Northern District of Illinois
Press releases recorded for this federal judicial district.
Crystal Lake Man Indicted in Fraud SchemeRead the Press Release
ROCKFORD — A Crystal Lake, Ill. man was indicted yesterday on federal charges of mail fraud. MICHAEL S. MACKAY, 46, was charged with two counts of mail fraud for his role in a “secret shopper scheme,” where victims applied to work-at-home advertisements on the Internet believing they were being hired to work as a “secret shopper” or payment processor.
According to the indictment, from September 2011 to at least May 16, 2012, Mackay was involved in a scheme to defraud victims into falsely believing that they were hired as “secret shoppers” to evaluate and report their experiences with local businesses. After applying for work, victims received a letter with at least one counterfeit negotiable instrument, such as a counterfeit money order. The victims were instructed to deposit the counterfeit negotiable instrument in their financial institution, retain a certain percentage as payment for their services, go to the nearest Western Union and wire transfer the remaining proceeds as instructed. The victims were also instructed to report their experience, believing they were hired as secret shoppers to evaluate local businesses, via email to an email address contained in the letter. The participants in the scheme received the proceeds via the wire transfers before the victims learned that the money orders were counterfeit.
During the course of the scheme, Mackay received at least $2,000,000 in counterfeit negotiable instruments in packages sent to Crystal Lake from New York, Nigeria, and Ghana. Each package contained counterfeit money orders, in amounts ranging from $900 to $2,000 each, that appeared to be issued by the United States Postal Service, American Express, Capital One Bank, Citizens National Bank of Texas, First National Bank, and Navy Federal Credit Union. Mackay received email instructions attaching a “secret shopper” letter and United States Postal Service Express mailing labels. According to the indictment, Mackay then placed a “secret shopper” letter in a United States Postal Service express mailing envelope along with at least two counterfeit money orders to at least 665 victims throughout the United States. The indictment alleges that Mackay mailed over $1,000,000 in counterfeit money orders to the victims, receiving wire transfers of at least $10,000 from his victims and others involved in the scheme as payment for his role in the scheme before the victims learned that the negotiable instruments were counterfeit.
Each count of mail fraud carries a maximum penalty of 20 years in prison, and a $250,000 maximum fine, or an alternate fine totaling twice the loss or twice the gain, whichever is greater, a period of supervised release of up to 3 years following imprisonment, and restitution. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines, as well as restitution.
The indictment was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Pete Zegarac, Inspector-in-Charge of the Chicago Division of the United States Postal Inspection Service; and Gary J. Hartwig, Special Agent-in-Charge of Homeland Security Investigations in Chicago.
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 represented by Assistant U.S. Attorney Michael D. Love.
Indictment
Former Sandwich, Illinois Business Owner Charged with FraudRead the Press Release
ROCKFORD — A former business owner in Sandwich, Ill. was indicted by a federal grand jury in Rockford today on fraud and false statement charges. STEVEN J. MOORHOUSE, 60, who was President and majority owner of Jefsco Manufacturing Co., Inc., a manufacturing business known as Fanplastic Molding Company, was charged with four counts of bank fraud and two counts of making a false statement to a financial institution.
According to the indictment, during July 2009, Moorhouse sought a new lender to make business loans to Jefsco and began to provide Jefsco financial information to Old Second National Bank in Aurora, Ill. It is alleged that Moorhouse falsely overstated the value of the accounts receivable owed to Jefsco by hundreds of thousands of dollars, including a balance due to Jefsco of $624,000, influencing Old Second National Bank to make a loan to Jefsco. On Dec. 2, 2009, Jefsco signed two promissory notes and related loan documents to receive two loans totaling $1,350,000. As a condition for making the loans, the bank required Jefsco to pledge its accounts receivable as collateral to the bank for the loans and required that all payments made to Jefsco for accounts receivable were to have been deposited into a Jefsco account at Old Second National Bank. The indictment alleges that during late 2009 and early 2010 Moorhouse deposited Jefsco accounts receivable payments into an account at another financial institution, thereby defrauding the bank and depriving it of its collateral.
Moorhouse is scheduled to appear at the Federal Courthouse in Rockford on Thursday, May 9, 2013, at 11:00 a.m., for arraignment. The arraignment will be conducted by United States Magistrate Judge P. Michael Mahoney.
Each count of bank fraud and each count of making a false statement to a financial institution carries a penalty of up to 30 years in prison, a fine of up to $1 million, and a term of supervised release of up to five years following imprisonment. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines, as well as restitution.
The indictment was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Christy Romero, Special Inspector General for the Troubled Asset Relief Program; and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The investigation was conducted jointly by the Office of the Special Inspector General for the Troubled Asset Relief Program and the 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 represented by Assistant U.S. Attorney Michael D. Love.
Indictment
Taiwanese Father and Son Arrested for Allegedly Violating US Laws to Prevent Proliferation of Weapons of Mass DestructionRead the Press Release
CHICAGO — A resident of Taiwan, who the U.S. government has linked to the supply of weapons machinery to North Korea, and his son, who resides in suburban Chicago, are facing federal charges here for allegedly conspiring to violate U.S. laws designed to thwart the proliferation of weapons of mass destruction, federal law enforcement officials announced today. HSIEN TAI TSAI, also known as “Alex Tsai,” who is believed to reside in Taiwan, was arrested last Wednesday in Tallinn, Estonia, while his son, YUEH-HSUN Tsai, also known as “Gary Tsai,” who is from Taiwan and is a legal permanent resident in the U.S., was arrested the same day at his home in Glenview, Ill.
Gary Tsai, 36, was ordered held in custody pending a detention hearing at 1:30 p.m. today before Magistrate Judge Susan Cox in U.S. District Court in Chicago. Alex Tsai, 67, remains in custody in Estonia pending proceedings to extradite him to the United States.
Both men were charged in Federal Court in Chicago with three identical offenses in separate complaints that were filed previously and unsealed following their arrests. Each was charged with one count of conspiring to defraud the United States in its enforcement of laws and regulations prohibiting the proliferation of weapons of mass destruction, one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) by conspiring to evade the restrictions imposed on Alex Tsai and two of his companies by the U.S. Treasury Department, and one count of money laundering.
The arrests and charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Gary Hartwig, Special Agent-in-Charge of Homeland Security Investigations in Chicago; 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 and Office of International Affairs assisted with the investigation. U.S. officials thanked the Estonian Internal Security Service and the Estonian Prosecutor’s Office for their cooperation.
According to both complaint affidavits, agents have been investigating Alex and Gary Tsai, as well as Individual A (a Taiwanese associate of Alex Tsai), and a network of companies engaged in the export of U.S. origin goods and machinery that could be used to produce weapons of mass destruction. Alex and Gary Tsai and Individual A are associated with at least three companies based in Taiwan – Global Interface Company, Inc., Trans Merits Co., Ltd., and Trans Multi Mechanics Co., Ltd. – that have purchased and then exported, and attempted to purchase and then export, from the United States machinery used to fabricate metals and other materials with a high degree of precision.
On Jan. 16, 2009, under Executive Order 13382, which sanctions proliferators of weapons of mass destruction and their supporters, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated Alex Tsai, Global Interface, and Trans Merits as proliferators of weapons of mass destruction, isolating them from the U.S. financial and commercial systems and prohibiting any person or company in the United States from knowingly engaging in any transaction or dealing with Alex Tsai and the two Taiwanese companies.
In announcing the January 2009 OFAC order, the Treasury Department said that Alex Tsai was designated for providing, or attempting to provide, financial, technological, or other support for, or goods or services in support of the Korea Mining Development Trading Corporation (KOMID), which was designated as a proliferator by President George W. Bush in June 2005. The Treasury Department asserted that Alex Tsai “has been supplying goods with weapons production capabilities to KOMID and its subordinates since the late 1990s, and he has been involved in shipping items to North Korea that could be used to support North Korea’s advanced weapons program.” The Treasury Department further said that Global Interface was designated “for being owned or controlled by Tsai,” who is a shareholder of the company and acts as its president. Tsai is also the general manager of Trans Merits Co. Ltd., which was designated for being a subsidiary owned or controlled by Global Interface Company Inc. http://www.treasury.gov/press-center/press-releases/Pages/hp1359.aspx
After the OFAC designations, Alex and Gary Tsai and Individual A allegedly continued to conduct business together, but attempted to hide Alex Tsai’s and Trans Merit’s involvement in those transactions by conducting business under different company names, including Trans Multi Mechanics. For example, by August 2009 – approximately 8 months after the OFAC designations – Alex and Gary Tsai, Individual A and others allegedly began using Trans Multi Mechanics to purchase and export machinery on behalf of Trans Merits and Alex Tsai. Specifically, the charges allege that in September 2009 they purchased a Bryant center hole grinder from a U.S. company based in suburban Chicago, and exported it to Taiwan using the company Trans Multi Mechanics. A Bryant center hole grinder is a machine tool used to grind a center hole, with precisely smooth sides, through the length of a material.
The charges further allege that by at least September 2009, Gary Tsai had formed a machine tool company named Factory Direct Machine Tools, in Glenview, Ill., which was in the business of importing and exporting machine tools, parts, and other items to and from the United States. However, the charges allege that Alex Tsai and Trans Merits were active partners in Factory Direct Machine Tools, in some instances procuring the goods for import to the United States for Factory Direct Machine Tool customers.
Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine; money laundering carries a maximum penalty of 20 years in prison and a $500,000 fine; and conspiracy to defraud the United States carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The government is being represented by Assistant U.S. Attorneys Patrick Pope and Brian Hayes.
The public is reminded that a complaint is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Alex Tsai Complaint
Gary Tsai ComplaintFour Defendants Sentenced to Prison Terms Between Five and 10 Years in Three Investment Fraud SchemesRead the Press Release
CHICAGO — Four defendants who swindled investors out of millions of dollars in three separate Ponzi fraud schemes were each sentenced to federal prison terms between 5 and 10 years and ordered to pay full restitution to their victims. The cases demonstrate that federal law enforcement agencies continue to safeguard investors from individuals who solicit, obtain and use other people’s money illegally. Two of the three cases resulted from investigations by law enforcement agencies and financial market regulators. One defendant reported himself to investigators as his fraud scheme was collapsing.
The defendants and their sentences last week in U.S. District Court were:
MICHAEL MORAWSKI, 56, of Sleepy Hollow, was sentenced to 10 years in prison, and his co-defendant, FRANK CONSTANT, 59, of West Dundee, was sentenced to 7½ years in prison, and both were ordered to pay more than $18 million in restitution for defrauding 267 victims;
JAMES BRANDOLINO, 44, formerly of Joliet and Chicago, was sentenced to just under nine years in prison and ordered to pay more than $3.8 million in restitution for defrauding more than 50 investors; and
CHRISTOPHER VARLESI, 54, of Chicago, was sentenced to five years in prison and ordered to pay $638,227 in restitution for defrauding approximately 15 investors.
In each case, many of the victims lost their life savings, including retirement money and college funds, as well as suffered emotional hardship. Each of the defendants benefitted personally, as well as used some investors’ funds to pay back earlier investors to keep their fraud schemes from collapsing.
United States v. Morawski and Constant
Morawski pleaded guilty to two counts of mail fraud in September 2012 and was sentenced to 10 years in prison by U.S. District Judge Gary Feinerman, who imposed the sentence last Tuesday. Constant pleaded guilty to one count of wire fraud and was sentenced to 90 months in prison by Judge Feinerman on Thursday. Both men were ordered to pay $18,211,547 in restitution and to begin serving their sentences on July 15, 2013.
“Mr. Morawski must be punished for the lies and fraud he perpetrated and the way in which he conducted business when it became clear that things were not going well. At the time when people get into situations when businesses go south, it is at that time there has to be the most deterrence,” Judge Feinerman said.
In sentencing Constant, the judge said: “The sentence should send a signal to people in positions of trust that truth has to be told in good time and bad. It’s important to investors to know when thing go well, but what Constant did was deprive the investors of full information to make an informed choice.”
Between 2006 and 2010, Morawski and Constant fraudulently obtained approximately $21 million and caused 267 investors to lose more than $18 million. After forming a real estate investment company, Michael Franks, LLC, in Palatine, and several related businesses, they misused the money they raised for their own benefit and to make Ponzi-type payments to earlier investors.
Michael Franks offered investors passive ownership in multi-family residential properties, including apartment buildings in Illinois, Texas and Alabama. Morawski and Constant offered two types of investments to the public: one was an investment in acquiring, improving and operating specific apartment complexes for a period of three to five years, and investors were typically told they would earn between seven and nine percent interest annually, and potentially more upon the sale of the property; the second was an investment in real estatebased “funds” that would provide an interest in various properties backed by promissory notes, often offering an annual interest payment of between 8 and 30 percent per year.
Certain real estate projects undertaken by Michael Franks performed poorly and failed to generate enough revenue to meet operating expenses. The defendants began transferring funds from various investments to support poorly-performing projects and to pay earlier investors, without disclosing this information. At the same time, they misused investor funds to pay employees, to make commission payments to individuals who raised new funds, and to pay themselves, as well as to make payments for Constant’s company car and country club payments, and to extend loans to friends of Morawski, who pocketed nearly $1 million for himself.
The government was represented by Assistant U.S. Attorney Sunil Harjani. The investigation was conducted by the FBI.
United States v. Brandol
Brandolino pleaded guilty to mail fraud in August 2011 and was sentenced to 107 months in prison and ordered to pay $3,865,484 in restitution by U.S. District Judge Elaine Bucklo, who imposed the sentenced last Thursday. Brandolino has been in custody since January 2011 when he turned himself in after a seven-year investment fraud scheme in which he swindled more than 50 investors out of $3.75 million. He agreed to being ordered to pay additional restitution of $128,576 to managed account holders who suffered trading losses.
Between 2003 and January 2011, Brandolino solicited approximately $4.8 million from about 60 investors, many of them family and friends. He lured investors with promises of healthy returns and principal safety, and he fabricated account statements showing steady gains, convincing investors to keep their money with him and to invest additional funds.
Of the funds he fraudulently obtained, Brandolino lost approximately $850,000 through unsuccessful futures trading and used approximately $1.4 million to pay principal and purported profit returns to existing pool participants, including more than $300,000 he paid to investors in excess of their investments. He also misappropriated more than $2 million for himself and used the money to purchase such items as a luxury BMW, a Rolex watch, and a piano.
Brandolino held various National Futures Association registrations in the commodities brokerage business, with exchange floor trading privileges at the Chicago Board of Trade, now part of the CME Group. He was also a principal of several commodities trading businesses, including Brandolino Investment Group, Lloyd Lewis Capital, Inc., Falcon Trading Group, Inc., and Falcon Capital Partners LLC.
The government was represented by Assistant U.S. Attorney Samuel B. Cole. The investigation was conducted by the FBI and the U.S. Postal Inspection Service. The Commodity Futures Trading Commission assisted in the investigation.
United States v. Varlesi
Varlesi pleaded guilty to wire fraud in December 2012 and was ordered to surrender on June 17, 2013, by U.S. District Judge Ruben Castillo, who imposed the five-year sentence last Wednesday. Varlesi engaged in a Ponzi scheme while purporting to operate a company called Gold Coast Futures and Forex, an investment trading pool. Between July 2008 and January 2012, he fraudulently obtained more than $1.5 million from approximately 18 investors, including friends, friends of friends, and family members. Neither Varlesi nor Gold Coast held any license or registration related to trading securities or commodities or operating a commodity trading pool.
Varlesi misappropriated a substantial portion of investor funds for his own benefit, including misusing more than $120,000 to pay for a year’s rent for an apartment in the Trump International Hotel & Tower in Chicago, as well as to make Ponzi-type payments to other investors.
Trading only a small portion of the money he received from investors, Varlesi made false representations about using clients’ money to trade gold, commodity futures, and foreign currency, the expected return on their investments, and the security of their money. He concealed the scheme by creating and distributing false account statements, and also told clients that their investments were guaranteed to be profitable, with no risk of losing principal. He provided promissory notes to certain investors, falsely promising to return the entire principal amount of their investment, as well as guaranteed interest ranging between 5 to 7.5 percent per month.
The government was represented by Assistant U.S. Attorney Sarah E. Streicker. The investigation was conducted by the FBI and the Illinois Securities Department. The Commodity Futures Trading Commission assisted in the investigation.
The sentences were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
The investigations fall 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 5 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.
Rockford Man Pleads Guilty to Illegally Possessing A FirearmRead the Press Release
ROCKFORD — A Rockford, Ill. man pleaded guilty today in federal court before U.S. District Judge Frederick J. Kapala to illegally possessing a firearm as a convicted felon. ROBERT J. GRAY, 34, admitted that on May 8, 2012, having previously been convicted of a felony, he possessed an SKS Norinco semi-automatic rifle with an obliterated serial number and sixteen rounds of ammunition at his home. In addition, Gray had approximately $372,993 in U.S. currency, six cell phones, a digital scale, a pocket scale, a heat sealer and bags, plastic grocery bags filled with rubber bands, and diamond jewelry at his home.
Gray is scheduled to be sentenced on Aug. 9, 2013, at 10:30 a.m. Gray faces a sentence of up to 10 years in prison, a fine of up to $250,000, and a term of supervised release of up to 3 years following his release from prison. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.
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 guilty plea 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; Cory B. Nelson, 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 is represented by Assistant U.S. Attorney Scott R. Paccagnini.
Plea Agreement
Ex-loan Officer Sentenced to 12½ Years in Prison for Mortage Fraud Scheme Involving Dozens of South Side PropertiesRead the Press Release
CHICAGO — A former loan officer was sentenced today to more than 12½ years in federal prison for engaging in a mortgage fraud scheme involving 65 real estate transactions with properties located mostly in economically-depressed neighborhoods on the city’s south side which netted him personally more than $700,000. The defendant, FRED HAYWOOD, worked as a loan officer or processor for several different mortgage brokerages during the scheme, which occurred between 2001 and 2007.
Haywood, 42, of Chicago, was sentenced to 151 months in prison and ordered to pay more than $1.4 million in restitution to various lenders by U.S. District Judge Ronald Guzman. Haywood pleaded guilty in April 2012 to wire fraud. Haywood was the last to be sentenced among six defendants who were charged in 2008 and 2009 and subsequently pleaded guilty, and his was the longest term of incarceration.
Haywood’s fraudulent acts included qualifying borrowers for loans based on false information submitted to lenders, including false information about their income, assets, employment, intention to occupy the property, and source of down payment. Court records also established that he continued his fraudulent conduct after he was indicted and while on pretrial release.
During the scheme, Haywood and his co-schemers recruited buyers with good credit to purchase properties, knowing at the time that these buyers did not have sufficient income to qualify for mortgages, had no intention of actually living in the properties they were purchasing, and had no intention of fulfilling any long-term payment obligations on the loans they obtained. Instead, he and others recruited the buyers by promising to pay them for acting as nominees and for putting the properties in their names. Haywood knew that the false statements and documents submitted to lenders were material to their decisions to make loans.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
The government was represented by Assistant U.S. Attorney Jason Yonan.
Crest Hill Man and His Sister Indicted for Allegedly Conspiring to Illegally Buy Firearms in Missouri and Ship Them to IllinoisRead the Press Release
CHICAGO — A suburban Crest Hill man who is barred from possessing firearms because he is a convicted felon and his sister in Missouri were indicted on federal charges for allegedly conspiring to have her illegally purchase at least five firearms in Missouri and ship them to him in Illinois. RICHARD CARRINO and his sister, ANGEL MARIE CARRINO, were charged in a seven-count superseding indictment that was returned yesterday by a federal grand jury, Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Larry Ford, Special Agent-in-Charge of the Bureau of Alcohol, Tobacco, Firearms and Explosives in Chicago, announced today.
Richard Carrino, also known as “R.J.,” 28, of Crest Hill, was initially indicted alone in March on three counts of being a felon-in-possession of firearms following an undercover investigation by ATF agents. He was arrested on April 3, pleaded not guilty, and remains in federal custody without bond pending trial.
Angela Marie Carrino, 24, of O’Fallon, Mo., was added as a defendant in the new indictment and will be arraigned at a later date in U.S. District Court in Chicago.
Both were charged with conspiring between November 2012 and February 2013 to have Angela Marie Carrino make illegal “straw purchases” of firearms from licensed dealers in Missouri, and illegally transfer them to her brother, a convicted felon, knowing that he lived in a different state. They allegedly discussed types of guns to obtain and Richard Carrino sent his sister money to make the purchases. She allegedly falsely certified that she was the actual buyer of the firearms and then shipped at least five firearms from Missouri to her brother in Illinois. Richard Carrino, in turn, allegedly sold or transferred three of the firearms to an undercover agent, believing in at least one transaction that the individual was a convicted felon, according to the indictment.
Angela Marie Carrino was also charged with three counts of illegally transferring firearms across state lines, while Richard remains charged with the three original counts of being a felon-in-possession of firearms.
Three of the firearms – two .45 caliber semi-automatic Hi-Point pistols and a 9- millimeter semi-automatic Hi-Point model C-9 handgun – were obtained by ATF agents during the investigation and the indictment seeks forfeiture of those guns.
The conspiracy count carries a maximum penalty of five years in prison and each count of illegally transferring or possessing firearms carries a maximum of 10 years in prison, and a maximum fine of $250,000 on each count. 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 McFadden.
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.
Superseding Indictment
Three Fraud Defendants Who Met in Prison Sent Back to Serve New Sentences in $3.6 Million Ponzi SchemeRead the Press Release
CHICAGO — Three serial fraud defendants who met while incarcerated for unrelated crimes at the federal prison in Oxford, Wis., and then, after they were released, joined together in a Ponzi-type investment fraud scheme that caused approximately 100 victims to lose more than $3.6 million have been sentenced for their latest crimes. Two of the defendants purported to run a business, Sundown Entertainment, Inc., that bought and sold films and comic-book rights and together raised more than $7 million from approximately 150 investors, while the third defendant entered the scheme later and lulled victims with false assurances about their investments.
U.S. District Court Judge Virginia Kendall last week sentenced DANIEL PARRILLI, 62, formerly of Carol Stream, to 70 months in prison, and finalized the sentencing of JOHN LAUER, 48, formerly of Chicago, who received a 31-month prison term. The lead defendant, CHRISTOPHER ANDERSEN, 57, formerly of Downers Grove, was sentenced last fall to 95 months in prison. All three had pleaded guilty to fraud charges that were brought against them in 2010. Parrilli was ordered to pay more than $3.65 million in restitution and to begin serving his sentence on Aug. 1. Lauer, was ordered to pay $457,367 in restitution and to surrender on June 12. Anderson, who is serving his sentence, was ordered to pay restitution totaling more than $3.7 million.
In connection with Parrilli and Andersen’s sentencings, the government argued that the fraud scheme “had a terrible impact on victims, who in many cases depleted their 401K funds or their college savings, or took out loans against their homes in order to invest with the defendants.”
Andersen had committed essentially the same crime previously when he was convicted in 2001 of offering and selling fraudulent investments in the form of promissory notes. He continued to engage in additional fraud schemes while the charges were pending in both cases and even after he pleaded guilty in the Sundown case. Parrilli had been imprisoned previously for bank fraud and fraudulently using aliases to obtain credit cards. When they teamed-up in the Sundown Entertainment fraud scheme, they promised investors returns starting at 10 percent to as much as 150 percent over a period of months to as short as a few days. Lauer joined Andersen and Parrilli after they had already fraudulently obtained most of the funds they raised from victims, and he provided lulling assurances to nervous victims that their investments were safe. Lauer also admitted engaging in a separate investment fraud scheme involving the purported purchase of a surety bond to obtain the release of bank funds from the Cayman Islands.
Lauer at one time was the director of risk management and benefits for the Chicago Housing Authority when he engaged in a fraud scheme involving the fraudulent offer and sale of investments in so-called prime bank instruments that resulted in losses of more than $20 million, including about $15 million in CHA pension funds. Lauer admitted engaging in multiple, separate fraud schemes and met Andersen and Parrilli while all three were serving their sentences at the Oxford prison. Lauer was on supervised release when he assisted them in the later stages of the Sundown Ponzi scheme.
The sentences were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission assisted in the investigation.
The government was represented by Assistant U.S. Attorneys Edward Kohler and Shoshana Gillers.
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.
Crestwood Official Convicted of Falsifying Reports to Conceal Village’s Use of Well in Drinking Water SupplyRead the Press Release
CHICAGO — A former water department official for the southwest suburban Village of Crestwood was convicted today of lying repeatedly to environmental regulators for more than 20 years about using a water well to supplement the village’s drinking water supply from Lake Michigan. The defendant, THERESA NEUBAUER, former water department clerk and supervisor and currently Crestwood’s police chief on leave, was found guilty of all 11counts of making false statements by a federal jury after a week-long trial.
Neubauer, 55, of Crestwood, faces a maximum sentence of five years in prison and a $250,000 fine on each count. U.S. District Judge Joan Gottschall set sentencing tentatively for Oct. 2. A co-defendant, FRANK SCACCIA, 61, of Crestwood, the village’s retired certified water operator, pleaded guilty on April 11 to making false statements and is also awaiting sentencing. Neubauer concealed the village’s use of its well from the government and the citizens of Crestwood to save money, prosecutors argued to the jury. By doing so, the village didn’t have to fix its leaking water distribution system, pay the neighboring Village of Alsip more money for water drawn from Lake Michigan, and properly monitor for contaminants that could have been introduced to Crestwood’s water supply.
“Nobody really knows what was in the water for all those years because [Neubauer’s] lies defeated testing,” Assistant U.S. Attorney Timothy Chapman said in his closing argument.
The charges did not allege, and the trial did not seek to establish, that the defendants’ false statements in regulatory reports concealing the use of well water resulted in any harm to Crestwood’s nearly 11,000 residents or to the environment, but the concealment avoided regulations requiring that Crestwood test its commingled water supply and monitor the amount of certain contaminants.
“The charges in this case are seemingly technical reporting violations. But the lies in those reports evidenced a calloused disregard for the welfare and safety of the citizens of Crestwood by their public officials. The decades’ long scheme proved at trial through the efforts of special agents of the U.S. EPA is a disheartening reminder of what can happen when public officials and employees put their own interests ahead of the people they were supposed to serve,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.
“Neubauer lied about the true source of the village’s drinking water and for years submitted false documents to cover up the fact that the residents of Crestwood were drinking water from a well that was not properly tested,” said Randall Ashe, Special Agent-in-Charge of the U.S. Environmental Protection Agency’s Office of Criminal Enforcement in Chicago.
According to 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, Neubauer schemed with others to conceal that Crestwood was supplementing its Lake Michigan water with water drawn from Well #1. She helped prepare and submit various false reports stating that Well #1 was on standby status and no water from the well was distributed to Crestwood’s drinking water customers, and also stating that the sole source of Crestwood’s drinking water was Lake Michigan water purchased from Alsip. The false statements were contained in annual Consumer Confidence Reports (CCRs) and Monthly Operation and Chemical Analysis Reports (MORs).
The trial evidence showed that Neubauer was part of a scheme involving a small circle of trusted village employees, including Scaccia, that were directed by Crestwood’s longtime former mayor, Chester Stranczek, who was not charged.
Under the federal Safe Drinking Water Act of 1974, the U.S. Environmental Protection Agency 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 Environmental Protection Agency, 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, however, the village was required to periodically monitor 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.
Scaccia was responsible for ensuring that water distributed by Crestwood met all federal and state regulations, including filing annual CCRs; obtaining the raw data that was used to complete the 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.
The government is being represented by Assistant U.S. Attorneys Erika Csicsila and Timothy Chapman.
Chicago Man Arrested for Allegedly Taking Cash to Assist with Filing False Bankruptcy Case to Avoid City Auto Impound FeesRead the Press Release
CHICAGO — A Chicago man was arrested today for allegedly soliciting and accepting a $600 cash payment to assist with filing a false bankruptcy case to avoid paying a fine or fees to the City of Chicago before obtaining the release of a vehicle from the city’s auto pound. The defendant, DANIEL RANKINS, was charged with bankruptcy fraud after an undercover investigation by the FBI and the City of Chicago’s Office of Inspector General.
Rankins, also known as “Little D,” 30, of Chicago, is scheduled to appear at 2 p.m. today before U.S. Magistrate Judge Mary Rowland in Courtroom 1342 of the Dirksen Federal Courthouse.
According to the unsealed complaint affidavit, authorities are investigating various individuals, including Rankins, who, in exchange for cash payments, orchestrate and assist in the filing of false bankruptcy petitions to avoid paying impound fees to the city. As a result of the allegedly fraudulent bankruptcy cases, the city suffers the loss of fines and fees due for each impounded vehicle, while the U.S. Bankruptcy Court suffers the loss of the $306 filing fee for each case.
In May 2012, the City of Chicago’s Department of Revenue (now Finance Department) alerted the U.S. Trustee for the Northern District of Illinois, which administers individual bankruptcy cases and liquidates debtors’ nonexempt assets, to a significant increase in the number of individuals who appeared to be using bankruptcy as a means of obtaining the release of their vehicles from city auto pounds without paying associated fines or fees. The city requires that individuals present their impound paperwork and pay what is owed at the Revenue Department before the city will release their vehicles from the pound. Revenue Department officials told the U.S. Trustee’s office that it appeared as though individuals were approaching people at the revenue office and assisting with filing false Chapter 7 bankruptcy cases to get their vehicles released without paying fines or fees.
The U.S. Trustee’s Office reviewed and identified more than 1,000 individual pro se bankruptcy filings in which the only creditors identified in the petitions were the Revenue Department and the city’s auto pounds. In almost all of these cases, the debtors filed applications claiming an inability to pay the $306 Bankruptcy Court filing fee.
According to the bankruptcy trustee’s office, almost all of these cases contained additional indications that the cases were filed fraudulently, with the debtors failing to appear at court hearings to review their applications to waive the filing fee. Eventually, nearly all of these cases were dismissed due to the failure of the debtors to file required documents, and the filing fees were never collected.
The complaint affidavit details an undercover operation on Jan. 7, 2013, to identify individuals who accepted cash in exchange for assisting with the filing of a false bankruptcy petition to obtain the release of impounded vehicles. An undercover officer went to the Revenue Department office, located at 400 West Superior St., and was approached by an individual who allegedly arranged for Rankins to contact the officer, which he did, later that day. The undercover officer told Rankins that $4,200 was owed to get a car released from the city pound, and Rankins allegedly said that he usually charged half of what a person owed the city to get their car. The officer told Rankins that he/she had only $600 and they arranged to meet that afternoon.
While driving the officer to the Dirksen Federal Courthouse, Rankins allegedly provided bankruptcy filing paperwork that was already completed except for the petitioner’s personal and vehicle information, and signature. Rankins allegedly explained that the officer was “wiping out” the city as a creditor by filing the bankruptcy. After completing the paperwork, the undercover officer entered the courthouse and filed the bankruptcy petition. The officer returned to Rankins’ vehicle, paid Rankins the $600, and was driven back to the Revenue Department, where Rankins instructed the officer to enter the east side of the building and speak with a Revenue Department representative who accepted the bankruptcy paperwork.
Bankruptcy fraud 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.
Rankins’ arrest and charge were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, and Joseph Ferguson, City of Chicago Inspector General. The U.S. Bankruptcy Court and the U.S. Trustee’s Office for the Northern District of Illinois cooperated and assisted with the investigation, which is continuing.
The government is being represented by Assistant U.S. Attorney Megan Church.
The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint
Former Freeport Man Convicted of Witness RetaliationRead the Press Release
ROCKFORD — A former Freeport, Ill. man was convicted late yesterday of witness retaliation by a federal jury in U.S. District Court in Rockford following a two-day jury trial. DAMON RUCKER, 36, was found guilty of causing bodily injury to a witness on Dec. 20, 2012, with intent to retaliate against the witness for testifying against Rucker in federal court.
According to the indictment and evidence at trial, Rucker was initially convicted in federal court in Rockford on July 31, 2012, having pled guilty to a drug trafficking crime. A co-defendant, who also pled guilty in that case, agreed to cooperate with the government and testified against Rucker during Rucker’s sentencing hearing.
On Dec. 20, 2012, Rucker, with intent to retaliate against the co-defendant for testifying, slammed the witness’s head against a concrete wall while both were in custody. At the time, the victim was in the process of being transported to a different jail and was in hand and leg shackles. Rucker was not shackled at the time.
Rucker faces a maximum sentence of 40 years in prison, in addition to a term of supervised release of up to 5 years following his imprisonment, and a fine of up to $250,000. The Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines. Sentencing is scheduled for July 30, 2013, at 2:30 p.m. in federal court in Rockford.
The conviction was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation. The United States Marshals Service and the Ogle County Sheriff’s Office assisted in the investigation.
The government was represented by Assistant U.S. Attorneys Scott R. Paccagnini and John G. McKenzie.
Former Freeport Man Convicted of Witness RetaliationRead the Press Release
ROCKFORD — A former Freeport, Ill. man was convicted late yesterday of witness retaliation by a federal jury in U.S. District Court in Rockford following a two-day jury trial. DAMON RUCKER, 36, was found guilty of causing bodily injury to a witness on Dec. 20, 2012, with intent to retaliate against the witness for testifying against Rucker in federal court.
According to the indictment and evidence at trial, Rucker was initially convicted in federal court in Rockford on July 31, 2012, having pled guilty to a drug trafficking crime. A co-defendant, who also pled guilty in that case, agreed to cooperate with the government and testified against Rucker during Rucker’s sentencing hearing.
On Dec. 20, 2012, Rucker, with intent to retaliate against the co-defendant for testifying, slammed the witness’s head against a concrete wall while both were in custody. At the time, the victim was in the process of being transported to a different jail and was in hand and leg shackles. Rucker was not shackled at the time.
Rucker faces a maximum sentence of 40 years in prison, in addition to a term of supervised release of up to 5 years following his imprisonment, and a fine of up to $250,000. The Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines. Sentencing is scheduled for July 30, 2013, at 2:30 p.m. in federal court in Rockford.
The conviction was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation. The United States Marshals Service and the Ogle County Sheriff’s Office assisted in the investigation.
The government was represented by Assistant U.S. Attorneys Scott R. Paccagnini and John G. McKenzie.
FBI Arrests Suburban Chicago Man for Allegedly Supporting Terrorism OverseasRead the Press Release
CHICAGO – A suburban Aurora man who allegedly attempted to travel overseas to join a jihadist militant group operating inside Syria is scheduled to have a detention hearing after being arrested Friday night. Gary S. Shapiro, United StatesAttorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation, announced the arrest on Saturday.
ABDELLA AHMAD TOUNISI, 18, a U.S. citizen, was arrested without incident Friday at O’Hare International Airport by members of the Chicago FBI’s Joint Terrorism Task Force as he attempted to board a flight destined for Istanbul, Turkey. He was charged in a criminal complaint filed Saturday in U.S. District Court with one count of attempting to provide material support to a foreign terrorist organization. Tounisi appeared Saturday before U.S. Magistrate Judge Daniel G. Martin and is being held pending a detention hearing at 9:30 a.m. tomorrow before Magistrate Martin in Federal Court in Chicago.
In announcing the charge, Mr. Nelson said that the investigation that led to Tounisi’s arrest began in 2012 and there is no connection between his arrest and the events that occurred last week in Boston.
The complaint states that Tounisi is a close friend of Adel Daoud, of Hillside, who was arrested in September 2012 for allegedly attempting to detonate a bomb outside a Chicago bar, and that Tounisi and Daoud appeared to share an interest in violent jihad. While Tounisi allegedly discussed attack techniques and targets prior to Daoud’s arrest, Tounisi did not participate in Daoud’s attempted attack. Daoud has pleaded not guilty and remains in custody while awaiting trial.
According to the Tounisi complaint, from January to April 2013, Tounisi conducted online research related to overseas travel and violent jihad, focusing specifically on Syria and the Jabhat al-Nusrah terrorist group. Jabhat al-Nusrah is listed by the U.S. Department of State as an alias for al-Qa’ida in Iraq (AQI), a designated foreign terrorist organization. The complaint alleges that Tounisi searched online for information about travel from Chicago to Syria, obtained a new passport, and, beginning in late March 2013, made online contact with an individual Tounisi believed to be a recruiter for Jabhat al-Nusrah. That individual was in fact an FBI employee acting in an online undercover capacity. The complaint further alleges that Tounisi and the undercover employee exchanged a series of emails in which Tounisi shared his plan to get to Syria by way of Turkey, as well as his willingness to die for the cause. During the exchanges, Tounisi also sought advice from the undercover employee on travel from Istanbul to the Turkish city of Gaziantep, which lies near the border of Turkey and Syria.
The complaint states that on April 10, Tounisi purchased an airline ticket for a flight from Chicago to Istanbul and on April 18, the undercover employee provided Tounisi with a bus ticket for travel from Istanbul to Gaziantep. Tounisi arrived at O’Hare International Airport’s international terminal Friday evening and was arrested after passing through airport security.
If convicted, Tounisi faces a maximum penalty of 15 years in prison and a $250,000 fine.
The JTTF is comprised of Special Agents of the FBI, officers of the Chicago Police Department, and representatives from an additional 20 federal, state and local law enforcement agencies. The Justice Department’s National Security Division assisted in the investigation.
Mr. Nelson expressed his gratitude to U.S. Customs and Border Protection for the significant support provided by its officers during the arrest of Tounisi.
The public is reminded that a complaint is not evidence of guilt and that the defendant is presumed innocent and entitled to fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint
Suspended North Side Pharmacist Indicted for Allegedly Smuggling and Trafficking Counterfeit ViagraRead the Press Release
CHICAGO — A suspended Chicago pharmacist was indicted for allegedly illegally obtaining counterfeit Viagra and Cialis from China and illegally dispensing the bogus medications at his north side pharmacy. The defendant, MICHAEL MARKIEWICZ, who owns Belmont Pharmacy, 6148 West Belmont, allegedly ordered three shipments of counterfeit Viagra from China, including one that also contained Cialis, and also trafficked counterfeit Viagra from his pharmacy between December 2010 and August 2012.
The Illinois Department of Professional Regulation suspended Markiewicz’ pharmacist license and revoked the license of Belmont Pharmacy in November 2012. The store continues operating as a nutrition and herb retailer.
Markiewicz, also known as Michael Markowitz, 36, of Norridge, was charged with eight counts of violating the federal Food, Drug and Cosmetic Act, four counts of trafficking in counterfeit drugs or goods using a counterfeit mark, and three counts of smuggling in a 15-count indictment that was returned yesterday by a federal grand jury. He will be arraigned in U.S. District Court on a date yet to be determined. The indictment also seeks forfeiture of his business premises and residence.
The indictment was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; John P. Stich, Acting Special Agent-in-Charge of the Food and Drug Administration’s Office of Criminal Investigations, and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
According to the indictment, in April 2011 and May 2012, via the Internet, Markiewicz ordered counterfeit Viagra and Cialis from China. The customs declaration on the outer packaging stated that it contained a “gift pen,” and the drugs were hidden in unlabeled clear plastic baggies underneath the pen. The charges allege that Markiewicz smuggled counterfeit and misbranded pills purporting to be Viagra and Cialis, knowing that they were illegally imported, and then violated FDA laws by selling the counterfeit medications.
Trafficking counterfeit drugs carries a maximum penalty of 20 years in prison and a $2 million fine; each count of trafficking counterfeit goods using a counterfeit mark carries a maximum penalty of 10 years in prison and a $2 million fine; smuggling carries a maximum sentence of 20 years in prison and a $250,000 fine; and violating the Food, Drug and Cosmetic Act carries a maximum sentence of three years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorney Samuel B. Cole.
The public is reminded that an indictment is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Fifth Sacred Heart Hospital Physician Arrested for Allegedly Illegally Prescribing Hydrocodone to A PatientRead the Press Release
CHICAGO — A Chicago physician associated with Sacred Heart Hospital on the city’s west side is facing federal charges for allegedly illegally prescribing hydrocodone to a hospital patient without having a valid license and registration to prescribe controlled substances. The defendant, Dr. KENNETH S. NAVE, allegedly illegally used the Drug Enforcement Administration registration number of another physician when he prescribed the hydrocodone last December.
Nave, 50, of Chicago, was arrested yesterday in Miami when he returned from a trip outside the country. He appeared today in Federal Court in Miami, was released, and ordered to appear at 3 p.m. tomorrow before U.S. Magistrate Judge Daniel G. Martin in U.S. District Court in Chicago. He was charged in a criminal complaint that was filed on Monday and unsealed upon his arrest.
Also today, the Illinois Department of Financial and Professional Regulation issued an order suspending Nave’s license to practice medicine.
On Tuesday, the owner and chief executive officer of Sacred Heart was arrested, along with the hospital’s chief financial officer and four physicians affiliated with the hospital on federal charges alleging a conspiracy to pay and receive kickbacks in exchange for referral of Medicare and Medicaid patients to the hospital. Federal agents also executed search and seizure warrants as part of an ongoing investigation of Medicare fraud allegations involving medically unnecessary emergency room admissions and in-patient tracheotomy procedures.
According to the complaint against Nave, who is the fifth physician to be charged, the investigation has revealed that between at least November 2012 and Feb. 25, 2013, he issued prescriptions to patients at Sacred Heart for controlled substances using the DEA registration issued to Physician I. On Dec. 7, 2012, Nave allegedly prescribed a particular patient 90 pills containing hydrocodone, a narcotic controlled substance, using Physician I’s registration number.
Nave’s Illinois license to practice medicine was suspended between 2002 and 2008. It was restored to probationary status on Dec. 20, 2012, but his state license to prescribe controlled substances was not restored until Feb. 26, 2013, according to the complaint affidavit. Separately, Nave was not registered with the DEA to prescribe controlled substances but an application for DEA registration that was submitted on March 6, 2013, is pending, the affidavit adds.
The affidavit cites records from the Centers for Medicare and Medicaid Services indicating that between Nov. 1, 2012, and Feb. 25, 2013, a person using Physician I’s name and DEA registration number issued approximately 101 prescriptions for controlled substances to approximately 33 patients at Sacred Heart Hospital.
The illegal prescription count 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.
Nave’s arrest and charge were announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Lamont Pugh, III, Special Agent-in-Charge of the U.S. Department of Health and Human Services Office of Inspector General; and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government is being represented by Assistant U.S. Attorneys Terra Reynolds, Joel Hammerman and Ryan Hedges.
The public is reminded that a complaint is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Complaint
U.S. Sues Cook County and County Pension Fund to Enforce the Employment Rights of Army Reserve MemberRead the Press Release
CHICAGO – The United States today filed a civil lawsuit alleging that a Cook County pension fund and Cook County willfully violated federal law by failing to allow a U.S. Army Reserve member to lawfully contribute to her pension for the time she was serving in the armed forces, announced Gary S. Shapiro, United States Attorney for the Northern District of Illinois and the Justice Department.
The lawsuit was filed in U.S. District Court in Chicago on behalf of Army Reserve Capt. Latoya A. Hayward, of Chicago, against the Cook County and the County Employees’ and Officers’ Annuity and Benefit Fund of Cook County. It alleges violation of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).
According to the complaint, in 2008 Hayward began working for John H. Stroger, Jr. Hospital, which is owned and operated by Cook County. During her employment with Stroger Hospital, Hayward was mobilized for a two-year tour of duty with the Army Reserves starting on July 27, 2009. During Hayward’s period of active service, she was mobilized as a nurse case manager at Walter Reed Hospital as part of the Warrior Transition Brigade. Upon Hayward’s return from duty, the complaint alleges that the county pension fund notified her that not only was she ineligible to make payments into her pension for the 90-day grace period following her active military service, but also that her employee contributions for the two-year period of her active military service would be subject to a 3 percent interest fee. Among the protections provided by USERRA are pension-related benefits that treat service members who are called to active duty as if they have had no break in service for purpose of the administration of pension benefits. According to the complaint, both of the pension fund’s requirements for her participation in the plan violated USERRA’s pension protection provisions.
“Members of the Army Reserves sacrifice time away from their jobs to serve their country,” said Mr. Shapiro. “Federal law ensures that they are not discriminated against after they have returned and their employment rights are protected,” he said.
“When Congress enacted USERRA, it was to protect our men and women in uniform from experiencing this kind of alleged injustice,” said Jocelyn Samuels, Principal Deputy Assistant Attorney General for the Civil Rights Division. “The Justice Department is committed to vigorously enforcing federal laws that protect the employment rights of our service members.”
The case stems from a referral by the U.S. Department of Labor following an investigation by the department’s Veterans’ Employment and Training Service. The Civil Rights Division and Assistant U.S. Attorney Jeffrey M. Hansen, are representing the government and working with the Labor Department to protect the jobs and benefits of National Guard and Reserve service members upon their return to civilian life.
Additional information about USERRA can be found on the Justice Department website: servicemembers.gov and www.usdoj.gov/crt/emp, as well as on the Labor Department’s website at www.dol.gov/vets/programs/userra/main.htm.
Complaint
Tennessee Man Sentenced to Five Years in Prison for Causing MF Global to Lose $141 Million on Unauthorized Futures TradesRead the Press Release
CHICAGO — A suburban Memphis man was sentenced today to five years in federal prison for causing $141 million in losses to his clearing firm after executing large, unauthorized overnight trades on wheat futures contracts through the Chicago Board of Trade in February 2008. The defendant, EVAN BRENT DOOLEY, an “associated person” in the Memphis office of MF Global, Inc., traded on his own account through the CME Globex electronic trading platform, via MF Global’s OrderXpress order entry system, knowing that he placed trading orders exceeding his ability to pay for potential losses resulting from those trades.
Dooley, 45, of Mt. Pleasant, Tenn., and formerly of Olive Branch, Miss., was also ordered to pay $141,024,294 in restitution to the MF Global, Inc., bankruptcy estate by U.S. District Judge Robert M Dow, Jr., who imposed the sentence in Federal Court in Chicago. Dooley, who pleaded guilty in December 2012 to two counts of violating the Commodity Exchange Act by speculative position limits, was ordered to begin serving his 60-month sentence on June 18.
[Dooley’s] “willful criminal conduct caused a staggering loss to MF Global,” the government argued in a sentencing memo. “The public, and in this case the financial services industry, needs to know that the courts will deter and incapacitate individuals like [the] defendant.”
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
According to the indictment returned in April 2010, Dooley was allowed to trade on his own account as well as for clients from September 2006 to February 2008, and he transmitted orders from a home computer. The indictment alleged that Dooley induced MF Global to open a trading account and act as his financial guarantor by providing false information about his financial condition on his account application.
As part of his guilty plea, Dooley admitted that during overnight trading starting on Feb. 26, 2008, he executed a series of large buy and sell orders for approximately 31,964 wheat futures contracts, knowing that he did not have the ability to pay for potential losses. (Each wheat futures contract called for the delivery of 5,000 bushels of wheat.) At the start of the session, Dooley had a negative balance of approximately $3,000 in his MF Global account and intended that the risks associated with his trading activity be borne directly and solely by MF Global. During the trading session, Dooley established a substantial “short” position, and by 6 a.m. on Feb. 27, 2008, he was short 16,174 May 2008 wheat futures contracts. During the same session, Dooley also traded contracts for March, July and December wheat futures, causing his overall position to exceed regulatory limits for both a single month (May 2008) and for all months combined.
On the morning of Feb. 27, 2008, when the price for May 2008 contracts rose rapidly as Dooley attempted to liquidate his short position, Dooley again executed a series of sell orders. By mid-morning, Dooley was short 17,181 contracts for May 2008 wheat futures and the price had gone “limit up” to approximately $13.495 per bushel. After MF Global representatives learned of Dooley’s overnight trading, MF Global deactivated his account and liquidated the remainder of his position. MF Global, as the clearing member on these trades, paid the CBOT’s clearing house the realized loss of $141,021,489, which Dooley was unable to cover, resulting in a loss of approximately $141,024,294 to MF Global, including the initial negative balance in his account.
The government is being represented by Assistant U.S. Attorney Clifford C. Histed. The Commodity Futures Trading Commission assisted with the investigation.
Sacred Heart Hospital Owner, Executive and Four Doctors Arrested in Alleged Medicare Referral Kickback ConspiracyRead the Press Release
CHICAGO – The owner and another senior executive of Sacred Heart Hospital and four physicians affiliated with the west side facility were arrested today for allegedly conspiring to pay and receive illegal kickbacks, including more than $225,000 in cash, along with other forms of payment, in exchange for the referral of patients insured by Medicare and Medicaid to the hospital.
Agents from the FBI and the U.S. Department of Health and Human Services Office of Inspector General today also began executing search and seizure warrants in connection with an ongoing investigation of alleged Medicare and Medicaid fraud schemes at the hospital involving emergency room evaluation, testing and observation services that were not medically necessary, as well as medically unnecessary sedation, intubation and tracheotomy procedures performed on patients. Approximately $2 million in Medicare reimbursement payments was seized today from various bank accounts.
Arrested were EDWARD J. NOVAK, 58, of Park Ridge, Sacred Heart’s owner and chief executive officer since the late 1990s; ROY M. PAYAWAL, 64, of Burr Ridge, executive vice president and chief financial officer since the early 2000s; and Drs. VENKATESWARA R. “V.R.” KUCHIPUDI, 66, of Oak Brook, PERCY CONRAD MAY, JR., 75, of Chicago, SUBIR MAITRA, 73, of Chicago, and SHANIN MOSHIRI, 57, of Chicago.
Sacred Heart Hospital is a 119-bed acute care facility located at 3240 West Franklin Blvd., in Chicago. Approximately 40 in-patients were in the hospital this morning, and representatives of the HHS Centers for Medicare and Medicaid Services (CMS) were on site and coordinating with the Illinois Department of Healthcare and Family Services to ensure continuity of patient care.
“These charges and the affidavit’s other allegations outline a kickback conspiracy to bribe doctors to refer patients to Sacred Heart where they would be treated in in an environment in which the quality of care and appropriate medical analysis were less important than maximizing the numbers of patients funneled into the hospital,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.
“The payment of kickbacks or bribes in exchange for the referral of Medicare or Medicaid patients, regardless of the form in which they are paid, is a crime,” said Lamont Pugh III, Special Agent-in-Charge of the Chicago Region of HHS-OIG. “The Office of Inspector General will continue to work closely with our law enforcement partners to aggressively investigate alleged illegal patient referral schemes and hold accountable those who seek to exploit vulnerable patients and the Medicare and Medicaid programs.”
“Today’s arrests demonstrate our commitment to enforcing the laws intended to prevent abuses of the Medicare and Medicaid programs and to preserve the ability of those programs to provide appropriate medical services to the elderly and the needy,” said Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of investigation.
The defendants were charged in a complaint that was filed yesterday and unsealed today after the arrests. All six defendants were scheduled to appear beginning at 3 p.m. before U.S. Magistrate Judge Daniel Martin in Federal Court.
Kickback Conspiracy
A 90-page affidavit in support of the criminal complaint and search and seizure warrants states that former Sacred Heart Physician A began cooperating in the investigation in October 2011, and Administrator A and Administrator B began assisting in January 2013 and February 2012, respectively. Each of them made consensual recordings of meetings and telephone conversations with other executives, administrators, physicians and employees that are described in the affidavit.
According to the complaint – at Novak’s direction and with his approval and Payawal’s assistance – Sacred Heart implemented a scheme to pay kickbacks to physicians in return or referrals of Medicare and Medicaid patients. Novak and Payawal allegedly tried to conceal the scheme by masking payments as fictitious rental payments; paying the salaries of physicians’ employees; providing physicians ghost contracts for duties without any real responsibilities; creating alternative billing arrangements; and purporting to pay physicians to supervise and teach non-existent medical students.
In a conversation that Administrator A recorded on Feb. 28, 2013, Novak and Payawal allegedly identified Drs. Moshiri, Maitra and May as physicians receiving regular kickback payments who Administrator A should pay.
Between January 2010 and February 2013, May allegedly received $74,000 in the form of 37 checks, for $2,000 each, disguised as “rental payments”; Moshiri, a podiatrist, allegedly received $86,000 in 38 checks pursuant to a purported contract to teach podiatry students; and Maitra allegedly received $68,000 in 34 checks pursuant to a purported teaching contract – and the $228,000 total in alleged kickbacks were all in exchange for their referral of patients to Sacred Heart, the charges allege.
In a recorded conversation last month, Maitra allegedly explained to Administrator A that he used to make Novak “so much money” performing almost daily penile implant procedures on patients, but that he no longer performed as many of those procedures because Medicare had decreased its rates of reimbursement for the procedure. Maitra did not comment on whether the patient need for the procedure had somehow changed, according to the affidavit.
Regarding Dr. Kuchipudi, Administrator A told agents that he was one of Sacred Heart’s most prolific patient referral sources and, according to Physician A, was known within the hospital as the “king of nursing homes.” According to Administrator A, Sacred Heart paid Kuchipudi for Medicare patient referrals in two ways: first, by paying most of the salaries of a physician’s assistant and a registered nurse who were effectively employed by Kuchipudi, and second, by paying Physician B for treating Kuchipudi’s patients at Sacred Heart, despite the fact that Kuchipudi, and not the hospital, billed insurers for the services Physician B provided to those patients. These arrangements allegedly benefited Kuchipudi as a result of the hospital absorbing employee salary costs that Kuchipudi would normally have to pay himself.
Emergency Room Admissions
Although not charged, the affidavit supporting the search warrant states that the investigation extends to allegations of unnecessary emergency room admissions. Administrator A told agents that Novak ignored numerous complaints that physicians admit patients who do not require hospitalization, and that certain physicians have subjected patients to unnecessary medial testing and procedures in an attempt to justify the patients’ admissions and to increase billing.
Insiders have told agents that Sacred Heart’s executives established a system to admit nursing home patients, irrespective of any medical necessity, by directing referring physicians to use ambulance companies with which Sacred Heart has had “a relationship.” By designating such patients as “direct admission,” Sacred Heart physicians are able to transfer their patients by ambulance from nursing homes, regardless of the proximity to the hospital. Instead of directly admitting these nursing home patients, however, Sacred Heart processes them through its emergency room, billing Medicare for emergency care, which is usually not medically necessary, according to Administrator A. Physician A told investigators that, in his experience, half of the patients presented to Sacred Heart’s ER already had a relationship with one of the hospital’s attending physicians and that the majority of those patients were admitted to the hospital from the emergency room.
Tracheotomy Procedures
The investigation is also probing claims that Sacred Heart Physician D, a pulmonologist, allegedly performs a high number of unnecessary intubations and prolongs them by directing heavy sedation of his patients, often resulting in tracheotomies being performed by Sacred Heart surgeons that may not have been medically necessary. Administrator A told agents that during a lunch with Novak and Payawal in December 2012, they both explained that tracheotomy cases provide substantial insurance reimbursement income for the hospital. On March 1, 2013, Administrator A recorded Novak stating that tracheotomies are Sacred Heart’s “biggest money maker” and the hospital can make $160,000 for a tracheotomy if the patient stays 27 days. On March 7, 2013, the Intensive Care Unit case manager told Administrator A that she must often “stretch” a tracheotomy patient’s stay to 28 days to maximize Medicare reimbursements “to make Novak happy.”
According to the affidavit, Sacred Heart allegedly conceals $7,000 monthly payments for respiratory patient referrals by paying that amount to a healthcare management company that has an employee who works at one of the nursing homes where Kuchipudi sees patients. The consulting firm employee works with Kuchipudi, nursing homes, and Sacred Heart to facilitate the admission of respiratory patients to Sacred Heart, Administrator A told investigators.
On March 4, 2013, investigators from CMS and the State of Illinois arrived at Sacred Heart to conduct an investigation of the hospital’s intubations and tracheotomies, and quality assurance and performance improvement protocols. On March 6, Administrator A recorded Physician D acknowledging that Sacred Heart lacked policies for various aspects of intubations and tracheotomies and that he had given some practice guidelines and procedures obtained from other hospitals to the surveyors in response to their request for Sacred Heart’s policies. At the same time, the ICU nurse manager told Administrator A that she had reviewed eight tracheotomy patient files in connection with the CMS investigation. Physician D was the pulmonologist for all the patients and had performed all but one of the tracheotomies. The nurse manager said that there was no documentation in the patient files explaining the decision to intubate the patients or any efforts to wean them from the ventilators. The following day Administrator A reported the findings to Novak and others and regarding the lack of documentation, and Novak replied with an expletive, according to the affidavit.
On April 8, Physician D told Administrator A in a recorded conversation that Novak had asked him to provide two more tracheotomy cases for the hospital soon before the CMS surveyors might return.
Novak’s Business Interests
According to the affidavit, Novak has direct or indirect ownership interest in various related entities, including Superior Home Health, LLC, a home healthcare company; the Golden L.I.G.H.T. clinics, which are family practice / internal medicine clinics operated as divisions as Sacred Heart; the Chen Medical center; the Garfield Kidney Center, LLC, an outpatient dialysis center; and the Bentley Insurance Group, a medical malpractice insurance company. Novak also owns various real estate and corporate management holding companies, and prior to June 2012, he operated the Chicago R.E.A.C.H Foundation, a purported non-profit, senior citizen program financed by the State of Illinois.
In a series of recorded conversations over the last two months, Payawal told Administrator A that a substantial part of Sacred Heart’s revenue comes from Medicare and Medicaid reimbursements, and explained various ways in which revenue generated from the hospital is transferred to and among Novak’s other corporate interests.
Conspiracy to violate the federal anti-kickback statute carries a maximum penalty of five years in prison and a $250,000 fine and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The government is being represented by Assistant U.S. Attorneys Joel Hammerman, Terra Reynolds and Ryan Hedges.
The public is reminded that a complaint is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
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. More than five dozen 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.
Complaint
Chicago Leader of Romanian-Based Conspiracy That Obtained $1.6 Million in False Tax Refunds Sentenced to 85 Months in PrisonRead the Press Release
CHICAGO — The leader in Chicago of a Romanian-based international conspiracy to fraudulently obtain millions of U.S. tax dollars was sentenced to just over seven years in federal prison. The defendant, OVIDIU ISAC, oversaw and directed nearly two dozen co-defendants in the United States who used their bank accounts to receive fraudulent federal income tax refunds after overseas co-conspirators filed hundreds of false tax returns claiming refunds in the names of Romanian citizens who had visited the United States on exchange student visas.
At least 470 false tax returns, typically claiming refunds between $4,000 and $7,000, were filed and resulted in a loss of more than $1.6 million to the U.S. Treasury during the conspiracy that spanned three tax years between 2007 and 2009. The returns were filed in the names and social security numbers of individuals who had previously traveled to the United States on temporary student visas and had filed tax returns in the past, but who were likely no longer living in the U.S. nor filing a real return in their own name. Isac led and organized the coconspirators in Chicago and controlled the flow of money to his co-conspirators in Romania. On one occasion, Isac led a group of co-conspirators in physically attacking a group of individuals who were associated with someone who refused to pay Isac his cut of the proceeds.
Isac, 31, a Romanian citizen who lived in Skokie, was sentenced on Friday to 85 months in prison and ordered to pay restitution totaling $1,641,209 by U.S. District Judge Charles Norgle. Isac pleaded guilty in January to conspiracy to defraud the United States and theft of government funds. He will be subject to deportation after completing his sentence.
Isac was arrested in April 2010 and was among 24 defendants who were indicted in July that year for their roles in the conspiracy. Nineteen of the defendants have been convicted and sentenced, while five remaining co-defendants are fugitives.
Evidence in two companion cases showed that the fraudulent returns typically claimed large deductions for moving expenses, and the fraud was concealed by electronically submitting false wage and tax statements. The returns were filed in the names of real individuals and employers who likely were unaware that their identities and information were being misused. At least 200 bank accounts in the names of more than 75 individuals were used to receive and obtain the tax refund money triggered by the fraudulent returns.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division; and Gary Hartwig, Special Agent-in-Charge of Homeland Security Investigations (HSI) in Chicago.
The government was represented by Assistant U.S. Attorneys Matthew Burke, Jennie Levin and Julie Porter.
Rockford, Illinois Woman Sentenced to 17 Months in Federal Prison for Embezzling from Local Labor UnionRead the Press Release
ROCKFORD — A Rockford, Ill. woman was sentenced today to 17 months in federal prison for having embezzled over $190,000 from a local labor union. U.S. District Judge Frederick J. Kapala sentenced Grace Rathke, 57, Rockford, to prison for embezzling monies and funds belonging to Local 32 of the Laborers International Union of North America between November 2004 and March 2009.
Rathke had been indicted on August 2, 2011, and charged with embezzling from Local 32. On January 3, 2013, she pleaded guilty to embezzlement. According to the written plea agreement, beginning in November of 2004 and continuing until March 2009 Rathke, the office manager for Local 32, embezzled over $190,000 from the union local.
Rathke was also sentenced to pay full restitution, consisting of $34,836 to Laborers’ Local 32 and $170,000 to its bonding company, Zurich American Insurance Co. Rathke was taken into custody on April 1, 2013, after having been found to have used marijuana while on release pending sentencing. After she is released from prison, she will be on supervised release for 3 years.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, James Vanderberg, Special Agent-In-Charge of the Chicago office of the United States Department of Labor, Office of Inspector General, Office of Fraud and Labor Racketeering Investigations, and Mary Kebisek, District Director of the Chicago office of the United States Department of Labor – Office of Labor-Management Standards.
The government has been represented by Assistants U.S. Attorney John G. McKenzie and Monica V. Mallory.
Rockford Tax Preparer Charged with Filing False Personal Income Tax ReturnsRead the Press Release
ROCKFORD — A Rockford, Ill. woman was indicted by a federal grand jury today on charges of tax fraud. ANNA MARTINEZ, 44, was charged with three counts of filing a false income tax return with the United States Internal Revenue Service. The alleged false returns Martinez filed were for tax years 2006, 2007, and 2008.
According to the indictment, Martinez owned and operated Community Tax Service, a tax preparation business, in Rockford, Illinois. Martinez allegedly filed her U.S. Individual Income Tax Return Form 1040 with schedules and attachments for the calendar year 2006, that she verified by written declaration made under the penalties of perjury, and allegedly failed to disclose approximately $68,026 of receipts of Community Tax Service for 2006. The indictment similarly charges Martinez with failing to disclose approximately $236,524 of receipts of Community Tax Service for the 2007 tax year, and approximately $79,594 of receipts of Community Tax Service for the 2008 tax year.
Martinez is scheduled to appear at the Federal Courthouse in Rockford on Monday, April 15, 2013, at 11:00 a.m., for arraignment. The arraignment will be conducted by United States Magistrate Judge P. Michael Mahoney.
Each count of filing a false tax return carries a penalty of up to 3 years in prison, and a maximum fine of $100,000. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines, as well as restitution.
The indictment was announced today by Gary S. Shapiro, 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.
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 represented by Assistant U.S. Attorney Scott R. Paccagnini.
Indictment
Addison Seafood Company and Its Owner Resolve Civil and Criminal Charges of Mislabeling Frozen Fish and ShrimpRead the Press Release
CHICAGO — An Addison seafood distributor and its owner have agreed to resolve civil and criminal charges for mislabeling certain products by substituting cheaper fish for more expensive fish and misstating the weight of shrimp to charge customers more for a lesser quantity, federal officials announced today. GOURMET EXPRESS MARKETING, INC., and its president and owner, PATRICK A. BRUNO, agreed to a permanent injunction in settling a civil lawsuit and Bruno has agreed to plead guilty to a criminal misdemeanor charge, admitting that he mislabeled and sold swai as “catfish,” and perch as “red snapper” or “pacific snapper,” and also packaged shrimp in an ice glaze that added to its weight.
The mislabeling has not resulted in any known illnesses or danger to public health, officials said.
U.S. District Judge Edmond Chang signed a consent decree today after the government filed a civil lawsuit against Bruno and Gourmet Express, alleging violations of the Federal Food, Drug, and Cosmetic Act. The decree enjoins the defendants from committing any future violations, requires the hiring of an independent expert at the company’s expense to ensure compliance with the agreement and federal laws, and provides for civil damages of $5,000 a day and $10,000 for each shipment in the event violations occur.
Also today, Bruno, 71, of Addison, was charged in a criminal information with a misdemeanor violation of the Federal Food, Drug, and Cosmetic Act for mislabeling Gourmet Express’ products. Through his attorney, Bruno has authorized the government to disclose that he will plead guilty to the criminal charge. He will be arraigned at a later date in U.S. District Court.
“Customers who purchase seafood products are entitled to know they got what they paid for,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois. “Proper labeling is necessary to protect consumers and we stand ready to take action against food distributors who violate federal food laws and regulations.”
Mr. Shapiro announced today’s action with Scott MacIntire, district director of the FDA’s Chicago District Office, and John P. Stich, Acting Special Agent-in-Charge of the FDA’s Office of Criminal Investigations.
According to court documents, Gourmet Express purchases, processes and repacks frozen seafood and sells its products to retailers and wholesalers in Illinois and other states. The Food and Drug Administration issued a warning letter to the defendants in February 2010 after inspections in 2009 found that they misrepresented the weight of frozen shrimp after adding an ice glaze to the products, and mislabeled perch as “red snapper,” or “pacific snapper.” Subsequent inspections in March and April 2010 documented continuing and additional violations.
The FDA tested samples of the defendants’ frozen cooked shrimp during some inspections in 2009 and 2010 to evaluate the net weight stated on the product labels. The tests revealed that the actual weight of the products was, respectively, 21.5 and 14.4 percent under the labeled weight. The FDA tested DNA samples to determine the true species of the fish.
The criminal case alleges that between 2007 and 2010, Bruno knew that seafood sold he was mislabeled and that the packages of frozen shrimp overstated the weight of that ice-glazed product. The FDA violation carries a maximum penalty of a year in prison and a $100,000 fine.
The civil consent decree requires Gourmet Express and Bruno to hire a qualified independent expert who will develop and implement a written plan for the receipt, processing, packing, labeling, and distribution of seafood to ensure that product labeling is accurate and the products are what they purport to be. Bruno must regularly certify to the FDA that the defendants are in compliance with the plan, and the defendants must pay for future FDA inspections to evaluate compliance. After five years of continuous compliance, Gourmet Express and Bruno may ask a judge to end the consent decree.
The government is being represented by Assistant U.S. Attorneys Donald Lorenzen and Kaarina Salovaara.
In a criminal case, 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. In a civil case, the government must prove its allegations by a preponderance of the evidence.
Bruno Information
Gourmet Express Consent Decree
Gourmet Express Complaint
Federal Tax Prosecutions Serve as Reminder to Taxpayers to Comply with Tax Obligations as April 15 Deadline ApproachesRead the Press Release
CHICAGO – Three tax return preparers, a salesman, and the owner of a psychic reading business are among seven Chicago and suburban defendants who are facing federal prosecution in separate cases for alleged federal income tax crimes. These cases, along with others recently charged, are typical of federal tax prosecutions that occur throughout the year, but they also serve as a reminder to taxpayers of the importance of voluntary compliance with their tax obligations as the April 15 filing deadline approaches, federal law enforcement officials announced today.
“The IRS Criminal Investigation Division is committed to ensuring that all taxpayers pay their fair share,” said James C. Lee, Special Agent-in-Charge of the IRS Criminal Investigation Division in Chicago. “We are aggressively serving the American people by investigating criminal violations of the Internal Revenue Code. Tax fraud does not know a season – IRS special agents pursue criminals year round, not only at tax time. Taxpayers who might be thinking about cheating with this month's filing deadline looming should think twice or they will risk the consequences.”
Gary S. Shapiro, United States Attorney for the Northern District of Illinois, noted that in addition to criminal penalties, including incarceration, fines, and the costs of prosecution, convicted defendants remain responsible for any taxes and interest due, as well as civil penalties of up to 75 percent of the tax owed. Those making false claims against the government may be required to pay restitution or may be sued civilly for an amount greater than the fraudulent claims.
In one case, an arrest warrant was issued for COREY B. NORWOOD, 35, of Chicago, who was indicted on Wednesday by a federal grand jury on four counts of making false claims for federal tax refunds totaling nearly $1 million. In 2009, Norwood allegedly falsely claimed a refund in the amount of $94,450 in a false tax return he filed for the purported “Corey Norwood Trust.”
After filing a document in 2011 with the Cook County Recorder of Deeds stating that he was to be known as “Amun Re Barber El,” Norwood allegedly submitted to the IRS three false decedent estate tax returns for 2008, 2009, and 2010, indicating that Norwood had died and “Amun Re Barber El” was the executor of his estate. Each of the three estate returns allegedly falsely claimed a tax refund of $300,000, according to the charges. The government is being represented by Assistant U.S. Attorney Stephen Heinze.
A tax return preparer, MICHAEL SINGLETON, is awaiting sentencing after pleading guilty to preparing 549 fraudulent tax returns between 2005 and 2007 that caused the government a tax loss of $2,854,800. Singleton, 48, of Chicago and formerly of Homewood, operated ITA Services, and admitted preparing tax returns for clients that included fabricated information enabling them to obtain deductions for charitable contributions, rental properties, dependents, and business expenses, as well as other expenses that were non-existent and did not entitle his clients to a refund. Singleton was indicted in 2010 and pleaded guilty in June 2012 to two counts of assisting in the preparation of false tax returns. He faces a maximum sentence of three years in prison and a $250,000 fine on each count, and his plea agreement anticipates a federal sentencing guidelines range of 46 to 57 in prison. Singleton was scheduled to be sentenced today, but the sentencing was postponed and no new date has yet been set. (AUSA Tony U. Iweagwu, Jr.)
In other recent cases:
JOHN AUSTIN, 70, of Northlake, who owned and operated N-Less Travel & Taxes, a tax preparation business in Northlake, was charged with assisting in the filing of approximately 1,292 false tax returns for some 741 different clients for tax years 2008 through 2010, and causing the government a tax loss of approximately $1,292,000. Austin allegedly reduced the tax liabilities and increased the tax refunds for clients by fraudulently misrepresenting their filing status, overstating and misrepresenting expenses, and misrepresenting taxpayers’ eligibility to claim tax credits. Austin has pleaded not guilty to two counts of assisting in the preparation of false tax returns that were filed on March 4. (AUSA Andrew DeVooght.)
BILL COOPER, 39, of Schaumburg and formerly of Arlington Heights, who owned a psychic reading business in Arlington Heights and Tampa, Fla., pleaded guilty on March 7 to two misdemeanor counts of failing to file individual income tax returns. Cooper admitted that he earned gross income of approximately $305,427 in 2006; $311,751 in 2007; and $100,356 in 2008, and failed to file federal income tax returns for each of those years. Cooper faces a maximum sentence of a year in prison and a $100,000 fine on each of the two counts and his plea agreement anticipates a sentencing guidelines range of 15 to 21 months in prison. He is scheduled to be sentenced on July 15. (AUSA Tyler Murray.)
CAROL FORTINO, 53, of Woodridge, who was a tax return preparer associated with AAF Accounting, Inc., on the city’s northwest side, pleaded guilty on March 7 to assisting in the filing of at least 42 false tax returns for at least 15 separate clients for tax years 2006 through 2009, and causing the government a tax loss of approximately $103,947. Fortino admitted that she fraudulently increased the amount of tax refunds for taxpayers by overstating and misrepresenting expenses, such as claiming inflated property taxes, gifts to charity, and unreimbursed business expenses, which were used to decrease their taxable income. Fortino faces a maximum sentence of three years in prison and a $250,000 fine and her plea agreement anticipates a federal sentencing guidelines range of 18 to 24 months in prison. She is scheduled to be sentenced on July 11. (AUSA Kaarina Salovaara.)
PAUL URDAN, 46, of Highland Park, a commissioned salesman, has pleaded not guilty after being indicted in February on three felony counts of filing false federal income tax returns and two misdemeanor counts of failing to file tax returns. According to the charges, Urdan opened two bank accounts in the name of a business partnership and directed his employer to make his commission checks payable at various times to his wife and the partnership. Between 2006 and 2008, Urdan received commission income, both directly and indirectly through his wife and the business partnership, totaling $332,253 in 2006; $466,173 in 2007; and $348,500 in 2008. Urdan allegedly filed false business partnership returns for 2006, 2007, and 2008. The charges also allege that he failed to file individual tax returns for 2007, when he received gross income of approximately $466,173, and for 2008, when he received gross income of approximately $348,500, the charges allege. (AUSA Christopher McFadden.)
TOWANA VIRAMONTES, 37, of McHenry, has pleaded not guilty after being indicted in January on 15 counts of making false claims for tax refunds in 2008 and 2009. Viramontes, who was the principal of a telemarketing business that operated under various names, including American Creative Solutions, Inc., Apple Leasing, Inc., and Leads 2 Guaranteed Loans, allegedly prepared false Forms W-2 that she provided to at least 15 individuals, some of whom worked for her business and some who did not. The charges allege that Viramontes caused these individuals to file false claims for income tax refunds, typically a few thousand dollars each, using the false W-2s that she provided and then to pay her a substantial portion of the tax refunds they obtained. (AUSA Dylan Smith.)
Assisting in the preparation of false tax returns or filing a false tax return carries a maximum sentence of three years in prison and a $250,000 fine on each count. Making a false claim upon the United States carries a maximum sentence of five years in prison and a $250,000 fine. Failing to file an income tax return, a misdemeanor, carries a maximum sentence of a year in prison and $100,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that criminal charges are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Chicago Man Sentenced to Life in Prison for Killing Bank Teller During Robbery in 2007Read the Press Release
CHICAGO — A Chicago man was sentenced today to life in prison for the fatal shooting of bank teller Tramaine Gibson during a bank robbery at the Illinois Service Federal Savings and Loan on the city’s south side on May 22, 2007. The defendant, DAVID VANCE, was convicted at a trial in July 2011 of the fatal shooting while robbing the ISF bank, located on Martin Luther King Drive, of $6,875 with two co-defendants. A security guard and a customer were also shot during the robbery.
Vance, 34, was also convicted of robbing the Cole Taylor Bank, located on East 63rd Street in Chicago, of $11,438 on May 10, 2007. He received the mandatory life sentence from U.S. District Judge Joan Gottschall, who also imposed a mandatory consecutive sentence of 32 years for Vance’s use of a firearm during the robberies and shooting. There is no parole in the federal prison system.
Judge Gottschall also ordered mandatory restitution of nearly $1.2 million that includes restitution to the banks, as well as funds for the security guard’s disability and the estate of Gibson, who was 23 when he was killed. No funds are likely to be recovered, however, the judge acknowledged in court.
“This heinous crime is an unfortunate example of how an armed robbery can go horribly wrong,” the government argued in support of the mandatory sentence. “A life sentence will send a message to individuals considering such crimes that they will forfeit the right to live in a free society when they are caught. They will forfeit that right not for a few years, but for the rest of their lives.”
Vance jumped the teller counter and “killed Gibson in his cold-blooded pursuit of the money in the bank vault,” the government argued. Vance confronted Gibson, who was unarmed, and demanded that he open the vault, which he was not even able to do. Vance shot Gibson at close range and then dragged his bleeding body toward the bank vault. Because the murder occurred during a bank robbery, the judge ruled that the life sentence was required regardless of whether Vance intended to kill Gibson.
Two co-defendants, Alton Marshall, 34, who testified against Vance, and Henry Bluford, 35, both of Chicago, each pleaded guilty to the bank robberies and, under the terms of their plea agreements, are expected to receive sentences of 20 years in prison when they are sentenced on April 17 and 24, respectively.
The government is being represented by Assistant U.S. Attorneys Sharon Fairley, Lela Johnson, and Andrianna Kastanek.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
Former Condo-Hotel Developer Arraigned After Being Extradited from Italy on Federal Tax Evasion ChargeRead the Press Release
CHICAGO — A former real estate developer who attempted to convert hotels in Chicago, Miami Beach, Fla., and elsewhere into condominium-hotels was arraigned today on federal tax evasion charges following his extradition from Italy. The defendant, DAVID R. FALOR, who was a principal in The Falor Companies, Inc., was charged with two counts of federal income tax evasion and one count of filing a false federal income tax return in an indictment that was returned by a federal grand jury in December 2011 when Falor was living in Modena, Italy.
Falor, 73, formerly of Chicago and the Miami area, was returned to the United States on Friday after Italian courts ordered him extradited on one count of income tax evasion. He remains in federal custody after pleading not guilty this morning before U.S. District Judge Matthew Kennelly in Federal Court in Chicago.
According to the indictment, The Falor Companies, which ceased operating in 2006, attempted to convert hotels to condo-hotels by selling individual guest rooms to investors as separately titled condominium units, and renting them through a related hotel management company to other guests when the owner was not in residence, with the owner receiving a percentage of the rental fee. The companies operated multiple condo-hotel ventures in the mid- 2000s, including the Blake Hotel, located at 500 S. Dearborn St., in Chicago, and the Tides Hotel on Ocean Drive in Miami Beach.
Falor was extradited on a tax evasion count alleging that he failed to pay income tax of approximately $341,093 on taxable income of approximately $1,048,802 during calendar year 2006. During that year, Falor allegedly converted approximately $779,096 in payments that were recorded as loans from The Falor Companies, but which became taxable income when the companies went out of business and Falor used the funds for personal expenses. Falor allegedly failed to file a federal income tax return for 2006 or to pay any taxes.
The indictment also charged Falor with tax evasion and filing a false federal income tax return for 2005, but the government indicated in court today that those two counts will likely be dismissed at a later time because of the terms of Falor’s extradition.
In separate cases, Falor’s two sons also face federal tax charges in Chicago. Christopher Falor, a consultant to the condo-hotel projects, is awaiting sentencing after pleading guilty to mail fraud and tax counts, and Robert Falor, who was the chief operating officer of The Falor Companies, is in custody awaiting disposition of tax charges.
The developments were 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 Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.
The government is being represented by Assistant U.S. Attorneys Ryan S. Hedges and Barry Jonas.
Tax evasion carries a maximum penalty of five years in prison and a $250,000 fine. In addition, defendants convicted of tax offenses face mandatory costs of prosecution and remain civilly liable to the Government for any and all back taxes, as well as a civil fraud penalty of up to 75 percent of the underpayment plus interest. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Four Chicago Men Sentenced to Lengthy Federal Prison Terms for Gun and Drug CrimesRead the Press Release
CHICAGO — Four Chicago men were sentenced to lengthy federal prison terms after being convicted in three separate cases of various firearms and narcotics charges, federal law enforcement officials announced today. Each case demonstrates the constant efforts of federal agencies — in these three instances, the Bureau of Alcohol, Tobacco, Firearms and Explosives – working together with the Chicago Police Department, to investigate and prosecute the violent combination of gangs, guns and drugs throughout the city.
RASHOD BETHANY and RICKY LONG, principal members of Bethany’s Gangster Disciples “Killing Crew,” who created a “zone of brutality” to protect their distribution of crack cocaine on the city’s far south side, were sentenced yesterday to 25 years and 15 years, respectively.
Separately, MICHAEL HENDERSON was sentenced yesterday to 19 years and 7 months in prison as an Armed Career Criminal for illegal possession of a firearm as a convicted felon. And WILLIE STOKES, a member of the Four Corner Hustlers street gang, was sentenced Tuesday to 10 years in prison as a career offender for illegal possession of two firearms and distribution of crack cocaine.
Bethany, 28, also known as “Fat Man,” and Long, aka “Li’l Ricky,” 32, both of Chicago, were sentenced by U.S. District Judge Harry Leinenweber following a three-day hearing that began Monday in Federal Court. Both were arrested in May 2006 and later pleaded guilty to narcotics charges in connection with the operation of two drug houses, located at 12012 South Emerald and 11952 South Eggleston, in an area dubbed “Trigger Town.”
The government presented evidence and testimony detailing both defendants’ involvement in murders, attempted murders, and beatings of individuals, including other drug dealers, a witness to a drug-related shooting, and workers at their crack houses. A Chicago police detective testified that witnesses to violence attributed to Bethany and his crew often were too fearful to cooperate with police, preventing Bethany from ever being charged with any specific murders.
“The defendants instituted a regime of control and intimidation to make sure that they were able to sell their crack,” Assistant U.S. Attorney Kruti Trivedi argued at the hearing. Assistant U.S. Attorney Tony Garcia also represented the government.
In a separate case, Henderson, 49, of Chicago, was sentenced yesterday by U.S. District Judge Samuel Der-Yeghiayan to 235 months in prison after being convicted at trial in March 2012 of possessing a firearm as a previously convicted felon. On Aug. 10, 2010, Henderson and a passenger were driving around at night in the area near West Diversey and North Sacramento on the city’s west side. Henderson had a loaded gun and his passenger was carrying heroin packaged for sale. Chicago Police officers stopped Henderson for committing a traffic violation and saw a gun on the driver’s seat. Henderson’s 10 prior convictions, including aggravated battery and drug trafficking, qualified him as an Armed Career Criminal under federal law, subjecting him to a mandatory minimum sentence of 15 years in prison. The Cook County State’s Attorney’s Office referred Henderson’s case for federal prosecution as part of Project Safe Neighborhoods because of the likelihood of a more substantial sentence in Federal Court. The government was represented by Assistant U.S. Attorneys Andrianna Kastanek, Patrick King, and Julie Porter.
In the third case, WILLIE STOKES, 37, aka “Flukey,” of Chicago, was sentenced on Tuesday to 10 years in prison by Judge Leinenweber after pleading guilty last October to being a felon-in-possession of a firearm, making him a career offender under federal law. Stokes, a member of the Four Corner Hustlers street gang, admitted that he sold two firearms and an ounce of crack cocaine to an undercover ATF agent in 2009. After serving a state sentence for shooting a man in the head, Stokes was warned that any subsequent firearms offense could subject him to federal prosecution. The government was represented by Assistant U.S. Attorney Andrew DeVooght.
The sentences were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Larry Ford, Special Agent-in-Charge of the Chicago Office of ATF; and Garry McCarthy, Superintendent of the Chicago Police Department
Rockford Man Charged with Fraud Involving Fictitious Money Orders Exceeding $500,000Read the Press Release
ROCKFORD — A Rockford, Ill. man was indicted by a federal grand jury today for producing and passing fictitious money orders. BRADLEY SHERMAN HAMPTON, 53, was charged with nine counts of fraudulently producing and passing fictitious financial instruments that appeared to be issued under the authority of the United States Department of the Treasury. The nine fictitious money orders, totaling $547,578, were dated between July 15, 2009 and Oct. 14, 2009.
Hampton is scheduled to appear at the Federal Courthouse in Rockford on Friday, March 22, 2013, at 11:00 a.m., for arraignment. The arraignment will be conducted by United States Magistrate Judge P. Michael Mahoney.
The indictment was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Frank Benedetto, Special Agent-in-Charge of the Chicago Field Office of the U.S. Secret Service, Department of Homeland Security; and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the 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 represented by Assistant U.S. Attorney Michael D. Love.
Indictment
Former Markham Deputy Police Chief Arrested on Federal Civil Rights Charge Alleging Aggravated Sexual AbuseRead the Press Release
CHICAGO — The former deputy police chief in south suburban Markham was arrested today after being charged in a federal indictment with violating the civil rights of a victim through acts that included aggravated sexual abuse. The defendant, TONY D. DEBOIS, was arrested at his home this morning without incident by special agents of the FBI. DeBois was the deputy chief of the Markham Police Department when the alleged crime occurred on Sept. 23, 2010.
DeBois, 41, of Matteson, was scheduled to appear at 2:15 p.m. today before U.S. District Magistrate Judge Sidney I. Schenkier in Federal Court. He was charged in a single-count indictment that was returned by a federal grand jury yesterday and unsealed today following his arrest.
The indictment alleges that on Sept. 23, 2010, while acting in his official capacity as Markham deputy police chief, DeBois violated the victim’s right to bodily integrity by acts that included aggravated sexual abuse.
DeBois served as deputy chief between 2008 and approximately 2011, and he was also the Markham Police Department’s head of internal affairs between 2007 and approximately 2011, when he became Markham’s inspector general until sometime in 2012. DeBois began his law enforcement career with the former Chicago Housing Authority Police Department in the 1990s, and he was a police officer in south suburban Harvey from 1999 to 2007, when he joined the Markham Police Department.
The arrest and indictment were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. They thanked Anita Alvarez, Cook County State’s Attorney, for her office’s extensive cooperation in the investigation, as well as the Illinois State Police.
The government is being represented by Assistant U.S. Attorney April Perry.
The felony civil rights violation carries a maximum penalty of life 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 public is reminded that the charge is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Former Chicago Bears Player and Cook County Sheriff’s Deputy Charged Separately with Failing to File Federal Tax ReturnsRead the Press Release
CHICAGO — A former Chicago Bears football player and a Cook County sheriff’s deputy who worked part-time as a collegiate and professional sports referee were charged separately today with misdemeanor federal offenses for allegedly failing to file federal income tax returns over a period of four years.
One defendant, CHRISTOPHER ZORICH, 43, of Chicago, who played for the Chicago Bears from 1991 through 1996 and for the Washington Redskins in 1997, was charged with four counts of failing to file federal income tax returns for calendar years 2006 through 2009 when he allegedly had gross income totaling more than $1 million. Through his attorney, Zorich authorized the government to disclose that he is cooperating with the Internal Revenue Service and will plead guilty to the misdemeanor charges.
The other defendant, STEPHEN R. PAMON, 61, of Elk Grove Village, a Cook County sheriff’s deputy who officiated college basketball, football, and baseball games, as well as Arena Football League games, was also charged with four counts of failing to file federal income tax returns for calendar years 2006 through 2009 when he allegedly had gross income totaling nearly $325,000.
Charging documents were filed today against both defendants in U.S. District Court. They will be arraigned separately on dates still to be determined.
According to the charges against Zorich, he graduated from the University of Notre Dame in 1991 and from its law school in 2002. He was employed by a Chicago law firm from 2002 through 2006, and by the University of Notre Dame from 2008 through 2010. In 1993, Zorich founded and served as the executive director of the not-for-profit Chris Zorich Foundation, which was established to help disadvantaged families in the Chicago area and provide scholarships for disadvantaged students to attend Notre Dame.
The Foundation paid Zorich rental income for the use of property of approximately $3,000 per month. In 2004, the Foundation’s registration with the Illinois Attorney General’s Office was cancelled after the Foundation failed to submit an annual report for calendar year 2002, making the Foundation ineligible to solicit, receive, or hold funds in Illinois. However, the Foundation continued to receive contributions and make rental payments to Zorich during the years 2006 through 2009, despite failing to file tax forms reporting the payments to Zorich during those four years.
The charges allege that during those years, Zorich received deferred compensation from the Chicago Bears, as well as rental income from the Foundation, and income from the law firm, Notre Dame, and personal appearance fees. He allegedly received gross income of at least $331,625 in 2006; $70,996 in 2007; $372,448 in 2008; and $242,298 in 2009, but failed to file federal income tax returns for each of those years.
According to the charges against Pamon, in addition to working for the Cook County Sheriff’s Department, he worked for a private security company from 2005 through 2008, and 3 from 1973 through at least 2010, he worked as a referee officiating collegiate games, including for the Big Ten Conference, and since 2000 as a referee in Arena Football League games.
The charges allege that Pamon received gross income of at least $102,657 in 2006; $87,474 in 2007; $59,082 in 2008; and $75,525 in 2009, but failed to file federal income tax returns for each of those years.
The charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
Failure to file a federal income tax return is a federal misdemeanor and carries a maximum penalty of one year in prison and a $100,000 fine on each count. 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. 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 in both cases by Assistant U.S. Attorney William Hogan.
The public is reminded that an information 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.
Zorich Information
Pamon InformationBrothers and Hit-Man Convicted of RICO and Murder Conspiracies Involving Little Village False Identification Document RingRead the Press Release
CHICAGO — Three defendants are facing mandatory life imprisonment after a federal jury found them guilty of racketeering conspiracy, murder in aid of racketeering, and related crimes after a six-week trial in U.S. District Court. Two brothers, JULIO and MANUEL LEIJASANCHEZ, who operated a lucrative, black-market counterfeit identification document business in Chicago’s Little Village community for at least 15 years, were convicted along with GERARDO SALAZAR-RODRIGUEZ, who they directed to commit an execution-style murder in Mexico of a fledgling competitor. The murder plot was intended to prevent two former employees from starting a competing business and to maintain control over employees of their operation, which generated annual revenues of approximately $3 million.
Evidence at trial showed that Salazar-Rodriguez fired more than a dozen shots in killing one of the victims in his taxi cab near Mexico City in April 2007, and the jury heard transcripts of intercepted telephone conversations in which he boasted to the brothers after the murder. He also hunted for a second victim who he believed was in Mexico at the time but who was actually in federal custody in Chicago. That intended victim, who pleaded guilty to fraudulent identification document charges, cooperated and testified as a government witness at trial.
After the jury returned guilty verdicts on all counts yesterday afternoon, the trial ended today when the jury returned special findings regarding the murder that raised the maximum penalty for racketeering conspiracy to life in prison. The murder in aid of racketeering conviction carries a mandatory life sentence for all three defendants. U.S. District Judge Rebecca Pallmeyer scheduled sentencing for Sept. 12.
“This violent conspiracy went to great lengths to corner the fake document market in Chicago, going so far as to murder a rival vendor in order to protect their lucrative turf,” said Gary Hartwig, Special Agent-in-Charge of HSI in Chicago. “The guilty verdicts clearly demonstrate our unyielding resolve to dismantle the criminal organizations that perpetuate and profit from document fraud within our borders.”
The trial and convictions stem from Operation Paper Tiger, an investigation conducted by Homeland Security Investigations agents, along with other local, state, and federal law enforcement agencies. In April 2007, the investigation resulted in charges against 24 defendants and the dismantling of the Leija-Sanchez fraudulent document organization that operated in and around the Little Village Discount Mall at West 26th and Albany in Chicago. Except for the three trial defendants and three fugitives, all of the remaining defendants were convicted.
Manuel Leija-Sanchez, 45, and Salazar-Rodriguez, 40, were arrested later in Mexico and were extradited to the United States in 2010 and 2011 to stand trial, together with Julio Leija- Sanchez, 37, who was arrested in Chicago in 2007. A third Leija-Sanchez brother, Pedro, 40, was also arrested in Mexico and extradited to the U.S in 2011. He pleaded guilty last August to racketeering conspiracy for operating the fraudulent ID ring with his brothers and is awaiting imposition of an agreed sentence of 20 years in prison, currently scheduled for March 13.
Evidence at trial showed that the three Leija-Sanchez brothers operated the bustling illegal business between 1993 and 2007. The Mexico-based organization was supervised by an overall leader living in Chicago, and the leadership position rotated among the Leija-Sanchez brothers. The organization sold as many as 100 sets of fraudulent identification documents each day, charging customers approximately $200 per “set,” consisting of a Social Security card and either an immigration “green card” or a state driver’s license.
Manuel and Julio Leija-Sanchez and Salazar-Rodriguez conspired to murder Guillermo Jimenez-Flores, also known as “Montes,” a former member of their organization who became a fledgling rival and was shot to death by Salazar-Rodriguez in Mexico in April 2007. The three trial defendants also were convicted of conspiracy to kill a second victim, Bruno Freddy Ramirez-Camela, who they believed was in Mexico but was actually incarcerated in Chicago.
The convictions were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois. He commended the years of hard work by HSI agents, who were joined in the investigation by the Chicago and Galveston, Tex., police departments and the Chicago offices of the U.S. Secret Service, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, and the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Government of Mexico and Mexican law enforcement partners also provided significant assistance.
The government is being represented by Assistant U.S. Attorneys Michelle Nasser, Andrew Porter and William Ridgway.
Chicago Investment Advisor Sentenced to Six Years in Prison for Causing Clients to Lose $1.6 Million in Fraud SchemeRead the Press Release
CHICAGO — A former Chicago investment advisor was sentenced today to six years in federal prison for an investment fraud scheme that swindled clients, causing them to lose more than $1.6 million. The defendant, DIMITRY VISHNEVETSKY, pleaded guilty last August to wire fraud and bank fraud, admitting that he misappropriated funds raised from investors for his own purposes, including to pay for such expenses as mortgage and car payments, travel and vacations, restaurant bills, athletic club dues, and to make trades for himself, while using additional investor funds to make Ponzi-type payments to clients.
Vishnevetsky, 34, of Chicago, was ordered to pay $1,684,763 in restitution, nearly all of it to a half-dozen investment clients, by U.S. District Judge Ruben Castillo, who likened Vishnevetsky’s conduct to a financial storm that devastated the lives of his victims. Vishnevetsky was ordered to begin serving his sentence on May 28.
“This offense was entirely unnecessary,” the government argued at sentencing. “There was no good reason for this fraud, and the defendant, who was skilled in the world of finances could have gotten a legitimate job. In fact, [he] obtained a Bachelor’s degree in business administration, and attended the University of Oxford.”
According to the court records, Vishnevetsky offered and purported to sell investments, including investments in funds which promised to trade S&P Futures, and a fund that could trade in things such as equities, futures contracts, and commodities, as well as brokerage and management services for some investors, and promissory notes, through Hodges Trading, LLC, and Oxford Capital, LLC, which he controlled. Three purported Oxford funds existed in name only, as did the promissory notes, which Vishnevetsky described as London Interbank Offered Rate (LIBOR) adjusted notes.
Between September 2006 and March 2012, Vishnevetsky made false representations about the profitability of his prior and current trading, the use of the invested funds, the risks involved, the expected and actual returns on investments and trading, as well as false representations about the funds he purportedly traded. For example, Vishnevetsky created and provided some investors fraudulent trading results showing profits as high as 36 percent per year. In fact, any trades that Vishnevetsky actually made consistently resulted in losses, not profits.
The bank fraud conviction resulted from false statements Vishnevetsky made between 2007 and 2010 to Merrill Lynch Bank & Trust concerning his income and assets to cause the bank to issue, and later modify, two loans totaling approximately $519,500 to purchase a condominium in Chicago.
The government is being represented by Assistant U.S. Attorney Jacqueline Stern.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Commodity Futures Trading Commission, which filed a companion civil enforcement lawsuit, assisted in the investigation.
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.
Rockford Men Plead Guilty to Fraud SchemeRead the Press Release
ROCKFORD — A Rockford, Ill. man pleaded guilty today in federal court before U.S. District Judge Frederick J. Kapala to one count of wire fraud. CAMERON LOVE, 27, who was charged in a superseding indictment along with three other men, admitted that between mid-2010 and January 2012 he defrauded large retail chain stores by fraudulently acquiring tens of thousands of dollars of merchandise and returning the items for cash.
In the written plea agreement, Hardy admitted that as part of the scheme he and his co-defendants created and used counterfeit checks and counterfeit identifications to purchase merchandise from large chain stores such as Wal-Mart and Farm and Fleet located in various states. After he and the others purchased merchandise from those stores, they returned the merchandise to a different store location for a cash refund. Hardy admitted he knew at the time that some of the names and addresses on the checks and identification he used, and some of the bank account information, were fictitious and some were real.
In a related case, ANTHONY HARDY, 42, also of Rockford, pleaded guilty on Feb. 19, 2013, to one count of wire fraud and one count of identity theft. In addition to Hardy admitting he participated in a wire fraud scheme with Love and others, Hardy admitted he unlawfully possessed the identification of another person used to purchase merchandise from the stores in the wire fraud scheme.
Love is scheduled to be sentenced on June 4, 2013, while Hardy is scheduled to be sentenced on June 8, 2013. Two other men are also each charged with three counts of wire fraud in the superseding indictment for their roles in the scheme: WILLIAM DORN, 24, also of Rockford, and ANTHONY TAYLOR, 43, of Marietta, Ga.
Each charge of wire fraud carries a maximum penalty of up to 20 years in prison, a term of up to 3 years of supervised release following imprisonment, a $250,000 fine, and mandatory restitution. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendants, whichever is greater. For Hardy, the charge of identity theft carries a mandatory sentence of 2 years imprisonment, which must run consecutive to any sentence on the wire fraud charge, as well as a fine of up to $250,000. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.
The guilty pleas were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Rockford Police Department assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Michael D. Love.
Love Plea Agreement
Hardy Plea AgreementWest Suburban Man Convicted of Federal Gun ChargeRead the Press Release
CHICAGO – An Addison man was convicted today by a federal jury of being a felon-inpossession of a firearm. The defendant, MARIO J. RAINONE, was found guilty following a two-day trial. The jury was empaneled on Monday before U.S. District Judge Harry Leinenweber in Federal Court.
Rainone, 58, who was arrested in February 2009, remains in federal custody pending sentencing, which Judge Leinenweber scheduled for June 5. Based on Rainone’s status as an Armed Career Criminal under federal law, the offense carries a mandatory minimum of 15 years and a maximum of life in prison. Rainone also faces a maximum fine of $250,000. The Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
Rainone was arrested by Addison police on state charges on February 12, 2009. A state search warrant was executed the next day at an apartment where Rainone was staying in the 1200 block of West Lake Street in the western suburb. A Smith & Wesson Model 19-3 .357 caliber revolver, along with personal papers and other belongings, were found in the nightstand in the bedroom used by Rainone, resulting in the federal firearms charge. The gun was stolen in October 2008, according to the original owner, who testified at trial.
A stipulation was entered at the trial that Rainone has a prior felony conviction. Federal law prohibits a convicted felon from possessing any firearm affecting interstate commerce.
The government was represented by Assistant U.S. Attorneys Amarjeet Bhachu and Michael Donovan. The verdict was announced Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and the Addison Police Department.
Skokie Business Owner Charged with Tax Evasion for Allegedly Hiding Funds in Secret Offshore Account with Swiss Bank UBSRead the Press Release
CHICAGO — The owner of a cemetery monument business in Skokie was charged with federal tax evasion for allegedly failing to report all of his income, including money he held in a secret offshore financial account with UBS, a global financial services firm headquartered in Switzerland. The defendant, PETER TROOST, was charged in a felony information filed late yesterday in U.S. District Court.
Troost, 78, of Skokie, owns and operates Troost Memorials, a closely-held company that designs and sells cemetery monuments and gravestones. The business is located in a strip mall that Troost owns at 9853 Gross Point Rd., Skokie, and he owns another strip mall located at 1816-44 Arlington Heights Rd., in Arlington Heights. The defendant is not involved with Peter Troost Monument Company, of Hillside, which is a different company from Troost Memorials.
Troost will be arraigned in U.S. District Court on a date yet to be determined.
Troost is the first taxpayer charged in Federal Court in Chicago in connection with an ongoing investigation of U.S. taxpayer clients of 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, Troost maintained at least one offshore account with UBS, which he managed with the assistance of a UBS personal banker based on the island of Jersey.
In 2007, Troost received gross income of at least $647,040, and owed federal income tax of at least $212,503, the charge states. Troost allegedly attempted to evade payment of at least $193,641 of that income tax by maintaining a secret Swiss account with UBS, to which he transferred income earned in the United States and also earned additional interest income in that account.
On his federal income tax returns for 2007-09, Troost allegedly stated that his total income was $80,271.35 in 2007; $60,802.37 in 2008; and $211,256.86 in 2009, when he knew that his total income was actually greater than those amounts in each of those years. In addition, Troost allegedly stated on his returns for each of those years that he did not have an interest in a financial account in a foreign country, when, in fact, he knew he maintained the offshore UBS account.
The charge was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.
“With the April tax deadline looming, we encourage taxpayers to think of the serious consequences, including civil and 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,” Mr. Lee said.
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 U.S. Treasury Department can result in a 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 Brian Havey.
The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Information
Black P Stone Nation “General” Sentenced to 20 Years in Federal Prison for Narcotics and Gun CrimesRead the Press Release
CHICAGO — A self-admitted high-ranking member of a Chicago street gang that operates in a south side neighborhood that he and his associates refer to as “Terror Town,” was sentenced today to 20 years in federal prison. The defendant, GILBERT SPILLER, holds the rank of “general” in the Black P Stone Nation street gang and has criminal convictions spanning two decades. He was arrested by the FBI and Chicago Police in October 2011 and pleaded guilty last September to two counts of selling crack cocaine and one count of illegally selling a firearm.
The sentence was imposed today by U.S. District Judge Charles Kocoras in Federal Court.
Spiller, 37, admitted selling approximately 62.2 grams of crack cocaine on July 13, 2011, and approximately 59.2 grams of crack on July 21, 2011, to a confidential informant in the vicinity of the 7800 block of South Kingston Avenue.
On Oct. 18, 2011, Spiller sold the same individual a loaded .40 caliber handgun, knowing that the individual was a felon on parole, had recently purchased crack from Spiller on two occasions, and believing that the individual had a score to settle with rival gang members.
According to court documents, Spiller admitted that he first joined the Black P Stone Nation while he was in grade school. He was subsequently convicted of aggravated battery with a firearm and aggravated discharge of a firearm, which arose from a drive-by shooting that killed one victim and wounded four others. He was later convicted of aggravated battery of a Chicago police officer.
“As his life in the gang further hardened, he became involved in violent crime,” the government wrote in a sentencing argument. Spiller “admitted that he was involved in shooting at other people on 5 to 10 different occasions, and believed that he hit the people he was aiming at in roughly half of these shootings.”
The government was represented by Matthew Burke. The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Garry McCarthy, Superintendent of the Chicago Police Department. The investigation was conducted by the FBI/CPD Joint Task Force on Gangs.
Former Commodities Broker Sentenced to Four Years in Prison for Fraud Causing Half-Dozen Clients to Lose $1.3 MillionRead the Press Release
CHICAGO — A former commodities broker was sentenced to four years in federal prison for defrauding a half-dozen customers of approximately $2.5 million and causing them to lose approximately $1.3 million. The defendant, JOSHUA T.J. RUSSO, 31, of Chicago, a former vice president of alternative investments for Olympus Futures, Inc. (previously Peak Trading Group), was sentenced after pleading guilty last November to commodities fraud.
Russo was ordered to pay $1.175 million in restitution to the Joshua T.T. Russo Settlement Fund, which was established by the National Futures Association to be distributed to the victims. He was ordered to begin serving the sentence on May 24 by U.S. District Judge Charles Norgle, who imposed the sentence last Wednesday in Federal Court.
“Using falsified e-mails, account statements, and annual reports, Russo caused his clients to raid their IRA accounts and give him their hard-earned savings to purchase what he claimed were conservative investments that hedged against risks in the commodity futures markets. In reality, Russo placed highly speculative trades that routinely lost money,” the government argued at sentencing.
In pleading guilty, Russo admitted that between March 2007 and April 2011, he fraudulently obtained approximately $2.5 million from six investors and caused losses of more than $1.3 million, including approximately $208,000 in commissions for himself that he spent on gambling, vacations, clothing, theater tickets, meals, and entertainment. Russo obtained the funds by misrepresenting to investors that their money would be used to purchase various investments, including shares of the Peak Performance Fund, which he knew had never accepted individual investors and no money was ever invested with the fund. Russo made false statements about his prior performance investing in commodity futures, the level of risk, the existence and trading performance of the Peak Performance Fund, and the uses of the funds he obtained from investors.
Instead of investing the funds as he purported, Russo misappropriated the money to make speculative trades — and regularly lost money — in various commodity futures, including energy sources, precious metals, agriculture products, foreign currencies, and stock indices. After providing one investor with false information about positive returns, Russo successfully encouraged that investor to refer friends and relatives to open accounts through him, resulting in additional victims.
The sentencing was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Commodity Futures Trading Commission and the National Futures Association assisted in the investigation.
The government was represented by Assistant U.S. Attorney Christopher McFadden.
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.
Waukegan Grocer Sentenced to 2½ Years in Prison for Defrauding U.S. Food Stamp and Nutrition Programs of More Than $844,000Read the Press Release
CHICAGO — A former Waukegan grocer was sentenced to 2½ years in federal prison for defrauding government food stamp and nutrition programs of more than $844,000 over approximately two years during an undercover investigation. The defendant, KHALED SALEH, who, together with his wife and co-defendant, FATIMA SALEH, owned and operated Sunset Food Market in Waukegan, illegally exchanged cash on thousands of occasions with customers using food stamp cards and nutrition coupons. They also paid customers approximately half the value in cash for goods the customers purchased at other stores using their benefits, typically infant formula, and then re-sold the same items in their store at a substantially higher price.
Khaled Saleh, 48, was sentenced on Friday to 30 months in prison by U.S. District Judge Charles Norgle, who ordered Saleh to begin serving the sentence on May 31. Sentencing for Fatima Saleh, 37, was continued to March 22. The couple were arrested in May 2011 and both pleaded guilty last August to conspiracy to defraud government programs.
The government administratively forfeited $391,616 in cash and bank account funds that were seized from the Salehs, and Judge Norgle ordered Khaled Saleh to pay $453,013 in restitution for the remaining loss.
“The food stamp and WIC [Women, Infants and Children] programs are designed to help members of society, including children, obtain a more consistent and nutritious diet than they might otherwise enjoy. To [Khaled Saleh], however, these vital programs were nothing more than his personal ATM machine and a means to stock his shelves with cheaply obtained inventory,” the government argued at sentencing.
The Salehs participated in the Supplemental Nutrition Assistant Program, formerly known as the Food Stamp Program, and were authorized to accept LINK cards used by customers to purchase eligible food items. Between August 2009 and April 2011, the defendants redeemed more than $1.175 million in LINK funds and WIC coupons.
During the undercover investigation, an agent with the U.S. Department of Agriculture, Office of Inspector General, exchanged food stamp benefits for cash and used benefits to purchase formula at a discount store, which he then re-sold for half the price in cash to the Salehs on several occasions.
After executing a search warrant at the store in April 2011, Fatima Saleh went to her apartment and agents observed her leaving a short time later with a suitcase. After giving consent to search the suitcase, agents found more than $350,000 in cash and more than 800 coupon vouchers for the WIC program. Additional cash was found in the apartment and in the couple’s bank account.
The sentencing was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Joe N. Smith, Special Agent-in-Charge of the USDA’s Office of Inspector General; and Frank Benedetto, Special Agent-in-Charge of the U.S. Secret Service, both in Chicago. The Illinois Department of Human Services assisted in the investigation.
The government is being represented by Assistant U.S. Attorney Andrew R. DeVooght.
Seventeen Defendants Facing Federal Narcotics or Firearms Charges Alleging Nexus of Guns and Drugs in ChicagoRead the Press Release
CHICAGO —Seventeen defendants are facing federal narcotics and/or firearms charges
which demonstrate again the intersection of drugs and illegal gun possession in Chicago. An
investigation by the Chicago Police Department and the U.S. Drug Enforcement Administration
of alleged drug-trafficking by a father and son that started less than a year ago, has resulted in
federal narcotics charges against them, two alleged suppliers, at least eight alleged customers,
and others, as well as the seizure of more than 14 kilograms of cocaine, three kilograms of
heroin, 15 firearms, and approximately $320,000.The investigation moved up and down an alleged drug supply ladder as a result of
Chicago police officers and DEA agents using federal wiretaps on at least a dozen phones to
intercept conversations and deliveries of narcotics and firearms.In a telephone conversation on Nov. 26 last year, defendant DWYANE PAYNE, also
known as “Murder,” allegedly told an individual that he needed a gun because he was going to a
memorial service at North Central Park Avenue and West Division Street, where rival gang
members would be present. Based on that call and others that followed, police and agents set up
surveillance at the intersection and, about an hour later, approached the man who Payne had been
talking to as he was standing next to a 2005 Chrysler 300. The individual ran but was quickly
apprehended and gave permission to search his car. Inside, two TEC-9 semi-automatic pistols
with extended magazines were found on the floor of the backseat – one was loaded with 30 live
rounds and the other, which had a defaced serial number, was loaded with approximately 28 live
rounds, including one in the chamber.Payne’s brother, MARSHALL PAYNE, was also indicted yesterday for being a
previously convicted felon in illegal possession of both loaded TEC-9s.Four days later, on Nov. 30, 2012, after listening to other intercepted conversations,
investigators stopped a vehicle in the 7400 block of West Waveland Avenue, arrested the driver
– an alleged drug courier, LUCIO CUEVAS – and seized two kilograms of cocaine and a
handgun later found in a trap compartment in the vehicle. Believing that the cocaine was
destined for delivery to the nearby residence of JOHNNY MENDEZ, located in the 3700 block
of North Olcott Avenue, authorities later that day arrested Mendez and his father, JOHNNY
CHAPARRO, who also lived nearby in the 3700 block of North Oketo Avenue. Investigators
searched Mendez’s home and seized two kilograms of heroin, a handgun and approximately
$209,130.Authorities first began investigating alleged wholesale cocaine and heroin distribution by
Chaparro and Mendez in 2012. The investigation resulted in charges against them, as well as
two of their alleged suppliers, JOSE ARGUIJO and ANTONIO VALENCIA-PANTOJA, and at
least eight alleged customers, ANTHONY MADISON, PAUL JENKINS, LAKICHA WHITE,
DISLSON ROCHA, JOEL MELENDEZ, DWAYNE PAYNE, DELILAH MARTINEZ, and
IRIS CORREA. The charges allege that Chaparro and Mendez obtained kilogram quantities of
narcotics from Arguijo on Sept. 3 and Nov. 26, 2012, and from Valencia-Pantoja on Nov. 30,
including the cocaine that was seized on those dates.Following the arrests of Chaparro, Mendez, and Cuevas on Nov. 30, and four other
defendants last week, six additional defendants were arrested on Wednesday, while two others
are in state custody, and two are fugitives.All 17 defendants were charged in eight separate indictments returned yesterday by a
federal grand jury. Most of the defendants either have been ordered detained or have detention
hearings next week in U.S. District Court.One indictment, against Chaparro, Mendez and seven others, seeks forfeiture of
approximately $758,729 in alleged narcotics proceeds, including approximately $236,000 that
was seized during the investigation. It also seeks forfeiture of Chaparro and Mendez’s
residences, and an automobile. Other indictments seek forfeiture of smaller amounts of cash, as
well as another vehicle and multiple firearms.“Anyone who has paid attention over the last 25 years knows that these charges are just
the latest result of the remarkable teamwork among the Chicago Police Department, DEA and
other federal law enforcement agencies,” said Gary S. Shapiro, United States Attorney for the
Northern District of Illinois. “While none of these defendants are accused of acts of violence;
nevertheless, narcotics and firearms prosecutions such as these are effective in helping reduce
violence in Chicago, and we will continue to work closely with the CPD to achieve that goal.”
Mr. Shapiro praised the dedication of the Chicago Police Department and the DEA for the
disruption of this alleged narcotics distribution activity.“Guns and drugs remain the greatest underlying source of our city’s violence. The
Chicago Police Department will continue to attack the pervasiveness of illegal weapons and
narcotics in our communities from every angle,” said Garry F. McCarthy, Superintendent of the
Chicago Police Department. “Focused, collaborative efforts with our federal partners send a
clear message that those responsible for driving the related violence in our communities will be
found and held accountable.”Jack Riley, Special Agent-in-Charge of the DEA’s Chicago office, said: “The indictments
of these 17 individuals yesterday should serve as a notice to criminal networks in Chicago that
allegedly traffic in narcotics and weapons that the Drug Enforcement Administration and the
Chicago Police Department stand shoulder to shoulder in our commitment and we will use every
available legal avenue to make our city safer.”The investigation was conducted under the umbrella of the U.S. Organized Crime Drug
Enforcement Task Force (OCDETF).Details of the separate indictments follow:
United States v. Chaparro, et al., 12 CR 969
JOHNNY CHAPARRO, 50; his son, JOHNNY MENDEZ, aka “Trigger,” 29; JOSE
ARGUIJO, 35; ANTHONY MADISON, 47; PAUL JENKINS, 63; LAKICHA WHITE, 36;
DILSON ROCHA, 58; JOEL MELENDEZ, 2; and DWAYNE PAYNE, 29, all of Chicago
except Melendez, who is from Milwaukee, were charged with various narcotics offenses in 19-
count indictment. Seven of the nine defendants are in custody; Arguijo and Melendez are
fugitives.Mendez was charged with being a felon-in-possession and also possessing a firearm – a
.40 caliber semi-automatic pistol – while committing a drug offense. The felon-in-possession
count carries a maximum penalty of 10 years in prison, while the count of possessing a firearm
during a drug offense carries a mandatory minimum sentence of five years to a maximum of life
in prison, which must be served consecutively to any other sentence, if convicted.Chaparro, Mendez, and Arguijo each face a mandatory minimum sentence of 10 years
and a maximum of life in prison and a $10 million fine on the narcotics charges. Madison,
Jenkins, White, Rocha, and Melendez each face a mandatory minimum of five years and a
maximum of 40 years in prison and a $5 million fine on the narcotics charges, if convicted.United States v. Chaparro and Meireles, 13 CR 171
JOHNNY CHAPARRO was charged again, together with MODESTO MEIRELES, aka
“Old Man,” 62, of Chicago, in a six-count indictment for various narcotics offenses.Chaparro and Meireles face a mandatory minimum of five years and a maximum of 40
years in prison and a $5 million fine, if convicted.United States v. Valencia-Pantoja and Cuevas, 13 CR 170
ANTONIO VALENCIA-PANTOJA, 23, and LUCIO CUEVAS, 24, both of Chicago,
were charged together in a three-count indictment for allegedly conspiring to distribute the
cocaine that was seized from Cuevas on Nov. 30, 2012.They each face a mandatory minimum of five years to a maximum of 40 years in prison
and a $5 million fine, if convicted.United States v. Martinez and Correa, 13 CR 157
DELILAH MARTINEZ, 33, and her mother, IRIS CORREA, 57, both of Chicago, were
charged together in an 11-count indictment for allegedly conspiring to distribute narcotics.Martinez was also indicted separately for allegedly being a felon-in-possession of a .357
revolver on July 23, 2012. (United States v. Martinez, 13 CR 173)They each face a man mandatory minimum of five years to a maximum of 40 years in
prison and a $5 million fine, if convicted. Martinez alone faces a maximum penalty of 10 years
in prison if convicted of being a felon-in-possession of a firearm.United States v. Payne, 13 CR 174
United States v. Lopez, 13 CR 154
United States v. Suriano, 13 CR 172Three other defendants were charged separately in single-count indictments for allegedly
being felons-in-possession of firearms. They are: MARSHALL PAYNE, 31, of Chicago, for
allegedly possessing the two TEC-9s on Nov. 26, 2012; CARLOS LOPEZ, aka “Moses,” 34, of
Elmwood Park, for allegedly possessing a .25 caliber semi-automatic handgun on June 8, 2012;
and SALVATORE SURIANO, 25, of Chicago, for allegedly possessing a shotgun on July 31,
2012.They each face a maximum penalty of 10 years in prison if convicted of being a felon-inpossession
of a firearm.In each case, if convicted, the Court must impose a reasonable sentence under federal
statutes and the advisory United States Sentencing Guidelines. The public is reminded that
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.The government is being represented by Assistant United States Attorneys Erika Csicsila
and Sarah Streicker.Chaparro et al Indictment
Valencia Cuevas Indictment
Chaparro and Mendez Complaint
Arguijo Complaint
White-Supremacist William White Sentenced to 42 Months in Prison for Soliciting Violence Against Hale Jury ForemanRead the Press Release
CHICAGO — Self-proclaimed white-supremacist WILLIAM A. WHITE was sentenced today to 42 months in federal prison for soliciting violence to the foreman of a federal jury in Chicago that convicted another white-supremacist, Matthew Hale, in 2004. White stood trial in Chicago in January 2011 and was convicted by a jury of one count of solicitation.
“No doubt the experience was extremely frightening for the juror,” U.S. District Judge Lynn Adelman, of Milwaukee, who imposed the sentence, said in reference to the Hale jury foreman who was the victim of White’s violent solicitation.
Judge Adelman, who was assigned to preside over the case in Federal Court in Chicago, ordered White to serve the sentence consecutively to all but a little more than a month remaining on a federal sentence that White is currently serving for making threats to other victims and intimidating a witness in Virginia. White’s prior sentence totaled 43 months and is scheduled to end in early April.
Initially, Judge Adelman dismissed the 2008 indictment against White but a federal appeals court in Chicago reinstated the solicitation charge in 2010. After White’s trial in January 2011, the judge overturned the jury’s guilty verdict, but the government appealed and White’s conviction was reinstated, leading to today’s sentencing. White’s prior sentence stemmed from a December 2009 trial conviction by a federal jury in Roanoke.
“This defendant has been prolific in making threats to people,” Assistant U.S. Attorney Michael Ferrara told Judge Adelman today in arguing for a consecutive sentence instead of White’s request for time served.
The evidence at White’s Chicago trial showed that after Matthew Hale was tried, convicted and sentenced for soliciting the murder of a federal j udge in Chicago, White solicited his followers to retaliate against the foreman of that jury. White created and maintained a former web site, “Overthrow.com,” which was publicly accessible on the Internet. The web site purported to be affiliated with the “American National Socialist Workers Party” (ANSWP), and claimed the organization was comprised of a “convergence of former [white supremacy] ‘movement’ activists who grew disgusted with the general garbage that ‘the movement’ has attracted and who formed the ANSWP under the Command of Bill White.” Members of the ANSWP were described as “National Socialists... who fight for white working people.”
Between Sept. 11 and Oct. 11, 2008, White used the web site to solicit anyone to injure Juror A on account of Juror A’s role as the foreperson of the jury that convicted Hale, the leader of a white-supremacist organization known as the World Church of the Creator. Hale was sentenced to 40 years in prison for soliciting the murder of a federal judge in Chicago.
As part of White’s solicitation of violence against Juror A, White posted derogatory comments and personal information about Juror A, including Juror A’s home address and phone numbers, on the Overthrow.com web site on Sept. 11, 2008. The solicitation occurred under circumstances strongly corroborating White’s intent that another person use, attempt to use, or threaten the use of force against Juror A.
White was aware that individuals associated with the white-supremacist movement, who were the target audience of his web site, at times engaged in acts of violence, directed at non-whites, Jews, gays and persons perceived by white-supremacists as acting contrary to their interests. Prior to the solicitation against Juror A, White on multiple occasions caused postings to the web site that disclosed what purported to be the home address and/or personal identifying information of individuals who were targets of criticism on the Internet.
The Government was represented by Assistant U.S. Attorneys Michael Ferrara and William Hogan. The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
Two Companies and Five Individuals Charged with Roles in Illegal Honey Imports; Avoided $180 Million in Anti-Dumping DutiesRead the Press Release
CHICAGO — Five individuals and two domestic honey processing companies have been charged with federal crimes in connection with a nationwide investigation of illegal importations of honey from China that was mislabeled as coming from other countries to avoid antidumping duties or was adulterated with antibiotics not approved for use in honey. Altogether, the seven defendants allegedly avoided antidumping duties totaling more than $180 million.
None of the charges allege any instances of illness or other public health consequences attributed to consumption of the honey.
The charges represent the second phase of an investigation led by agents of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). In June 2011, an undercover agent assumed the role of director of procurement at defendant HONEY HOLDING I, LTD., which by then was cooperating with the investigation.
Honey Holding, doing business as Honey Solutions, of Baytown, Tex., and defendant GROEB FARMS, INC., of Onsted, Mich., two of the nation’s largest honey suppliers, have both entered into deferred prosecution agreements with the government, subject to court approval, with Honey Holding agreeing to pay a $1 million fine and Groeb Farms agreeing to the payment of a $2 million fine. Both companies have agreed to implement corporate compliance programs as part of their respective agreements.
The individual defendants include three honey brokers, as well as DOUGLAS A. MURPHY, former director of sales for Honey Holding, and DONALD COUTURE, president of Premium Food Sales, Inc., a broker and distributor of raw and processed honey in Bradford, Ontario.
In 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 investigation resulted in charges against 14 individuals, including executives of Alfred L. Wolff GmbH and several affiliated companies of the German food conglomerate whose U.S. honey-importing business was based in Chicago, and others for allegedly avoiding approximately $80 million in antidumping duties on Chinese-origin honey. Authorities seized and forfeited more than 3,000 drums of honey that entered the country illegally.
The second phase of the investigation, announced today, involves allegations of illegal buying, processing, and trading of honey that illegally entered the U.S. on the “demand side” of the industry. The investigation is continuing.
“We applaud the efforts of HSI, Customs and Border Protection, and other agencies involved in this complex, long-term investigation to enforce the laws that exist to protect U.S. consumers and the honey market,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.
“These businesses intentionally deprived the U.S. government of millions of dollars in unpaid duties,” said ICE Deputy Director Daniel Ragsdale. “Schemes like these result in legitimate importers and the domestic honey-producing industry enduring years of unprofitable operations, with some even being put out of business. We will continue to enforce criminal violations of antidumping laws in all industries and ports of entry so American businesses and foreign producers of goods all play by the same rules.”
Also announcing the charges were Gary Hartwig, Special Agent-in-Charge of HSI Chicago; William A. Ferrara, Acting Director of Field Operations for U.S. Customs and Border Protection (CBP) in Chicago, and Daniel Henson, Special Agent-in-Charge of the Chicago Field Office of the Food and Drug Administration’s Office of Criminal Investigations.
The U.S. Food and Drug Administration operates a toll-free number for consumer inquiries: 1-888-INFO-FDA (463-6332).
The government is being represented by Assistant U.S. Attorney Andrew S. Boutros.
The public is reminded that indictments and informations contain only charges and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. If convicted, courts must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. Three of the five individuals charged have authorized the government to disclose that they intend to plead guilty to the charges against them.
Details of the six separate cases follow:
United States v. Groeb Farms, Inc., 13 CR 137
GROEB FARMS, INC., of Onsted, Mich., described as the largest industrial honey supplier in the United States, was charged with buying 1,578 container loads of Chinese-origin honey between February 2008 and April 2012, knowing that it was illegally imported into the United States to avoid more than $78.8 million in antidumping duties.
The company has entered into a deferred prosecution agreement in which it accepted and acknowledged responsibility for its conduct and that of its current and former executives and employees. The agreement requires the company to continue cooperating fully for two years, to pay a $2 million fine based on its ability to pay, and to dispose any illegally-entered Chinese-origin honey in its possession.
The company admitted in a factual statement that two former executives purchased Chinese-origin honey for processing at its facilities and sold that honey to its domestic retail, foodservice, and industrial customers as mislabeled non-Chinese honey, and at other times, as Chinese honey, all while knowing that it had been illegally imported to avoid antidumping duties and, at times, honey assessment fees. The honey was variously described falsely as sugars and syrups instead of Chinese-origin honey, and as having originated in Indonesia, Malaysia, Mongolia, Thailand, and Vietnam, instead of China.
The two former executives engaged in fraudulent practices despite the company’s own audits and inspections that raised substantial concerns that the honey was illegally imported. They also provided false information to the company’s board of directors, customers, and the public regarding Groeb Farms’ involvement in knowingly purchasing, processing, and selling illegally smuggled Chinese-origin honey.
The corporate compliance program is designed to ensure that Groeb Farms maintains supply chain integrity and conducts reasonable inquiries to safeguard against any illegal activity.
United States v. Douglas A. Murphy and Honey Holding I, 13 CR 138
DOUGLAS A. MURPHY, 56, of Kingwood, Tex., and HONEY HOLDING I, LTD., doing business as Honey Solutions, a large industrial honey supplier based in Baytown, Tex., were charged together with violating the federal Food, Drug, and Cosmetic Act for allegedly purchasing discounted Polish-origin honey containing the prohibited antibiotic Chloramphenicol from Alfred L. Wolff USA in 2006. Murphy was director of sales between 2003 and 2008 and was responsible for the purchase of wholesale quantities of honey, maintaining relationships with suppliers, and the sale of honey to U.S. customers.
DOUGLAS A. MURPHY, 56, of Kingwood, Tex., and HONEY HOLDING I, LTD., doing business as Honey Solutions, a large industrial honey supplier based in Baytown, Tex., were charged together with violating the federal Food, Drug, and Cosmetic Act for allegedly purchasing discounted Polish-origin honey containing the prohibited antibiotic Chloramphenicol from Alfred L. Wolff USA in 2006. Murphy was director of sales between 2003 and 2008 and was responsible for the purchase of wholesale quantities of honey, maintaining relationships with suppliers, and the sale of honey to U.S. customers.
Murphy pleaded guilty today and, under the terms of his cooperation plea agreement, subject to court approval, he will receive a sentence of six months’ imprisonment and a fine of $26,624 when he is sentenced on May 31.
Honey Holding has entered into a deferred prosecution agreement in which it accepted and acknowledged responsibility for its conduct and that of its employees and agents. The agreement requires the company to continue cooperating fully for two years and to pay a $1 million fine based on its ability to pay. The agreement describes Honey Holding’s “extensive cooperation, including its agreement to allow an undercover law enforcement agent to assume the role of [its] director of procurement in an undercover capacity since June 2011.”
The company admitted in a factual statement that Honey Holding defrauded its downstream customers of approximately $26,624 by purchasing, processing, and selling the Polish-origin honey that was adulterated with the antibiotic.
The company also admitted that it purchased Chinese-origin honey from at least seven shell and front companies that were controlled by various Chinese honey producers and manufacturers. These illegal honey imports avoided more than $33.4 million in antidumping duties.
Honey Holding also agreed to establish a corporate compliance program to ensure that it maintains supply chain integrity and takes steps to safeguard against any illegal activity.
United States v. Jun Yang, 13 CR 139
JUN YANG, 39, of Houston, who brokered the sale of honey to Honey Holding among others, and who operated National Honey, Inc., which did business as National Commodities Company in Houston, was charged with brokering the sale of illegal Chinese-origin honey, which was misrepresented as originating in India, into the United States to avoid antidumping duties.
Yang, through his attorney, has authorized the government to disclose that he will plead guilty, admitting responsibility for fraudulently avoiding antidumping duties totaling as much as $37.9 million on Chinese-origin honey that entered the country illegally as Malaysian and Indian honey between 2009 and 2012. Yang has agreed to pay a fine of $250,000 and restitution totaling $2.64 million, in addition to whatever other sentence is imposed by the court. The government has agreed to recommend a sentence of 74 months in prison.
United States v. Urbain Tran, 13 CR 140
URBAIN TRAN, 78, of Culver City, Calif., an agent of Honey Holding who brokered honey transactions for the company since 2006, was charged with two counts of brokering the sale and transportation of illegal Chinese-origin honey, which was misrepresented as originating in Malaysia and Vietnam, into the United States to avoid antidumping duties.
Tran, through his attorney, has authorized the government to disclose that he will plead guilty under the terms of an agreement calling for a fine of $500,000 and restitution totaling $204,403, in addition to whatever other sentence is imposed by the court. Tran faces a maximum of 20 years in prison on each fraudulent sales and transportation count.
United States v. Hung Yi Lin, 13 CR 125
HUNG YI LIN, also known as “Katy Lin,” 42, of Temple City, Calif., was charged in a federal grand jury indictment returned yesterday with one count of transporting 10 container loads of Chinese-origin honey through the Chicago area after it entered the country illegally. Lin owned and operated 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. She was initially charged in a criminal complaint and arrested on Feb. 9 in California. She was released on a $100,000 secured bond and will be arraigned on a later date in U.S. District Court in Chicago.
According to the indictment, between 2009 and 2012, Lin schemed to falsify the contents of hundreds of shipping containers of Chinese-origin honey by misrepresenting them as sugars and syrups during the importation process. 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 charges allege.
The charge carries a maximum penalty of 20 years in prison and a $250,000 fine.
United States v. Donald Couture, 11 CR 781
DONALD COUTURE, 60, of Bradford, Ontario, the president, owner, and operator of Premium Food Sales, Inc., a Canadian broker and distributor of raw and processed honey, was indicted on four counts of violating the Food, Drug, and Cosmetic Act. In May 2009, Couture allegedly caused four container loads of his company’s honey that were rejected by one U.S. customer because of the presence of a prohibited antibiotic, Tetracycline, to be delivered to a second U.S. customer without disclosing that the honey contained the antibiotic. The honey was shipped through the Chicago area when it was transported from one customer to the other.
An arrest warrant was issued in the U.S. for Couture. Couture was initially charged in a sealed complaint in November 2011 and the complaint was unsealed after he was indicted last week. Each count carries a maximum penalty of three years in prison and a $250,000 fine.
Groeb Farms Information
Groeb Farms DPA
Murphy and Honey Holding Information
Honey Holding DPA
Murphy Plea Agreement
Yang Information
Tran Information
Lin Indictment
Couture IndictmentRound Lake Beach Man Sentenced to More Than 5 Years in Federal Prison for Robbery of Fifth Third Bank in AlgonquinRead the Press Release
ROCKFORD — A Round Lake Beach, Ill. man was sentenced today in federal court for bank robbery. The defendant, Mohammed Nusrath Ali Khan, 42, was sentenced before U.S. District Judge Frederick J. Kapala to 62 months in federal prison for the robbery of the Fifth Third Bank, 450 South Randall Road, Algonquin, Ill., on May 23, 2012. In addition, the court also ordered Khan to pay restitution of $5,211 to Fifth Third Bank.
Khan pled guilty to the charge on Nov. 20, 2012. According to the written plea agreement, On May 23, 2012, at approximately 4:45 p.m., Khan entered the Fifth Third Bank branch on South Randall Road and approached a bank teller. Khan admitted that when he entered the bank, he had a BB gun concealed in the waistband of his pants under his shirt. Khan handed the Teller a note which stated that this was a robbery and demanded money. The note further stated Khan was armed with a gun and that the Teller was not to make a scene, give him any "dye packs," or activate any alarms or the defendant would shoot her. The Teller gave Khan $5,211 of the bank’s money from her teller drawer. Khan retrieved the note from the teller and then walked out of the bank. Khan has been in federal custody since his arrest by the Skokie Police Department on June 8, 2012.
The sentencing was announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois; Thomas R. Trautmann, Acting Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; Russell Laine, Chief of the Algonquin Police Department; and Anthony Scarpelli, Chief of the Skokie Police Department.
The government was represented by Assistant U.S. Attorney Joseph C. Pedersen.
Former Des Plaines Police Commander Charged with Making False Statements About DUI Arersts in Federal Funding ReportsRead the Press Release
CHICAGO — A former Des Plaines Police Department commander was charged today with making false statements in reports that concealed the suburban department’s failure to meet the requirements of a federally-funded impaired-driving enforcement campaign between 2009 and 2012. The defendant, TIMOTHY VEIT, allegedly inflated by 122 the number of arrests for driving under the influence and provided false information regarding blood-alcohol content levels for the fictitious arrests. As a result, the charges allege that Des Plaines fraudulently obtained $132,893 in federal reimbursement for overtime compensation.
Veit, 55, of Mt. Prospect, was with the Des Plains Police Department for 31 years and was commander of the support services division until he retired last year. He was charged with one count of making false statements in a felony information that was filed today. No date has been set yet for his arraignment in U.S. District Court.
The charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Michelle McVicker, Special Agent-in-Charge of the Chicago Regional Office of the U.S. Department of Transportation Office of Inspector General.
According to the charges, the U.S. Department of Transportation’s National Highway Traffic Safety Administration funded grants to state and local law enforcement agencies to conduct highway safety programs, including the Sustained Traffic Enforcement Program (STEP). Locally, the grants were administered through the Illinois Department of Transportation. The STEP grants required intensive enforcement of specific traffic laws, coupled with other measures, at specific times of the year, particularly on major holidays when alcohol-involved and unbuckled fatalities were highest.
Veit served as project director for the Des Plaines Police Department’s participation in STEP enforcement campaigns and was responsible for certifying the department’s compliance with its terms and conditions, including the performance objective that grant recipients average at least one DUI arrest for every 10 hours of overtime worked by officers on impaired-driving enforcement.
STEP grant participants paid the program costs from local funds and then, after each enforcement campaign, submitted claims for reimbursement that covered overtime pay for officers, mileage, and equipment. The reimbursement forms required such information as the identity of the project director, the total officer hours worked during each campaign, and the number of specific enforcement actions, such as DUI arrests, along with the blood-alcohol content level for each DUI arrest. Between 2009 and 2012, the Illinois Transportation Department authorized a total of $170,366 in STEP funds for Des Plaines’ impaired-driving enforcement efforts.
After Veit collected and reviewed accurate information regarding the number of citations, including DUI arrests, issued by Des Plaines officers during each enforcement campaign, the 3 charges allege that he then intentionally inflated the number of DUI arrests and provided false information about blood-alcohol content levels in the reimbursement forms. Overall, between 2009 and 2012, Veit reported a total of 152 DUI arrests during STEP campaigns, when he knew that only 30 had actually occurred. The numbers allegedly reported and actually occurring in each year were: 2009 – 27 and 13; 2010 – 47 and 8; 2011 – 62 and 8; and 2012 – 16 and 1.
As a result of the false information that Veit allegedly provided, he caused a loss of $132,893 in federal funds that were reimbursed to the City of Des Plaines for impaired-driving enforcement campaigns.
The government is being represented by Assistant U.S. Attorney Megan Church.
Making false statements carries a maximum penalty of five years in prison and a maximum fine of $250,000. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that the charges are not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Information
Former Chairman of Western Springs Bank Sentenced to Prison for Concealing Personal Interest in Loans from U.S. RegulatorsRead the Press Release
CHICAGO — The former chairman of a west suburban bank was sentenced today to a year and a day in federal prison for making false statements in regulatory documents regarding his undisclosed personal interest in loans that resulted in the bank losing more than $680,000. The defendant, JAMES A. REGAS, who was chairman of the board of directors of the former Western Springs National Bank & Trust, pleaded guilty last July, admitting that he falsified and concealed material facts that should have been fully disclosed to the bank’s directors and government regulators during 2008 and 2009. The bank’s two branches were closed by federal regulators in April 2011, and its assets were purchased by Heartland Bank and Trust Company.
Regas, 82, of Oak Brook, has paid $681,617 in restitution and he was fined $60,000 by U.S. District Judge Gary Feinerman, who cited Regas’ “sustained course of conduct” in imposing the sentence in Federal Court in Chicago. Regas was ordered to begin serving his sentence in 90 days.
“At a time when the public’s confidence in the banking system has plummeted, Regas concealed material information from the board of directors, placed his personal interests above those of the bank, and caused false statements to be made to regulators charged with ensuring that all national banks are operating in a safe and sound manner,” the government argued in urging a custodial sentence.
In pleading guilty, Regas admitted causing a bank employee to file a false quarterly Report of Condition and Income, also known as a “Call Report,” with the Federal Deposit Insurance Corp., and he signed the report knowing they contained false information regarding the delinquency status of certain loans.
Regas admitted that between 2004 and 2009 he referred business associates to Western Springs for loans, without disclosing to the bank that he had financial partnerships with those individuals and that he intended to benefit personally from the loans. Regas knowingly submitted false conflict-of-interest statements to the bank, in which he denied having any financial relationship with any of the bank’s borrowers.
Among the loans from which Regas benefitted, directly or indirectly, without the knowledge and approval of disinterested bank directors, were: an $803,000 loan to North Park Webster LLC in December 2004, which was used partially to finance the purchase of three properties in Evanston in which Regas and family members had financial interests; a $500,000 loan to one of Regas’ associates in November 2005, from which Regas received approximately half of the proceeds indirectly through a third-party; and a $750,000 loan to a real estate investor in September 2008 to finance the investor’s purchase of an apartment building in Evanston from Regas. That building served as collateral for the bank on another loan that Regas acquired and sold through a nominee company.
These loans enabled Regas to use bank funds for his own benefit without having to apply for loans himself, posting collateral, or signing any promises to repay the bank’s money, while evading federal restrictions on insider loans. Because the loans were not fully repaid, Western Springs suffered a loss of approximately $681,617, which Regas paid as restitution.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The government was represented by Assistant U.S. Attorneys Brian Havey and Andrianna Kastanek.
The prosecution 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
Rockford Man Sentenced to 9 ½ Years in Federal Prison for Operating A $4 Million Ponzi SchemeRead the Press Release
ROCKFORD — A Rockford, Ill. man sentenced today in federal court in federal court for mail fraud. JAMES PANTAZELOS, 64, of Rockford, was sentenced to 9½ years in federal prison by U.S. District Judge Philip G. Reinhard for operating a “Ponzi” type scheme in which he defrauded investors out of more than $4 million. The fraud occurred from May 2007 through December 2010.
Pantazelos pled guilty to the charge on September 6, 2012. According to the written plea agreement, Pantazelos was the owner and CEO of an entity known as Destiny’s Partners, Inc. Pantazelos admitted that he and his associates invited individuals to attend conferences to learn about investment opportunities with Destiny’s Partners. These conferences were held at various locations in the United States, including Milwaukee, Dallas, and San Diego. Pantazelos and his associates told the potential investors that Destiny’s Partners placed its investors’ funds in “Private Investment Trading Platforms” which traded bank notes in foreign markets. Pantazelos also claimed that Destiny’s Partners donated a substantial portion of its profits to charitable and humanitarian causes. In addition, Pantazelos promised the investors that their funds would be safe, because the investments would be deposited into and kept in an escrow account. Pantazelos guaranteed the investors would receive their principal investment back, and offered the investors a variety of investment “options,” for periods ranging from 90 to 365 days, promising returns of up to 200%. As Pantazelos admitted in his plea agreement, all of his representations to the investors were false.
Instead of investing the funds as promised, Pantazelos used most of the investors’ funds to pay for his own personal expenses, including purchasing a home for a family member, purchasing expensive automobiles for himself and family members, and attempting to open a restaurant that was to be known as “Jimmy P’s.” Further, Pantazelos used some of the funds received by Destiny’s Partners from newer investors to make Ponzi-type payments to some of the prior investors, deceiving these investors into believing that their investments had been successful. Pantazelos then used these prior investors who received Ponzi-type payments to recruit additional investors for Destiny’s Partners.
Pantazelos admitted that when the investment terms expired he failed to pay the investors the promised rates of return and failed to return their principal to them. In order to conceal his fraud, Pantazelos made false statements to the investors about why he could not pay them, such as that the United States government had frozen funds coming in to Destiny’s Partners from foreign countries. According to the plea agreement, Pantazelos knew these excuses were false and that the reason he could not repay the investors was that he had spent the majority of their funds on his own personal expenses and making Ponzi-type payments to other investors.
In order to further conceal his fraudulent scheme, defendant repeatedly told the investors that funds were about to be released to Destiny's Partners and he would be able to repay the investors in the near future. Pantazelos admitted that during the course of his scheme he received approximately $4,294,930 from the investors, and returned approximately $872,262.50 in Ponzi-type payments to some of these investors.
The Financial Fraud Enforcement Task Force 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.
The sentencing was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Thomas P. Brady, Postal Inspector-in-Charge of the Chicago Division of the United States Postal Inspection Service; Steven L. Haugen, Director of the Chicago Region of the U.S. Department of Labor - Employee Benefits Security Administration; and Jesse White, Illinois Secretary of State.
The government was represented by Assistant U.S. Attorney Scott A. Verseman.
Former Dixon Comptroller Rita Crundwell Sentenced to Nearly 20 Years in Federal Prison for $53.7 Million Theft from CityRead the Press Release
ROCKFORD — The former comptroller of the City of Dixon, Ill., RITA A. CRUNDWELL, was sentenced today to 19 years and 7 months, nearly the 20-year maximum, in federal prison for stealing $53.7 million from the city over two decades. Crundwell was taken into custody to immediately begin her sentence, which was imposed by U.S. District Judge Philip G. Reinhard in Federal Court in Rockford.
Crundwell, 60, formerly of Dixon, pleaded guilty on Nov. 14, 2012, to wire fraud, and agreed she also engaged in money laundering, in connection with stealing more than $53 million from the city since 1990 and using the proceeds to finance her quarter horse farming business and life of luxury. It is believed to be the largest theft of public funds in state history.
“This has been a massive stealing of public money – monies entrusted to you as a public guardian of Dixon, Ill.,” Judge Reinhard said in imposing sentence. Crundwell showed “greater passion for the welfare of her horses than the people of Dixon who she represented,” he added.
“While the city was suffering, the defendant was living her dreams,” Assistant U.S. Attorney Joseph Pedersen told the judge during a sentencing hearing that lasted more than two hours today. Crundwell’s “conduct in continuing to take millions of dollars from the City of Dixon to support her lavish lifestyle while she knew that Dixon was in dire financial straits was especially egregious,” the government argued.
Crundwell must serve at least 85 percent of her 235-month sentence and there is no parole in the federal prison system.
Judge Reinhard granted the government’s request for an upward variance in the federal sentencing guidelines. In addition to the financial loss, he found that Crundwell caused a significant non-monetary loss, which involved a loss of public confidence in local government and a significant disruption of government function that struck “at the very heart of Dixon’s abilities to provide essentials for its citizenry.”
The judge ordered agreed restitution to the city of Dixon totaling $53,740,394, and he imposed an agreed forfeiture judgment in the same amount. Following her arrest on April 17, 2012, Crundwell agreed to the liquidation of assets that she had acquired with proceeds from her decades-long fraud scheme. To date, the United States Marshals Service has recovered more than $12.38 million from sales, including online and live auctions, of approximately 400 quarter horses, vehicles, trailers, tack, a luxury motor home, jewelry and personal belongings, while sales of real property in Illinois and Florida remain pending. The net proceeds from the forfeited property – nearly $9.5 million so far – are being held in escrow pending further proceedings on restitution to the City of Dixon. Under federal law, the government may continue to seek additional assets of a defendant and obtain restitution for up to 20 years after a defendant is released from prison.
Gary S. Shapiro, United States Attorney for the Northern District of Illinois, praised the FBI agents who conducted the investigation and the U.S. Marshals Service for its efficient management of the seized assets. “We have used criminal and civil forfeiture proceedings to ensure the recovery of as much money as possible for the City of Dixon and its taxpayers,” he said. “Unfortunately, this case serves as a painful lesson that trust, without verification, can lead to betrayal.”
Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, said: “The law is clear. Those who hold positions of trust must not abuse that trust. We remain committed to holding anyone using an official position for personal gain, as Rita Crundwell did for years, fully accountable for their corrupt actions.”
Dixon, with a population of approximately 15,733, is located about 100 miles southwest of Chicago.
According to her guilty plea and sentencing documents, Crundwell began working for Dixon’s finance department in 1970 while still in high school, and she was appointed comptroller/treasurer in 1983. She began the fraud scheme on Dec. 18, 1990, when she opened a secret bank account, which she alone controlled, in the name of the City of Dixon. The name of the account was “RSCDA – Reserve Fund,” known as the RSCDA account. The initials stood for “Reserve Sewer Capital Development Account,” although no such account actually existed for the city, and Crundwell did not disclose the existence of the secret account. At today’s hearing, the government also presented evidence that Crundwell stole at least $25,000 from a separate Dixon bank account for its Sister City program between 1988 and 1990 before the charged fraud scheme began.
Crundwell began transferring money from city accounts to the RSCDA account in January 1991. Subsequently, she used her position as comptroller to transfer funds from Dixon’s Money Market account and various other city accounts to its Capital Development Fund account. She then repeatedly transferred city funds from the Capital Development Account into the RSCDA account and used the money to pay for her personal and private business expenses, including horse farming operations, personal credit card payments, real estate and vehicles.
In 1991, Crundwell transferred more than $181,000 to the RSCDA account. As the fraud scheme continued, the amounts she stole increased to a high of $5.8 million in 2008, and she took an average of more than $2.5 million a year over the 20-year course of the scheme.
While she was taking these large sums of money, Crundwell participated in budget meetings with city council members and various city department heads. She repeatedly stated that the city’s lack of funds was due to a downturn in the economy and because the State of Illinois was behind in its payments. At the time she made those statements, Crundwell was stealing millions of dollars, causing Dixon to cut its budget, which had a significant impact on city operations.
As part of the fraud scheme, Crundwell created 159 fictitious invoices purported to be from the State of Illinois to show the city’s auditors that the funds she was fraudulently depositing into the RSCDA account were being used for a legitimate purpose. In one instance, on Sept. 8, 2009, Crundwell wrote checks for $150,000 and $200,000 drawn on two of the city’s multiple bank accounts. She deposited both checks into Dixon’s Capital Development Fund account and, later the same day, wrote a check for $350,000 payable to “Treasurer” and deposited that check into the secret RSCDA account. Crundwell created a fictitious invoice to support the payment of $350,000 to the State of Illinois that falsely indicated the payment was for a sewer project in Dixon that the state completed. Later on Sept. 8, 2009, Crundwell wrote a check drawn on the RSCDA account for $225,000, which she deposited into her personal RC Quarter Horses account. She used that money to cover a $225,000 check, dated Sept. 1, 2009, drawn on the RC Quarter Horses account to purchase a quarter horse named Pizzazzy Lady. The purchase check would not have cleared if Crundwell had not deposited $225,000, using city funds, into her horse account on Sept. 8.
To conceal the scheme, Crundwell picked up the city’s mail, including bank statements for the RSCDA account, to prevent other employees from learning about the secret account. When she was away, she asked a relative or other city employees to pick up the mail and separate any of her mail, including the statements for the RSCDA account, from the rest of the city’s mail.
Dixon’s mayor reported Crundwell to law enforcement authorities in the fall of 2011 after another city employee assumed her duties during an extended unpaid vacation. Crundwell, whose annual salary was $80,000 annually at the time, received four weeks of paid vacation and she took an additional 12 weeks of unpaid vacation in 2011. While Crundwell was absent, her replacement requested all of the city’s bank statements. After reviewing them, the employee brought the records of the RSCDA account to the attention of the mayor, who was unaware of the account’s existence.
While serving as Dixon’s comptroller, Crundwell also owned RC Quarter Horses, LLC, and kept her horses at her ranch on Red Brick Road in Dixon and the Meri-J Ranch in Beloit, Wis., as well as with various trainers across the country. In addition to the horses and all of their equipment, among the assets seized or restrained were Crundwell’s two residences and horse farm in Dixon, a home in Englewood, Fla., 80 acres of vacant land in Lee County, a 2009 luxury motor home, more than four dozen trucks, trailers and other motorized farm vehicles, a 2005 Ford Thunderbird convertible, a 1967 Chevrolet Corvette roadster, a pontoon boat, jewelry, and approximately $224,898 in cash from two bank accounts.
The government is represented by Assistant U.S. Attorneys Joseph C. Pedersen and Scott Paccagnini.
Two Former Krahl Construction Executives Sentenced to Prison Terms for Billing Fraud and Kickback SchemeRead the Press Release
CHICAGO — Two former top executives of a defunct general contractor, Krahl Construction, were sentenced to prison terms after pleading guilty to engaging in a $10.4 million fraudulent billing and kickback scheme. Five additional employees of Krahl and two individuals who received kickbacks – all of whom also pleaded guilty – are scheduled to be sentenced on various dates beginning today through mid-March in U.S. District Court.
JOHN PADERTA, 54, of Fontana, Wis., and formerly of Burr Ridge, Krahl’s former president who owned at least 80 percent of the company, was sentenced to five years in prison. DOUG HARNER, 48, of Chicago, Krahl’s former executive vice president and part owner, was sentenced to four years in prison. The sentences were imposed last week by U.S. District Judge Matthew Kennelly, who also will sentence the remaining defendants.
Paderta was ordered to pay restitution of $9,987,463 to Digital Realty Trust, of San Francisco, which hired Krahl to renovate portions of an eight-story building located at 350 E. Cermak, Chicago, and $433,059 to Berwind Property Group, a Chicago firm that hired Krahl to develop commercial property in Bolingbrook known as the Tallgrass project. Paderta was ordered to begin serving his sentence on May 7.
Harner was ordered to pay restitution of $9,471,908 to Digital, and $100,000 to Berwind. He was ordered to begin serving his sentence on May 8. Paderta and Harner were each ordered to also forfeit $9 million in fraudulent proceeds to the government.
The sentences were announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.
The fraud scheme caused actual losses of nearly $10 million to Digital and $433,000 to Berwind, while two former employees of those firms allegedly received kickbacks valued at $625,000 and $119,500, respectively. Krahl, which specialized in interior construction, closed its Chicago office at 322 S. Green St., in January 2010, less than a week after FBI agents executed a federal search warrant. The judge noted that 180 Krahl employees who lost their jobs as a result of the fraud scheme were also victims, as were the company’s customers and sub-contractors whose projects were adversely affected when Krahl closed.
According to court records, between 2005 and 2009, certain defendants fraudulently inflated the cost of renovation projects being performed by Krahl and caused the creation of false documents to support the inflated costs, resulting in over-billing Digital and Berwind a combined total of approximately $15 million. At the same time, the two clients’ employees secretly used their positions to solicit and accept bribe/kickback payments and home improvements in exchange for favorable action to help Krahl obtain contracts with those companies.
The remaining Krahl defendants who admitted roles in the scheme and are awaiting sentencing are: Thaddeus Stepniewski, 52, of Lisle, Krahl’s chief financial officer; Scott Mousel, 49, of New Orleans and formerly of Lisle, a Krahl project manager for two portions of the Cermak project; John Bak, 38, of Ringwood, Ill., also a Krahl project manager on portions of the Cermak project; Heather Ellis, 36, of Midlothian, a Krahl project manager assistant on portions of the Cermak project; and Erin Scott, 37, of Clarendon Hills, also a Krahl project manager assistant on the Cermak project.
Also awaiting sentencing are Scott Solano, 41, of Burr Ridge, a Digital employee who managed the Cermak building, and Timothy Scannell, 49, of Chicago, a Berwind vice president who managed the Tallgrass renovation of a three-story office building and warehouse in Bolingbrook.
Solano solicited and accepted kickbacks from Krahl, including payments totaling approximately $500,000 and renovations on his home totaling approximately $125,000. In exchange for the kickbacks, Solano promised to, and did, take favorable action on behalf of Krahl as requested and as opportunities arose, including helping Krahl obtain contracts from Digital.
Scannell also solicited and accepted kickbacks from Krahl, including payments totaling approximately $100,000, as well as renovations on his home totaling approximately $19,500. In exchange for the kickbacks, Scannell promised to take favorable action on behalf of Krahl as requested and as opportunities arose, including agreeing to help Krahl obtain contracts from Berwind.
The government is being represented by Assistant U.S. Attorneys Stephen Heinze and Jacqueline Stern.
Two Defendants Indicted in Alleged Sham Marriage Conspiracy to Illegally Enable Legal U.S. ResidenceRead the Press Release
CHICAGO – A suburban immigration consultant is among two defendants who were arrested after being indicted for allegedly conspiring to arrange fraudulent marriages to evade immigration laws and enable foreign nationals to illegally become U.S. legal permanent residents. The pair allegedly arranged at least four fraudulent marriages and attempted to arrange a fifth between foreign national and undercover agent who was posing as a U.S. citizen.
TERESITA ZARRABIAN, 60, of Des Plaines, a naturalized U.S. citizen who owns Zarrabian and Associates, an immigration consulting business in Arlington Heights, and MICHAEL SMITH, 41, of Bellwood, a U.S. citizen, were each charged with conspiracy to commit marriage fraud, marriage fraud and visa fraud, and Zarrabian was also charged with obstruction of justice in a seven-count indictment that was returned on Jan. 31 and unsealed when they were arrested last Thursday.
Zarrabian and Smith pleaded not guilty when they appeared Thursday and Friday, respectively, in U.S. District Court and were released on their own recognizance.
The indictment and arrests were announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Gary J. Hartwig, Special Agent-in-Charge of Homeland Security Investigations in Chicago. The charges resulted from an investigation conducted by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and its partner agencies on the Chicago Document and Benefit Fraud Task Force, including U.S. Citizenship and Immigration Service's Fraud Detection and National Security Unit.
“Marriage fraud is a serious crime that exploits our nation’s immigration system and poses a vulnerability to our security,” Mr. Hartwig said. “HSI will continue its efforts to identify and arrest individuals whose actions allegedly show a complete disregard for U.S. immigration laws and undermine the legitimate immigration process.”
According to the indictment, between 2005 and 2012, Zarrabian assisted foreign-born clients complete the necessary forms to become legal permanent residents on the basis of marriage to a U.S. citizen. Clients paid Zarrabian between $8,000 and $15,000 in exchange for arranging fraudulent marriages to U.S. citizens recruited by Zarrabian and Smith, the charges allege. Foreign nationals who marry U.S. citizens legitimately may become legal permanent residents of the United States but not if the marriage was a sham solely to evade immigration laws.
Zarrabian allegedly paid Smith a portion of the money she received from foreign national clients for Smith’s recruitment of U.S. citizen spouses. In turn, Zarrabian allegedly promised to pay approximately $5,000 to the U.S. citizen spouses for their participation in a sham marriage. Both defendants arranged to have individuals travel to Las Vegas for a fraudulent wedding and also took photos of the “couple” and other steps to create the false impression that the sham marriages were legitimate. Zarrabian also met with the couples and told them what actions they needed to take to make their marriages appear legitimate during marriage interviews with officials, according to the indictment.
The obstruction count alleges that Zarrabian attempted to persuade a U.S. citizen involved in a fraudulent marriage from communicating information to law enforcement.
The government is being represented by Assistant U.S. Attorney Tony Iweagwu.
Conspiracy to commit marriage fraud and each count of marriage fraud carry a maximum penalty of five years in prison and a $250,000 fine. Visa fraud carries a maximum penalty of 10 years in prison and a $250,000 fine, and the obstruction count against Zarrabian carries a maximum of 20 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment
Latin Kings’ Second-In-Command Sentenced to 40 Years in Prison for RICO Conspiracy and Related Gang CrimesRead the Press Release
CHICAGO — The second highest-ranking leader nationwide of the Latin Kings street gang was sentenced to 40 years in federal prison after being convicted at trial in 2011 of racketeering conspiracy (RICO) and related charges involving narcotics trafficking and violence that plagued numerous neighborhoods on the city’s north, south and west sides. The defendant, VICENTE GARCIA, Jr., 35, the “Supreme Regional Inca” of the Almighty Latin King Nation, who oversaw the day-to-day illegal activities of all factions of the gang with some 10,000 members in Illinois alone, has been in federal custody since late 2008 and must serve at least 85 percent of his sentence.
The sentence was imposed Friday by U.S. District Judge Charles Norgle, who also ordered five years of supervised release after Garcia’s prison term ends.
Garcia, also known as “DK” or “Disciple Killer,” together with Augustin Zambrano, the leader or “Corona” of the Latin Kings, and two additional defendants were found guilty in April 2011 of running a criminal enterprise to enrich themselves and others through drug-trafficking and preserving and protecting their power, territory and revenue through acts of murder, attempted murder, assault with a dangerous weapon, extortion, and other acts of violence.
“This sentence holds Garcia accountable for the barbaric enterprise known as the Latin Kings and his role in murder, attempted murder, shootings, beatings, drug trafficking, and other crimes,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.
Zambrano, 52, was sentenced to 60 years in prison in January 2012. Two other co-defendants convicted at the same trial also received substantial prison terms. Jose Guzman, a former “Nation Enforcer” in the 26th Street, or Little Village, faction, was sentenced to 35 years in prison, and Alphonso Chavez, the “Inca,” or leader of the gang’s 31st and Drake faction, was sentenced to 30 years in prison. Another co-defendant, Fernando “Ace” King, who preceded Garcia as Supreme Regional Inca and pleaded guilty, was sentenced in October 2011 to 40 years in prison.
Trial evidence included audio and video recordings of three beatings inflicted upon gang members for violating the rules and testimony documenting three murders and 20 shootings in the Little Village area. In addition to RICO conspiracy, Garcia was convicted of assault with a dangerous weapon and using a firearm during a violent crime.
Garcia was among a total of 31 co-defendants who were indicted in September 2008 or charged in a superseding indictment in October 2009. Of those 31 defendants, 24 pleaded guilty, four were convicted at trial, and three remain fugitives. From its origin and base in the west side Little Village community, the Latin Kings spread throughout Chicago and Illinois and established branches in other states, where local leaders acted with some autonomy but adhered to the rules and hierarchy of the Chicago gang, according to the evidence in the five-week federal trial.
The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, together with Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, and Larry Ford, Special Agent-in-Charge of the Chicago Office of the Bureau of Alcohol, Tobacco, Firearms and Explosives. The Chicago Police Department, the U.S. Immigration and Customs Enforcement (ICE) Office of Homeland Security Investigations (HSI) in Chicago, and the Cook County Sheriff’s Police also had significant roles in the investigation, which was conducted through the federal High Intensity Drug-Trafficking Area (HIDTA) Task Force and under the umbrella of the Organized Crime Drug Enforcement Task Force (OCDETF).
In late 2006, ATF agents led an investigation that resulted in federal drug trafficking and firearms charges against 38 Latin Kings members and associates. In 2008, the FBI led an investigation that resulted in state and federal charges against 40 Latin Kings members and associates, including a dozen of the Zambrano co-defendants. In total, more than 80 Latin Kings members and associates have faced state or federal charges since 2006. The convictions result from a sustained, coordinated effort by federal law enforcement agencies, working together with the Chicago Police Department and other state and local partners, to dismantle the hierarchy of the Latin Kings and other highly-organized, often violent Chicago street gangs.
Garcia and Zambrano were the highest-ranking Latin Kings to be convicted and sentenced since Gustavo “Gino” Colon, who also holds the title of “Corona,” was sentenced to life in prison in 2000.
The government was represented by Assistant U.S. Attorneys Andrew Porter, Nancy DePodesta and Tinos Diamantatos.
For further information about the Garcia trial, see the government’s previous press release at: Latin Kings’ Nationwide Leader, Augustin Zambrano, and Three Other High-ranking Gang Members Convicted of RICO Conspiracy and Related Crimes in Federal Trial.
Rockford Man Sentenced to More Than 26 Years in Federal Prison on Federal Drug Conspiracy ChargesRead the Press Release
ROCKFORD C A Rockford, Ill. man was sentenced yesterday in federal court on drug conspiracy charges. STEVEN T. McDOWELL, 38, of Rockford, also known as “Ty,” was sentenced by U.S. District Judge Frederick J. Kapala to 315 months in federal prison for his role in a conspiracy to distribute at least one kilogram of heroin, and ordered to serve 5 years of supervised release following his imprisonment. McDowell was convicted on June 14, 2012, after a nine-day jury trial in U.S. District Court in Rockford, of one count of conspiracy to distribute heroin, and six counts of distribution of heroin.
According to the indictment and evidence at trial, McDowell was the leader of an illegal drug trafficking operation in Rockford. Beginning as early as April 2010, and continuing into December 2010, the conspirators obtained large amounts of heroin from Chicago, transported the heroin to Rockford where it was diluted for resale and packaged in smaller zip lock bags or baggies for individual use, then grouped into packs. The defendants used runners to distribute street-level quantities of heroin at numerous locations in Rockford. McDowell and other co-conspirators rented cars that were used to deliver heroin to their street-level dealers, and used cell phones to notify runners where to go to distribute heroin to a customer or for when a runner needed to be resupplied or have money picked up. Some of the co-conspirators used or possessed firearms for protection during their operations.
Two other Chicago men were also convicted on June 14, 2012, after the jury trial for their roles in the drug conspiracy:
JEREMY COOPER, 24, also known as “J.D.,” was convicted of one count of conspiracy to distribute at least one kilogram of heroin, three counts of distribution of heroin, one count of possession with intent to distribute heroin, and one count of being a felon in possession of a firearm. Cooper was sentenced on Sept. 18, 2012, to 270 months in federal prison, and 5 years of supervised release following his imprisonment.
ROBERT PRESLEY, 33, also known as “Munchie,” was convicted of conspiracy to distribute at least one kilogram of heroin, one count of possessing a firearm in furtherance of a drug-trafficking crime, and two counts of being a felon in possession of a firearm. Presley is awaiting sentencing.
In addition, two other men pled guilty to their involvement in the conspiracy:
MURRAY STEVE HARRIS, JR., 36, of Chicago, also known as “M,” pled guilty on Jan. 19, 2012, to conspiracy to distribute at least one kilogram of heroin, and was sentenced on April 19, 2012, to 130 months in federal prison, to be followed by 5 years of supervised release following his imprisonment.
NORMAN BREEDLOVE, 47, of Rockford, also known as “Way,” pled guilty on May 24, 2012, to one count of conspiracy to distribute at least one kilogram of heroin, and one count of possessing a firearm in furtherance of a drug trafficking crime, and is awaiting sentencing.
The sentencing was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Richard Meyers, Winnebago County Sheriff; and Chet Epperson, Chief of the Rockford Police Department.
The government was represented by Assistant U.S. Attorney Mark T. Karner.
MCC Guard Indicted for Allegedly Taking Bribes to Violate Prison Rules Regarding Inmate Possession of ContrabandRead the Press Release
CHICAGO — A correctional guard at the federal Metropolitan Correctional Center in Chicago was indicted on bribery charges for allegedly violating Federal Bureau of Prisons rules regarding inmate possession of contraband. The defendant, TONY HENDERSON, was charged with five counts of bribery in an indictment returned by a federal grand jury. The charges are not related to the Dec. 18, 2012, escape of two inmates, both of whom were later captured, from the federal facility in downtown Chicago.
Henderson, 51, of Portage, Ind., an MCC correctional guard since 1996, was placed on administrative leave last September. No date has been set yet for his arraignment in U.S. District Court.
The charges, returned yesterday, were announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and John F. Oleskowicz, Special Agent-in-Charge of the Chicago Field Office of the U.S. Department of Justice Office of the Inspector General.
According to the indictment, on five different dates in July and August 2012 – July 12 and 28 and Aug. 4, 18 and 31 – Henderson accepted a bribe to violate BOP rules and regulations regarding inmate possession of contraband.
The Metropolitan Correctional Center, or MCC Chicago, located at 71 West Van Buren St., is an administrative detention facility operated by the Federal Bureau of Prisons.
The government is being represented by Assistant U.S. Attorney Christopher Parente.
Each count of bribery carries a maximum penalty of 15 years in prison and a $250,000 fine, or a fine of up to three times the value of the bribe. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.
The public is reminded that an indictment is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
Indictment