised release, with restitution to be determined within 60 days of his sentencing.
The sentencings were announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-In-Charge of the Chicago Office of the Federal Bureau of Investigation
The government was represented by Assistant U.S. Attorney Michael D. Love.
Former Elgin Man Sentenced to 30 Years in Federal Prison for Gun and Drug CrimesRead the Press Release
CHICAGO — A former Elgin man was sentenced to 30 years in federal prison after being convicted of firearms and narcotics crimes at trial this past summer, federal law enforcement officials announced today. The case is another example of successful cooperation between federal, state and local law enforcement partners in investigating and prosecuting dangerous gun and drug offenders in northern Illinois.
JOEL RIVAS, 35, who resided in Chicago when he was arrested in 2010, was sentenced yesterday by U.S. District Judge Amy J. St. Eve, who said the lengthy sentence was necessary to protect society.
“Although drug trafficking may provide a steady source of income for people unwilling to do the hard work required for legitimate employment, such behavior is reprehensible and should be severely punished,” prosecutors said in a sentencing memo. “The sentence may help to deter others from making the same poor choices as [Rivas].”
Rivas was sentenced as an Armed Career Criminal after being convicted at trial in July of conspiracy to distribute more than five kilograms of cocaine, possession of cocaine and marijuana, and illegally possessing two guns, both as a previously convicted felon and in furtherance of drug trafficking.
Evidence in the case showed that between 2007 and 2010, Rivas and co-defendant ISMAEL MIRANDA, 36, also formerly of Elgin, distributed wholesale amounts of cocaine and marijuana to customers in northern and central Illinois. Rivas and Miranda rented a storage unit in Elgin to conduct their business of storing, packaging, and selling narcotics. In February 2010, Elgin police searched the storage unit and seized cocaine and marijuana, as well as a loaded .357 caliber handgun in a tool box and a 9 mm caliber handgun inside a desk.
Rivas’ lengthy sentence was determined, in part, by his status as an Armed Career Criminal under federal law, based on his previous convictions dating to the 1990s for various state narcotics offenses. Judge St. Eve also found that Rivas lied during his testimony at trial. Miranda previously pleaded guilty and was sentenced to 20 years in federal prison. The case is just one example of lengthy federal prison sentences that defendants face when convicted of serious firearm and narcotics charges. Other recent examples may be found at: www.psnchicago.org/prosecutions.html.
The government was represented by Assistant U.S. Attorneys Joseph Thompson and Erika Csicsila.
The sentences were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Constance Hester, Acting Special Agent-in-Charge of the Chicago Office of ATF. The Elgin Police Department, the Illinois State Police and other state and local law enforcement agencies assisted in the investigation and trial.
Zachary T. Fardon Takes Oath of Office as U.S. Attorney for the Northern District of IllinoisRead the Press Release
CHICAGO ― Zachary T. Fardon, who served as a federal prosecutor for nearly a decade before entering private law practice, returned to government service today as the United States Attorney for the Northern District of Illinois. Mr. Fardon, 47, took his oath of office from Chief U.S. District Court Judge Ruben Castillo after President Obama signed his commission.
“I am honored and excited to serve as United States Attorney for the Northern District of Illinois. I spent my formative years as a prosecutor in this office, so I feel like I am back home. This is a great office, full of smart and passionate people. I look forward to continuing the office’s strong traditions of fairness and excellence in the pursuit of justice on behalf of the nine million residents of the Northern District of Illinois,” Mr. Fardon said.
A public investiture ceremony for Mr. Fardon is planned for the future but no date or details have yet been determined.
Gary S. Shapiro, who served as interim U.S. Attorney after Patrick J. Fitzgerald stepped down nearly 16 months ago, remains First Assistant U.S. Attorney. Mr. Fardon commended Mr. Shapiro for his stewardship of the office.
Mr. Fardon leads an office that is widely recognized for numerous significant investigations and prosecutions involving international terrorism and terrorism financing, public corruption, corporate fraud, violent crime, narcotics, and gangs. As U.S. Attorney, Mr. Fardon manages more than 300 employees, including approximately 170 authorized Assistant U.S. Attorney positions in Chicago and Rockford.
Mr. Fardon became an Assistant U.S. Attorney in Chicago in 1997 and tried several highprofile cases, including the 2005-06 corruption trial against former Illinois Governor George Ryan. From 2003 to 2006, he served as First Assistant U.S. Attorney for the Middle District of Tennessee in Nashville, where he supervised approximately 30 Assistant U.S. Attorneys in all federal criminal and civil matters. In 2007, he became a partner at Latham & Watkins LLP, where he chaired the Litigation Department in Chicago.
Mr. Fardon was born in Kansas City and raised in Knoxville, Tenn. He graduated in 1988 from Vanderbilt University in Nashville, where he also earned his law degree in 1992. He is married and has three children
Owner, Executives and Physcians at Closed Sacred Heart Hospital Indicted in Alleged Medicare Referral Kickback ConspiracyRead the Press Release
CHICAGO ― The owner and three other executives of the now-closed Sacred Heart Hospital and four physicians affiliated with the former west side facility were indicted on federal charges alleging that they collectively paid and received hundreds of thousands of dollars in illegal kickbacks in exchange for the referral of hospital patients who were insured by Medicare and Medicaid. Sacred Heart allegedly paid physicians bribes and kickbacks to induce patient referrals and increase the patient census, which, in turn, increased hospital revenue.
Sacred Heart Hospital was a 119-bed acute care facility located at 3240 West Franklin Blvd., in Chicago. The hospital closed and filed for bankruptcy this summer after Medicare payments were suspended in the aftermath of criminal charges that were first filed in April. The indictment charges only conduct involved in the alleged kickback conspiracy while a broader investigation that was outlined in the earlier criminal complaint continues.
The eight defendants were charged in a 17-count indictment that was returned by a federal grand jury late yesterday and announced today by Zachary T. Fardon, United States Attorney for the Northern District of Illinois. Five of the eight defendants were charged and arrested on April 16 this year, while three new defendants were charged in the indictment for the first time. A fifth physician associated with Sacred Heart was indicted separately for illegally prescribing prescription medications. No new arrests occurred in connection with the indictments.
Mr. Fardon announced the charges with Lamont Pugh III, Special Agent-in-Charge of the Chicago Region of the U.S. Department of Health and Human Service Office of Inspector General, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of investigation.
The five defendants charged previously in the conspiracy case are: EDWARD J. NOVAK, 58, of Park Ridge, Sacred Heart’s owner and chief executive officer; ROY M. PAYAWAL, 64, of Burr Ridge, executive vice president and chief financial officer; and Drs. PERCY CONRAD MAY, JR., 75, of Chicago, SUBIR MAITRA, 73, of Chicago, and SHANIN MOSHIRI, also known as “Shawni Moshiri,” 58, of Chicago. All five of these defendants remain free on various bonds after they were arrested in April.
The three new defendants are: Dr. RAJIV KANDALA, 41, of Chicago; ANTHONY J. PUORRO, 57, formerly of Chicago, who was Sacred Heart’s chief operating officer; and NOEMI VELGARA, 64, of Chicago, who was Sacred Heart’s vice president of geriatric services and was responsible for overseeing the Golden L.I.G.H.T. medical clinics, including managing employees responsible for marketing, and recruiting and transporting patients.
All eight defendants will be ordered to appear for arraignment in U.S. District Court.
Four defendants ― Novak, Payawal, Puorro, and Velgara ― were each charged with one count of conspiracy to violate the federal healthcare anti-kickback statute by offering and paying kickbacks and bribes, directly and indirectly, from Sacred Heart to Drs. May, Maitra, Moshiri, Kandala, and other physicians to induce them to refer patients to the hospital for services that would be reimbursed by Medicare and Medicaid. Sacred Heart’s chief operating officer before Puorro, identified as “Administrator A,” is named as an unindicted co-conspirator.
In addition, Novak and Payawal were each charged with eight substantive counts of paying kickbacks for patients, while Drs. May, Maitra, Moshiri, and Kandala were charged with two counts each of accepting kickbacks for patient referrals. The indictment also seeks forfeiture of illegal proceeds from Novak, Payawal, and the four physicians, including the unspecified total amount of Medicare and Medicaid reimbursements made on claims submitted on behalf of hospital patients whose referral involved kickbacks, and the total amount of kickbacks paid to the four physicians.
According to the indictment, Sacred Heart’s owner, executives and administrators conspired between 2004 and April 2013 to pay physicians bribes concealed as consulting, employment and personal services compensation, rent, and instructional stipends in return for referrals of Medicare and Medicaid patients. Although styled as payments for legitimate services, the payments actually contained disguised bribes paid to and for the benefit of Drs. May, Maitra, Moshiri, and Kandala in exchange for patient referrals.
The indictment alleges that Novak, Payawal, Puorro, and Administrator A caused Sacred Heart to pay May hundreds of thousands of dollars in bribes disguised as rent, and Moshiri more than $150,000 in bribes disguised as payments for purportedly teaching podiatric surgery residents. Novak, Payawal, and Puorro allegedly caused Sacred Heart to pay Maitra at least $68,000 in bribes disguised as payments for purportedly teaching medical students at the hospital; and Kandala at least $32,000 in bribes disguised as compensation for consulting and instructional services purportedly provided to the hospital and its staff.
Payawal, Puorro, and Velgara allegedly agreed to have Sacred Heart offer to pay bribes to the hospital’s transportation staff to recruit and refer patients to the hospital, and those three defendants, together with Novak, also caused Sacred Heart to pay individuals employed as “marketers” to recruit patients.
As part of the same investigation, a fifth physician associated with Sacred Heart was indicted separately this month for allegedly illegally prescribing hydrocodone or lorazepam to four different patients without having a valid license and registration to prescribe controlled substances. The defendant, Dr. KENNETH S. NAVE, 51, of Chicago, who also was arrested and charged last April, allegedly illegally used the Drug Enforcement Administration registration number of another physician when he prescribed the prescription narcotics between October and December 2012. Nave pleaded not guilty at his arraignment this week.
Each count in the eight-defendant Novak indictment carries a maximum penalty of five years in prison and a $250,000 fine and restitution is mandatory. Each count in the Nave indictment carries a maximum penalty of four years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorneys Joel Hammerman, Ryan Hedges and Terra Reynolds.
The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
The case falls under the umbrella of the Medicare Fraud Strike Force, which expanded operations to Chicago in February 2011, and is part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Justice Department and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. Dozens of defendants have been charged in health care fraud cases since the strike force began operating in Chicago.
To report health care fraud to learn more about the Health Care Fraud Prevention & Enforcement Action Team (HEAT), go to: stopmedicarefraud.gov.
Indictment
Calif. Honey Broker Sentenced to Three Years in Prison for Avoiding $39.2 Million in Tariffs on Chinese-Origin HoneyRead the Press Release
CHICAGO — A California woman was sentenced today to three years in federal prison for illegally transporting hundreds of container loads of Chinese-origin honey through the Chicago area after it entered the country illegally. The defendant, HUNG YI LIN, also known as “Katy Lin,” 42, of Temple City, Calif., pleaded guilty in May to three counts of violating U.S. importation laws by falsely declaring that the honey shipments contained sugars, syrups, and apple juice concentrate to avoid $39.2 million in anti-dumping duties.
Lin, who owns and operates KBB Express Inc., of South El Monte, Calif., and served as the U.S. agent for at least 12 importers that were controlled by Chinese honey producers and manufacturers, was sentenced to a year in prison on each of the three counts, to be served consecutively, by U.S. District Judge Milton Shadur. Lin was ordered to begin serving her sentence on Nov. 12. She was also ordered to pay restitution of $512,852 in unpaid tariffs.
“This sentence is the result of an extensive worldwide investigation that successfully dismantled the largest food fraud scheme in U.S. history,” said Gary Hartwig, Special Agent-in- Charge of HSI Chicago. “Lin’s illegal business practices cheated the U.S. government of nearly $40 million, while also inflicting damage on the domestic honey marketplace. We remain committed to protecting U.S. businesses from fraudulent trade practices, while fostering and facilitating the movement of legitimate trade across our borders that is critical to our economy.”
According to court documents, between 2009 and 2012, Lin schemed to falsify the importation documents for hundreds of containers of Chinese-origin honey by misrepresenting the contents as sugars and syrups. As a result, the honey, which had an aggregate declared value of nearly $11.5 million when it entered the country, avoided antidumping duties and honey assessments totaling $39.2 million.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois and Mr. Hartwig, as well as officials with Field Operations for U.S. Customs and Border Protection (CBP) in Chicago, and the Chicago Field Office of the Food and Drug Administration’s Office of Criminal Investigations.
Lin was among a group of individuals and companies who were charged earlier this year in the second phase of an investigation led by agents of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HIS). See:
Two Companies and Five Individuals Charged With Roles in Illegal Honey Imports; Avoided $180 Million in AntiDumping DutiesIn December 2001, the Commerce Department determined that Chinese-origin honey was being sold in the United States at less than fair market value, and imposed antidumping duties. The duties were as high as 221 percent of the declared value, and later were assessed against the entered net weight, currently at $2.63 per net kilogram, in addition to a “honey assessment fee” of one cent per pound of all honey. In October 2002, the Food and Drug Administration issued an import alert for honey containing the antibiotic Chloramphenicol, a broad spectrum antibiotic that is used to treat serious infections in humans, but which is not approved for use in honey. Honey containing certain antibiotics is deemed “adulterated” within the meaning of federal food and drug safety laws.
In 2008, federal authorities began investigating allegations involving circumventing antidumping duties through illegal imports, including transshipment and mislabeling, on the “supply side” of the honey industry. The second phase of the investigation involved the illegal buying, processing, and trading of honey that illegally entered the U.S. on the “demand side” of the industry.
The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.
Nine Alleged Members of Hobos Street Gang Indicted in RICO Conspiracy for Murders and Other Violent Drug-Related CrimesRead the Press Release
CHICAGO — Nine defendants who allegedly directed or participated in a violent, drugtrafficking street gang known as the Hobos were charged today in a federal racketeering conspiracy (RICO) indictment with engaging in murders, attempted murders, robberies, and narcotics distribution. The five-count indictment returned by a federal grand jury alleges five murders, solicitation of a sixth murder, four attempted murders, three robberies, and the operation of “drug spots” and “drug lines” on the city’s south side among a pattern of criminal activity between 2004 and 2009.
Four of the defendants are charged with personally shooting to death five victims between 2006 and 2009, including one victim who was allegedly killed because he was cooperating with law enforcement.
The indictment charges that the “Hobos Enterprise” allegedly used violence to enrich its members and their associates; to promote and enhance the criminal enterprise; to preserve and protect its power, territory, operations, and proceeds; to keep victims and witnesses in fear; and to prevent law enforcement from detecting its crimes.
“The indictment portrays a gang with virtually no restraint on its ruthless use of violence to further its goals,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois. “The gang’s alleged murders, robberies and drug dealing invited our employing the federal racketeering laws to prosecute the full scope of their crimes, some extending beyond the normal statute of limitations; and, if convicted, to bring the most severe federal sentences to bear for the terror that plagued the blocks and street corners they allegedly controlled.” The investigation is continuing, Mr. Shapiro added.
“This RICO indictment is the result of a long-term commitment we share with our law enforcement partners to address the dangerous threats facing our communities today. This investigation targeted an exceptionally violent group that used murder, threats, and intimidation to further their agenda. The charges demonstrate our focus and determination to strike at gangrelated criminal enterprises and to eliminate the terror these groups inflict on our neighborhoods,” said Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
“Through the work of Chicago Police officers and our gang investigators, in close partnership with the FBI, IRS, and the U.S. Attorney’s Office, we are able to announce federal RICO charges against nine dangerous members of the Hobos gang,” said Chicago Police Superintendent Garry F. McCarthy. “Today’s announcement should serve as a warning ― we do not and we will not accept violence in our communities or in our neighborhoods. And we will do everything in our power to hold dangerous criminals accountable for the crimes they commit,” he added.
“Today’s indictment sends a loud message that we are committed to our law enforcement partners and the communities in which we live,” said James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago. “Gang activity and criminal enterprises thrive on financial gain and perpetuate criminal violence on our streets. IRS Criminal Investigation brings its financial expertise to an investigation and we are privileged to be working with the Chicago Police Department and other federal law enforcement partners to keep our communities safe.”
The Illinois Department of Corrections also participated in the investigation. The Chicago Police Department initiated the investigation, which the federal agencies joined later under the umbrella of the Organized Crime Drug Enforcement Task Force (OCDETF) and the Chicago High Intensity Drug Task Force (HIDTA). The case is part of a sustained, coordinated effort by federal law enforcement agencies, working together with the Chicago Police and other state and local departments, to disrupt Chicago’s sophisticated, often violent, drug-trafficking organizations.
Law enforcement has identified the Hobos as a tight-knit, violent crew that originated in the former Robert Taylor Homes and banded together from factions of the much larger Gangster Disciples and Black Disciples street gangs. They allegedly targeted drug dealers and high-value targets to rob and relied upon each other to protect their drug territory, retaliate against rival gangs, and prevent witnesses from cooperating with law enforcement.
All nine defendants were charged with racketeering conspiracy and are currently in state or federal custody. They are: GREGORY CHESTER, ALSO KNOWN AS “Bowlegs,” “Big Homie,” “Pops,” and “Desjuar Anderson,” 36, of Richton Park, identified as the leader of the Hobos; ARNOLD COUNCIL, aka “Armstrong” and “Hobo,” 37; PARIS POE, aka “Poleroski,” 33; GABRIEL BUSH, aka “Louie,” 34; STANLEY VAUGHN, aka “Smiley,” 36; WILLIAM FORD, aka “Joe Buck,” 33; GARY CHESTER, aka “Chee,” 35, (Gregory Chester’s cousin); BYRON BROWN, aka “B-Rupt,” 28; and RODNEY JONES, aka “Milk,” 26, all of Chicago. Byron Brown’s deceased twin brother, Brandon Brown, is named as an unindicted coconspirator.
Poe, Council, Bush, and Byron Brown were each charged with one count of murder in aid of racketeering, and Council was charged with brandishing a firearm during a clothing store robbery. The indictment also seeks forfeiture of an unspecified amount of illegal proceeds.
All nine defendants will be arraigned on later dates in U.S. District Court.
According to the indictment, the murders committed by members and associates of the Hobos Enterprise included:
- Wilbert Moore, who was killed because he was cooperating with law enforcement, by Council and Poe on Jan. 19, 2006;
- Terrance Anderson by Bush and others on Sept. 1, 2007;
- Eddie Moss by Byron Brown and others on Dec. 14, 2007;
- Larry Tucker by Bush, the Brown brothers, and others on Jan. 20, 2008; and
- Kenneth Mosby by Byron Brown and others on May 12, 2008.
Gregory Chester allegedly solicited the murder of Antonio Bluitt, which occurred on Sept. 2, 2007.
The attempted murders included: Victim 1 by Council and Poe on June 11, 2006; Victims 2 and 3 by Bush and Ford on June 5, 2007; Victim 4 by Bush and Vaughn on June 27, 2007; and Victim 5 by Jones on Nov. 5, 2007.
The robberies included: Victim 1 by Council and Poe on June 11, 2006; the Collections Clothing Store by Council and others on Nov. 8, 2008; and Victims 6 and 7 by Poe, Gary Chester, and others on March 25, 2009.
The RICO conspiracy count further alleges that the Hobos and their associates operated drug spots and drug lines where they distributed user quantities of narcotics, at times using nicknames to identify their products. These locations included:
- the building and area located at 4429 South Federal, within the former Robert Taylor Homes, which was controlled and managed by Gregory Chester and Council and drugs were sold under the nicknames “Green Monster” and “Pink Panther;”
- the area around 47th Street and Vincennes Avenue, which was controlled by Bush and Vaughn and operated by Ford;
- the area around 51st Street and Calumet Avenue, which was managed by the Brown brothers and Jones; and
- the area around 51st Street and Martin Luther King Drive, which was controlled by Bush.
As part of the racketeering conspiracy, the defendants allegedly:
- used gang-related terminology, symbols, and gestures, including the slogan “Hobo or Nothing,” and a hand sign known as the “Hobo Horns;”
- shared the proceeds of robberies and the trafficking of narcotics;
- obtained, used, brandished, and discharged firearms in connection with the enterprise’s illegal activities;
- managed the procurement, transfer, use, concealment, and disposal of firearms and dangerous weapons within the enterprise to protect their interests and further their goals;
- monitored law enforcement radio frequencies and acquired radio equipment to detect and avoid law enforcement inquiry into their illegal activities;
- had nominees obtain rental vehicles to conceal their use while committing illegal activities;
- identified victims from whom they could obtain distribution quantities of controlled substances or large sums of money by robbing them;
- conducted surveillance of intended murder and robbery victims, a practice referred to as “lamping” and “doing homework;” and
- restrained and murdered victims and witnesses to prevent their escape, and to prevent identification of themselves and their associates.
The RICO conspiracy count carries a maximum sentence of 20 years in prison, or life for the four defendants charged with committing murders. Those four defendants ― Poe, Council, Bush, and Byron Brown ― also face a mandatory life sentence, or death, if convicted of murder in aid of racketeering. Only the Attorney General of the United States may decide later whether to seek the death penalty. The charge of brandishing a firearm against Council carries a mandatory consecutive sentence of seven years and a maximum of life in prison. If convicted, the Court must determine a reasonable sentence to impose under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorneys Patrick Otlewski, Erika Csicsila, and Derek Owens.
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
William Beavers Sentenced for Failing to Pay Taxes on Campaign and County Funds Used for Personal PurposesRead the Press Release
CHICAGO — WILLIAM BEAVERS, a former Cook County Commissioner and, before that, a longtime Chicago alderman and police officer, was sentenced today to six months in prison for obstructing the Internal Revenue Service and failing to report, and pay taxes on, all of his income. Beavers was convicted after a trial in March of concealing his under-reporting of income and underpayment of taxes on thousands of dollars that he converted to personal use from his campaign accounts, as well as from his county discretionary spending account. Between 2006 and 2008, Beavers wrote 100 checks to himself, totaling approximately $226,000, from three separate campaign accounts and used at least a portion of those funds for personal purposes, including gambling. In 2006, he used more than $68,000 from a campaign account to boost his city pension, and between 2006 and 2008, he used his $1,200 monthly county contingency account, totaling $28,800, for personal purposes without reporting any of these funds as income on his federal tax returns.
Beavers, 78, of Chicago, was also fined $10,000 and ordered to pay $30,848 in restitution to the IRS by U.S. District Judge James Zagel. Beavers was ordered to begin serving his sentence on Dec. 2, to be followed by a year of supervised release. During supervised release, the judge ordered Beavers to perform 400 hours of community service and prohibited him from gambling or visiting a casino or racetrack.
“Far from being the victim of others’ poor advice, Beavers was a victim of his own greed,” prosecutors wrote in a sentencing memo. “[H]is public claims that he was charged not because of his tax fraud, but rather as a result of government vindictiveness, were yet another effort to shift blame away from himself and point the finger at others.”
Beavers was elected to the Cook County Board of Commissioners, representing the 4th District, in November 2006 and began serving as a commissioner a month later. Previously, he served as the 7th Ward alderman on Chicago’s City Council from 1983 until November 2006, when he was elected to the commissioner’s post.
According to the evidence at trial, Beavers had sole authority over three campaign committees that supported his political activities ― Citizens for Beavers, Friends of William Beavers, also known as Friends for William Beavers, and 7th Ward Democratic Organization. As part of the corrupt endeavor to obstruct the IRS, Beavers converted campaign funds for his own personal use, provided false information to his campaign treasurers regarding the use of these funds, and understated his income and the taxes he owed in his individual income tax returns for 2006, 2007, and 2008.
While giving Beavers credit at face value for every explanation for the use of campaign funds, no matter how implausible, the government presented evidence at trial showing that between 2006 and 2008 he failed to report income totaling at least $127,747 and failed to pay taxes on that amount totaling $40,463.
During those three years, Beavers caused his campaign committees to issue checks payable to himself and to third parties on his behalf, and he used at least part of the proceeds for personal expenses, including gambling. The checks totaled about $96,000 in 2006, $69,300 in 2007, and $61,000 in 2008, for a total of $226,300.
As part of the corrupt endeavor, Beavers concealed his personal use of campaign funds by maintaining and causing campaign workers to maintain records that falsely reflected the uses of the campaign checks, including records used to prepare semi-annual Illinois campaign finance reports known as D-2s. Beavers caused campaign workers to falsely record, on check stubs and other records, that certain campaign checks written to him and used for personal purposes were instead used for campaign expenses.
In some instances, Beavers attempted to conceal his personal use of campaign funds by telling campaign workers that checks payable to and cashed by him were for paying campaignrelated expenses, even though those expenses were not incurred by the campaign committees until months after Beavers had converted the funds. In other instances, Beavers withheld from his campaign staff any explanation of certain checks payable to him, or he caused workers to falsely record that certain checks were “void” or unused even though he had cashed them.
On Nov. 14, 2006, Beavers caused a check for $68,763.07 to be paid from Citizens for Beavers to the Municipal Employees’ Annuity and Benefit Fund of Chicago, a pension plan for certain City of Chicago employees including Aldermen, to increase his monthly pension from $2,890 to $6,541. The check was for personal use and should have been, but was not, reported as income on his 2006 income tax return.
The sentence was announced by Gary S. Shapiro, 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 Robert J. Shields, Jr., Acting Special Agent-in- Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorneys Matthew Getter, Samuel B. Cole, and Carrie Hamilton.
Ten Defendants Indicted in Alleged $14.5 Million Mortgage Fraud Scheme That Resulted in $8 Million Loss to LendersRead the Press Release
CHICAGO ― Ten defendants, including five licensed loan originators, were indicted for allegedly participating in a scheme to fraudulently obtain approximately 52 residential mortgage loans totaling at least $14.5 million from various lenders. The indictment alleges that the mortgages were obtained to finance the purchase of various properties, primarily on the west and south sides of Chicago, by straw buyers who were fraudulently qualified for loans while the defendants allegedly profited. As a result, various lenders and their successors incurred losses of at least $8 million because the mortgages were not fully recovered through subsequent sale or foreclosure.
An 11th defendant who worked as a closing agent for a title company in suburban Westchester was indicted separately as part of the same investigation.
Both indictments were returned yesterday by a federal grand jury and announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General.
KEITH AUSTIN, 41, of Broadview, who controlled companies called Icy Investments, Inc., and Kesha & Icy Investments, Inc., allegedly directed the fraud scheme. He was charged with six counts of wire fraud, three counts of bank fraud, one count of aggravated identity theft, and one count of obstruction of justice.
The obstruction of justice count alleges that Austin and co-defendants CESAR MARIN, 30, of Schaumburg, and MARK PETTIS, 57, of Chicago, both licensed loan originators, prepared and provided false documents in response to federal grand jury subpoenas issued last year. Marin was also charged with three counts of wire fraud, while Pettis was also charged with one count of bank fraud.
Three other licensed loan originators indicted were JOSEPH BATEAST, 40, of Bolingbrook, one count of bank fraud; ROBERT BROWN, 37, address unknown, one count of wire fraud; and CONSTANCE PAEK, 34, of Glenview, one count of wire fraud. Also charged were: WILSON TITUS, 64, of Broadview, three counts of wire fraud and two counts of bank fraud; CLYDE BANKS, also known as “Charles Barksdale,” 36, address unknown, one count of wire fraud; STEVEN GAWLIK, 41, of Chicago, one count of wire fraud; and MICHAEL THILL, 54, of Park Ridge, one count of wire fraud.
The indictment also seeks forfeiture of more than $8 million from Austin, Marin, Titus, Banks, and Bateast, as well as $6,800 seized from Austin’s home during the execution of a search warrant in October 2012, and Austin’s 2007 Lexus LS460, which was seized today. BRANDIE ROBERTS, 34, of Brookfield, formerly a closing agent for a title company in Westchester, was indicted separately on two counts of wire fraud, and her indictment seeks forfeiture of at least $68,366.
All 11 defendants will be arraigned on dates yet to be determined in U.S. District Court.
Austin, Titus, Paek, Pettis, and Thill allegedly recruited property owners to sell their homes, knowing they intended to falsely inflate the sales price so they and others could obtain the proceeds of the mortgage. Austin, Titus, Banks, and Paek allegedly recruited individuals to act as straw buyers by promising that they would not have to use any of their own money, would be paid to attend closings, and would not have to make any subsequent mortgage payments.
The indictment alleges that Austin, Marin, Titus, Brown, and Paek received the proceeds of the fraudulent loans and used the funds to enrich themselves.
The government is being represented by Assistant U.S. Attorneys Yasmin N. Best and Kenneth E. Yeadon.
Each count of wire fraud affecting a financial institution and bank fraud 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 or twice the gain, whichever is greater. The aggravated identity theft count against Austin carries a mandatory consecutive sentence of two years in prison, and the obstruction of justice count carries a maximum of 20 years in prison. 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.
Since 2008, more than 200 defendants have been charged in Federal Court in Chicago and Rockford with engaging in various mortgage fraud schemes involving more than 1,000 properties and approximately $300 million in potential losses, signifying the high priority that federal law enforcement officials give mortgage fraud in an effort to deter others from engaging in crimes relating to residential and commercial real estate.
Today’s announcement is part of efforts by the Financial Fraud Enforcement Task Force (FFETF), which wages an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force facilitates increased investigation and prosecution of financial crimes; enhanced coordination and cooperation among federal, state and local authorities; addresses discrimination in the lending and financial markets, and conducts outreach to the public, victims, and financial institutions. For more information on the task force, visit stopfraud.gov.
Indictment
Nebraska Executive Sentenced to 21 Months in Prison for Federal Bribery Conspiracy with Former Chicago AldermanRead the Press Release
CHICAGO — The head of a large Nebraska-based prescription medication provider was sentenced today to 21 months in federal prison for conspiring with a former Chicago alderman and another man to commit bribery of a fictitious public official to purportedly obtain business from the Los Angeles County hospital system. The defendant, JAMES BARTA, 71, of Fremont, Neb., and two co-defendants were convicted of conspiracy to commit bribery following a twoweek trial in June in U.S. District Court.
Barta was also fined $125,000 and ordered to begin serving his sentence in early January by U.S. District Judge John J. Tharp, Jr. Co-defendants, AMBROSIO MEDRANO, 59, of Chicago, GUSTAVO BUENROSTRO, 50, of Arlington Heights, are scheduled to be sentenced, respectively, on Nov. 4 and Nov. 25.
“This offense involves bribery to influence governmental action,” Judge Tharp said, adding that Barta was a “paradigm of what a businessman should be, and yet . . . he readily agreed to pay a bribe to get a contract.” The judge noted a recording that was played at trial of Barta saying that he expected to pay a bribe and doing so was “business as usual.”
“It is not business as usual to bribe public officials,” Judge Tharp said, adding that this message “must be repeated to avoid the cynicism that overtook Mr. Barta.”
According to the evidence and court records, which included numerous audio and video recordings of conversations with the defendants, Medrano introduced an undercover FBI agent, who was posing as a purchasing agent, to Barta, the president of family-owned Sav-Rx, and Buenrostro, an associate of Barta and a former Sav-Rx employee. Barta, Buenrostro, and Medrano agreed to bribe the undercover agent and the fictitious Los Angeles County hospital official — with Barta handing a $6,500 check to the undercover agent at a restaurant in Omaha on June 22, 2012 — to do business with Sav-Rx, a Fremont, Neb.-based national provider of managed care prescription medication services.
Between December 2011 and March 2012, Medrano, Buenrostro, and a cooperating witness discussed the scheme, resulting in a meeting attended by those three, Barta, and the undercover agent at a Chicago restaurant on March 21. During the meeting, Barta discussed Sav-Rx’s business, including a contract with Cook County. The undercover agent explained a kickback arrangement for him and the fictitious Los Angeles County hospital official, if they were to succeed in expanding Sav-Rx’s services into the Los Angeles County hospital system. Barta replied that the arrangement was okay with him. In subsequent conversations, Medrano allegedly assured the cooperating witness and undercover agent that Barta and Buenrostro wanted to do a deal with the agent and were willing to provide an initial $10,000 payment in good faith.
The same group of individuals met again on May 9 at a Chicago restaurant and continued discussing steering Sav-Rx’s services to Los Angeles County, including using Medrano and Buenrostro to be the minority participants in a contract, with Barta endorsing that idea. Barta directed Buenrostro to do research on Los Angeles County and paid the lunch bill. The undercover agent said that the fictitious hospital official was not going to take any action until there was an agreement and the official saw some money. “We understand that and that’s not the problem,” Barta replied.
On June 22, 2012, Barta, Buenrostro, and Medrano met with the undercover agent at a restaurant in Omaha. The undercover agent explained that half of the good faith money they had been discussing was for his role in brokering the contract and half was for the fictitious Los Angeles County official. The undercover agent assured Barta that the good faith payment would be refunded if Sav-Rx did not obtain a contract from the hospital system. After further discussion about the indirect manner that Barta’s payment would be funneled to the fictitious official, Barta wrote a check on a Sav-Rx operations account, payable to the undercover agent for $6,500, and gave it to the undercover agent.
The sentence was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorney Christopher J. Stetler.
Surgery Center Owner Pleads Guilty to Federal Charges, Admits Paying Physicians Bribes and Kickbacks for Patient ReferralsRead the Press Release
CHICAGO ― The owner of multiple area outpatient surgery centers pleaded guilty today to federal fraud and tax charges, admitting that he paid bribes and kickbacks to physicians for patient referrals and impeded the Internal Revenue Service in the collection of federal income taxes. The defendant, RAGHUVEER NAYAK, was scheduled to stand trial starting Oct. 1 in U.S. District Court, but the trial was stricken following today’s guilty plea.
Nayak, 58, of Oak Brook, entered a conditional plea of guilty to one count of mail fraud and also pleaded guilty to one count of impeding the IRS. The conditional plea allows Nayak to appeal a legal issue pertaining to the mail fraud count and, if he prevails, he may withdraw his plea to that count alone. U.S. District Judge Robert Gettleman scheduled a sentencing hearing for Jan. 22-23, 2014.
Nayak faces a maximum sentence of 20 years in prison on the mail fraud count and a maximum fine of $250,000, or an alternate fine totaling twice the loss or twice the gain, whichever is greater, as well as mandatory restitution. Impeding the IRS carries a three-year maximum prison term and a $250,000 fine. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
According to a written plea agreement, Nayak opened Rogers Park One-Day Surgery Center in about 1998, and he opened Lakeshore Surgery Center about seven years later. Both facilities are privately-owned one-day surgery centers, where surgeons performed outpatient surgeries not requiring an overnight stay, ranging from urological to podiatric to orthopedic procedures. Nayak’s profits depended upon doctors bringing patients for surgery to his outpatient facilities, rather than to a traditional hospital, or to one of the many other surgery centers in the Chicago area.
As part of the scheme, Nayak paid, or offered to pay, physicians money in exchange for referring patients to or conducting surgeries at Rogers Park and Lakeshore, rather than at a hospital or competing surgery center. Nayak paid some physicians cash in exchange for patients they brought or referred to Rogers Park and Lakeshore, in amounts that reflected the volume of surgeries they conducted at the surgery centers or the number of patients they referred there. Nayak paid these physicians cash in exchange for referrals to his surgery centers, intending that the money would influence their medical motives and further intending that the physicians would not disclose the cash payments to their patients. Nayak did not intend to cause the medical patients any physical or monetary harm by his cash payments to their physicians.
Nayak admitted that he paid one physician, a podiatrist, approximately $200-300 in cash per surgery he conducted at Rogers Park or Lakeshore, in addition to the professional fees the doctor billed separately to his patients’ insurance companies. Nayak gave the podiatrist the cash when they were alone, including at the doctor’s office, and Nayak acknowledged that the doctor did not disclose the cash payments to his patients. In total, this physician conducted approximately 142 surgeries at Rogers Park between 2004 and 2009, for which Nayak paid the doctor cash.
In impeding the IRS, Nayak admitted that he paid physicians money in exchange for referrals of patients the physicians had made or would make to Rogers Park and Lakeshore. Nayak paid these physicians in cash, in an attempt to actively conceal the payments, knowing that the natural consequence would be a lack of documentation of the cash payments in Rogers Park’s and Lakeshore’s business records if the IRS were to audit or question the transactions. Nayak did not disclose the cash payments to his bookkeeper and outside tax preparer, and he did not file, issue, or cause to be issued Forms 1099 for physicians to whom he paid cash in exchange for patient referrals for tax years 2002 through 2010. Nayak knew that a foreseeable consequence of his actions was that the federal income tax returns filed by the physicians to whom he made cash payments would be false. Nayak also instructed the podiatrist to not deposit the cash Nayak gave him in his bank account, and to not report those cash payments on his federal tax returns, intending that the doctor would file federal tax returns that would be false.
The government also contends, but Nayak disputes, that in approximately 2002, he engaged in a scheme to obtain cash, including to make cash payments to physicians in exchange for patient referrals, by giving Individual A more than $2 million in checks drawn on Nayak’s medical facilities from about 2002 through December 2008. In exchange, at Nayak’s direction, Individual A gave Nayak cash in an amount equal to approximately 70 percent of the value of the checks that he gave Individual A. As part of this scheme, Nayak hid the true purpose of the checks that he provided to Individual A by indicating to his tax preparer that the checks to Individual A were for advertising, and should be treated as advertising expenses on the tax returns that Nayak signed and caused to be filed for himself and for his facilities.
In addition to those two facilities, Nayak owned and/or controlled the following health care-related businesses in Illinois and Indiana: Lakeside Surgery Center LLC, Merillville Plaza Surgery Center LLC, Lincoln Park Open MRI, Delaware Place MRI LLC, Paulina Anesthesia, Inc., Illiana Anesthesia, Western Touhy Anesthesia, Inc., and Division Medical Diagnostics, Inc., according to the indictment.
The government is being represented by Assistant U.S. Attorneys Carrie Hamilton, Andrianna Kastanek, and Jeffrey Perconte.
Plea Agreement
South Holland Man Convicted of Illegally Dealing Hundreds of Guns He Trafficked from Indiana Gun Shows and Sold in ChicagoRead the Press Release
CHICAGO ― A federal jury today convicted a south suburban man of buying hundreds of high-powered firearms at guns shows in Indiana and illegally transporting them to Chicago where he sold them without a federal firearms dealer license. The defendant, DAVID LEWSIBEY, was found guilty by jurors who deliberated several hours yesterday and today after a two-week trial in U.S. District Court.
Lewisbey, 23, of South Holland, was convicted of dealing firearms without a federal license and two counts each of illegally transporting firearms across state lines, and interstate travel to sell guns without a license. He faces maximum penalties of 10 years in prison on each count of interstate travel, and five years in prison on each of the other three counts, and a maximum $250,000 fine on each count. U.S. District Judge Ronald Guzman scheduled sentencing for Dec. 10. The judge must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
“This is one of the most significant gun-trafficking cases we have prosecuted and one that effectively ended a steady supply of potentially lethal weapons from Indiana to Chicago,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois. He announced the verdict with W. Larry Ford, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms, and Explosives. The Chicago Office of the Federal Bureau of Investigation, the Chicago Police Department, and the Illinois State Police assisted in the investigation.
Evidence at the trial showed that between January 2008 and September 2012, Lewisbey, who had no criminal record that disqualified him from buying firearms, routinely traveled to various gun shows in Indiana and purchased duffle bags full of guns that he brought back to Chicago. A government witness testified that he personally observed Lewisbey buy more than 100 firearms, as well as dozens of high-capacity magazines, at Indiana gun shows.
The evidence further showed that during just one 48-hour period, on April 22-23, 2012, Lewisbey bought 43 guns in Indiana and brought them to Chicago, where he delivered them to co-defendant LEVAINE TANKSLEY, who with two other co-defendants, sold them to an individual who was cooperating with ATF agents. All of those guns were recovered by law enforcement.
Tanksley, 28; CHARLES LEMLE, 27; and MICHAEL HALL, 28, all of Chicago, each pleaded guilty to illegally possessing firearms as previously convicted felons, and are awaiting sentencing.
The government was represented by Assistant U.S. Attorneys Christopher Parente and Bethany Biesenthal.
Former Dolton Police Officer Sentenced to 75 Months in Prison for Violating Civil Rights of Two Men He Beat with BatonRead the Press Release
CHICAGO — A former south suburban Dolton police officer was sentenced today to 75 months in federal prison for violating the civil rights of two men by using excessive force against them with his baton outside a Dolton nightclub in May 2009. The defendant, KEVIN FLETCHER, 36, of South Holland, who was convicted at trial in May, was sentenced on two counts of violating the victims’ civil right to be free from the use of unreasonable force by a person acting under color of law. The judge and the jury had the benefit of video surveillance recordings that captured most of the scene.
“There was only one person who was out of control that night and that was Mr. Fletcher,” U.S. District Judge Elaine Bucklo said in imposing the sentence in Federal Court in Chicago. The judge said she took into account Fletcher’s anger that night, that he lied when he testified at trial, and had expressed no contrition, while also noting that “being a policeman is a hard job.”
Fletcher joined the Dolton Police Department in October 2006. The evidence at trial showed that at approximately 2 a.m. on May 17, 2009, he and other officers were working crowd control outside the former Mr. Ricky’s 141 Club, as it and other bars along Chicago Road near 141st Street in Dolton were closing. While performing his duties as a police officer, Fletcher used an expandable metal police baton as a dangerous weapon to strike two victims, Michael McPherson and Laurence Williams, once each in the head. The jury found that both victims suffered bodily injury, and the evidence showed that both required hospital treatment and staples to close their head wounds.
Fletcher “had used lethal force against two unarmed victims who had merely mouthed off to him,” Assistant U.S. Attorney Megan Cunniff Church argued at sentencing. “With each of these baton strikes [Fletcher] gave the community reason to doubt law enforcement, reason to challenge its authority, reason to believe that law enforcement cannot be trusted. He inflicted violence into the community that he had sworn to protect.”
Ms. Church, together with former Assistant U.S. Attorney Tinos Diamantatos, argued during the trial that Fletcher was offended by the victims cursing at him as he directed them to depart the Chicago Road area after leaving the nightclub, and then abused his authority by striking them each over the head with his baton to “teach them a lesson.” Fletcher made no effort or attempt to arrest either victim and departed the scene after striking them with his baton, without rendering or summoning any medical aid. Both victims, as well as Fletcher, testified at the trial.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Justice Department’s Civil Rights Division assisted in the investigation.
H. Ty Warner Charged with Tax Evasion for Allegedly Hiding Funds in Secret Offshore Account with Swiss Bank UBSRead the Press Release
CHICAGO — The creator of Beanie Babies and other plush animal toys was charged today with federal tax evasion for allegedly failing to report income he earned in a secret offshore financial account he held with UBS, a global financial services firm headquartered in Switzerland. The defendant, H. TY WARNER, was charged in a felony information filed this morning in U.S. District Court.
Warner, 69, of west suburban Oak Brook, is the sole owner of TY Inc., a Westmont-based company that designs and sells plush toy animals including Beanie Babies. Warner, who also owns other business interests, will be arraigned in U.S. District Court on a date yet to be determined.
Through his attorney, Warner authorized the government to disclose that he is cooperating with the Internal Revenue Service and will plead guilty to the charge.
“Regardless of wealth, everyone must pay taxes on all of their income, not just the amount they choose to report. The charge alleges that Warner went to great lengths to hide from his accountants and the IRS more than $3.1 million in foreign income generated in a secret Swiss account. Such conduct invites federal prosecution,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.
“We encourage taxpayers to think of the serious consequences, including possible criminal penalties, for willfully presenting false information on their federal tax returns. All taxpayers must honor their obligation to report all of their income and pay all of the taxes they owe,” said James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
Warner is the second taxpayer charged in Federal Court in Chicago in connection with an ongoing investigation of U.S. taxpayer clients of Union Bank of Switzerland (UBS) and other overseas banks that hid foreign accounts from the Internal Revenue Service. In February 2009, UBS entered into a deferred prosecution agreement with the United States, admitting that it helped taxpayers hide accounts from the IRS. As part of the agreement, UBS provided the government with the identities of, and account information for, certain customers of UBS’ U.S. cross-border banking business.
According to the charging document, Warner maintained a secret offshore account with UBS starting in 1996. In late 2002, Warner transferred the assets in his UBS account to a second Swiss financial institution, Zürcher Kantonalbank, when the account had a balance of approximately $93,630,083.
In 2002, Warner earned approximately $3,161,788 in gross income through investments held in his UBS account, according to the charge. Warner allegedly committed tax evasion for that year by failing to tell his accountants about that income and by failing to report that income or the existence of the UBS account in his 2002 form 1040 filed with the IRS in October 2003, as well as failing to report that same income on an amended 2002 form 1040 filed in November 2007. The charge states Warner initially failed to pay $1,257,064 in income tax on the unreported income, but his amended 2002 return reduced the amount of additional tax that he failed to pay to $885,300. By omitting his UBS income, Warner falsely reported his total income in 2002 was $49,124,095, according to the charge.
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. Taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. A deliberate failure to file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS can result in a civil penalty of up to 50 percent of the amount in the account at the time of the violation. If convicted, the Court must determine a reasonable sentence to be imposed under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorney James Conway.
The public is reminded that the information contains only a charge and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Information
Former Cook County Official Convicted of Steering Four Contracts Under $25,000 in Return for Nearly $35,000 in KickbacksRead the Press Release
CHICAGO ― A federal jury today convicted a former Cook County official of 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 found guilty by jurors who began deliberating Monday afternoon after a week-long trial in U.S. District Court.
Mullins, 49, of Chicago, a former Chicago police officer, was convicted of three counts of wire fraud and four counts of accepting kickbacks. He was acquitted of one count of wire fraud. He faces a maximum penalty of 20 years in prison on each count of wire fraud and 10 years in prison on each count of accepting a kickback, and a maximum $250,000 fine on each count. U.S. District Judge Amy St. Eve scheduled sentencing for Dec. 19. The judge must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
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.
The verdict was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Anita Alvarez, Cook County State’s Attorney; Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Patrick Blanchard, Cook County Inspector General. The case stemmed from a state and federal corruption investigation that resulted recently in the state court conviction of Carla Oglesby, a former Cook County official, who also illegally steered county contracts under $25,000.
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 kick-backed $9,000 to Mullins; a $24,985 energy grant contract to Peery, who kick-backed $12,000; a $24,995 census contract to Borner, who kickbacked $5,000; and a $24,997 census contract to Demos, who kick-backed $8,700.
Evidence also showed that Mullins steered an additional census contract for $24,390 to another individual, and then solicited a portion of the proceeds. However, this individual instead returned the uncashed vendor check to the county. In each instance, 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.
To conceal the scheme, Mullins advised the contract recipients to falsely deny the circumstances surrounding the contracts if questioned by investigators. For example, he advised Peery not to say anything about paying him a portion of the contract in cash, and advised Borner to claim ownership of the invoice submitted in support of his census contract.
The government was represented by Assistant U.S. Attorneys Lindsay Jenkins and Sarah E. Streicker.
Milwaukee Man Charged with Sex-Trafficking A Minor from Wisconsin to Illinois to Engage in ProstitutionRead the Press Release
CHICAGO ― A Milwaukee man was arrested on a federal charge of sex-trafficking a minor and the alleged 15-year-old victim, from Madison, Wis., was returned to her home, federal law enforcement authorities announced today. The defendant, DAJUAN KEY, also known as “Dejuan Key,” 30, was scheduled to return to Federal Court in Chicago at 2:30 p.m. today for a detention hearing before U.S. Magistrate Judge Daniel Martin.
Key was taken into federal custody by FBI agents on Saturday and charged with sextrafficking a minor for allegedly transporting the 15-year-old girl from Madison to Chicago to engage in prostitution. He appeared before Magistrate Martin on Saturday and was ordered to remain in custody pending today’s hearing.
Transporting a minor across state lines to engage in prostitution carries a mandatory minimum sentence of 10 years and a maximum of life 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.
According to a criminal complaint affidavit, the victim was found last Tuesday by Romeoville police at a fast food restaurant in the far southwest suburb after the girl’s mother reported that her daughter had called her crying, and told her that she was at a motel in Romeoville, and did not have a way home. Romeoville police responded to the motel where they located Key with a woman identified as an adult victim, who then accompanied police to the nearby restaurant and identified the minor victim.
The minor victim told FBI agents that she met a man, who she identified as Key, at an apartment complex in Madison on Sept. 8. Key told the girl that he was going to take her to Milwaukee and would return her to Madison. Instead, Key allegedly drove the girl to Chicago and they eventually arrived at a motel in Romeoville, where Key introduced the girl to a woman he told her was working for him as a prostitute. Key allegedly told the girl that if she worked for him, she would be able to keep all of the money she made. The victim told Key that she wanted him to take her home, but Key got the victim a motel room and took photographs of her, which he then apparently posted in online advertisements because her cell phone began to receive calls from unidentified numbers.
The victim repeatedly told Key that she wanted to go home, but she had no way to do so on her own, was tired, and agreed to spend the night believing Key would take her home in the morning. On Sept. 9 and 10, the victim engaged in commercial sex acts, believing that she would get to keep the money and use it for a bus ticket home. However, in each instance, Key demanded the money and the victim gave it to him because she was afraid of what he might do if she did not comply.
The arrest and charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation. They commended the assistance and cooperation of the Romeoville Police Department.
The investigation was conducted by the FBI’s Child Exploitation Task Force. The task force is part of a nationwide effort known as the Innocence Lost National Initiative targeting those involved in the commercial sexual exploitation of children in the United States. In Chicago, the CETF is comprised of FBI special agents and officers and investigators from the Chicago Police Department, the Cook County Sheriff's Office, and the Cook County State’s Attorney’s Office. The case also falls under the umbrella of the Cook County Human Trafficking Task Force.
The government is being represented by Assistant U.S. Attorney Katherine A. Sawyer.
A complaint contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Two Chicago Area Men, Both Charged with Manufacturing Child Pornogrphy, Arrested in Separate, Unrelated Federal CasesRead the Press Release
CHICAGO ― Two Chicago area men have been arrested on separate, unrelated federal charges alleging that they manufactured child pornography, federal law enforcement officials announced today.
In one case, JOHN GABRIEL, 77, of Joliet, was arrested early today at his home without incident by FBI agents. Gabriel was charged with one count of manufacturing child pornography and one count of obstruction of justice in a two-count federal grand jury indictment that was returned yesterday and unsealed upon his arrest. Gabriel pleaded not guilty today before U.S. Magistrate Judge Geraldine Soat Brown in Federal Court in Chicago, and he remains in custody pending a detention hearing at 1:30 p.m. on Monday.
In the second case, MARK BARRETO, 35, of Elmwood Park and formerly of Chicago, was arrested yesterday at his home without incident by U.S. Postal Inspection Service agents. Barreto was charged with two counts of manufacturing child pornography, three counts of transporting child pornography, and one count of possessing child pornography in a six-count federal grand jury indictment that was returned on Tuesday. Barreto pleaded not guilty today before U.S. District Judge Charles Kocoras, and he remain in custody pending a detention hearing next week.
Manufacturing child pornography carries a mandatory minimum sentence of 15 years and a maximum of 30 years in prison and a $250,000 fine.
Gary S. Shapiro, United States Attorney for the Northern District of Illinois, announced the Gabriel case with Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation, and the Barreto case with Tony Gómez, Special Agent-in-Charge of the U.S. Postal Inspection Service in Chicago.
In the Gabriel case, the indictment alleges that he manufactured child pornography with a minor female in July 2012 in Will County. The obstruction count alleges that Gabriel destroyed computer files when FBI agents executed a search warrant his residence on Aug. 14, 2012.
The Gabriel 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 representatives from the Chicago Police Department, the Cook County Sheriff's Office, and the Cook County State’s Attorney’s Office.
In the Barreto case, the indictment alleges that he manufactured child pornography with two different minor females, one in February through July 2012, and the other in June and July 2012. It further alleges that he transported images depicting child pornography on dates in April and July 2012, and that he possessed child pornography on his computer when postal inspectors executed a search warrant at his residence in Chicago last October.
The Barreto investigation was conducted by the U.S. Postal Inspection Service, together with the Bolingbrook and Naperville police departments and the Will County State’s Attorney’s Office.
In addition to the penalties for manufacturing child pornography, if convicted, Gabriel also faces a maximum sentence of 20 years in prison for obstruction of justice. Barreto, if convicted, also faces a mandatory minimum of five years and a maximum of 20 years in prison on each count of transporting child pornography, and possessing child pornography carries a maximum of 10 years in prison. Both defendants also face a maximum fine of $250,000 on each count. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.
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.
Barreto Indictment
Gabriel IndictmentRockford Man Sentenced to 77 Months in Federal Prison on Gun ChargeRead the Press Release
ROCKFORD — A Rockford, Ill. man was sentenced today in federal court before U.S. District Judge Frederick J. Kapala to 77 months in prison without parole, to be followed by 3 years of supervised release, for illegally possessing a firearm as a convicted felon. Jeffrey L. Lottie, 27, pled guilty to the charge on June 3, 2013.
According to the written plea agreement, at approximately 1:31 a.m., on February 23, 2013, Lottie was a front seat passenger in a red Chevy Monte Carlo being driven by his girlfriend on West State Street in Rockford. A Winnebago County Sheriff's Deputy on patrol on West State Street in Rockford stopped the vehicle for a traffic violation. Lottie admitted that after the car was stopped, he placed a Highpoint .45 caliber semi-automatic handgun into his girlfriend's purse on the rear seat of the Monte Carlo. During the traffic stop, the deputy observed the open purse on the backseat and saw the Highpoint handgun. The magazine of the gun, which was seized by the police, was loaded with 5 rounds, although there was not a round in the chamber. Lottie admitted that he illegally possessed the firearm as a convicted felon and that he possessed the gun when he entered the vehicle.
The defendant was originally charged in state court, and is now charged in federal court under tough federal firearms laws as part of the Project Safe Neighborhoods program. Project Safe Neighborhoods is an intensive, cooperative effort between local, state, and federal law enforcement to attack gun crimes. The cornerstone of the program is that every defendant committing an offense involving a gun will be reviewed for possible federal prosecution in order to obtain the harshest penalties for the worst offenders. Additional information about Project Safe Neighborhoods may be found at: psn.gov.
The sentencing was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; W. Larry Ford, Special Agent-in-Charge of the Chicago Field Division of the Bureau of Alcohol, Tobacco, Firearms & Explosives; Chet Epperson, Chief of the Rockford Police Department; and Richard Meyers, Winnebago County Sheriff.
The government was represented by Assistant U.S. Attorney Joseph C. Pedersen.
Aurora Man Sentenced to Nine Months in Federal Prison for Sexual Contact with Female Passenger Aboard Flight to ChicagoRead the Press Release
CHICAGO ― An Aurora man was sentenced today to nine months in federal prison for sexually groping the inner thigh of a Chicago area woman while they were seated next to each other aboard an airplane from Las Vegas to Chicago in June 2011. The defendant, SRINIVASA S. ERRAMILLI, who was convicted of abusive sexual contact by a federal jury last December, has two previous convictions for nearly identical crimes.
Erramilli, 46, a software consultant, was fined $5,000 and placed on court supervision for a year after he is released from custody by U.S. District Judge Joan H. Lefkow. The judge set a hearing for next Wednesday on the government’s request to revoke Erramilli’s bond. He is prohibited from airline travel while he is on supervised release and he is subject to deportation to India after being released from custody.
Erramilli’s advisory federal sentencing guidelines was found by the judge to be 10 to 16 months in custody. The judge said she would have imposed a 13-month sentence but reduced that by four months to give Erramilli credit for the time he spent in immigration custody following the assault.
Judge Lefkow agreed with the government that a custodial sentence was necessary to deter Erramilli and others from invading an individual’s bodily integrity and also to ensure that victims of abusive sexual contact will be heard and given protection.
Evidence at the trial showed that Erramilli was the last passenger to board a Southwest Airlines flight to Chicago’s Midway Airport on June 14, 2011, and was seated in the only open seat available between the victim, who had chosen a window seat to sleep during the flight, and her husband, who had chosen an aisle seat to enable easier access during the flight. The couple had traveled to Las Vegas for their 34th wedding anniversary.
The victim, now 65, who was wearing shorts during the flight, testified that Erramilli groped her three times aboard the plane. The first time she awoke to feeling something brush against her thigh; the second time, she testified that she awoke to feeling “pressure” on her thigh. The third time, the victim testified that Erramilli placed his hand up the leg of her shorts and then rubbed and grabbed her inner thigh. She struck Erramilli and yelled at him after realizing that he had been groping her. Other passengers and flight attendants also testified during the trial.
The jury also heard testimony from another victim who was seated in the row in front of Erramilli when he fondled her breast on a flight from Detroit to Chicago in August 1999. Erramilli pleaded guilty to battery in Cook County in 2000 and was sentenced to two years’ probation and five days’ community service. In 2002, Erramilli was sentenced in Federal Court in Detroit to three years’ probation after he was convicted of abusive sexual contact for groping the breast of yet another woman aboard a flight from San Jose, Calif., to Detroit.
The government was represented by Assistant U.S. Attorneys Bolling W. Haxall and Heather K. McShain.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special- Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Chicago Police Department assisted in the investigation.
Two Men Sentenced to Federal Prison for Fraud in Obtaining City Cable Franchise Subcontracts for Sham Minority BusinessRead the Press Release
CHICAGO — Two defendants who were convicted at trial earlier this year were sentenced today to federal prison for fraudulently running a sham minority-owned cable television installation business that obtained $8.3 million in subcontracts from a cable company that serves residents on the city’s north side. The defendants, GUY POTTER, and MATTHEW GIOVENCO, neither a minority, actually controlled and operated the now-defunct ICS Cable, Inc., which they and others fraudulently disguised as a minority-owned business to obtain citymandated minority sub-contracts under the lakefront cable franchise held by RCN Telecom Services of Illinois LLC.
Potter, 67, of Versailles, Ky., and formerly of Bensenville, was sentenced to 4½ years beginning on Oct. 31, and Giovenco, 43, of Grayslake, was sentenced to three years in prison beginning on Dec. 2. The sentences were imposed by U.S. District Judge Rebecca Pallmeyer, who also ordered both defendants to forfeit $2.2 million in profits and to pay $217,580 in restitution to RCN.
The defendants engaged in a “cynical manipulation of this program . . . designed to enhance business opportunities for minorities,” Judge Pallmeyer said in sentencing Potter.
Potter and Giovenco, along with two co-defendants, were indicted in April 2011 and they were both convicted of six counts of mail fraud last April after a jury trial in Federal Court. Two co-defendants, JERONE BROWN, who served as the sham minority owner and president of ICS, and his mother, CHERONE MAYES, both of Chicago, who paid a $500 bribe to a city employee to expedite the minority-owned business (MBE) certification for ICS, testified as government witness after pleading guilty and both are awaiting sentencing.
“The defendants engaged in a lengthy fraud scheme that resulted in millions of dollars of contracts being diverted from legitimate minority- and women-owned businesses,” Assistant U.S. Attorney Jessica Romero argued at sentencing.
According to the trial evidence and court records, RCN’s cable franchise agreement required it to sub-contract 40 percent of the cable installation and disconnection services to citycertified minority-owned businesses. Between April 2003 and October 2006, Potter and Giovenco, assisted by Brown and Mayes, fraudulently obtained at least $8.3 million from RCN by falsely representing that Brown owned and operated ICS. All four defendants supported the false representations to RCN with an MBE certification for ICS that they obtained by making false representations to the city regarding Brown’s purported ownership and control of ICS, when, in fact, Potter and Giovenco alone controlled ICS and made most, if not all, financial and managerial decisions for the business.
The sentences were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Robert J. Shields, Jr., Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Joseph Ferguson, Inspector General for the City of Chicago.
Former Machesney Park Man Charged with Bankruptcy FraudRead the Press Release
ROCKFORD — A former Machesney Park, Ill. man was indicted today by a federal grand jury in Rockford on charges of bankruptcy fraud. ROBERT J. YONKEE, JR., 54, now of Lake Geneva, Wisconsin, filed a Chapter 7 Bankruptcy Petition on September 15, 2008. The indictment alleges that Yonkee fraudulently concealed property from the bankruptcy trustee, creditors, and the United States Trustee, including his ownership interest in: a business that sold auto parts, automobiles, and motorcycles; the United States Super Truck Racing Series; Bobby Yonkee Racing; as well as other inventory, merchandise, capital, vehicles, and motorcycles. The indictment further charges that Yonkee made false statements on a bankruptcy schedule and a Statement of Financial Affairs, both of which were filed under penalty of perjury. In addition, Yonkee was charged with making material false statements under oath in a bankruptcy proceeding during a meeting of creditors.
Each charge in this case carries a maximum penalty of 5 years’ imprisonment, and a fine of up to $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater. The judge may also impose a sentence of probation of one to five years, and a term of supervised release of up to three years. The actual sentence will be determined by the United States District Court, guided by the Sentencing Guidelines.
The indictment was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Robert J. Shields, Jr., Acting Special Agent-In-Charge of the Chicago Office of Federal Bureau of Investigation.
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 government is being represented by Assistant U.S. Attorney Michael D. Love.
Indictment