Northern District of Illinois

CHICAGO – Two defendants who were arrested in May after they allegedly attempted to rob a bank in Richmond, Ill., during which a third suspect was fatally shot, will be arraigned on federal charges tomorrow in U.S. District in Chicago. The defendants, AARON RUSSELL and ROBERTO FAVELA, who were initially charged in Federal Court in Rockford, were indicted last week by a federal grand jury in Chicago, moving the case to the Federal Court in Chicago.

Russell, 40, of Orland Hills, and Favela, 34, of Chicago, are scheduled to be arraigned at 10:30 a.m. tomorrow before U.S. Magistrate Judge Sheila Finnegan. They were indicted last Thursday on one count each of attempted bank robbery, conspiracy to commit bank robbery, and using firearms during a violent crime. Russell alone was also indicted for illegally possessing firearms as a previously convicted felon.

On May 10, Russell, Favela, and Tony Starnes, 45, of Chicago, allegedly traveled from Chicago to Richmond, where they planned to and attempted to rob the Associated Bank on Main Street in the McHenry County village near the Wisconsin border. FBI agents confronted the men when they arrived in the bank’s parking lot in two vehicles, and Starnes, who was driving one of the cars, was shot and killed after he drove his car into an agent’s vehicle. Russell and Favela were arrested at that time.

Between them, Russell and Favela allegedly possessed four loaded guns, and Russell was charged with being a felon-in-possession of three of the firearms.

The charges 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. Various local police departments and county sheriff’s departments assisted in the investigation and apprehension of the defendants. The government is being represented by Assistant U.S. Attorneys Christopher Stetler and Marc Krickbaum.

Attempted bank robbery carries a maximum penalty of 20 years in prison; conspiracy to commit bank robbery carries a maximum of 5 years in prison; and carrying firearms during a crime of violence carries a mandatory consecutive sentence of 5 years and a maximum of life in prison, and each count carries a $250,000 maximum fine. The felon-in-possession of firearms count against Russell carries a maximum of 10 years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The 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 against each defendant.

Indictment

ROCKFORD — A Freeport, Ill. man was sentenced today in federal court for wire fraud. U.S. District Judge Frederick J. Kapala sentenced ANTHONY TAYLOR, 44, to 29 months in federal prison, in addition to 3 years of supervised release following his release from prison, and ordered Taylor to pay restitution of $212,542.44

Taylor pled guilty to the charge on April 15, 2013, admitting 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, Taylor admitted that as part of the scheme he and other individuals 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 Taylor and the others purchased merchandise from those stores, they returned the merchandise to a different store location for a cash refund. Taylor 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.

Three other individuals have been charged for their roles in the wire fraud scheme with Taylor:

ANTHONY HARDY, 42, of Rockford, pled guilty on Feb. 19, 2013, to one count of wire fraud and one count of identity theft, and was sentenced on June 4, 2013, to 65 months in prison, 5 years of supervised release following imprisonment, and ordered to pay restitution of $212,542.44.

CAMERON LOVE, 28, of Rockford, pled guilty on Feb. 28, 2013, to one count of wire fraud, and was sentenced on June 28, 2013, to 15 months in prison, 3 years of supervised release following imprisonment, and ordered to pay restitution of $212,542.44.

WILLIAM DORN, 25, also of Rockford, pled guilty on May 30, 2013, to one count of wire fraud. Dorn is scheduled to be sentenced on Sept. 9, 2013 at 2:30 p.m.

The sentencing today was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Pete Zegarac, Postal Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Rockford Police Department and Freeport Police Department assisted in the investigation.

The government was represented by Assistant U.S. Attorney Michael D. Love.

ROCKFORD — A Rockford, Ill. man was sentenced yesterday in federal court for robbing the BMO Harris Bank, N.A., 1275 Bennington Road, Rockford, Ill., on July 22, 2010. U.S. District Judge Frederick J. Kapala sentenced Drew Yancy, 33, to 85 months in federal prison for the robbery and ordered that Yancy serve 3 years on supervised release following his release from prison, and pay restitution of $5,905 to BMO Harris Bank. Yancy will not be eligible for parole.

Yancy pled guilty to the charge on April 5, 2013. According to the written plea agreement, on July 22, 2010, Prince Williams, 27, also of Rockford, drove Yancy to Harris Bank in a stolen car where they both entered the bank. Williams stood near the front door of the bank while Yancy approached the tellers and demanded money. Yancy admitted in the plea agreement that he told a teller to give him money or he would shoot and kill her. After obtaining $5,905 from the tellers, Williams and Yancy left the bank and fled in the stolen car.

Williams, who pled guilty on April 19, 2012, to his involvement in the bank robbery, will be sentenced at a future date.

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 Federal Bureau of Investigation; Chet Epperson, Chief of the Rockford Police Department; and Richard Meyers, Winnebago County Sheriff.

The government was represented by Assistant U.S. Attorney Joseph C. Pedersen.

HAMMOND, Ind. — A suspended physician who owned weight loss clinics in northwest Indiana and south suburban Chicago was sentenced to two years in federal prison for illegally dispensing millions of pills containing amphetamine-based controlled substances to patients, and he and his wife were also sentenced for federal income tax evasion relating to their operation of the clinics. The defendants, DR. RAKESH ANAND and MEENA ANAND, who owned and managed Doctors Weight Loss Clinics in Merrillville, Ind., and Tinley Park and Orland Park in Illinois, were also ordered to pay $745,872 in restitution to the IRS from nearly $5.2 million that was seized from them and ordered forfeited.

Rakesh Anand, 57, a suspended physician in Illinois and who was also licensed in Indiana, and his wife, Meena Anand, 53, both of Tinley Park, were sentenced yesterday by U.S. District Judge Joseph S. Van Bokkelen in Federal Court in Hammond after both defendants pleaded guilty in January. The U.S. Attorney’s Office in Chicago is handling the prosecution in the Northern District of Indiana. Judge Van Bokkelen fined Rakesh Anand $750,000 and ordered him to begin serving his two-year sentence on Aug. 30. Meena Anand was fined $100,000 and ordered to begin serving her 30-day sentence on Sept. 3.

In addition to the fines, forfeiture, and restitution, the Anands remain civilly liable to the Internal Revenue Service for any and all back taxes and a civil fraud penalty of up to 75 percent of the underpayment plus interest.

The Anands had agreed, and the judge ordered them, to pay restitution of $745,872 to the IRS for taxes they owed on nearly $2 million of unreported income between 2005 and 2008. The restitution is to be paid from funds frozen in a brokerage account when the Anands were indicted in August 2011. In addition, they agreed to forfeit more than $4.45 million in additional funds that were frozen or seized during the investigation, bringing to nearly $5.2 million the total amount of funds being applied to forfeiture and restitution.

Rakesh Anand admitted that between January 2002 and February 2010, he and another physician, Dr. Dinesh Saraiya, purchased and dispensed more than 1 million pills containing Phendimetrazine, a Schedule III controlled substance, and more than 3 million pills containing Phentermine, a Schedule IV controlled substance. The Anands grossed more than $5 million from their operation of the three weight loss clinics.

(Saraiya, 75, of Tinley Park, cooperated in the case and pleaded guilty to conspiracy to distribute controlled substances. He is scheduled to be sentenced on July 30 in Federal Court in Chicago.)

According to court records, between 2002 and February 2010, Rakesh Anand hired Saraiya, who agreed with him to illegally dispense the amphetamine-based controlled substances as weight loss medications to patients without performing physical examinations or any medical tests, and without reviewing patients’ records, obtaining a complete medical history, or providing any subsequent monitoring. In return, Rakesh Anand paid Saraiya based on how many patients he saw and how many pills he dispensed to patients on a daily basis. In dispensing the medications, Rakesh Anand and Saraiya failed to determine whether patients had first made a reasonable effort to lose weight through diet and exercise, a prerequisite to prescribing controlled substances for weight loss. In some instances, Rakesh Anand employed clerks to dispense the controlled substances even though he was not present and had not consulted with them.

During the course of the investigation, several undercover law enforcement agents, including two with slight builds and body mass indexes well below the obesity level, purchased controlled substances at the clinics without any of the appropriate medical protocols.

The sentences were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois. The investigation was conducted by the Federal Bureau of Investigation, the Drug Enforcement Administration, the Internal Revenue Service Criminal Investigation Division, the Food and Drug Administration and the Indiana State Police.

The government is being represented by Assistant U.S. Attorneys Matthew Schneider, Diane Berkowitz, and Orest Szewciw.

CHICAGO – A Chicago man was sentenced to 5½ years in federal prison for cheating about 35 victims of approximately $2.6 million in an investment fraud scheme. The defendant, ROBERT G. NELSON, offered and sold promissory notes, promising investors substantial returns, and instead used the money to pay earlier investors and for personal expenses.

Nelson, 40, who pleaded guilty to mail fraud last December, was sentenced yesterday to 66 months in prison by U.S. District Samuel Der-Yeghiayan. He was ordered to begin serving his sentence on Sept. 17, and the judge also ordered him to pay $2.643 million in restitution.

Nelson admitted that between January 2006 and the middle of 2008, he fraudulently obtained more than $6 million from investors by selling promissory notes personally and through his companies, F.C. Financial, Inc., Future Capital Financial Inc., and RGN Investment Group. He falsely promised that the notes were a safe and secure investment, and that proceeds from the sale of the notes would be used to purchase real estate and make investments that would promptly generate a high interest rate, sometimes as high as 45 percent within three months. He then used the money he obtained to pay earlier investors and for family expenses.

“Again and again, Nelson persisted in his scheme, assuring desperate investors that in exchange for one more investment, he would pay all of the monies that investor was owed. He thus fueled his fraud with more lies and false representations,” the government argued at sentencing.

In 2007, the Illinois Department of Securities prohibited Nelson and his companies from offering or selling promissory notes. The criminal investigation began after he violated the state order by continuing to sell promissory notes into the middle of 2008.

The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois. The investigation was conducted by the U.S. Postal Inspection Service in Chicago and the Illinois Secretary of State’s Securities Division. The government was represented by Assistant U.S. Attorney Kaarina Salovaara.

The case falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement, who working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: StopFraud.gov.

CHICAGO — A former supervisor at the Federal Reserve Bank of Chicago pleaded guilty today to a federal misdemeanor for stealing computer files containing confidential information relating to the bank’s responsibility to assess and monitor its credit risk exposure. The defendant, BRIAN MCCARTHY, admitted attempting to download on to his personal thumb drive approximately 300 computer files, and actually downloading 71 computer files, belong to the Chicago Federal Reserve Bank.

McCarthy, 31, of Elmhurst, was a senior credit analyst in the bank’s Statistical and Financial Reporting Department from 2009 to 2010, and in 2011 was a supervisor in the Statistical Support Group where he supervised approximately seven bank employees. He pleaded guilty to theft of property from the Federal Reserve Bank of Chicago at his arraignment after being charged in a criminal information filed last week in U.S. District Court.

Under the terms of his plea agreement, McCarthy is barred from participating directly or indirectly in the affairs of any financial institution insured by the National Credit Union Share Insurance Fund or the Federal Deposit Insurance Corp. without prior written consent. McCarthy faces a maximum sentence of a year in prison and a $100,000 fine, and his plea agreement anticipates a federal sentencing guideline range of 10 to 12 months in prison. U.S. Magistrate Judge Susan Cox set sentencing for Oct. 10.

According to his guilty plea, McCarthy had access to, and was entrusted with, sensitive information, and had signed a Code of Conduct agreement requiring him to leave behind all bank computer files when his employment ended. The theft occurred on Oct. 5, 2011, which was McCarthy’s last day of employment. He admitted taking steps to avoid detection and circumvent the bank’s information security systems, which nonetheless determined that information had been accessed and the Federal Reserve Bank contacted the FBI.

The plea agreement calls for McCarthy to pay $26,400 in restitution to the bank to reimburse it for employee time expended to determine how much information, and the nature of the material, that he downloaded.

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

Plea Agreement

CHICAGO — The owner of a cemetery monument business in north suburban Skokie was sentenced today to a year and a day in federal prison for evading more than $1 million in federal taxes on more than $3.3 million in income, including interest on millions of dollars he held in a secret offshore financial account with UBS, a global financial services firm headquartered in Switzerland. The defendant, PETER TROOST, pleaded guilty in March to the felony charge that was filed in February in U.S. District Court.

Troost, 78, of Skokie, has already paid $1,039,343 in back taxes to the Internal Revenue Service, as well as a civil penalty of approximately $3.75 million, but U.S. District Judge John J. Tharp, Jr., said those payments alone would not sufficiently deter wealthy individuals from failing to meet their voluntary tax obligations.

Judge Tharp also fined Troost $32,500 and ordered him to serve 200 hours of community service during a year of supervised release after he is incarcerated. He was ordered to begin serving his sentence on Dec. 2.

“Troost did not evade his taxes out of financial need or desperation. He operated a profitable and successful business; he had more than enough money to pay his taxes. He made a deliberate, conscious decision not to do so,” the government argued at sentencing.

Troost 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 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 was 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 Troost’s plea agreement, from at least 1999 until 2009, he transferred hundreds of thousands of dollars from the United States to his individual offshore UBS account for the sole purpose of evading domestic income taxes. He maintained at least one offshore UBS account between 1981 and 2009, while maintaining at least one additional joint account. He managed both accounts with the assistance of a UBS personal banker based on the island of Jersey. In addition to failing to report interest income, Troost admitted that he intentionally failed to report all of his income from his monument business and his rental properties.

Between 1999 and 2009, Troost failed to report income from all sources totaling $3,338,929, on which he owed $1,039,343 in federal taxes. In addition, Troost 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 sentence 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.

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 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.

The government was represented by Assistant U.S. Attorney Brian Havey.

ROCKFORD — A Rockford, Ill. chiropractor was sentenced today by U.S. District Judge Frederick J. Kapala for federal income tax evasion. The defendant, Todd R. Cevene, 42, of Caledonia, Ill., was sentenced to 10 months in federal prison. Cevene had been charged on Dec. 14, 2012, with tax evasion by a criminal Information and pled guilty to the charge on Dec. 21, 2012. The court also ordered Cevene to serve 3 years of supervised release following imprisonment, and to pay a fine of $40,000.

According to the Information and plea agreement, Cevene owned or controlled Cevene Care Clinic, S.C., Cevene Management Group, Inc., Cevene Enterprises, LLC, and Todd Cevene Alaska Asset Preservation Trust. Cevene admitted in his plea agreement that for a four-year period between 2004 and 2007, he intentionally evaded payment of his federal income taxes by transferring substantial amounts of Cevene Care Clinic's income to Cevene Management Group, Todd Cevene Alaska Asset Preservation Trust, and Cevene Enterprises. Cevene then used a large amount of the transferred funds to pay for his personal expenses, knowing that these payments would improperly be used as business expense deductions on the federal income tax returns of the entities and that he would not claim those payments as his own personal income. Cevene admitted in his plea agreement that he also caused a large amount of the transferred funds to be transferred directly to him and that he did not include all of those distributions as income on his own personal federal income tax returns.

According to the plea agreement, Cevene admitted that by spreading the income of Cevene Care Clinic among the other entities and using those funds to pay for his personal expenses and make distributions, he intended to diminish the likelihood of discovery of his attempt to evade federal income taxes. Cevene further admitted that he frequently made more than one transfer between the entities in an attempt to avoid detection.

Cevene admitted he owed substantial amounts of income tax for calendar years 2004 through 2007 to the United States that he did not accurately report or pay. Cevene further admitted that his failure to accurately report income and expenses during those years caused a total underpayment of federal income tax of $91,568. Cevene paid these back taxes to the Internal Revenue Service prior to today’s sentencing.

The sentencing was announced 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.

The government was represented by Assistant U.S. Attorney Michael D. Love.

CHICAGO — A former suburban man was sentenced today to one month more than the mandatory minimum of 10 years in federal prison for possessing child pornography. The defendant, BRIAN PERRON, 41, formerly of Wood Dale, pleaded guilty in April 2012, admitting then that he had sexually molested two children he was babysitting when he was 19 years old. He faced the 10-year mandatory minimum sentence because of a 2006 state conviction for possessing child pornography, and he was attempting to obtain additional child pornography depicting sexual abuse when he was arrested on the federal charges.

Perron, who has been in federal custody almost four years, was sentenced to 121 months in prison, followed by five years of supervised release, by U.S. District Judge Robert Gettleman. He must serve at least 85 percent of his federal sentence before he is eligible for release and there is no parole in the federal prison system.

Perron was arrested in July 2009 after Homeland Security Investigations agents executed a search warrant at his home and seized an external computer hard drive that contained 97 images and 21 videos depicting child pornography. The search and arrest stemmed from an HSI investigation of a commercial website that advertised and sold videos of children being forced to perform sexual acts with adults.

Perron “not only collected images and videos of child pornography, but he was attempting to purchase a membership to a child pornography library to obtain more material,” the government argued in a sentencing memo.

The sentence was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Gary Hartwig, Special Agent-in-Charge of Homeland Security Investigations in Chicago.

The government was represented by Assistant U.S. Attorney Tony U. Iweagwu, Jr.

CHICAGO — Twenty-three defendants are facing federal narcotics charges for their alleged roles in supplying and distributing wholesale quantities of heroin and cocaine in Illinois, Indiana and Wisconsin, local and federal law enforcement officials announced today. An investigation led by the Chicago Police Department and the Drug Enforcement Administration resulted in the charges, as well as accumulated seizures since last fall of approximately three pounds of heroin and nearly nine pounds of cocaine. Additional quantities of heroin, crack cocaine, and ecstasy, as well as approximately tens of thousands of dollars, and two guns were seized this morning.

Chicago police, DEA agents, and other law enforcement partners early today executed 11 search warrants upon nine residences and two vehicles in Chicago, and arrested at least 21 of the 23 defendants, in connection with the investigation that began in September 2012.

All 23 defendants were charged with possession with intent to distribute or distribution of narcotics offenses in an 18-count criminal complaint that was filed Wednesday in U.S. District Court and unsealed following the arrests. The defendants arrested began appearing this afternoon in U.S. District Court and remain in federal custody pending detention hearings scheduled for next week.

“This case is yet another example of the remarkable cooperation among the Chicago Police Department, DEA and other local, state and federal law enforcement agencies, extending back decades,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois. “While these defendants are not charged in this complaint with committing acts of violence or being involved in organized gang activity, we believe that bringing serious charges such as these is an effective tool in reducing violence in our communities – a goal we all share.” Mr. Shapiro announced the charges with Garry F. McCarthy, Superintendent of the Chicago Police Department, and Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration.

“Removing narcotics markets from our communities is an essential part of our strategy to continue reducing violence and crime in Chicago,” said Superintendent McCarthy. “These joint, long-term operations provide a real benefit for our communities and I would like to thank our law enforcement partners for their great work, particularly the men and women of the Chicago Police Department who played a major role in this case.”

The DEA’s Mr. Riley said: “This investigation, which was conducted by the DEA-led Chicago Strike Force, is representative of the commitment that is necessary to dismantle drug trafficking organizations. I’m proud of the work done by these agents and officers, who worked tirelessly to achieve these results, and I’m confident that with our continued partnership, we will have increasing success.”

The investigation was conducted under the umbrella of the U.S. Organized Crime Drug Enforcement Task Force (OCDETF) and the Chicago High-Intensity Drug-Trafficking Area Task Force (HIDTA). The Milwaukee County HIDTA, the DEA in Madison, Wis., the Internal Revenue Service, Criminal Investigation Division in Chicago, the Bureau of Alcohol, Tobacco, Firearms and Explosives in Chicago, and Rockford Police Department, and the Illinois, Indiana and Wisconsin State Police also assisted in the investigation.

According to the allegations in a 262-page complaint affidavit, the investigation determined that:

• MICHAEL WHITING was a wholesale supplier of heroin, working with his brother, ANTONIO WHITING, as well as MICHAEL COLEMAN, COREY MINNIFIELD, and CHARLES JAMES. Investigators also learned that Michael Whiting was supplied heroin by JIMMY SERRANO, and Michael Whiting sold heroin to customers, including VONZAYE DAVIS, of Milwaukee, Wis., and RICHARD HICKS, according to the charges;


 
•  
• Michael Whiting shared a narcotics stash house at 2437 West Adams St., with Charles James, who was a wholesale supplier of cocaine. Defendants JAMESON HAMLIN, EDUARDO RIVERA, DANIEL VAZQUEZ, and LADELL SMITH supplied cocaine to James, who in turn sold wholesale amounts of cocaine to his customers, including MICHAEL STARNES, MELISSA BELCHER, and MALCOM HARRIS; and


 
•  
• ERIC PASKON supplied wholesale amounts of cocaine to DANIEL VAZQUEZ, who ran his own wholesale cocaine distribution operation and maintained a stash house in an apartment at 3130 N. Lake Shore Dr. Vazquez employed FRANCISCO MIRELES, ANWER SHABAZ, and ANGEL PEREZ, and supplied wholesale amounts of cocaine to multiple customers, including BRANDON ELSING, NEFTALI FRYTES, and NICOLAS FRANCO.

Between November 2012 and April 2013, the Whiting brothers allegedly sold nearly a half-pound of heroin to a cooperating witness and an undercover agent. During the same time, law enforcement seized an additional 2.5 pounds of heroin and nearly nine pounds of cocaine. On Feb. 22, 2013, Chicago police officers executed a search warrant at the residence of Ladell Smith, in the 300 block of East 125th Street, and seized more than a kilogram of powder and crack cocaine, more than three-quarters of a kilogram of heroin, a .40-caliber Glock handgun, a bullet-proof vest, and more than $20,000. Most of the narcotics and the gun were found behind the radio in the dash board of a vehicle driven by Smith.

The charges against all but five of the defendants carry a mandatory minimum of five years and a maximum of 40 years in prison and a maximum fine of $5 million. Four defendants — Vazquez, Mireless, Shahbaz, and Perez— each face a mandatory minimum of 10 years and a maximum of life in prison and a $10 million fine, while Davis alone faces a maximum penalty of 20 years in prison and a $2 million fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant United States Attorneys Stephen P. Baker, Jeffrey D. Perconte, and Raj P. Laud.

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

Complaint

ROCKFORD — A Dakota, Ill., man was arrested today on federal mail fraud charges relating to his operation of two purported charities. In an indictment filed yesterday, CLIFFORD J. EDWARDS, JR., 33, formerly of Loves Park, Ill., was charged with 20 counts of mail fraud for allegedly defrauding victims out of more than $120,000 in charitable donations that the victims were told would be used to benefit children with cancer, under-privileged children, and children with cleft palates and facial deformities.

Edwards pleaded not guilty at his arraignment today and was released on his own recognizance. A status hearing was scheduled for Aug. 22 in U.S. District Court in Rockford.

According to the indictment, Edwards established and operated two supposed charitable entities: Helping Out, LLC, also known as “Helping Out,” and the Smiles for Kids Foundation, also known as “Smiles for Kids,” “the Smiles for Kids Foundation, Inc.,” “the Smiles 4 Kids Foundation,” and “Smiles 4 Kids.” Edwards ran these entities from locations in Rockford, Loves Park, and Dakota, Ill. The indictment alleges that Edwards and his agents made telemarketing type phone calls on behalf of Helping Out and Smiles for Kids. During these phone calls, Edwards and his agents solicited donations by claiming that Helping Out and Smiles for Kids provided benefits to children with cancer, under-privileged children, and children with cleft palates and facial deformities. It is further alleged that Edward mailed pledge statements, sponsor confirmations, and return envelopes addressed to Helping Out and Smiles for Kids, to the individuals who agreed to make donations. These individuals then mailed their personal checks back to Helping Out and Smiles for Kids in the return envelopes.

The indictment charges that, instead of using the donated funds to benefit children as promised, Edwards used the funds to pay his own personal expenses and to pay fund-raising costs. According to the indictment, Edwards conducted this fraud from at least June 2010 through June 2013.

Each count of mail fraud carries maximum penalties of 20 years in prison and a $250,000 fine, or an alternate fine totaling twice the loss or twice the gain, whichever is greater, 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 case was investigated by the United States Postal Inspection Service in Chicago. The investigation was conducted under the auspices of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov.

The arrest and indictment were announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Pete Zegarac, Inspector-in-Charge of the Chicago Division of the United States Postal Inspection Service.

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

The government is being represented by Assistant U.S. Attorney Scott A. Verseman.

Indictment

CHICAGO — A former Chicago alderman, the head of a $1 billion Nebraska-based prescription medication provider, and another man were convicted today of conspiracy to commit bribery of a fictitious public official to purportedly obtain business from the Los Angeles County hospital system after a two-week trial. A federal jury deliberated approximately several hours today before returning guilty verdicts against all three defendants.

The defendants, AMBROSIO MEDRANO, 59, of Chicago; JAMES BARTA, 71, of Fremont, Neb.; and GUSTAVO BUENROSTRO, 50, of Arlington Heights, were each convicted of the single count against them. They each face a maximum penalty of five years in prison and a $250,000 fine. They remain free on bond pending sentencing, which U.S. District Judge John J. Tharp, Jr., scheduled for 1p.m. on Sept. 24.

According to the trial evidence, which included numerous audio and video recordings of conversations with the defendants, Medrano introduced an undercover FBI agent, who was posing as a purchasing agent, to Barta, the president of family-owned Sav-Rx, and Buenrostro, an associate of Barta and a former Sav-Rx employee. Barta, Buenrostro, and Medrano allegedly agreed to bribe the undercover agent and the fictitious Los Angeles County hospital official — with Barta handing a $6,500 check to the undercover agent on June 22, 2012 — to do business with Sav-Rx, a Fremont, Neb.-based national provider of managed care prescription medication services.

Between December 2011 and March 2012, Medrano, Buenrostro, and a cooperating witness discussed the scheme, resulting in a meeting attended by those three, Barta, and the undercover agent at a Chicago restaurant on March 21. During the meeting, Barta discussed Sav-Rx’s business, including a contract with Cook County. The undercover agent explained a kickback arrangement for him and the fictitious Los Angeles County hospital official, if they were to succeed in expanding Sav-Rx’s services into the Los Angeles County hospital system. Barta replied that the arrangement was okay with him. In subsequent conversations, Medrano allegedly assured the cooperating witness and undercover agent that Barta and Buenrostro wanted to do a deal with the agent and were willing to provide an initial $10,000 payment in good faith.

The same group of individuals met again on May 9 at a Chicago restaurant and continued discussing steering Sav-Rx’s services to Los Angeles County, including using Medrano and Buenrostro to be the minority participants in a contract, with Barta endorsing that idea. Barta directed Buenrostro to do research on Los Angeles County and paid the lunch bill. The undercover agent said that the fictitious hospital official was not going to take any action until there was an agreement and the official saw some money. “We understand that and that’s not the problem,” Barta replied.

On June 22, 2012, Barta, Buenrostro, and Medrano met with the undercover agent at a restaurant in Omaha. The undercover agent explained that half of the good faith money they had been discussing was for his role in brokering the contract and half was for the fictitious Los Angeles County official. The undercover agent assured Barta that the good faith payment would be refunded if Sav-Rx did not obtain a contract from the hospital system. After further discussion about the indirect manner that Barta’s payment would be funneled to the fictitious official, Barta wrote a check on a Sav-Rx operations account, payable to the undercover agent for $6,500, and gave it to the undercover agent.

The guilty verdict was 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 government is being represented by Assistant U.S. Attorneys Christopher J. Stetler and Steven Grimes.

CHICAGO — REGINA EVANS and her husband, RONALD EVANS, the former police chief and the former inspector general, respectively, of suburban Country Club Hills, were each charged today with three counts of filing false federal income tax returns for allegedly failing to report all of their income during calendar years 2007-09. They were charged in a felony information filed today in U.S. District Court in Chicago.

Regina Evans’ attorney has authorized the government to disclose that she will be pleading guilty to the tax charges after the government files a request to transfer the case against her to the Central District of Illinois in Springfield for disposition. Regina Evans, 50, who was Country Club Hills police chief from 2009 to 2011, and Ronald Evans, 46, are scheduled to appear in U.S. District Court in Springfield on June 18.

The defendants were charged with failing to report all of their income in 2009, when they allegedly converted to personal income more than $500,000 of a $1.25 million state grant. They also allegedly failed to report all of their income in 2007, 2008, and 2009 from Prime Time Limousine, a Chicago transportation and security services company that they jointly owned and operated.

According to the charging document, Regina Evans founded and ran an organization called We Are Our Brother’s Keeper that, in 2009, received a $1.25 million employment opportunities grant from the Illinois Department of Commerce and Economic Opportunity to provide pre-apprenticeship educational and vocational training for people employed in building trades, such as bricklayers and electricians. The couple allegedly used more than $500,000 for non-grant-related personal purposes, making that money personal income.

On their federal income tax return for 2009, the couple stated that Prime Time’s gross receipts were approximately $150,000, knowing that its gross receipts totaled more than $201,297. They also allegedly stated that they did not have any other income, knowing that they had converted at least $500,000 in grant money.

In 2007, the defendants allegedly filed a false tax return by reporting Prime Time’s gross receipts were approximately $205,290, when the business actually had gross receipts totaling more than $360,649, and they allegedly filed a false 2008 tax return stating Prime Time’s gross receipts were approximately $150,630, when it actually had gross receipts of more than $291,414.

The charges were 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. The Chicago Office of the Federal Bureau of Investigation participated in the investigation.

Filing a false federal income tax return carries a maximum penalty of three 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. 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 Joel Hammerman.

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

ROCKFORD — A Rockford, Ill. man was sentenced today in federal court by U.S. District Judge Frederick J. Kapala for wire fraud and identity theft. ANTHONY HARDY, 42, was sentenced to 65 months in federal prison, in addition to 5 years of supervised release following his release from prison, and ordered to pay restitution of $212,625.13. Hardy guilty to the charges on Feb. 19, 2013, admitting 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 other individuals 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 Hardy 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. Hardy also admitted in the plea agreement that he unlawfully possessed and used the Social Security Number of another person as part of his fraud scheme to purchase merchandise from the large chain stores.

Three other individuals have been charged in a separate indictment for their roles in the wire fraud scheme with Hardy: William Dorn, 24, and Cameron Love, 28, both of Rockford, Ill., and Anthony Taylor, 44, of Marietta, Ga., each of whom have pled guilty to one count of wire fraud.

The sentencing was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Pete Zegarac, Postal Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Rockford Police Department and Freeport Police Department assisted in the investigation.

The government was represented by Assistant U.S. Attorney Michael D. Love.

CHICAGO — An admitted white-supremacist was sentenced today to the maximum of 10 years in federal prison for violating the civil rights of an African-American family whose home he set on fire after they moved onto his block in 2007. The defendant, BRIAN JAMES MOUDRY, pleaded guilty in January of this year and agreed to the 10-year sentence, admitting that at approximately 4 a.m. on June 17, 2007, he carried a can containing gasoline to the home, splashed the gasoline on the residence and ignited it. No one was injured, although the home was occupied by eight children, ranging in age from 4 to 14, and an adult at the time of the fire.

Moudry, 36, formerly of the 300 block of South Reed Street, Joliet, pleaded guilty to using fire to interfere with the victims’ housing rights on the basis of race. He has been in federal custody since he was arrested on May 30, 2012. U.S. District Judge Robert Gettleman imposed the agreed maximum sentence and ordered Moudry to undergo mental health and substance abuse treatment. He also ordered Moudry to pay $7,108 in restitution to cover damage to the residence and to reimburse the Joliet Fire Department.

“This was an exceptionally despicable crime motivated by hate. The victims of the arson did nothing, but move into a new residence in Joliet. Unbeknownst to the victims, several houses down lived a white supremacist who never knew the victims but hated them because they were African American,” the government argued in a sentencing memo.

“There is nothing we do as federal prosecutors that’s more important, not to mention more satisfying, than vindicating the rights of our fellow citizens, whatever their race, ethnicity, or religious background, to live in peace and security,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.

“One of the FBI’s top priorities is safeguarding the rights of all Americans. This case demonstrates our commitment to investigate and bring to justice those whose hatred of others leads them to violate civil rights,” said Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

In pleading guilty, Moudry admitted that he was upset that an African-American family rented a house at 318 South Reed St., in May 2007 on the same block as his house. He admitted that he set the fire because African-Americans were occupying the home, and that he intended to interfere with their continued ability to rent the residence and to intimidate the owner from continuing to rent to African-Americans.

The government was represented by Assistant U.S. Attorneys Nancy DePodesta and Steven Dollear.

CHICAGO — Two attorneys are among four defendants who have been indicted in two separate mortgage fraud cases, federal law enforcement officials announced today. In one case, an attorney, a real estate investor, and a loan originator were charged with allegedly participating in a scheme to fraudulently obtain at least five residential mortgage loans totaling approximately $1.5 million from various lenders. In the second case, an attorney was charged with allegedly participating in a scheme to fraudulently obtain at least 12 residential mortgage loans totaling nearly $3.75 million from various lenders.

Both indictments allege that the mortgages were obtained to finance the purchase of properties on Chicago’s south side, stretching from the Back of the Yards to Englewood and West Englewood neighborhoods, at inflated prices by buyers who were fraudulently qualified for loans, or were being paid, while the defendants allegedly profited. As a result, various lenders and their successors incurred losses because the mortgages were not fully recovered through subsequent sale or foreclosure.

Three defendants were charged together in a five-count indictment that was unsealed on Friday following the arrest of STEVEN BARTLETT, 42, of Chicago, a part owner of SSB Re, Inc., also known as SSB Real Estate Solutions, Inc., through which Bartlett bought and sold residential properties in Chicago. Bartlett, ROBERT LATTAS, 36, of Oak Brook, an attorney who represented SSB Re in real estate closings, and NICHOLAS BURGE, 34, of Bloomington, Ill., a loan originator for two different lenders, were each charged with one count of mail fraud and four counts of wire fraud. The indictment seeks forfeiture of $1,494,248.

Bartlett remains in custody pending a detention hearing at 10 a.m. tomorrow before U.S. Magistrate Judge Sheila Finnegan. Lattas and Burge were ordered to appear voluntarily for arraignment at 11:30 a.m. Thursday before Magistrate Judge Finnegan in U.S. District Court.

Between January 2008 and January 2009, Bartlett allegedly used SSB Re to sell properties at inflated sales prices to buyers that he knew were fraudulently qualified for mortgage loans. Bartlett and Burge prepared and submitted loan applications to lenders that they knew contained false information about buyers’ qualifications, including information about buyers’ income, assets, liabilities, employment, source of down payment, and intention to occupy properties as a primary residence, the indictment alleges.

Bartlett and Lattas allegedly prepared and submitted to lenders HUD-1 settlement statements that they knew contained false information, including the true source of the buyers’ down payments. Lattas allegedly represented, or had his associates represent, SSB Re at closings in which properties were sold to buyers, knowing that Bartlett had recruited individuals to provide funds that were falsely represented to lenders as the buyers’ down payments. Lattas knew individuals other than the buyers were providing cashier’s checks representing the buyers’ down payments and falsely listed them as the remitters, the charges allege.

The charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General in Chicago; and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Federal Housing Finance Agency Office of Inspector General assisted in the investigation. The government is being represented by Assistant U.S. Attorney Jason Yonan.

In a separate, unrelated case, ANTHONY CAMPANALE, 58, of Oak Park, an attorney who represented SNAP Holdings, LLC and affiliated entities at real estate closings, was charged with three counts of mail fraud and five counts of wire fraud in an eight-count indictment returned on May 16. Campanale pleaded not guilty on May 24 at his arraignment in Federal Court. The indictment seeks forfeiture of $3,733,250.

According to the indictment, between October 2007 and November 2008, Campanale knew that he was representing SNAP Holdings and its affiliates at closings for properties that were being sold at inflated sales prices to buyers whom he knew were being paid by his clients to purchase the properties. Campanale allegedly caused sales contracts to be submitted to lenders that he knew contained false information, including inflated sales prices, and he submitted to lenders HUD-1 settlement statements that he knew contained false information about the true source of the buyers’ down payments and about payments provided to the buyers for purchasing the properties.

The charges result from the same investigation that led to the July 2012 indictment of seven defendants for allegedly participating in a scheme to fraudulently obtain more than 20 residential mortgages totaling approximately $8.5 million from various lenders. Three of those defendants, including Thomas Hyland, 40, of Glen Ellyn, who co-owned SNAP Holdings, have pleaded guilty while charges remain pending against the other four defendants.

Mr. Shapiro announced the Campanale charges with Cory B. Nelson, Special Agent-in- Charge of the Chicago Office of the Federal Bureau of Investigation; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor’s Office of Inspector General; and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The government is being represented by Assistant U.S. Attorneys Jason Yonan and Ryan Hedges.

Each count of wire fraud and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the Court may impose an alternate fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. The Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

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

Since 2008, several hundred defendants have been charged in Federal Court in Chicago and Rockford with engaging in various mortgage fraud schemes involving more than 1,000 properties and more than $300 million in potential losses, signifying the high priority that federal law enforcement officials give mortgage fraud in an effort to deter others from engaging in crimes relating to residential and commercial real estate.

Today’s announcement is part of efforts underway by the Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has facilitated increased investigation and prosecution of financial crimes; enhanced coordination and cooperation among federal, state and local authorities; addressed discrimination in the lending and financial markets, and conducted outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit stopfraud.gov.

Bartlett Indictment

Campanale Indictment

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. WILLIAM DORN, 24, who was charged in a superseding indictment along with three other men, admitted that between March 2011 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, Dorn admitted that as part of the scheme he and his co-defendants ANTHONY HARDY, 42, and CAMERON LOVE, 28, both of Rockford, and ANTHONY TAYLOR, 44, of Marietta, Georgia, 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. Dorn 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.

Dorn is scheduled to be sentenced on Sept. 9, 2013, at 2:30 p.m. Taylor, who pleaded guilty on April 15, 2013 to one count of wire fraud, is scheduled to be sentenced on July 24, 2013, at 2:30 p.m. Sentencing for Cameron Love, who pleaded guilty on Feb. 28, 2013, to one count of wire fraud, is not currently scheduled.

Anthony Hardy, who was also charged in a related case, pleaded guilty on Feb. 19, 2013, to one count of wire fraud and one count of identity theft, is scheduled to be sentenced on June 4, 2013, at 2:30 p.m. In addition to Hardy admitting he participated in a wire fraud scheme with Dorn and others, Hardy admitted he unlawfully possessed the identification of another person used to purchase merchandise from the stores in the wire fraud scheme.

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 plea was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; and Pete Zegarac, Postal 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.

Plea Agreement

CHICAGO – A former Illinois prison guard living in Arkansas was arrested on federal charges for allegedly illegally selling eight firearms, including five assault rifles, to an individual he knew was a convicted felon because they met when the individual was an inmate and they later remained in contact. The defendant, DWAYNE MEEKS, was arrested yesterday by FBI agents following an undercover investigation in which the former inmate, posing as a firearms trafficker, was cooperating with federal agents.

Meeks, 48, of Little Rock, Ark., and formerly of Chicago and Joliet, was charged with one count each of dealing firearms without a federal license and selling firearms to a convicted felon in a criminal complaint that was unsealed following his arrest. He was ordered to remain in federal custody pending a detention hearing at 1:15 p.m. Monday before U.S. Magistrate Judge Sidney I. Schenkier in Federal Court in Chicago.

According to the complaint affidavit, Meeks and the former inmate met in Chicago in May 2012 and Meeks began discussing selling various firearms and showing the cooperating individual photos of the weapons on his cell phone and via emails. They continued their discussions about arranging a deal involving multiple firearms through the next two months. On July 14, 2012, Meeks and the cooperating former inmate met in a suburban Cook County Forest Preserve where Meeks allegedly sold eight high-powered firearms to the individual for $18,000, consisting of $15,000 for the weapons from Meek’s supplier and $3,000 for Meeks’ delivery fee. FBI agents conducted surveillance and monitored audio and video-recorded transmissions of the alleged transaction, including during the transfer of the weapons from the back of Meeks’ truck to the trunk of a car driven by the cooperating individual.

On more than one occasion, Meeks described the assault rifles as “tact’d out,” meaning they included such features as night scopes and laser sights, the affidavit states. The weapons Meeks allegedly sold and were seized were: two .223 caliber assault rifles, a 5.56 caliber assault rifle, a .50 caliber assault rifle with an ammunition drum attached, a 7.62 caliber assault rifle, a .45 caliber semi-automatic pistol, a 9 mm semi-automatic pistol, and a .22 caliber rifle.

Meeks allegedly discussed selling additional firearms to the former inmate but a deal planned for the end of July 2012 did not occur following the mass shooting at a theater in Aurora, Col. They allegedly discussed another future firearms transaction but Meeks consistently reported the difficulty he was having finding firearms, according to the complaint. In early January of this year, Meeks allegedly complained to the former inmate about the continued difficulty finding firearms after the school shooting in Newtown, Ct., in December.

During the last two weeks, Meeks and the former inmate allegedly discussed Meeks arriving in Chicago yesterday to sell the cooperating individual at least eight additional firearms. Meeks was arrested yesterday when he arrived at the same Forest Preserve location where they met last summer and three AR15 assault rifles that he allegedly brought to sell were seized.

The arrest and charge 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. Chicago Police Department task force officers assisted in the investigation.

Dealing firearms without a federal license carries a maximum sentence of five years in prison, and selling firearms to a convicted felon carries a maximum of 10 years, and each count carries a $250,000 maximum fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines. The Government is being represented by Assistant U.S. Attorney Ronald DeWald.

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

CHICAGO — A Chicago man was sentenced today to 23 years in federal prison for placing a backpack that he thought contained a powerful explosive device into a curbside trash container on a crowded street near Wrigley Field in September 2010. The defendant, SAMI SAMIR HASSOUN, pleaded guilty in April 2012 to one count each of attempted use of a weapon of mass destruction and attempted use of an explosive device, and faced between 20 and 30 years in prison under the terms of his plea agreement.

Hassoun, 25, a Lebanese citizen and permanent resident alien who formerly resided on the city’s north side, has remained in federal custody since he was arrested during the very early morning on Sept. 19, 2010. The purported bomb was actually an inert device that was provided by undercover FBI agents, who were investigating and monitoring Hassoun’s proclaimed determination to commit acts of violence in Chicago for monetary gain and to cause local political instability.

“The thought of what might have happened if it was real is horrific,” said U.S. District Judge Robert Gettleman, who ordered Hassoun placed on five years of supervised release following his prison term and noted that he will be subject to deportation when he is released.

As a result of the undercover investigation, Hassoun never posed any actual imminent danger, but his guilty plea made clear that he intended to cause mass casualties and had rejected opportunities to walk away from the plot. He chose the particular location and time of the proposed attack – the 3500 block of North Clark Street and late on a Saturday night – because it presented the opportunity to inflict a greater number of casualties. There was a concert at Wrigley Field on Saturday night, Sept. 18, 2010, just before he was arrested.

“If the bag that Hassoun left in that Clark Street trash receptacle had contained the type of explosive device that he thought it did, the results would have been horrific,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois. “In conversation after conversation, Hassoun made clear that he was willing to bomb innocents and shoot police officers as part of a bizarre effort to destabilize the City of Chicago. And his actions demonstrated that his words were more than empty bravado,” Mr. Shapiro said.

“I am proud of the work done by a talented investigative team in preventing Hassoun from carrying out his intended act of great violence. I am also grateful to the dedicated prosecution team for their role in bringing Hassoun to justice. We remain vigilant in our mission to prevent attacks against Americans and to identify and hold accountable individuals and groups involved in the planning and execution of such attacks,” said Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The investigation was conducted by the Chicago FBI’s Joint Terrorism Task Force, which consists of FBI special agents, Chicago police officers, and other federal, state and local law enforcement agencies.

In pleading guilty, Hassoun admitted telling a law enforcement cooperating source (CS) in early June 2010 that he wanted to commit acts of violence in Chicago and suggested bombing the commercial area surrounding Wrigley Field as one option. Hassoun said that an attack against such an entertainment center could “paralyze” Chicago commerce. The CS told Hassoun that he/she had friends willing to help Hassoun to perpetrate such an attack. Hassoun and the CS continued to discuss Hassoun’s terrorist attack ideas during the following weeks, and Hassoun indicated that he wanted to meet the CS’s contacts and was anxious to act against Chicago.

On July 8, 2010, the CS introduced Hassoun to an undercover FBI task force officer posing as one of the CS’s purported contacts, and Hassoun said that he believed that a series of escalating violent acts could be used to undermine the city’s political establishment. When asked what he was personally willing to do, Hassoun indicated that he was willing to facilitate a car bombing or attacks against Chicago police officers. When asked later if he was concerned about the victims of such violence, Hassoun said that casualties were the inevitable result of what he termed “revolution.”

On July 21, 2010, an undercover FBI agent was introduced to Hassoun as a “good friend” and “brother,” and Hassoun discussed his idea of a series of escalating violent attacks to damage Chicago’s sense of security, its economy, and trust in leadership. He identified Chicago entertainment establishments, civic buildings, commercial high-rises, and transportation infrastructure as potential targets, the plea agreement states.

During this meeting, the undercover agents gave Hassoun a digital camcorder to videotape potential targets. Hassoun traveled to the area around Wrigley Field and filmed potential targets on Aug. 8, 12 and 14, 2010, focusing on the bars, restaurants and potential security in the area. As he filmed, Hassoun commented on the potential tactical advantages and risks of perpetrating an attack at the various locations he observed. Also during the July 21 meeting, Hassoun asked the undercover agents effectively to employ him planning the bombing, and from July 21 to Sept. 18, 2010, they paid Hassoun $2,700.

On Aug. 16, 2010, Hassoun met with the agents and debriefed them on his reconnaissance efforts. He gave them the camcorder and after reviewing the videos, they all discussed the areas that could be targeted to cause maximum casualties with minimum operational difficulty and risk. On Aug. 31, 2010, Hassoun and the undercover agents traveled to Hassoun’s chosen location, which Hassoun said would be crowded with bar patrons.

At a prearranged meeting on the night of Sept. 18, 2010, at a hotel in Rosemont, the undercover agents provided Hassoun with a shopping bag and a backpack that contained the purported bomb. While driving together to the target area, one of the agents explained to Hassoun that the bomb was surrounded by ball-bearings and that its blast could destroy up to half a city block. As they approached the area, one of the agents told Hassoun that he was setting the bomb’s timer for 20 minutes, but Hassoun said that was too long. The agent and Hassoun then set the timer together and activated the purported bomb’s arming mechanism in Hassoun’s presence. They arrived near the target location at approximately 12:10 a.m. on Sunday Sept. 19 and parked about a block away. As planned, Hassoun exited the vehicle with the shopping bag containing the backpack and purported explosive device, walked a short distance, and deposited what he thought was the armed bomb into the trash container on the crowded sidewalk.

The government was represented by Assistant U.S. Attorneys Joel Hammerman and Tinos Diamantatos.

CHICAGO – A former Lake County man was sentenced today to more than six years in federal prison for cheating at least 20 victims of approximately $1.6 million in an investment fraud scheme. The defendant, WILLIAM BLOCK, promised investors substantial profits, in some cases up to 300 percent returns over just six months, and instead used the money to finance a lavish lifestyle.

Block, 54, formerly of Lake Forest, who has been in custody since he was arrested in November 2008, was sentenced to 75 months in prison by U.S. District Judge Harry Leinenweber. Block was also ordered to forfeit approximately $1.6 million, as well as to pay restitution totaling approximately $1.9 million, which also includes the proceeds of a separate $300,000 bank fraud. Block did not admit guilt but was found guilty by Judge Leienweber earlier this month after conceding that the government could provide him guilty.

The government’s proof established that between May 2002 and November 2008, Block operated an investment fraud scheme in which he falsely told at least 20 individual investors that if they gave him money, ranging from tens of thousands to hundreds of thousands of dollars, he could pay fees and costs to recover certain monies to which he was entitled and the investor would reap a financial reward. As a result, Block fraudulently obtained about $1.6 million from his victims.

In fact, Block’s representations were bogus, and he converted the victims’ funds for a variety of personal and living expenses, including cigars, limousine services, clothing, travel, wine, and a trip on a private plane to view a yacht that he represented he was considering for purchase.

As relevant conduct at sentencing, the government also established that Block engaged in a separate bank fraud scheme in 2007, by using a $300,000 check that he knew had ‘bounced,’ and then using at least $190,000 of the proceeds to obtain an official check from AmCore Bank. He used the proceeds from that official check for a variety of personal expenses, including cigars, a $2,600 watch, rounds of golf, and payments to a girlfriend.

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 Kaarina Salovaara and Jessica Romero.

The case falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: StopFraud.gov.

CHICAGO — A former Dubuque, Iowa, machinist was sentenced today to 37 years in prison for mailing a dozen threatening letters from the Chicago area and elsewhere, and mailing two pipe bombs from a Chicago suburb, between 2005 and early 2007 to investment firms and advisors as part of terror campaign to drive up the value of stock he owned in two companies. The defendant, JOHN P. TOMKINS, who signed some of his letters “THE BISHOP,” was convicted in May 2012 after a two-week trial in U.S. District Court.

Tomkins, 48, received a mandatory minimum sentence of 30 years for using a destructive device while mailing a threatening communication, which was imposed consecutively to seven years on other counts. He was convicted of two counts of possessing a unregistered destructive device and nine counts of mailing a threatening communication.

Tomkins “taunted” and “terrified” a dozen victims, who could have been seriously injured or killed, in committing “a series of horrific crimes,” U.S. District Judge Robert M. Dow, Jr., said in imposing the sentence after conducting a hearing last month. Tomkins has remained in federal custody without bond since he was arrested on April 25, 2007, following an investigation led by the U.S. Postal Inspection Service.

“Tomkins took these terrifying and secretive actions because he was greedy – because he did not like the financial and life situation in which he found himself. To remedy those perceived problems, he decided to terrorize people to get what he wanted. He was indifferent to whether he killed people in the process. For these horrific choices, that he repeatedly made over the course of two years, Tomkins received the lengthy sentence imposed today,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.

“Through an intensive investigation, the U.S. Postal Inspection Service identified Tomkins before his behavior led to victims sustaining severe physical injuries or even death. Although this sentencing brings Tomkins’ acts of terror to a close, his victims will live forever with the pain they suffered because of him. The Postal Inspection Service takes any crime involving the mail very seriously and we will continue to investigate individuals who misuse the U.S. mail to commit crime,” said Pete Zegarac, Inspector-in-Charge of the Chicago Division of the U.S. Postal Inspection Service.

The evidence at trial showed that the two unregistered destructive devices were each mailed on Jan. 26, 2007, at the Rolling Meadows Post Office, northwest of Chicago. One package was addressed to an individual at Janus Small Cap at an address in Denver, where it was forwarded unopened by Janus to a related investment entity in Chicago. The second parcel was addressed to an individual at American Century at an address in Kansas City, Mo. Upon delivery, authorities were notified and both parcels were recovered by Postal Inspectors.

Each parcel contained an improvised explosive weapon, commonly known as a pipe bomb. Expert testimony at trial showed that they were functional, even though the firing circuit was not fully connected, and they were capable of exploding as a result of jostling or impact and causing serious injury or death to persons near the explosion. Each parcel contained a letter stating, in part: “BANG!! YOU’RE DEAD.”

Tomkins was convicted of mailing a dozen threatening letters to investment companies and individuals associated with them between May 23, 2005, and July 17, 2006. The typewritten letters bore postmarks from Chicago, Palatine, Milwaukee, Des Moines and Orlando, Fla., and some were signed “THE BISHOP,” while others ended with the words “TIC TOC.” The first letter, for example, stated how easy it is to kill someone, citing “The Unibomber” (sic) and “Salvo,” a reference to convicted sniper Lee Malvo. In addition to threatening language, some of the letters demanded that the price of the former 3Com Corporation (COMS) stock be raised to $6.66 by a certain date. Other demands were made for a rally in the stock price of Navarre Corporation, a publicly-traded technology and entertainment company that traded under the ticker symbol NAVR.

Evidence also included U.S. Securities and Exchange Commission records showing individuals with positions of at least 200 option contracts. Two reports each obtained for 3Com and Navarre identified Tomkins as the only investor whose account appeared in those reports at certain times dating back to 2005. Trading records showed that Tomkins held financial interests in 3Com and Navarre that would have increased in value had the securities moved in the directions demanded in the threatening letters and when the pipe bombs were mailed.

One the day he was arrested, law enforcement officials searched storage garages rented by Tomkins in Dubuque and recovered two additional assembled pipe bombs similar to the ones that were mailed, as well as all of the components used in making the mailed devices. For example, inspectors discovered store receipts for shotgun shells containing the explosive powder that was used in the mailed pipe bombs and was purchased in Madison, Wis., 23 days before the two package bombs were mailed. Inspectors also found a receipt for end caps used to assemble the devices that were purchased in Dubuque just two days before they were mailed in January 2007.

The government was represented by Assistant U.S. Attorneys Patrick C. Pope and Paul H. Tzur.

The investigation was led by the U.S. Postal Inspection Service, joined by agents from the Federal Bureau of Investigation’s Joint Terrorism Task Force and the Bureau of Alcohol Tobacco Firearms and Explosives. The SEC, the Illinois State Police, the Iowa Department of Public Safety, the Dubuque, Kansas City and Chicago police departments, the Quad Cities Bomb Squad, and the U.S. Attorney’s Office in the Northern District of Iowa also assisted in the investigation.

ROCKFORD — A Roscoe, Ill. man pleaded guilty today in federal court to two counts of transporting child pornography via the internet. In pleading guilty, JASON NICOSON, 35, admitted before U.S. District Court Judge Frederick J. Kapala that in December 2011 and January 2012, he used the internet to transport images and videos contained multiple visual depictions of minors engaging in sexually explicit conduct. Nicoson’s sentencing hearing is scheduled for Sept. 6, 2013, at 2:30 p.m.

Nicoson faces a mandatory minimum sentence of 5 years and a maximum of 20 years in prison, a term of supervised release following imprisonment of at least 5 years and up to life, and a fine of up to $250,000 on each count. The Court must impose a reasonable sentence guided by the advisory United States Sentencing Guidelines.

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 Illinois State Police and the Illinois Internet Crimes Against Children Taskforce assisted in the investigation.

The government is being represented by Assistant U.S. Attorney Michael D. Love.

Plea Agreement

CHICAGO — A retired Chicago police officer was sentenced today to 18 years in federal prison for his lengthy participation in a drug-trafficking conspiracy that involved the distribution of hundreds of kilograms of cocaine, murder, violent kidnappings, robberies, home invasions, and obstruction of justice. The defendant, GLENN LEWELLEN, a Chicago police officer from 1986 until he resigned in 2003, was one of five co-defendants who were convicted following a two-month trial in late 2011 and early 2012. There was no allegation that Lewellen participated in any murders.

Lewellen, 57, formerly of Chicago, Las Vegas, and south suburban Frankfort, was taken into custody following his conviction on Jan. 31, 2012. He faced a maximum sentence of life and a mandatory minimum of 10 years in prison. The government sought a sentence of 30 years from U.S. District Judge Joan Gottschall, who, in imposing the sentence, said that public interest in general deterrence and respect for the law, as well as the seriousness of Lewellen’s crimes, called for the 18-year sentence, even though she did not believe that he posed any risk of personal recidivism. The jury that convicted Lewellen of a narcotics distribution conspiracy did not reach a verdict on whether he also participated in a racketeering (RICO) conspiracy, and the government today dismissed that count because it would not have added any time to Lewellen’s sentence.

The evidence at trial showed that from 1998 to 2006, after he had retired, Lewellen, together with brothers Hector and Jorge Uriarte and others, participated in the drug conspiracy with Saul Rodriguez, who Lewellen had arrested in 1996 and enlisted as a Chicago police informant while allowing him to continue buying, selling and stealing cocaine. Lewellen personally participated in violent kidnappings and robberies of drugs and money, and obstructed justice by providing information to his cohorts and interfering with criminal investigations into their activities.

“Lewellen decided that he could make more money breaking his oath and the law than he could by serving and protecting,” the government argued in a sentencing memo. He “ruthlessly kidnapped victim after victim at gunpoint, restrained them, and threatened them until cocaine or money was provided to secure their release.”

A total of 11 defendants were charged in the case. Rodriguez and three co-defendants pleaded guilty and testified as government witnesses at the trial of Lewellen and four codefendants. The case began when Rodriguez and others were arrested in April 2009 after they conspired to steal hundreds of kilograms of purported cocaine from a warehouse in southwest suburban Channahon as part of an undercover sting operation.

Rodriguez is awaiting sentencing and is expected to receive 30 to 40 years in prison under the terms of his plea agreement. Jorge Urirate was sentenced to 60 years in prison; Hector Uriarte received 50 years in prison, and trial defendants, Tony Sparkman and Robert Cardena, received 42 years and 10 years, respectively.

Lewellen’s sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration, and James C. Lee, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago. The investigation was conducted under the umbrella of the Organized Crime Drug Enforcement Task Force (OCDETF).

The government is represented by Assistant U.S. Attorneys Terra Reynolds, Steven Block and Tiffany Tracy.

CHICAGO – RUSSELL K. GORDON, 48, of rural McHenry, Ill., was arrested at his home Saturday night by special agents of the U.S. State Department Diplomatic Security Service (DSS) and the Federal Bureau of Investigation for allegedly making threatening communications to kill State Department officials, including the U.S. Ambassador in Serbia, as well as Serbians in Chicago, apparently due to a visa dispute involving his wife in Serbia. Gordon is scheduled to have his initial court appearance at 2:30 p.m. today before U.S. Magistrate Judge Susan Cox in the Dirksen Federal Courthouse in Chicago.

According to a criminal complaint affidavit, Gordon, a U.S. citizen, lived in Serbia from 1996 to November 2012, and married a Serbian woman who had a child whose father was a Serbian national. In September 2012, Serbian courts awarded custody of the child to the biological father.

Starting in February 2013, Gordon allegedly sent threatening or intimidating text messages to a U.S. Embassy consular assistant in Belgrade, Serbia. On April 15, and again on May 12, the FBI in Chicago received an email, purportedly from Gordon, at a publicly available email account that allegedly was consistent with his prior threatening messages, which are detailed in the complaint affidavit. Last Friday, Gordon’s wife went to the U.S. Embassy in Belgrade to request a visa for entry into the U.S., and told embassy officials that Gordon had developed detailed plans to shoot Serbian citizens in Chicago, including diplomats at places he believed Serbians routinely congregated. On Saturday, Gordon’s wife told the consulate chief at the U.S. Embassy in Belgrade that Gordon was enraged upon learning that his wife would receive only a two-week guest visa, and that he was going to kill the U.S. Ambassador, his wife, their two daughters and another State Department employee.

The arrest and charge were announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cornell Chasten, Special Agent-in-Charge of the DSS Field Office in Chicago; and Cory B. Nelson, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation. DSS Offices in Belgrade and Washington, D.C. provided significant assistance in the investigation. The McHenry Police Department, the McHenry County Sheriff’s Office and the Kane County Bomb Squad assisted in Gordon’s arrest on Saturday and with the execution of a search warrant at his home on Friday.

If convicted, Gordon faces a maximum penalty of five years in prison and a $250,000 fine. The Government is being represented by Assistant U.S. Attorney William Ridgway.

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

ROCKFORD — An Oregon, Ill. man was sentenced today in federal court for distributing child pornography. JONATHAN LONG, 51, who was originally charged in federal court in Alaska, was sentenced by U.S. District Judge Philip G. Reinhard to 121 months in federal prison for distributing child pornography, in addition to 10 years of supervised release following his release from prison.

Long pled guilty to the charge on Nov. 16, 2012. According to the written plea agreement, Long admitted that in March 2012 he distributing visual images of a minor engaging in sexually explicit conduct via email to an individual in Alaska. Long was arrested on July 24, 2012, and has since been in federal custody.

The sentencing was announced 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 government was represented by Assistant U.S. Attorney Michael D. Love.

ROCKFORD — A Hanover, Ill. man was sentenced today by U.S. District Judge Philip G. Reinhard in federal court in Rockford for wire fraud. ANTHONY F. DEFILIPPO, 56, of Hanover, was sentenced to 18 months imprisonment, to be followed by 3 years of supervised release, 9 months of which DeFilippo must spend in home confinement, in addition to restitution in the amount of $53,664.61. DeFilippo pled guilty to wire fraud on Nov. 21, 2012, admitting that from 2009 to 2011 he devised and engaged in a scheme to defraud and obtain money, funds, and property from Wal-Mart.com, Inc., credit card issuers, and credit card holders by means of materially false and fraudulent pretenses, representations, and promises.

According to the written plea agreement, DeFilippo admitted that he used his eBay account to sell various types of merchandise, such as vacuum cleaners and sewing machines, that another participant in the scheme then fraudulently obtained from Wal-Mart.com, Inc. through the unauthorized use of names and credit cards numbers of other credit cardholders. The merchandise was then shipped to the address of the person that had purchased the item through DeFilippo’s eBay account, but containing the name of the victim credit cardholder. DeFilippo further admitted that he arranged for the money eBay received from the eBay buyers to be paid to DeFilippo through PayPal debit cards. DeFilippo periodically withdrew money from the debit cards, keeping a portion for himself and sending the rest to other persons, including persons in foreign countries such as the Ukraine.

The sentencing was announced 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; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Hiram Grau, Director of the Illinois State Police.

The government was represented by Assistant U.S. Attorney Michael D. Love.

ROCKFORD C A DeKalb, Ill. doctor and his wife were arrested today on charges of illegally dispensing controlled substances and federal income tax fraud. RICHARD H. NG, 61, a doctor of osteopathic medicine, and President and sole shareholder of Sauk Medical Clinic with offices located in Sterling and DeKalb, Ill., was charged by a federal grand jury in Rockford yesterday in an 89 count indictment, including one count of conspiracy to dispense controlled substances outside the course of professional practice and without a legitimate medical purpose, 81 counts of dispensing controlled substances outside the course of professional practice and without a legitimate medical purpose, and 7 counts of income tax fraud. LEE LEE FOONG, 54, also known as “Audrey,” who was married to Ng, was charged with one count of conspiracy to illegally dispense controlled substances outside the course of professional practice and without a legitimate medical purpose, 5 counts of dispensing controlled substances outside the course of professional practice and without a legitimate legal purpose, and one count of income tax fraud.

According to the indictment, Ng owned and operated the Sauk Medical Clinic, and Foong was the office manager for the Clinic. Beginning in January 2007 and continuing through October 2011, Ng and Foong allegedly dispensed Oxycodone, Methadone, Morphine, and other prescription pain medications outside the course of professional practice and without a legitimate medical purpose, the dispensation of which in some cases resulted in death and other bodily injuries. During the course of the conspiracy, Ng saw patients at Sauk Medical Clinic’s offices in Sterling and DeKalb on at least a monthly or bi-weekly basis to dispense large quantities of prescription controlled substances. The indictment alleges Ng failed to conduct adequate medical evaluations, increased the dosage amounts, and required patients to return frequently to Ng to obtain excessive amounts of the controlled substances. According to the indictment, Ng continued to issue prescriptions despite obvious “red flags” that his patients were abusing or misusing the controlled substances. The indictment alleges that Ng continued to prescribe excessive amounts of controlled substances knowing that these dispensations resulted in the death of three of his patients.

The indictment also alleges that Ng filed false U.S. corporate income tax returns for Sauk Medical Clinic for 2008–2010, knowing the returns underestimated gross receipts of Sauk Medical Clinic by a total of $922,850 over those years, which would have resulted in additional federal income tax due of $320,738. It is further alleged that false federal individual tax returns were filed by Ng for the calendar years 2008–2010, and by Ng and Foong for 2011, the year they were married, which failed to report a total of $1,256,486 in cash received from Sauk Medical Clinic and rental receipts. The indictment charges that the unreported income would have resulted in additional federal income tax due of $270,873.

Depending on the controlled substance involved, each charge of illegally dispensing a controlled substance carries a maximum penalty from up to 5 years in prison to a maximum penalty of life imprisonment in cases of death or serious bodily injury, in addition to a fine ranging from $250,000 to $1 million. Each count of filing a false income tax return carries a maximum penalty up to 3 years in prison, or a fine of up to $100,000 for an individual ($500,000 for a corporation), or both, as well as the costs of prosecution. If convicted, the Court must impose a reasonable sentence under the advisory United States Sentencing Guidelines.

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

The arrests were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Jack Riley, Special Agent-in-Charge of the Chicago Field Division of the Drug Enforcement Administration; and James C. Lee, Special Agent-in-Charge of the Chicago Field Office of the Internal Revenue Service - Criminal Investigation Division. The Sterling, Ill. Police Department assisted in the investigation.

“Those in the medical profession, like Dr. Ng and his wife, who allegedly abused their position of trust and prescribe drugs without any legitimate medical purpose, will be prosecuted to the fullest extent of the law,” said Jack Riley, Special Agent-in-Charge of the Chicago Field Division.

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

Indictment

CHICAGO — Two area physicians and three health clinic co-owners are among seven defendants charged here with engaging in five separate, unrelated health care fraud schemes to defraud the Medicare program and/or private health insurers of millions of dollars, federal law enforcement officials announced today.

Four of the five cases here are part of a nationwide takedown by Medicare Fraud Strike Force operations in eight cities, announced today by the Departments of Justice and Health and Human Services, resulting in charges against 89 defendants, including doctors, nurses, and other licensed medical professionals, for their alleged participation in Medicare fraud schemes collectively involving approximately $233 million in false billings.

In Chicago, the defendants were charged in two criminal complaints and two informations filed today and yesterday, and an indictment that was unsealed today following the arrest of one defendant in Miami. All seven defendants were charged with health care fraud for allegedly defrauding the Medicare program, or violating the anti-kickback statute, which makes it illegal to offer, pay, solicit, or receive payments in exchange for referrals of Medicare patients. The charges involve various medical treatments and services, as well as durable medical equipment.

“Today’s announcement marks the latest step forward in our comprehensive efforts to combat fraud and abuse in our health-care systems,” said Attorney General Eric Holder. “These significant actions build on the remarkable progress that the HEAT has enabled us to make – alongside key federal, state, and local partners – in identifying and shutting down fraud schemes. They are helping to deter would-be criminals from engaging in fraudulent activities in the first place. And they underscore our ongoing commitment to protecting the American people from all forms of health-care fraud, safeguarding taxpayer resources and ensuring the integrity of essential health-care programs,” he added.

“Today’s charges are part of our continuing efforts not only to deprive dishonest healthcare providers of their illegal profits, but to demonstrate to the broader medical services community that healthcare fraud will be found out and prosecuted with all of our resources. In short, we will not tolerate medical professionals and providers who abuse our healthcare system,” said Gary S. Shapiro, United States Attorney for the Northern District of Illinois.

Details of the Chicago cases follow:

United States v. Ankur Roy, Akash Patel, and Dipen Desai

ANKUR ROY, AKASH PATEL, and DIPEN DESAI, who owned and operated Selectcare Health, Inc., which provided outpatient physical and respiratory therapy in Park Ridge and Skokie, were charged with submitting more than $4 million in false billings to Medicare between March and July 2011. Each defendant was charged with six counts of health care fraud in an indictment that was returned by a federal grand jury last Wednesday and unsealed today.

Roy, 36, of Miami was arrested today in south Florida, while Patel, 33, of Morton Grove, and Desai, 33, of Chicago, will be ordered to appear for arraignment on a later date in U.S. District Court in Chicago.

According to the indictment, the defendants submitted false claims to Medicare and Blue Cross Blue Shield on behalf of Selectcare patients for respiratory therapy services that were never provided. The alleged false billings sought reimbursement for services purportedly provided on days that Selectcare’s sole respiratory therapist was not working; for time periods in which the patients were not receiving care from Selectcare; and for treatment seven days a week for three hours per day, a schedule well in excess of any schedule prescribed for patients at Selectcare.

Roy, Patel and Desai used a third-party billing service to forward the alleged false claims to Medicare, as well as to private insurers such as Blue Cross if the patient had supplemental private insurance, including insurance funded by labor union health and welfare plans.

Between March and July 2011, the defendants allegedly submitted $4,009,094 in false billings for services that were purportedly provided between April 2010 and April 2011, resulting in payments totaling approximately $2,214,424 from Medicare and $320,881 from Blue Cross Blue Shield. The indictment seeks forfeiture of $2,535,305 in alleged fraud proceeds, including $446,974 in funds withdrawn by cashiers’ checks that were seized by the FBI in July 2012.

The government is represented by Assistant U.S. Attorney Maureen Merin. The case was investigated by the FBI, the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), and the U.S. Department of Labor Office of Inspector General (DOL-OIG).

United States v. Cecilia Ibrahim

Dr. CECILIA IBRAHIM, an internal medicine physician who operated Sunrise Medical Center in Flossmoor, was charged with one count of health care fraud for allegedly engaging in a $1.7 million Medicare and private insurance false billing scheme.

Ibrahim, 50, of Frankfort, was charged in an information filed today in U.S. District Court. She will be arraigned on a date to be determined.

Between March 2006 and August 2009, Ibrahim allegedly submitted more than 3,200 false claims to Medicare and Blue Cross Blue Shield using a billing code for spinal decompression neuroplasty, a surgical procedure that she did not perform, when she only performed intervertebral differential dynamics therapy (IDD), a non-surgical procedure. As a result, she allegedly caused a loss of at least $300,000 to Medicare and $550,000 to Blue Cross Blue Shield. The indictment seeks forfeiture of at least $882,500 in alleged fraud proceeds.

The government is represented by Assistant U.S. Attorney Samuel B. Cole. The case was investigated by the FBI, HHS-OIG, and the Railroad Retirement Board Office of Inspector General.

United States v. Ellyse Lamon

ELYSSE LAMON, an account executive at a company that sold durable medical equipment, including back braces and transcutaneous electrical nerve stimulation units, also known as tens units, was charged with one count of health care fraud for allegedly engaging in a $350,000 Medicare false billing scheme.

Lamon, 30, of Elmhurst, was charged in an information filed today in U.S. District Court. She will be arraigned on a date to be determined.

Between October 2010 and May 2011, Lamon allegedly caused her company to submit false claims to Medicare representing that a physician had prescribed back braces and tens units when she knew that no physician had done so and the items were not medically necessary. In order to provide written support for the false claims, Lamon allegedly obtained patient records without a physician’s permission and added false information reflecting that a physician had ordered the equipment for the patients. She allegedly forged doctors’ signatures on documents, including false treatment records she created. Lamon further used patient information she had inappropriately accessed at a pain medicine center in Chicago to set up patient meetings where she falsely told patients that doctors had prescribed the equipment for them, according to the charges.

Lamon allegedly submitted false claims to Medicare totaling $352,685, resulting in payment of at least $206,233 to her medical equipment company. She allegedly profited from these false claims by receiving increased commissions and other benefits from her company.

The government is represented by Assistant U.S. Attorney Kruti Trivedi. The case was investigated by the FBI and is not part of the Medicare Fraud Strike Force operation.

United States v. Nalini Ahluwalia

Dr. NALINI AHLUWALIA, was charged with one count of violating the anti-kickback law for allegedly receiving $1,000 in exchange for referring two patients to a home health care agency in August 2012.

Ahluwalia, 58, of Burr Ridge, was charged in a complaint filed today in U.S. District Court. She will be ordered to appear on a date to be determined.

According to the complaint, a confidential informant who worked at a home health care company in Chicago, told agents that the CI had previously paid kickbacks to Ahluwalia of $400 to $500 per patient in exchange for her referral of Medicare patients to the home health care company.

On Aug. 23, 2012, at the direction of agents, the confidential informant met with Ahluwalia at the doctor’s office in Chicago, and paid her $1,000 for the two Medicare patient referrals in an exchange that was reflected on an audio/video recording, according to the complaint affidavit. In October 2012 and February 2013, the informant allegedly made two additional $500 payments to Ahluwalia in exchange for Medicare patient referrals.

The government is represented by Assistant U.S. Attorney Samuel B. Cole. The case was investigated by the FBI and the HHS-OIG.

United States v. Joseph Dickson

JOSEPH DICKSON, the president and owner of JD Medical Consultants, Inc., a medical marketing company, was charged with one count of violating the anti-kickback law for allegedly receiving $4,200 in exchange for referring patients to a home health care agency in October 2012.

Dickson, 65, of Lansing, was charged in a complaint filed yesterday in U.S. District Court. He will be ordered to appear on a date to be determined.

According to the complaint, a confidential informant who owned a home health care company in the Chicago area, told agents that the CI had previously paid kickbacks to Dickson, among others, for referring Medicare patients to another home health care company where s/he previously worked. Dickson was described as a “middle man” who arranged the referral of patients from a physician to a home health care company, and the confidential informant told agents that the CI had paid Dickson approximately $15,000 for referring about 30 patients between 2006 and 2008.

On Oct. 3, 2012, at the direction of agents, the confidential informant met with Dickson at his office in Chicago, and paid him $4,200 for seven Medicare patient referrals, at $600 each, in an exchange that was reflected on an audio/video recording, according to the complaint affidavit. In December 2012, the informant allegedly made an additional $1,800 payment to Dickson in exchange for Medicare patient referrals and re-certifications.

The government is represented by Assistant U.S. Attorney Joseph H. Thompson. The case was investigated by the FBI and the HHS-OIG.

The charges in these cases carry the following maximum penalties on each count: health care fraud — 10 years in prison and a $250,000 fine, or an alternate fine totaling twice the loss or twice the gain, whichever is greater; and violating the anti-kickback statute — 5 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 Medicare Fraud Strike Force began operating in Chicago in February 2011, and consists of agents from the FBI and HHS-OIG, working together with prosecutors from the U.S. Attorney’s Office and the Justice Department’s Fraud Section. The strike force is are part of the Health Care Fraud Prevention & Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Since their inception in March 2007, Strike Force operations in nine locations have charged more than 1,500 defendants who collectively have falsely billed the Medicare program for more than $5 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

The nationwide takedown was announced today by Attorney General Holder, HHS Secretary Kathleen Sebelius and other federal law enforcement officials. Mr. Shapiro announced the Chicago charges with Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Lamont Pugh III, Special Agent-in-Charge of the Chicago Regional Office of the HHS-OIG, and James Vanderberg, Special Agent-in-Charge of the Labor Department Office of Inspector General in Chicago. The Railroad Retirement Board Office of Inspector General assisted in the Ibrahim investigation.

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

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: StopMedicareFraud.gov.

Ibrahim Information

Ahluwalia Complaint

Lamon Information

Dickson Complaint

SelectCare Indictment

ROCKFORD — A Cary, Ill. business owner pleaded guilty to wire fraud today in federal court before U.S. District Judge Frederick J. Kapala. CLARE THOMAS ANDERSON, 44, who owned and operated multiple businesses in Cary, Ill, and Florida, admitted that between April 2009 and January 2013, he schemed to defraud over $1 million from more than 10 victims that did business with the companies he operated.

According to the written plea agreement, the businesses Anderson owned and operated were Certifibre, LLC, Anderson International Global, LLC, which had an assumed name of Worldwide Paper Company, Inc., American Surplus Supply, Southernmost Exports, LLC, Southernmost Holdings, LTD, and Sea Consulting, LLC. Through these businesses, Anderson contracted to sell wood pulp and other raw materials to manufacturers, brokers and suppliers, which were usually located in foreign countries.

Anderson obtained payments from his customers before the shipments arrived at their destinations. Often, the customers obtained Letters of Credit from their banks in order to pay for the shipments in advance. Anderson admitted that he caused payments to be disbursed under these Letters of Credit to bank accounts he controlled by creating and presenting fraudulent Bills of Lading, Certificates of Origin, and packing lists. These documents falsely represented that the agreed upon quantity and quality of materials had been shipped.

Anderson admitted that instead of shipping the wood pulp or other raw materials he had agreed to sell, on various occasions he shipped worthless scrap materials to his foreign customers. When the customers called him to complain about the worthless scrap materials they had received, Anderson falsely told them that the scrap materials were intended for another customer in a different country.

Anderson further admitted that on some occasions, instead of shipping the agreed upon weights and volume of wood pulp or other raw materials, he instead shipped substantially smaller amounts of wood pulp or other raw materials. When the customers called and complained about the short shipments, Anderson falsely told them that short shipments were caused by clerical errors.

Anderson acknowledged that, in order to maximize the profits from his scheme to defraud, he often failed to pay for the materials he obtained and for the freight shipping charges. Anderson also admitted that he spent the funds that his customers sent to him on his own personal expenses.

As he acknowledged in the Plea Agreement, on a few occasions Anderson refunded some money to his victims in order to avoid detection of his scheme. Anderson paid these refunds only after the victims contacted, or threatened to contact, federal law enforcement officials. Anderson admitted that he obtained the funds used to pay these refunds by defrauding additional customers.

Anderson is scheduled to be sentenced on Aug. 22, 2013, at 2:30 p.m. 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 defendant, whichever is greater. The actual sentence will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.

The guilty plea was announced by 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 is being represented by Assistant U.S. Attorney Scott A. Verseman.

Plea Agreement

CHICAGO — A Chicago police officer was convicted today of obtaining two extortion payments totaling $3,200 from a cooperating tow truck driver, in exchange for steering vehicle tows from accident scenes, during an undercover investigation. The defendant, DEAVALIN PAGE, who was assigned to the South Chicago District at the time, was relieved of his police powers and assigned to desk duty following the payments that occurred in late 2007 and early 2008. Page was convicted on two counts of attempted extortion by a federal jury that deliberated a little more than two hours this morning after being presented with video recordings and other evidence of the payments during a trial that began Monday in U.S. District Court.

Page, 46, of Chicago, an officer since 1995, faces a maximum penalty of 20 years in prison and a $250,000 fine on each count of attempted extortion. He remains free on bond pending sentencing, which U.S. District Judge John Darrah scheduled for 1 p.m. on Oct. 23.

Page was indicted last October as part of the Federal Bureau of Investigation’s Operation Tow Scam, a corruption probe of police officers who steered vehicle tows at accident scenes to favored tow drivers in exchange for extortion payments. Page is the eighth police officer to be convicted, along with four civilians – three of them tow truck drivers, and charges are pending against two additional police officers.

Evidence at the trial showed that Page obtained two payments from a cooperating tow truck driver, Brian Chandler, in exchange for steering him various tows. Chandler has pleaded guilty to wire fraud and bank larceny and is awaiting sentencing. The first payment, on Nov. 28, 2007, was $2,000 in the bathroom of a coffee shop at 79th Street and Stoney Island. The second payment, on Jan. 28, 2008, was $1,200 in the parking lot of a bank while Page was in his private vehicle. The latter payment, in part, was in exchange for towing three cars, at least one of which did not require towing, from an accident scene at 86th and Burnham involving a teenager who was driving her parents’ insured car.

The guilty verdict was announced today 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 F. McCarthy, Superintendent of the Chicago Police Department.

The government is being represented by Assistant U.S. Attorneys Michael Donovan and Steven Grimes.

CHICAGO — A south suburban Dolton police officer was convicted today of federal civil rights charges for using excessive force against two victims outside a Dolton nightclub in May 2009. The defendant, KEVIN FLETCHER, who is on administrative leave from the department, was found guilty on two counts of violating the victims’ civil right to be free from the use of unreasonable force by a person acting under color of law. Jurors, who had the benefit of a video recording that captured most of the scene, deliberated less than an hour today after a trial that began Monday in U.S. District Court.

Fletcher, 35, of South Holland, faces a maximum penalty of 10 years in prison and a $250,000 fine on each count. He was ordered to return to court at 9:45 a.m. Monday for a hearing on the government’s motion to revoke his bond before U.S. District Judge Elaine Bucklo. Sentencing was set for 10:30 a.m. on Aug. 16.

Fletcher joined the Dolton Police Department in October 2006. The evidence at trial showed that at approximately 2 a.m. on May 17, 2009, he and other officers were working crowd control outside the former Mr. Ricky’s 141 Club, as it and other bars along Chicago Road near 141st Street in Dolton were closing. While performing his duties as a police officer, Fletcher used an expandable metal police baton as a dangerous weapon to strike two victims, Michael McPherson and Laurence Williams, once each in the head. The jury found that both victims suffered bodily injury, and the evidence showed that both required hospital treatment and staples to close their head wounds.

Assistant U.S. Attorneys Tinos Diamantatos and Megan Cunniff Church argued to the jury today that Fletcher was offended by the victims cursing at him as he directed them to depart the Chicago Road area after leaving the nightclub, and then abused his authority by striking them each over the head with his baton to “teach them a lesson.” Fletcher made no effort or attempt to arrest either victim and departed the scene after striking them with his baton, without rendering or summoning any medical aid. Both victims, as well as Fletcher, testified at the trial.

Before trial, the government dismissed an obstruction of justice count that was contained in the November 2011 indictment against Fletcher.

The guilty verdict 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 Justice Department’s Civil Rights Division assisted in the investigation.

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

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

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 Complaint

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 — 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

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.

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

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.

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 — 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

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.

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.

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

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

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

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

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.

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 — 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.