Eastern District of Kentucky

The guilty plea serves as a landmark prosecution in the efforts to disrupt Detroit’s drug pipeline to Kentucky

LEXINGTON, Ky. – The leader of a drug trafficking organization that brought significant amounts of heroin and fentanyl from Detroit, Mich., to Richmond, Ky., has admitted that he distributed fentanyl that caused the overdose death of a Madison County resident earlier this year.

On Monday, Navarius Westberry, 38, originally from Michigan, but living in Lexington, pleaded guilty to distributing a controlled substance resulting in an overdose death. Westberry faces a minimum of 20 years and a maximum of life in prison, without parole. He will be sentenced on November 8, 2016.

Westberry admitted that, from January 2014 until August 2015, he organized and operated a drug trafficking organization in Richmond that distributed between 750 and 1,000 grams of heroin and 50 grams of fentanyl. Westberry also admitted that, in March 2016, he supplied heroin and fentanyl that led to the overdose death of 25 year-old Corey Brewer. The toxicology report and autopsy showed that Brewer’s death was caused by toxic levels of fentanyl.

One of Westberry’s co-defendants, Benjamin Fredrick Charles Robinson, 21, also from Detroit, previously pleaded guilty to distributing fentanyl that caused another overdose. That victim survived the overdose after receiving medical treatment. Robinson is subject to the same penalty range, as Westberry. Both defendants must serve at least 85 percent of the prison sentences imposed at their upcoming sentencing hearings.

“We have known for some time that the Detroit area is a significant source of supply for the growing amounts of heroin, fentanyl, and other narcotics that are devastating so many Kentucky communities,” said Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky. “The evidence indicates that the leaders of this conspiracy relocated to Central Kentucky for the sole purpose of establishing a heroin distribution network in our communities. The results, were deadly. This case represents a significant victory in our ongoing efforts to disrupt the “Detroit Pipeline” and is a shining example of effective collaboration between federal and local law enforcement agencies.”

This case marks the first time the U.S. Attorney’s Office for the Eastern District of Kentucky has applied the federal overdose provisions in a case involving defendants from Michigan whose distribution of drugs in Kentucky caused an overdose.

Three others, including Kevin Feltner, 24, of Richmond, Dion Terry Taylor, 23, from Detroit, and Kathy Lashell Brown Miller, 30, also of Richmond, have previously pleaded guilty to their roles in the drug conspiracy and are awaiting sentences.

U.S. Attorney Harvey, Timothy J. Plancon, Special Agent in Charge, Drug Enforcement Administration, and Robert Mott, Acting Police Chief, Richmond Police Department, jointly announced the plea.

The investigation was conducted by the DEA and the Richmond Police. Assistant U.S. Attorney Todd Bradbury prosecuted this case on behalf of the federal government.

Any sentence imposed will come after the Court considers the U.S. Sentencing Guidelines and the federal statutes.

COVINGTON, Ky. — A Crittenden, Ky., woman has been sentenced to 224 months in federal prison for providing illegal drugs to her daughter, an inmate in the Kenton County Jail, who subsequently died of an overdose.

Today, U.S. District Judge Amul Thapar sentenced Kimberly Mullins, 44, for conspiracy to distribute fentanyl and morphine that resulted in an overdose death.  Two co-defendants, Lisa Lattimore and Lynette Ball, received 160 and 144 months, respectively, for their roles in the conspiracy.  Under federal law, all three must serve at least 85 percent of their prison sentences.  A fourth defendant, Michael Howard, who supplied the drugs to Mullins, has pleaded guilty and is awaiting sentencing.

Mullins, Lattimore, and Ball admitted that, on September 4, 2015, they conspired to bring illegal drugs into the Kenton County Jail.  Mullins bought what she thought was heroin from Howard that day; but the substance actually contained a combination of fentanyl and morphine.  Mullins arranged for the substance to be delivered to her daughter, Jamie Green, through co-defendants Ball and Lattimore, fellow inmates in the Kenton County Jail. 

During the early morning hours of September 5, 2015, Green took the substance and died of an overdose shortly thereafter.  Mullins admitted that she had been regularly arranging deliveries of heroin to her daughter, while her daughter was incarcerated.  

Mullins, Lattimore, and Ball pleaded guilty on March 29, 2016.  Two other individuals, Mabry Baioni and Heather Tucker, were later charged and pleaded guilty to conspiring with Howard and Mullins to distribute heroin to Green, while Green was in the Campbell County Detention Center.  Baioni and Tucker did not take part in the Kenton County events that led to Green’s death.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and Timothy J. Plancon, Special Agent in Charge, Drug Enforcement Administration, jointly announced the sentences.  The investigation was conducted by the Cincinnati Field Office of the Drug Enforcement Administration and the Kenton County Police Department.  Assistant U.S. Attorney Tony Bracke represents the federal government in this case.

Howard is scheduled to be sentenced on September 23, 2016.  He faces up to life in prison and a fine of $1,000,000.00.  Any sentence, however, will be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the federal statutes.

COVINGTON, Ky. – A Dayton, Ky., man has been sentenced to 20 years in federal prison for distributing child pornography. 

On Wednesday, U.S. District Judge Amul Thapar formally sentenced Paul Morris, 40, and also ordered him to serve a lifetime of supervised release, upon his release from prison.   Under federal law, Davis must serve at least 85 percent of his prison sentence.

At his guilty plea in March of this year, Morris admitted that he had uploaded videos and images that depicted minors engaged in sexually explicit conduct to an online messaging application, back in July of 2015.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and James M. Gibbons, Special Agent in Charge, Homeland Security Investigations (Chicago Field Division), jointly announced the sentence.

The investigation was conducted by HSI.  Assistant United States Attorney Elaine K. Leonhard prosecuted this case on behalf of the federal government.

LEXINGTON, Ky. – The United States Government has sued a Lexington man, and the Lexington-based medical device company he owns, for violations of the False Claims Act, a federal law that prohibits people from submitting false or fraudulent claims for payment to the federal government.

On Tuesday, July 26, 2016, the United States filed a civil suit against Jerome Hahn and Telehealth Holdings, LLC, alleging that they defrauded the government by submitting false claims in connection with federal grants.  According to the Complaint, filed in U.S. District Court, Telehealth received three grants from the federal government, worth over $600,000, to support the development of a sleep apnea monitoring system and the development of electronic pillboxes customized for specific patient populations, including cancer patients.

The Complaint alleges that Hahn and Telehealth committed fraud in connection with these grants, including by making false statements in the grant applications about Telehealth’s personnel, facilities, and accounting systems.

The Complaint also alleges that Hahn and Telehealth falsely stated in grant reports that they had spent the grant funds for purposes of the grants and in compliance with grant regulations.  Instead, Hahn and Telehealth allegedly spent the grant money on personal expenses, such as meals at restaurants, a trip to Keeneland Racecourse, and interest payments on personal credit cards.  Hahn and Telehealth also allegedly used grant money on business expenses not allowed under the grant regulations, including costs associated with marketing and promoting their products.  Additionally, Hahn and Telehealth allegedly spent over $100,000 in grant funds purchasing foreign goods and services, even though grant regulations require grant recipients to use American goods and workers.

According to the Complaint, Telehealth also falsified entries in its accounting ledgers and created false invoices in order to conceal from the government that the federal grant funds had been misspent.

The Government contends that the false statements made in the grant applications, the grant reports, and the accounting ledgers constitute violations of the False Claims Act.  If the defendants are found liable at trial, they would be responsible for paying three times the amount of loss proven at trial, plus additional penalties for each false claim.

In a related criminal case, Mr. Hahn pleaded guilty to conspiring to defraud the United States by making false claims in connection with grants that were awarded to Telehealth.  On June 13, 2016, U.S. District Judge Danny C. Reeves sentenced Hahn to four months in prison and an additional six months on home detention.  Hahn was also ordered to pay $222,037 in restitution to the National Institutes of Health.

The investigation was conducted by the United States Attorney’s Office for the Eastern District of Kentucky; the Federal Bureau of Investigation; the U.S. Department of Health and Human Services, Office of Inspector General; and the Internal Revenue Service, Criminal Investigation Division.  Assistant U.S. Attorney Kate K. Smith represented the United States in the related criminal case.  Assistant United States Attorneys Christine Corndorf and Carrie B. Pond are litigating the False Claims Act case on behalf of the Government.

LEXINGTON, Ky. – The United States Government has sued a Lexington man, and the Lexington-based medical device company he owns, for violations of the False Claims Act, a federal law that prohibits people from submitting false or fraudulent claims for payment to the federal government.

On Tuesday, July 26, 2016, the United States filed a civil suit against Jerome Hahn and Telehealth Holdings, LLC, alleging that they defrauded the government by submitting false claims in connection with federal grants.  According to the Complaint, filed in U.S. District Court, Telehealth received three grants from the federal government, worth over $600,000, to support the development of a sleep apnea monitoring system and the development of electronic pillboxes customized for specific patient populations, including cancer patients.

The Complaint alleges that Hahn and Telehealth committed fraud in connection with these grants, including by making false statements in the grant applications about Telehealth’s personnel, facilities, and accounting systems.

The Complaint also alleges that Hahn and Telehealth falsely stated in grant reports that they had spent the grant funds for purposes of the grants and in compliance with grant regulations.  Instead, Hahn and Telehealth allegedly spent the grant money on personal expenses, such as meals at restaurants, a trip to Keeneland Racecourse, and interest payments on personal credit cards.  Hahn and Telehealth also allegedly used grant money on business expenses not allowed under the grant regulations, including costs associated with marketing and promoting their products.  Additionally, Hahn and Telehealth allegedly spent over $100,000 in grant funds purchasing foreign goods and services, even though grant regulations require grant recipients to use American goods and workers. 

According to the Complaint, Telehealth also falsified entries in its accounting ledgers and created false invoices in order to conceal from the government that the federal grant funds had been misspent.

The Government contends that the false statements made in the grant applications, the grant reports, and the accounting ledgers constitute violations of the False Claims Act.  If the defendants are found liable at trial, they would be responsible for paying three times the amount of loss proven at trial, plus additional penalties for each false claim.

In a related criminal case, Mr. Hahn pleaded guilty to conspiring to defraud the United States by making false claims in connection with grants that were awarded to Telehealth.  On June 13, 2016, U.S. District Judge Danny C. Reeves sentenced Hahn to four months in prison and an additional six months on home detention.  Hahn was also ordered to pay $222,037 in restitution to the National Institutes of Health.  

The investigation was conducted by the United States Attorney’s Office for the Eastern District of Kentucky; the Federal Bureau of Investigation; the U.S. Department of Health and Human Services, Office of Inspector General; and the Internal Revenue Service, Criminal Investigation Division.  Assistant U.S. Attorney Kate K. Smith represented the United States in the related criminal case.  Assistant United States Attorneys Christine Corndorf and Carrie B. Pond are litigating the False Claims Act case on behalf of the Government.

LEXINGTON, Ky. – A Lexington man has been sentenced to 75 months in federal prison for wire fraud, aggravated identity theft, and money laundering.

On Saturday, U.S. District Judge Danny C. Reeves formally sentenced 37 year-old Adam Sloan for his offenses.  He also sentenced Sloan’s girlfriend, Jennifer Houska, 30, to thirty months in federal prison for wire fraud and aggravated identity theft.  Under Federal law, Sloan and Houska must serve at least 85 percent of their sentences.

According to Sloan’s plea agreement, from January 2011 to September 2015, Sloan developed and executed a scheme to defraud Chronic Disease Fund, Inc. d/b/a Good Days from CDF (“Good Days”).  Good Days was a Section 501(c)(3) charitable organization based in Plano, Texas that provided copayment assistance for low income individuals suffering from chronic diseases, including cancer.

As part of the scheme, Sloan used real patient information he acquired through Bluegrass Pharmacy of Lexington, a legitimate business he co-owned until June 30, 2015.  Sloan used names, social security numbers, medical benefit cards, and documentation reflecting the patients’ income to fraudulently enroll patients for benefits from Good Days, based on false diagnoses and prescriptions.  He would then withdraw the funds allocated to those patients to his personal bank account.  Sloan submitted 260 fraudulent applications to Good Days, using personal identifying information for at least 125 real patients, and fraudulently stole approximately $1,129,264.

According to Houska’s plea agreement, she assisted in the scheme by using real patient information to fill out 26 applications for fraudulent benefits.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and Howard S. Marshall, Special Agent in Charge, FBI, jointly announced the sentences.

The investigation was conducted by the FBI.  Assistant U.S. Attorneys Kate Smith and Kate Anderson prosecuted the case on behalf of the federal government.

LEXINGTON, Ky. – A Lexington man has been sentenced to 40 years in federal prison, for possessing and distributing child pornography.

On Thursday, Chief U.S. District Judge Karen Caldwell formally sentenced 64 year-old Kevin Labona for his offenses.  Labona, who has a criminal history of illegal sexual contact with minors that dates back to 1986, received an enhanced sentence.  Under Federal law, he must serve at least 85 percent of his sentence.

Labona was convicted in a bench trial, on March 2, 2016.  At trial, the evidence established that, beginning in 2013, Labona distributed images of child pornography that were violent, sadistic, and masochistic in nature.  The evidence further established that he distributed images, by showing them on his phone to four minors, as a way to entice minors into having sexual contact with him.  Labona sexually exploited more than one of these minors in 2014.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky; Howard S. Marshall, Special Agent in Charge, FBI (Louisville Division); Angela L. Byers, Special Agent in Charge, FBI (Cincinnati Division); and Andrew J. Smith, Sheriff, Logan County, Ohio, jointly announced the sentence.

The investigation was conducted by the FBI and the Logan County, Ohio Sheriff’s Office.  Assistant U.S. Attorneys David Marye and Neeraj Gupta prosecuted the case on behalf of the federal government.

LEXINGTON – The U.S. District Court has entered a civil judgment of $4,506,267 in favor of the United States and against a Lexington woman, and the medical device companies she owns, holding them liable for making false statements that allowed them to receive millions of dollars in federal grants from the National Institutes of Health (NIH).

This civil judgment, announced today by the U.S. Attorney’s Office, is part of a settlement agreement resolving False Claims Act allegations that Vesta Blue, 70, and her companies, LifeTechniques, Inc. and Care Team Solutions LLC, defrauded NIH of millions of dollars over the course of eight years.

“Ms. Brue defrauded the government in two ways, each of which cost taxpayers,” said United States Attorney Kerry B. Harvey.  “By including false statements in grant applications, her companies received grants to which they were not entitled, thereby depriving qualified small businesses of those funds.  Ms. Brue then diverted the funds – which should have been used to develop new healthcare technologies – to support herself and her businesses.  Her scheme to defraud undermined the integrity of the grant process.  Our office will continue to vigorously pursue fraud against the government, and will work to ensure that companies and their leaders who receive taxpayer dollars are truthful and accurate in their dealings with federal agencies like NIH.”

According to the settlement agreement, NIH awarded Brue and her companies five Small Business Innovation Research grants, worth millions of dollars, to support the development of electronic pillboxes customized for specific patient populations, including HIV and pediatric patients.

In the settlement agreement, Brue and her companies acknowledge that they made false statements on the grant applications about their personnel, facilities, and accounting systems.

Brue and the companies also acknowledge that they falsely stated on grant reports that they had spent the grant funds for purposes of the grants and in compliance with grant regulations.  In fact, Brue spent the grant money on personal expenses, such as plastic surgery, jewelry, home renovations, and massages, among other expenses.  She also used grant money on business expenses not allowed under the grant regulations, such as costs associated with marketing and promoting her businesses.  The false statements made in the grant applications and in the grant reports constitute violations of the False Claims Act.

According to the government’s complaint, Brue also falsified entries in her companies’ accounting ledgers in order to conceal from NIH auditors that the federal funds had been misspent.

Under the terms of the settlement agreement, Brue will have one year to sell her real properties and will pay 80 percent of the net sale proceeds to the government.  For a period of four years, Brue will also pay 70 percent of the net profit of her businesses to the government.  These payments will be applied to satisfy the civil judgment entered by the U.S. District Court.

In a related criminal case, Ms. Brue pleaded guilty to making a false claim to the United States in connection with grants awarded by NIH to her partner’s company, Telehealth Holdings, LLC.  On March 30, 2016, U.S. District Judge Danny C. Reeves sentenced Brue to seven months in prison, and an additional seven months on home detention.  Brue was also ordered to pay $222,037 in restitution to NIH. 

“In a prime example of audacious greed, Ms. Brue accepted sizeable federal grants meant to fund the development of medical devices but instead diverted these taxpayer funds to pay for her personal and company expenses,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of  Health and Human Services Office of Inspector General.  “The sentence and judgment announced today prove that our agency, along with our law enforcement partners, will not tolerate such behavior and will protect the interests of taxpayers and those served by such federal grants.”

The investigation was conducted by the United States Attorney’s Office for the Eastern District of Kentucky, the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, and the Internal Revenue Service, Criminal Investigation Division.  Assistant U.S. Attorneys Christine Corndorf and Kate K. Smith represented the United States.

COVINGTON, Ky. – A Cincinnati man has admitted in federal court that he conspired to provide illicit drugs to a woman who then died of an overdose.

Michael Howard, 41, pleaded guilty yesterday, before U.S. District Judge Amul Thapar, to conspiracy to distribute fentanyl and morphine that resulted in death.

Howard admitted selling heroin to co-defendant Kimberly Mullins on a regular basis, during a four-month period in 2015, knowing that Mullins could arrange to get the drugs to Jamie Green, who was incarcerated.  Howard knew that distributing these drugs could cause death.

Howard further admitted supplying what he believed to be heroin to Mullins, on September 4, 2015, who was to then get the drugs to Green.  The substance actually contained a combination of fentanyl (a dangerous opiate that is much more powerful than heroin) and morphine.

Mullins arranged to deliver the substance to Green though Lynnette Ball and Lisa Lattimore, who were also inmates in the Kenton County Detention Center.  On September 5, 2015, Green took the drugs and died of an overdose.

“Those who traffick in heroin and fentanyl cause tremendous damage to our communities and demonstrate a wanton disregard for human life,” said Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky.  “Our office and our law enforcement partners intend to use every available tool to combat the heroin and fentanyl epidemic that has taken deep root in so many of our communities.  The twenty-year mandatory minimum sentence imposed by federal law on drug dealers who traffick in narcotics that cause a death is one such tool.  Drug dealers should be on notice – we intend to seek these stiff penalties when their criminal conduct results in death or serious injury – an all too predictable occurrence.”

Howard, Mullins, Lattimore, and Ball were charged with their involvement in the conspiracy in November of 2015.  Mullins, Lattimore, and Ball pleaded guilty earlier this year.  Two other individuals, Mabry Baioni and Heather Tucker – who were not involved in the events leading to Green’s death – were later charged and pleaded guilty to conspiring with Howard and Mullins to distribute heroin to Green.

U.S. Attorney Harvey and Timothy J. Plancon, Special Agent in Charge, Drug Enforcement Administration, jointly announced the guilty pleas.  The investigation was conducted by the Cincinnati Resident Office of the Drug Enforcement Administration and the Kenton County Police Department.  The U.S. Attorney’s Office was represented by Assistant U.S. Attorney Tony Bracke.

Howard is scheduled to be sentenced on September 23, 2016.  Mullins, Ball and Lattimore are scheduled to be sentenced on July 21, 2016.  Each faces a maximum of life in prison.  Baioni is set for sentencing on July 21, 2016 and Tucker is set for sentencing on September 15, 2016.  They face up to 20 years in prison.  Any sentences, however, will be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the federal statutes.

LEXINGTON – The United States Government has sued a Breathitt County ambulance company, its owner, and billing manager for violations of the False Claims Act, a federal law that prohibits people from submitting false or fraudulent claims for payment from the federal government.

On Friday, June 3, 2016, the United States filed suit against Arrow-Med Ambulance, Inc. (“Arrow-Med”), Herschel Jay Arrowood, and his wife, Lesa Arrowood, alleging that the company submitted numerous fraudulent claims seeking payment for unnecessary non-emergency ambulance transports, and that the Arrowoods caused the company to make those fraudulent claims. Jay Arrowood is the owner of Arrow-Med and Lesa Arrowood serves as its billing manager. According to the complaint, the false claims caused more than a million dollars in loss to the Medicare and Kentucky Medicaid programs.

The Arrowoods also allegedly instructed and pressured employees to falsify patients’ medical records to justify the unnecessary services to help ensure payment from Medicare and Medicaid. In addition, the complaint describes how the Arrowoods converted hundreds of thousands of dollars from Arrow-Med’s bank accounts to their own use.

According to the complaint, from September 2012 to August 2015, Arrow-Med transported patients, who had no medical need for an ambulance transport, to dialysis clinics and to other medical appointments. Under federal law, Medicare pays for non-emergency ambulance transports only if the patient’s condition is such that taking other forms of transportation would endanger the patient’s health.

The complaint provides examples of unnecessary non-emergency ambulance transports provided to patients who rode in the front seat of the ambulance or to patients who walked a half-mile daily for exercise.

The complaint alleges the defendants caused damages to Medicare and Medicaid in excess of a million dollars. Under the False Claims Act, if the defendants are found liable at trial, they would be responsible for paying three times the amount of loss proven at trial, plus additional penalties of $5,000 to $10,000 for each false claim.

The litigation against Arrow-Med was initiated by Darrell Stephen McIntosh, who filed a complaint against Arrow-Med pursuant to the whistleblower provisions of the False Claims Act in April 2015. The United States’ Complaint in Intervention reflects the government’s intent to pursue allegations of fraudulent claims for medically unnecessary services against the defendants.

The investigation was conducted by the U.S. Department of Health and Human Services, Office of Inspector General, and the Office of the Kentucky Attorney General’s Medicaid Fraud and Abuse Control Unit. Assistant U.S. Attorneys Daniel Hancock and Paul McCaffrey are litigating this case on behalf of the federal government.

LEXINGTON — A Boyle County man has been found guilty on all six counts of an indictment charging various child exploitation offenses.

On Thursday, a federal jury in Lexington, Ky., convicted 54 year-old Mark Andrew Morris of two counts of producing child pornography, two counts of distributing child pornography, and one count each of receiving and possessing child pornography.  The jury returned its verdicts after approximately 35 minutes of deliberation, following two days of trial.

According to evidence presented at trial, Morris used a hidden camera to record a minor female engaged in sexually explicit conduct.  The evidence further revealed that Morris had downloaded numerous images of child pornography from the internet.

The investigation started when an investigator with the Kentucky Attorney General’s Cyber Crimes Unit discovered images of child pornography being made available through a peer to peer (P2P) network on the internet.  The investigator collected the child pornography images, obtained the subscriber information for the Internet Protocol (IP) address, and traced the source of the images to Morris’s computer.  In June 2014, a search warrant was conducted at Morris’ residence and authorities found the child pornography images on his computer and other electronic media.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard Marshall, Special Agent in Charge, Federal Bureau of Investigation; and Andy Beshear, Kentucky Attorney General, jointly made the announcement.

The case was investigated by the Office of the Kentucky Attorney General, Cyber Crimes Unit, and the FBI.  Assistant U.S. Attorney David Marye prosecuted the case on behalf of the federal government.

Morris is scheduled to be sentenced on August 29, 2016.  Production of Child Pornography carries a minimum sentence of 15 years and a maximum of 30 years; receipt and distribution of child pornography carry a minimum of 5 years in prison and a maximum of 20 years; and possession of child pornography carries a maximum penalty of 10 years in prison.

LEXINGTON — A Lexington man faces a minimum of 20 years in prison after he was convicted by a federal jury of distributing heroin and fentanyl which resulted in the death of an individual.

On Tuesday evening, the jury convicted 43 year-old Christopher Allen for distribution of heroin and fentanyl resulting in death, conspiracy to distribute heroin and fentanyl, and possession with intent to distribute heroin and fentanyl. The jury returned the verdict after approximately two hours of deliberation following two days of trial.

“Trafficking in deadly drugs such as heroin and fentanyl has increased dramatically in Lexington and surrounding communities over the last few years,” said Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky. “The results have been deadly. Fayette County documented 29 overdose deaths in 2008. By 2015, that number had risen to 137. The victims grow younger every year and these tragedies reach every area of our community. This is a crisis that requires us to use every available tool to fight back. One such tool is the federal law that imposes a prison sentence of 20 years to life, with no parole, on those who illegally distribute drugs that cause death or serious injury. Those involved in drug trafficking should know that we are using this tool with increasing frequency, working closely with our law enforcement partners.”

According to testimony, in September of 2015, Allen distributed heroin and fentanyl to a Lexington woman who used the drugs, overdosed and died. The woman was found by her boyfriend in her home.

Authorities were able to verify that Allen supplied the drugs to the victim. A toxicologist testified that the woman died as a result of the toxic effects of the heroin and fentanyl. The toxicologist further testified that the victim ingested a lethal dose of fentanyl, three times the normal therapeutic range.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Timothy J. Plancon, Special Agent in Charge of the Detroit Division of the Drug Enforcement Administration; and Mark Barnard, Chief of Lexington Police, jointly made the announcement today.

The investigation was conducted by the Lexington Police and DEA. Assistant U.S. Attorneys Todd Bradbury and Cindy Rieker, prosecuted this case on behalf of the federal government.

Allen is scheduled to be sentenced on August 22. He faces a minimum of 20 years in prison and a maximum of life. However, the Court will impose sentence after considering the U.S. Sentencing Guidelines and the federal statutes.

ASHLAND — Three Kentuckians and two Russian nationals are among those convicted of schemes to defraud federal, state and local governments, nationwide, of cigarette excise taxes totaling approximately $48 million dollars.

John Maddux, Jr. and Christina Carman, both formerly of Russell, Ky.; Julie and Anthony Coscia, of Pinetop, Ariz.; David White, formerly of Ashland, Ky.; Michael Smith, of Escondido, Calif.; and Alexander Sergeev and Mikhail Serov, both of St. Petersburg, Russia, will be sentenced for their roles in the schemes.

According to court documents and evidence at trial, the defendants operated mail order or internet businesses engaged in the delivery sales of cigarettes to customers in all fifty states. Maddux and Carman operated a cigarette mail order business known as YKTR, which sold domestically manufactured cigarettes to United States customers. YKTR also fulfilled cigarette orders for Julie and Anthony Coscia, who operated a business known as Cigarette Girl, for David White, who operated a business known as AA Discount Cigarettes, and for Michael Smith, who operated a business known as Payless Enterprises.

Maddux also operated a cigarette mail order business known as ESR II, which sold internationally manufactured cigarettes supplied by Sergeev and Serov, and other foreign nationals. The Coscias, White, and Smith also purchased cigarettes from Sergeev and Serov and comingled their money with Maddux, who wired the payments overseas.

In each scheme, the defendants illegally sold the cigarettes at discount prices, which violate the Jenkins Act and the PACT Act. The Jenkins Act, in effect prior to June 2010, required registering and reporting the sales made by each of these businesses to state tax administrators. This reporting allowed the states to collect excise taxes from their citizens. The PACT Act amended the Jenkins Act, in June 2010, by enhancing the registering and reporting requirements, and by requiring the businesses to pay the excise taxes themselves. The defendants avoided these requirements altogether. The co-conspirators also violated a provision of the PACT Act which prohibited the use of the U.S. Mail for the distribution of deliver sales of cigarettes. They did so by disguising the cigarette packages as mail order gifts and other items, in violation of the law.

Julie and Anthony Coscia and Michael Smith were convicted of multiple counts, at a trial in January 2016, relating to the sale of domestic and international cigarette product. Christina Carman was also convicted at the trial, of a charge relating to her participation in the sale of domestic product. She was acquitted of charges relating to the sale of international product.

Maddux pleaded guilty, on May 6, 2016, to multiple conspiracies to commit mail and wire fraud, money laundering and violations of the PACT Act. Maddux also pleaded guilty to charges that he made false statements to the Department of Labor, in an on-going effort to receive worker’s compensation payments to which he was not entitled as a result of the illegal business enterprises in which he was involved. Serov and Sergeev pleaded guilty, the same day, to charges including conspiracy to commit wire fraud and conspiracy to violate the PACT Act.

Domestic and International trafficking in untaxed cigarettes via mail order or the Internet is a serious crime, which defrauds state and federal governments of hundreds of millions of dollars in tobacco taxes and funds other criminal activity.

This announcement was jointly made by Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky; John Cooper, Special Agent in Charge, Louisville Field Division, Alcohol Tobacco Firearms and Explosives; Tracey Montano, Special Agent in Charge, Nashville Field Office, Internal Revenue Service-Criminal Investigations; Richard Deer, Acting Special Agent in Charge, Philadelphia Regional Office of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations; and Mark McCormack, Special Agent in Charge, Metro Washington Field Office, U.S. Food and Drug Administration.

The investigation was conducted by the Bureau of Alcohol Tobacco Firearms and Explosives, the Internal Revenue Service-Criminal Investigations, the United States Department of Labor, Office of Inspector General, and U.S. Food and Drug Administration. Assistant United States Attorneys Laura K. Voorhees and Wade T. Napier, and ATF Associate Chief Counsel, Jeffery A. Cohen, prosecuted this case on behalf of the federal government.

Sentencing will be scheduled in August 2016, before U.S. District Court Judge David L. Bunning. The conspiracy offense carries a maximum of 20 years in prison. Any sentence will be imposed by the Court, however, after consideration of the federal Sentencing Guidelines and the statutes governing the imposition of sentences.

Allegations include claims of filling fraudulent prescriptions for stimulants and failing to maintain proper records of controlled substances

LEXINGTON, Ky. – Appalachian Regional Healthcare, Inc. (“ARH”) has been accused of unlawfully filling fraudulent prescriptions for stimulants, written by a physician working in Harlan ARH’s Emergency Room, for ARH nurses and staff, and their family members, without a proper doctor-patient relationship, and failing to make and maintain complete and accurate records of its controlled substances.

In a civil lawsuit filed today, the United States has alleged that Harlan ARH Hospital Pharmacy improperly filled prescriptions for stimulants that were written by a Harlan ARH Emergency Room physician. The United States contends that many of these prescriptions were written for double the standard recommended dose of prescription pills and that, as a result of these improperly filled prescriptions, thousands of stimulant pills were illegally dispensed to ARH employees and their family members. The United States further contends that ARH failed to make and maintain complete and accurate records of its controlled substances at two other pharmacies – Hazard ARH Regional Medical Center Clinic Pharmacy and Middlesboro ARH Pharmacy – which prevents the Government from determining whether other controlled substances had been diverted for illegal use.

The United States is seeking civil penalties for ARH’s alleged violations of the Controlled Substances Act.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky, and Timothy J. Plancon, Special Agent in Charge of the Detroit Division of the Drug Enforcement Administration, jointly announced the filing of the complaint.

A complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.

LONDON, Ky.—A federal jury in London has convicted a doctor, his wife and their clinic of drug trafficking, health care fraud and money laundering, for orchestrating a scheme in which they made millions of dollars by unlawfully prescribing large amounts of prescription pills to citizens of eastern Kentucky.

Dr. James "Ace" Chaney, 51, was convicted of conspiracy to commit drug trafficking, 62 counts of illegal distribution of controlled substances, 2 counts of maintaining a premise for drug distribution, conspiracy to commit money laundering, 20 counts of money laundering, conspiracy to commit health care fraud and 84 counts of health care fraud.

Lesa Chaney, 50, the President and CEO of Ace Clinique of Medicine, LLC, was convicted of conspiracy to commit drug trafficking, 2 counts of maintaining a premise for drug distribution, conspiracy to commit money laundering, 20 counts of money laundering, conspiracy to commit health care fraud and 84 counts of health care fraud.

Ace Clinique of Medicine, LLC, was found guilty on over 180 counts of drug trafficking, health care fraud and money laundering.

The jury rendered its verdict after 13 hours of deliberation, following seven weeks of trial.

From 2006 to 2014, James and Lesa Chaney owned and operated Ace Clinique of Medicine, LLC, in Hazard, Ky. The evidence established that Dr. Chaney pre-signed prescriptions for controlled substances, to be filled out by clinic staff while he was vacationing or otherwise not present at the clinic. The evidence also established that Dr. Chaney knowingly provided prescriptions for controlled substances to individuals who were diverting the pills for sale and to individuals that were abusing the drugs. Dr. Chaney also required all of his patients to undergo monthly urine drug screening to test for the presence of the drugs he prescribed, as well as illegal narcotics. When the results showed the patients were not taking the prescribed pills, or were taking illegal narcotics, Dr. Chaney directed his staff to alter the test results to falsely indicate an appropriate result. These fraudulent test results were then submitted to Medicare, Medicaid and private insurers for payment. From 2009 to 2011, they billed Medicare for more urine drug screen tests than any provider or laboratory in Kentucky.

The evidence at trial also showed that patients would frequently wait eight hours or longer, each month, to be seen by a health care provider at the clinic. The examinations would then typically be of short duration and the patient would receive a prescription for controlled substances. The Chaneys would nonetheless bill for an office visit that falsely indicated a thorough physical examination had occurred. The evidence further showed that the Chaneys billed Medicare for work Dr. Chaney allegedly did while he was vacationing outside of the United States. Dr. Chaney also wrote prescriptions for controlled substances to an employee of the clinic, which he then took for himself.

The Chaneys billed Medicare more than $9,500,000 and billed Medicaid more than $6,300,000 during the period of the conspiracy. The money the Chaney’s made from the scheme was used for personal purchases, including a private plane, houses, vehicles, travel and personal luxury items.

"The defendants in this case combined a massive illegal drug distribution scheme with a massive healthcare fraud scheme," said Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky. "The resulting criminal enterprise harmed countless Kentuckians, and sent the fraudulent bill to the American taxpayer. It is difficult to overestimate the importance of this victory in the effort to rid eastern Kentucky of this sort of criminal conduct, which has caused so much damage to our communities. Our trial team and our law enforcement partners at the FBI and the Kentucky State Police performed admirably in bringing these defendants to justice and they deserve our thanks."

"The devastation of patients’ lives to facilitate the Chaney’s’ lavish lifestyle caused great harm to the people of southeastern Kentucky," said Howard S. Marshall, Special Agent in Charge of the Louisville Division of the FBI. "The Federal Bureau of Investigation and its law enforcement partners will stay committed to the dismantlement of significant drug trafficking organizations in Perry County and the rest of Kentucky."

U.S. Attorney Harvey, Special Agent in Charge Marshall and Richard Sanders, Commissioner of the Kentucky State Police, jointly announced the verdict.

The investigation was conducted by the FBI and the Kentucky State Police.

Assistant U.S. Attorneys Roger West and Andrew Sparks prosecuted this case on behalf of the federal government.

The Chaneys are scheduled for sentencing on August 25, 2016, at 1:30 p.m. The most serious offenses carry a maximum penalty of 20 years in prison. The Court, however, will impose sentence after consideration of the U.S. Sentencing Guidelines and the applicable federal statutes.

LEXINGTON, Ky.—Timothy M. Longmeyer, the former Secretary of the Kentucky Personnel Cabinet, admitted in federal court today that he solicited and accepted over $200,000 in kickbacks from a private consultant during his tenure.

Longmeyer, 48, pleaded guilty to bribery of a public official, before U.S. District Judge Karen Caldwell.

Longmeyer admitted that, while serving as Secretary of the Personnel Cabinet, he solicited and agreed to accept $212,500, in exchange for assistance in securing multi-million dollar contracts for a consultant. Over the course of the scheme, Longmeyer received $197,500 in cash and $6,000 in straw campaign contributions to various political campaigns, for a total of $203,500.

Longmeyer oversaw the Kentucky Employees’ Health Plan ("KEHP") and used his position to persuade insurance companies, who provided KEHP healthcare coverage, to hire the consultant to organize focus groups and telephone surveys. In return, Longmeyer accepted recurring payments from the consultant, including cash and straw contributions.

According to the plea agreement, Longmeyer agreed to accept $90,000 from the consultant in November 2014 and $100,000 from the consultant in December 2014. The consultant later used the proceeds from contracts with Humana, Inc., to make a series of payments to Longmeyer between November 2014 and June 2015, totaling $175,000 in cash and $6,000.00 in straw contributions.

In addition, in September 2015, Longmeyer agreed to accept approximately $22,500 from the consultant. The consultant used the proceeds from a contract with Anthem Blue Cross Blue Shield to make two cash payments to Longmeyer, totaling $22,500.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and Howard Marshall, Special Agent in Charge, Federal Bureau of Investigation, jointly announced the guilty plea. Assistant U.S. Attorneys Andrew T. Boone and Kathryn M. Anderson are prosecuting the case on behalf of the federal government.

Longmeyer is scheduled to be sentenced on August 18, 2016 at 1:00 p.m. He faces up to 10 years in prison and a maximum fine of $250,000. However, any sentence following a conviction would be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the applicable federal statutes.

Timothy M. Longmeyer, the former Secretary of the Kentucky Personnel Cabinet, admitted in federal court today that he solicited and accepted over $200,000 in kickbacks from a private consultant during his tenure. 

Longmeyer, 48, pleaded guilty to bribery of a public official, before U.S. District Judge Karen Caldwell for the Eastern District of Kentucky. 

Longmeyer admitted that, while serving as Secretary of the Personnel Cabinet, he solicited and agreed to accept $212,500, in exchange for assistance in securing multi-million dollar contracts for a consultant.  Over the course of the scheme, Longmeyer received $197,500 in cash and $6,000 in straw campaign contributions to various political campaigns, for a total of $203,500. 

Longmeyer oversaw the Kentucky Employees’ Health Plan (KEHP) and used his position to persuade insurance companies, who provided KEHP healthcare coverage, to hire the consultant to organize focus groups and telephone surveys.  In return, Longmeyer accepted recurring payments from the consultant, including cash and straw contributions. 

According to the plea agreement, Longmeyer agreed to accept $90,000 from the consultant in November 2014 and $100,000 from the consultant in December 2014.  The consultant later used the proceeds from contracts with Humana Inc., to make a series of payments to Longmeyer between November 2014 and June 2015, totaling $175,000 in cash and $6,000 in straw contributions. 

In addition, in September 2015, Longmeyer agreed to accept approximately $22,500 from the consultant.  The consultant used the proceeds from a contract with Anthem Blue Cross Blue Shield to make two cash payments to Longmeyer, totaling $22,500.  

U.S. Attorney Kerry B. Harvey for the Eastern District of Kentucky, and Special Agent in Charge Howard Marshall for the Federal Bureau of Investigation, jointly announced the guilty plea.  Assistant U.S. Attorneys Andrew T. Boone and Kathryn M. Anderson are prosecuting the case on behalf of the federal government. 

Longmeyer is scheduled to be sentenced on Aug. 18.  He faces up to 10 years in prison and a maximum fine of $250,000.  However, any sentence following a conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the applicable federal statutes. 

LEXINGTON, Ky. – A former corrections officer at the Federal Medical Center in Lexington (FMC Lexington) has admitted to smuggling tobacco into the prison, in exchange for payments from an inmate.

On Wednesday, William C. McClelland, 46, pleaded guilty to a bribery charge, before U.S. District Judge Karen Caldwell.

According to his plea agreement, on two occasions during 2015, McClelland smuggled tobacco into the prison for an inmate; he received $1,800 in return.

Prisoners incarcerated in federal correctional facilities, including FMC Lexington, are prohibited from possessing contraband, such as tobacco.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; John F. Oleskowicz, Special Agent in Charge, Department of Justice Office of the Inspector General, Chicago Field Office; and Howard S. Marshall, Special Agent in Charge, Federal Bureau of Investigation, jointly made the announcement.

The investigation was conducted by the Department of Justice Office of the Inspector General and the Federal Bureau of Investigation.  Assistant U.S. Attorney Andy Smith prosecuted this case on behalf of the federal government.

McClelland is scheduled to be sentenced on July 28, 2016.  The bribery offense carries a maximum punishment of 15 years in prison.  Any sentence imposed by the Court, however, will come after the Court has considered the U.S. Sentencing Guidelines and the applicable federal statutes.

LEXINGTON – A former nurse at the federal prison in Lexington has been sentenced for smuggling tobacco into the prison, in exchange for payments from inmates.

On Wednesday, U.S. District Judge Danny Reeves sentenced 47 year-old Michael Hardin, formerly employed as a registered nurse at the Federal Medical Center in Lexington, to twelve months in prison, for bribery of a public official.  Under federal law, Hardin must serve the entire term of his sentence; and at the conclusion of his incarceration, he must serve one year of home detention.  Hardin will also be required to complete 400 hours of community service during his three-year term of supervised release.

According to his plea agreement, from July 2014 to August 2015, Hardin smuggled tobacco into the prison facility for inmates, who paid him a total of $22,429 in return.  The inmates used family members and friends to send the money to Hardin.  As a condition of his plea agreement, Hardin repaid all the money he received.

Prisoners incarcerated in federal correctional facilities, including FMC Lexington, are prohibited from possessing contraband, such as tobacco.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; John F. Oleskowicz, Special Agent in Charge, Department of Justice, Office of the Inspector General, Chicago Field Office; Tommy D. Coke, Inspector in Charge of the U.S. Postal Inspection Service; Pittsburg Division; and Howard S. Marshall, Special Agent in Charge, Federal Bureau of Investigation, jointly made the announcement.

The investigation was conducted by the Department of Justice, Office of the Inspector General; the Federal Bureau of Investigation; and the United States Postal Inspection Service.  Assistant U.S. Attorney Andy Smith prosecuted this case on behalf of the federal government.

LEXINGTON - Timothy M. Longmeyer, the former Secretary of the Kentucky Personnel Cabinet, solicited and accepted over $200,000 in kickbacks during his tenure, according to a criminal complaint unsealed in federal court today.

An affidavit filed with the complaint alleges that Longmeyer accepted kickbacks from a private consulting company, in exchange for his help in securing multi-million dollar contracts for the consultant, which allowed the consultant to work with the insurance companies who provide healthcare coverage to everyone employed by the state.

As Secretary of the Personnel Cabinet, Longmeyer was responsible for overseeing the Kentucky Employees’ Health Plan (“KEHP”). The KEHP contracted with Humana, Inc. (“Humana”) and Anthem Blue Cross Blue Shield (“Anthem”) to provide healthcare coverage under the KEHP.

Longmeyer used his position to persuade Humana and Anthem to hire the private consultant for services, such as focus groups and telephone surveys. In return, Longmeyer accepted recurring payments from the consultant, including cash and straw contributions to certain political campaigns. The consultant made these payments with the proceeds from contracts with Humana and Anthem.

Longmeyer resigned from the Kentucky Personnel Cabinet on September 30, 2015. During the year leading up to his resignation, Longmeyer solicited approximately $212,500 in kickbacks from the consultant, according to the complaint. Longmeyer received approximately $203,500 in cash and straw campaign contributions.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and Howard Marshall, Special Agent in Charge, Federal Bureau of Investigation, jointly made the announcement today after the complaint was filed.

Longmeyer is scheduled to appear in court on April 20, at 1:30 p.m. He will face up to 10 of years in prison and a maximum fine of $250,000. However, any sentence following a conviction would be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the federal statutes.

Any criminal complaint is an accusation only. A defendant is presumed innocent and is entitled to a fair trial at which government must prove guilt beyond a reasonable doubt.

LEXINGTON — A former state representative and Pikeville coal operator, Wendell Keith Hall, has been sentenced to 7 years for bribing a state mine official.

Today, U.S. District Judge Karen Caldwell sentenced Hall, 56, and also ordered him to pay a $25,000 fine and serve two years on supervised release, following service of his sentence.  Under federal law, Hall will have to serve at least 85 percent of his sentence.

Hall, who represented House District 93 in the Kentucky General Assembly, was convicted by a jury, in June, of paying former mine reclamation officer Kelly Shortridge, for favorable treatment in connection with his official duties.

Shortridge worked at the Kentucky Division of Mine Reclamation and Enforcement, where he was responsible for enforcing mine reclamation statutes and regulations.  Evidence presented at trial established that from 2006 through 2011, Shortridge inspected mines owned by Hall and ignored violations that occurred on Hall’s property, in exchange for a series of payments totaling over $46,000.

The evidence also established that the two men disguised the payments as consulting fees.  In 2010, a shell company, DKJ Consulting, was established in the name of Shortridge’s wife.  Hall then used a company he owned, S&K Properties, to funnel money to Shortridge, through DKJ, in order to make the payments appear as legitimate business expenses.

Shortridge was sentenced to two years in prison in January.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard S. Marshall, Special Agent in Charge, FBI; and Scott Oliver, Department of Interior, Office of Inspector General, jointly made the announcement.

LONDON — A Perry County couple who owned several trucking companies has been convicted of defrauding and extorting their customers.

On March 18, 2016, a federal jury in London rendered a guilty verdict convicting 49 year-old Elliott Campbell and his wife, Melinda, age 39, of charges related to wire fraud and extortion. Elliott Campbell was convicted of six counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit extortion. Melinda Campbell was found guilty of five counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit extortion. The jury rendered its verdict after two days of deliberation, following three days of trial.

The evidence at trial established that, from 2010 until 2012, the Campbells operated trucking companies and contracted with shipping brokers throughout the country to transport cargo freight. According to the evidence, the Campbells induced shipping brokers to enter into contracts with special conditions, which stipulated that payment would occur after delivery. Once the pair obtained the cargo freight, however, they failed to fulfill the specified conditions of delivery and then held the cargo hostage, by demanding payment prior to delivery. In response to complaints from shipping brokers, the Campbells created new companies and used false names, in order to continue their fraudulent scheme.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard Marshall, Special Agent in Charge, Federal Bureau of Investigation; and Thomas J. Ullom, Regional Special Agent-in-Charge, U.S. Department of Transportation Office of Inspector General, jointly announced the conviction.

The Campbells are scheduled to be sentenced on June 14, 2016. They face a maximum of 20 years on each wire fraud count, and for the extortion offense. They face a maximum of five years for the wire fraud conspiracy. However, any sentence would be imposed only after the Court has considered the U.S. Sentencing Guidelines and the applicable statutes.

ASHLAND, Ky. — An Ohio doctor has been convicted by a federal jury of traveling to Morehead, Ky., to engage in sex with a minor.

On Wednesday, the jury convicted 28 year-old Albert Trinh of traveling across state lines, with the intent to engage in sex with a minor.

Testimony at trial established that, in September 2015, Trinh had online communications with an undercover Kentucky State Police detective that he thought was a 14 year-old girl. When Trinh arrived at the agreed-upon meeting location, in Morehead, he was arrested.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard Marshall, Special Agent in Charge, FBI; and John Tilley, Acting Commissioner, Kentucky State Police, jointly announced the conviction.

The investigation was conducted by FBI and the Kentucky State Police. Trinh is scheduled to be sentenced on June 30, 2016. He faces a maximum of 30 years in prison. Under federal law, Trinh will have to serve at least 85 percent of his prison sentence.

LONDON, Ky. – A Knott County man, with a significant criminal history, has been sentenced to 320 months in federal prison for unlawfully possessing firearms.

On March 3, U.S. District Judge Danny C. Reeves sentenced Roy Dean Pratt, Jr., 50, for being a felon in possession of firearms. Pratt’s sentence was enhanced because his criminal history classified him as an armed career criminal, which means he had previously been convicted of three or more violent felonies or serious drug offenses. Under federal law, Pratt must serve at least 85 percent of his prison sentence.

In December, 2015, a jury convicted Pratt of the offense. Testimony at trial established that, in April 2015, Kentucky State Police conducted a search of Pratt’s home and located numerous firearms. Pratt’s prior felony convictions prohibited from possessing the firearms. Pratt has a significant criminal record dating back to 1995.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; John R. Cooper, Special Agent in Charge, ATF, Louisville Field Division; and Rodney Brewer, Commissioner of the Kentucky State Police, jointly announced the sentence.

Assistant U.S. Attorney Todd Bradbury prosecuted this case on behalf of the federal government.

Louis Brothers, 63, of Covington, Kentucky, was sentenced to 93 months in prison for illegally exporting sophisticated technology equipment to the People’s Republic of China (PRC) and concealing the unlawful proceeds.  The sentence also includes a monetary judgment of $1.1 million.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Kerry B. Harvey of the Eastern District of Kentucky, Special Agent in Charge Clark E. Settles of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Washington, D.C. Office and Special Agent in Charge Howard Marshall of the FBI’s Louisville Division jointly made the announcement today.

U.S. District Judge Amul R. Thapar of the Eastern District of Kentucky sentenced Brothers for conspiracy, aiding and abetting in the illegal export of defense articles and conspiracy to launder funds.

Brothers, a former president and CEO of Valley Forge Composite Technologies, pleaded guilty to the offenses in July 2015.  He admitted that from 2009 until 2013, he unlawfully exported microcircuits to the PRC.  Under federal law, anyone exporting a defense article, including microcircuits, to the PRC must obtain the permission of the Department of State for the purposes of maintaining national security.

According to his plea agreement, Brothers intentionally avoided notifying the Department of State about his activity and labeled his shipments as “computer parts” in order to conceal the true identity of the items.

Brothers further admitted that he falsified paper work to make it appear that the proceeds he received from his business with the PRC were actually profits from a business he owned in Kentucky.

The investigation was conducted by the FBI and HSI.  The case is being prosecuted by Assistant U.S. Attorney Robert McBride of the Eastern District of Kentucky and Trial Attorney Casey Arrowood of the National Security Division’s Counterintelligence and Export Control Section.

WASHINGTON – Louis Brothers, 63, of Covington, Kentucky, was sentenced to 93 months in prison for illegally exporting sophisticated technology equipment to the People’s Republic of China (PRC) and concealing the unlawful proceeds. The sentence also includes a monetary judgment of $1.1 million. Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Kerry B. Harvey of the Eastern District of Kentucky, Special Agent in Charge Clark E. Settles of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Washington, D.C. Office and Special Agent in Charge Howard Marshall of the FBI’s Louisville Division jointly made the announcement today. U.S. District Judge Amul R. Thapar of the Eastern District of Kentucky sentenced Brothers for conspiracy, aiding and abetting in the illegal export of defense articles and conspiracy to launder funds. Brothers, a former president and CEO of Valley Forge Composite Technologies, pleaded guilty to the offenses in July 2015. He admitted that from 2009 until 2013, he unlawfully exported microcircuits to the PRC. Under federal law, anyone exporting a defense article, including microcircuits, to the PRC must obtain the permission of the Department of State for the purposes of maintaining national security. According to his plea agreement, Brothers intentionally avoided notifying the Department of State about his activity and labeled his shipments as “computer parts” in order to conceal the true identity of the items. Brothers further admitted that he falsified paper work to make it appear that the proceeds he received from his business with the PRC were actually profits from a business he owned in Kentucky. The investigation was conducted by the FBI and HSI. The case is being prosecuted by Assistant U.S. Attorney Robert McBride of the Eastern District of Kentucky and Trial Attorney Casey Arrowood of the National Security Division’s Counterintelligence and Export Control Section.

FRANKFORT, Ky.  C  A federal judge has sentenced a California man to 40 years in federal prison, for orchestrating a fraudulent oil production enterprise in Kentucky that defrauded investors, nationwide, out of more than $3 million.

On Wednesday, U.S. District Judge Gregory Van Tatenhove sentenced John G. Westine, Jr., 69, for mail fraud, conspiracy to launder funds, and securities fraud.  Westine was also ordered to pay $3,042,621 in restitution.  One of Westine’s co-defendants, Mark Cornell, 56, was sentenced to 114 months in prison, for deception in the purchase and sale of a security.  Cornell was ordered to pay $2,181,414 in restitution.

Westine’s sentence was enhanced due to a prior conviction, for running a similar fraud scheme in Ohio.  Westine served more than 20 years in prison for his 1992 conviction and was still on parole when he orchestrated the fraud scheme in Kentucky.

According to testimony at trial, Westine, Cornell, and others solicited money from investors, by intentionally making false statements regarding the success of their oil production business.  They misled investors to believe that oil was being produced, when in fact it was not, and also misled investors to believe that the oil companies Westine operated had been in the oil production business for decades.  Additionally, Westine concealed from investors that he had served more than 20 years in prison for a fraud scheme and was still on parole.

Westine and his co-defendants used aliases and fictitious company names to conceal their true identities from both investors and authorities and they defrauded more than 240 investors, nationwide.  Two of Westine’s other co-defendants, Michael Hicks and Henry Irving Ramer, were previously convicted and sentenced, to three years imprisonment and thirteen years imprisonment respectively, for their roles in the scheme.

The investigation was initiated based on investor complaints submitted to the Kentucky Department of Financial Institutions, Division of Securities.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Tommy D. Coke, Inspector in Charge of the U.S. Postal Inspection Service; Pittsburg Division; and Charles Vice, Commissioner of the Kentucky Department of Financial Institutions, jointly made the announcement.

The investigation was conducted by the U.S. Postal Inspection Service, including Postal Inspector Roberta Bottoms, and the Kentucky Department of Financial Institutions, Division of Securities.

Assistant U.S. Attorneys Ken Taylor and Neeraj Gupta prosecuted this case on behalf of the federal government

LEXINGTON — A 23-year-old Lexington man, who previously admitted to distributing child pornography images on the internet, has been sentenced to ten years in federal prison. 

On Wednesday, U.S. Chief District Judge Karen Caldwell sentenced Joshua Gilley, ordered him to serve a lifetime term of supervised release, and ordered that he register as a sex offender, following his release from prison.  Under federal law, Gilley must serve at least 85 percent of his sentence.

According to his plea agreement, between 2012 and 2013, Gilley distributed numerous child pornography images to others, via email.  Gilley admitted that a search warrant at his home revealed thousands of child pornography images, including more than 900 sexual abuse images of prepubescent children. 

The case started when an FBI investigator noticed child pornography images being distributed online.  The FBI later traced the source of those images to a computer that was operated by Gilley.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard Marshall, Special Agent in Charge, FBI; Mark Barnard, Chief of Lexington Police; and Rodney Brewer, Commissioner of the Kentucky State Police, jointly announced the sentence.

The investigation was conducted by the FBI’s Violent Crimes Against Children Section, the Lexington Police, and the Kentucky State Police’s Electronic Crime Branch.  Assistant U.S. Attorney David A. Marye prosecuted this case on behalf of the federal government.

LEXINGTON — A Lexington couple has admitted in federal court that they submitted false claims related to federal grants from the National Institutes of Health (“NIH”) and defrauded the government out of hundreds of thousands of dollars.

Today, Jerome Hahn, 69, pleaded guilty, to conspiracy to defraud the United States with respect to claims, before U.S. District Judge Danny C. Reeves.  On December 16, 2015, Vesta Brue, 70, pleaded guilty to making a false claim against the United States.

According to court documents, Vesta Brue certified on behalf of Telehealth Holdings, LLC, a company owned by Jerome Hahn, that the company had incurred expenses totaling $222,037, relating to two federal grants Telehealth received from NIH, for the development of medical devices.  Brue falsely certified that the funds had been spent in accordance with grant rules and regulations.

Brue and Hahn waived their right to be indicted by a grand jury, were formally charged in court, and admitted to the charges.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky; Howard S. Marshall, Special Agent in Charge, Federal Bureau of Investigation; Derrick Jackson, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General, Atlanta Region; and Christopher A. Henry, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division, jointly announced the guilty pleas.          

The investigation was conducted by the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, and the Internal Revenue Service, Criminal Investigation Division.  Assistant U.S. Attorney Kate K. Smith represents the federal government in this case.

Vesta Brue is scheduled to be sentenced on March 30, 2016.  She faces a maximum prison sentence of 5 years and a maximum fine of $250,000.  Jerome Hahn is scheduled to be sentenced on May 18, 2016.  He faces a maximum prison sentence of 10 years and a maximum fine of $250,000.  Any sentence will be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the federal statutes.

PIKEVILLE, Ky. — A Floyd County man, who previously admitted that he received nearly 30,000 images of child pornography, has been sentenced to 165 months in federal prison.

On January 28, U.S. District Judge Danny C. Reeves has sentenced Bret A. Dunning, 53, for receipt of child pornography.  Judge Reeves has also ordered Dunning to pay $10,000 in restitution and has assessed a $1,750 fine.  Under federal law, Dunning must serve at least 85 percent of his prison sentence; and upon his release, he will be under the supervision of the U.S. Probation Office for 15 years.  Dunning must register as a sex offender for the rest of his life.

Dunning admitted, at his guilty plea, that he had downloaded child pornography images from the internet.  In March 2013, Kentucky State Police conducted a search at Dunning’s residence and found the images.  The images depicted prepubescent children engaged in sexually explicit conduct. 

Dunning pleaded guilty in October of 2015.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard Marshall, Special Agent in Charge, FBI; and Rodney Brewer, Kentucky State Police Commissioner, jointly announced the sentence.

The investigation was conducted by Kentucky State Police and the FBI.  Assistant U.S. Attorney David A. Marye prosecuted this case on behalf of the federal government.

LEXINGTON — A Winchester, Ky., man, who previously admitted that he stole over $3 million from his former employer, Apollo Oil, LLC, has been sentenced to 51 months in federal prison.

Yesterday, U.S. District Court Judge Danny C. Reeves sentenced Bradley Earl Taylor, 38, for wire fraud. Under federal law, Bradley must serve at least 85 percent of his prison sentence. Following his release, he will be under the supervision of the U.S. Probation Office for three years.

Taylor, who worked as Apollo’s operations manager, admitted that he created a fictitious supplier, called BCW, LLC, and falsified purchase orders, invoices, and other shipping documents, causing Apollo to issue checks to BCW for nonexistent products. Taylor then stole the checks, deposited them into a bank account he opened in the name of BCW, and used the proceeds for personal gain.

According to the plea agreement, from 2004 to 2014, Taylor caused Apollo to issue 232 checks to BCW, totaling $3,055,422.33. Taylor personally received all of this money. In addition to his prison term, Taylor has also been ordered to make full restitution.

Taylor pleaded guilty to the offense in October 2015.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and Howard Marshall, Special Agent in Charge, FBI, jointly announced the sentence.

The investigation was conducted by the FBI. Assistant U.S. Attorney Andrew Boone prosecuted this case on behalf of the federal government.

U.S. Attorney Kenneth A. Polite announced that CARY PAYTON, age 61, of New Orleans, pled guilty to one count of conspiracy to receive illegal kickbacks.

On March 12, 2015, PAYTON was indicted along with 19 other defendants in a 26-count indictment charging approximately $30,052,295 in Medicare fraud and the BP fraud.

PAYTON was a Licensed Practical Nurse (LPN) at Abide Home Care Services, a home health company operated by owner Lisa Crinel. PAYTON and other LPNs, aides, recruiters and marketers were paid about $150 - $300 for each referral of a Medicare beneficiary to Abide. Abide then fraudulently billed Medicare for medically unnecessary home health services. PAYTON admitted to receiving a $300 payment for his referral of a Medicare beneficiary to Abide.

PAYTON faces a maximum term of imprisonment of five years, a $250,000 fine, and three years of supervised release following imprisonment. U.S. District Judge Susie Morgan set sentencing for April 20, 2016.

U.S. Attorney Polite praised the work of the Federal Bureau of Investigation in investigating this matter.   Assistant U.S. Attorneys Patrice Harris Sullivan, Sharan Lieberman and Andre Lagarde are in charge of the prosecution.

LONDON, Ky. — Paintsville Mayor Robert Porter and the former general manager of the local, public utility commission have been accused of misappropriating property and city resources. 

A federal grand jury in London, Ky., returned an indictment today charging Mayor Porter and Larry Herald, the former general manager of the Paintsville Utilities Commission, with two counts of theft of government property.  Herald was also charged with one count of intentionally making false statements to the FBI.

According to the indictment, from 2009 until 2012, Porter, with the knowledge, approval and assistance of Herald, did not pay for utilities services provided to residences that he owned in Paintsville.  The total delinquency was in excess of $7,000.  In addition, Porter is alleged to have used city funds to pay for personal expenses, such as maintenance on his automobiles and shipping fees for personal items.  The indictment further alleges that Porter used a city owned vehicle for personal trips.

It is also alleged that, in August 2015, during the investigation, Herald intentionally made materially false statements to the FBI, about his knowledge of Porter’s delinquent utilities bill. 

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky, Howard S. Marshall, Special Agent in Charge, FBI, and Rodney Brewer, Kentucky State Police Commissioner, jointly announced the indictment.  

The investigation was conducted by the FBI and the Kentucky State Police.  Assistant U.S. Attorneys Kenneth Taylor and Kate Smith are prosecuting this case on behalf of the federal government.  

A date for the defendants to appear in court has not yet been set.  Misappropriating federal property carries a maximum penalty of 10 years and making false statements to a federal agent carries a maximum penalty of five years.  However, any sentence following a conviction will be imposed after the Court carefully considers the U.S. Sentencing Guidelines and the federal statutes.

An indictment is an allegation only.  All defendants are presumed innocent and are entitled to a fair trial, at which the government must prove their guilt beyond a reasonable doubt.

LEXINGTON — The owner of a local produce business in Scott County, Ky., has admitted to fraudulently obtaining business loans, by falsifying information on the loan applications.

On Monday, William C. Thompson, 52, pleaded guilty, before Senior U.S. District Judge Joseph Hood, to wire fraud and making false statements on loan applications.

Thompson admitted that, in 2013, he submitted loan applications to receive thousands of dollars from federally funded agencies within the U.S. Department of Agriculture.  However, in order to conceal his poor credit history, he used his son’s social security number on the applications.  Thompson also made the false statements on the application to hide that he had previously filed for bankruptcy.  If the agencies had known Smith’s credit history, they would not have issued him the loans. 

The investigation was conducted by the U.S. Department of Agriculture, Office of Inspector General; U.S. Department of Agriculture, Farm Services Agency; and the Central Kentucky Agricultural Credit Association.  Assistant U.S. Attorney Jim Arehart is prosecuting this case on behalf of the federal government.

Thompson is scheduled to be sentenced on March 7, 2015.  He faces a maximum of 30 years in prison.  However, the Court must consider the U.S. Sentencing guidelines and the federal statutes before imposing a sentence.

ASHLAND — An Ashland, Ky., couple, previously convicted of devising a scheme to defraud the Social Security Administration (SSA) and the Kentucky Medicaid Program, out of hundreds of thousands of dollars in benefit payments, has been sentenced to federal prison.

U.S. District Court Judge David L. Bunning sentenced Diana Lynn Ball, 59, to 36 months in federal prison for Supplemental Security Income (SSI) fraud, Medicaid fraud, theft of government property and making a false statement.  Her husband, Lawrence Ball, 59, received 24 months for making a false statement.  Judge Bunning has also ordered the couple to pay restitution, equal to the amount of the improper benefits received.

Both defendants were tried and convicted in July.  Evidence at the trial established that, from 1996 until December of 2013, Diana Ball intentionally concealed her true living arrangement from the SSA, in order to fraudulently collect SSI and Medicaid benefits.

According to testimony, Ball repeatedly told the SSA she had separated from her husband and was not sharing living expenses.  In reality, Ball had been living with her husband and was receiving financial support from him.  Had the SSA been aware of the true living arrangement, Ball would not have been eligible to receive the benefit payments. 

SSI is an income assistance program designed to provide financial assistance to elderly and disabled individuals who meet the program’s eligibility requirements. Kentuckians who are eligible for SSI also qualify for benefits under the Kentucky Medicaid Program.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky, and Guy P. Fallen, Special Agent in Charge, Social Security Administration, Office of Inspector General, jointly made the announcement today.

The investigation was conducted by the SSA, Office of Inspector General.  Assistant U.S. Attorney Laura K. Voorhees prosecuted this case on behalf of the federal government.

PIKEVILLE, Ky. — A former high school teacher in Johnson County, Ky., who previously admitted to sexually exploiting a minor student, has been sentenced to 14 years in federal prison.

On Tuesday, U.S. District Judge Danny C. Reeves sentenced 26 year-old Robert Cantrell, of Versailles, Ky., for illegally enticing a minor to engage in sexual activity.  Judge Reeves further ordered Cantrell to serve 15 years of supervised release, following his sentence.  Under federal law, Cantrell must serve at least 85 percent of his prison sentence.

Earlier this year, Cantrell admitted that, in 2014, he had enticed a minor student to text him sexually explicit images of the student engaging in sexually explicit conduct.  Additionally, Cantrell admitted that he had induced the minor student to engage in sex acts with him.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard S. Marshall, Special Agent in Charge, Federal Bureau of Investigation; Jack Conway, Kentucky Attorney General; and Dwayne Price, Johnson County Sheriff, jointly made the announcement.

The investigation was conducted by the FBI, the Kentucky Attorney General’s Cyber Crimes Unit; and Johnson County Sheriff’s Office.

LEXINGTON, Ky. — A Lexington man and a Versailles man have both been charged with unlawfully distributing a controlled substance resulting in an overdose death.

On November 5, 2015, a superseding federal indictment was returned against Luis Aguirre-Jerardo, of Lexington, and Gill Dewayne Garrett, of Versailles, charging both men with illegally distributing fentanyl resulting in a death.  Garrett was named in the original indictment, returned on September 3, 2015.

Fentanyl is an extremely dangerous opioid, having a potency 30-50 times greater than heroin.  According to the indictment, on or about July 1, 2015, Aguirre-Jerardo and Garrett unlawfully distributed fentanyl to a Woodford County woman who died as a result of using the drug they supplied.  The indictment also alleges that, from approximately June 2015 until October 2015, Aguirre-Jerardo, Garrett, and two others, Allen P. White and Helaina Gracelyn Naehring, conspired to illegally distribute fentanyl, heroin, cocaine, and crack cocaine in Woodford County.

Fentanyl is the most potent opioid used in medical treatment and is occasionally diverted from legitimate sources for illicit use.  However, most fentanyl sold on the street is manufactured for illicit use by drug cartels.  Frequently, the drug user believes they are using heroin or narcotic pain pills because illicit fentanyl is often made to closely resemble those substances.

The Centers for Disease Control and Prevention recently warned of the increased presence of fentanyl on our streets and the resulting heightened risk of overdose fatalities.  The DEA’s Office of Diversion Control reports a dramatic increase in the number of seizures of illicit fentanyl in recent years, indicating the rising availability of the drug on our streets.  The reports indicate that 80% of fentanyl seizures in 2014 were concentrated in ten states.  Kentucky was one of those “top ten” states.

This indictment is the result of an initiative launched by the Office of the United States Attorney for the Eastern District of Kentucky and the DEA.  The initiative seeks to establish enhanced partnerships with participating state and local law enforcement gencies and county coroners, in order to aggressively investigate and prosecute illegal drug trafficking that results in an overdose.  Under federal law, defendants guilty of illegal drug trafficking resulting in death or serious injury are subject to a mandatory minimum sentence of 20 years in federal prison.  If the defendant has a prior felony conviction for a drug offense, the mandatory sentence is life imprisonment.  The Versailles Police Department, a local partner in this initiative, investigated the case in conjunction with the DEA, leading to the charges against both the Lexington and Versailles defendants.

“Cases such as this one are precisely why we launched our initiative to partner with state and local law enforcement agencies in order to bring to justice the drug dealers who are causing so much damage in our region,” said Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky.  “The growing heroin problem, coupled with the introduction of substantial quantities of fentanyl to Lexington, Versailles, and other communities in Central Kentucky, marks a deadly turn in the drug threat confronting our region.  Traffickers in heroin and fentanyl callously profit from the misery of others.  With increasing frequency, the results are deadly.  There is no stronger tool in our arsenal than the federal prosecution of drug traffickers whose criminal conduct results in an overdose.  Effective use of that tool requires close cooperation between federal, state and local authorities.  Our colleagues in the Versailles Police Department answered our call to action, and we are deeply appreciative.  Because of their superb police work, these two defendants, who we allege to be purveyors of substantial quantities of deadly drugs, have been removed from the streets of Lexington and Versailles,” Harvey said.

U.S. Attorney Harvey; Joseph Reagan, Special Agent in Charge, DEA; and John Wilhoit, Chief of the Versailles Police Department, jointly announced the indictment.

Assistant U.S. Attorney Todd Bradbury is prosecuting the case on behalf of the federal government.

Aguirre-Jerardo and Garrett face a minimum of 20 years in federal prison and a maximum of life imprisonment.  Any sentence following a conviction, however, would be imposed after the Court considers the U.S. Sentencing Guidelines and the applicable law.

An indictment is an allegation only.  All defendants are presumed innocent and are entitled to a fair trial, at which the government must prove their guilt beyond a reasonable doubt.

LEXINGTON — A federal grand jury has returned a 100-count indictment charging five men, who owned a clinical laboratory, with billing health care third-party payors for urine drug tests that were medically unnecessary and not eligible for reimbursement.

On Thursday, a federal grand jury returned an indictment charging Dr. Robin G. Peavler, 54, of Lexington, Ky., Dr. Bryan S. Wood, 48, of Danville, Ky., and Dr. Robert L. Bertram, 47, James W. Bottom, 62, Brian C. Walters, 43, all of Russell Springs, Ky., with one count of conspiracy to commit health care fraud and 99 counts of health care fraud.  The alleged conduct was part of a scheme to defraud Medicare, Medicaid, Anthem BlueCross BlueShield, Bluegrass Family Health, and others.

Beginning around December 2010, as alleged in the indictment, the defendants agreed to collect thousands of urine samples for testing at PremierTox, a clinical lab formerly owned by the defendants, which lacked the ability to perform quantitative drug tests on such a high volume of samples. 

PremierTox allegedly froze the samples, at a lab in Russell Springs, Ky., and didn’t perform the tests until up to ten months later, knowing that the results were no longer relevant to the treatment of the patients.  According to the indictment, the defendants submitted claims to Medicare, Medicaid and private insurers, and were reimbursed thousands of dollars for these unnecessary tests.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Derrick Jackson, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General, Atlanta Region; and Jack Conway, Kentucky Attorney General, jointly made the announcement today.

The investigation was conducted by the U.S. Department of Health and Human Services, Office of Inspector General, and the Office of the Kentucky Attorney General’s Medicaid Fraud and Abuse Control Unit.  Assistant U.S. Attorney Kate K. Smith is prosecuting this case on behalf of the federal government.

The defendants are scheduled to appear in court on December 1, 2015 at 1:30 p.m.  If convicted, the defendants face a maximum of ten years in prison.  Any sentence following a conviction, however, would be imposed after the Court considers the U.S. Sentencing Guidelines and the applicable federal statutes.

An indictment is an allegation only.  All defendants are presumed innocent and are entitled to a fair trial, at which the government must prove their guilt beyond a reasonable doubt.

hickman_damon_-_indictment.pdf (80.65 KB)WASHINGTON – The Justice Department announced today that a federal grand jury in London, Kentucky, has indicted two former deputy jailers at the Kentucky River Regional Jail on charges related to the July 9, 2013, in-custody death of Larry Trent, a pretrial detainee at the jail.  The indictment charges Damon Hickman, 38, and William Howell, 59, with causing Trent’s death, and charges Hickman with attempting to cover up his involvement in the death.

Hickman and Howell are charged with federal civil rights violations for depriving Trent of his civil rights.  Count one of the indictment charges Hickman and Howell of failing to provide Trent with necessary medical care after he was injured, thereby acting with deliberate indifference to a substantial risk of harm to Trent, which resulted in Trent’s death.  Count two of the indictment also charges both defendants with using excessive force against Trent, resulting in bodily injury to him.

Hickman is additionally charged with one count of obstruction of justice for falsifying an official log by indicating that observations of Trent were being made and that Trent was “10-4,” meaning that he was safe and not in obvious physical distress, when in fact Trent was not “10-4.”

Hickman and Howell face a maximum penalty of life in prison for the death-resulting civil rights offense, and face a maximum penalty of 10 years in prison for assaulting Trent.  Hickman faces a maximum penalty of 20 years in prison for falsification of records in a federal investigation.

An indictment is merely an accusation, and the defendants are presumed innocent unless proven guilty.

The case is being investigated by the FBI’s London Resident Agency, with assistance provided by the Kentucky State Police.  The case is being prosecuted by Trial Attorney Sanjay Patel of the Civil Rights Division’s Criminal Section and Assistant U.S. Attorney Hydee Hawkins of the Eastern District of Kentucky.

COVINGTON — A Covington, Ky., man has been sentenced to 200 months for distributing heroin in Kenton County.

On Friday, U.S. District Judge Amul Thapar sentenced Johnny J. Shands for distribution of heroin.  Shands’ criminal history qualified him as a career offender and led to an enhanced sentence.  His prior convictions include weapons offenses and trafficking cocaine.  Under federal law, Shands must serve at least 85 percent of his prison sentence; and following the completion of his sentence, he will be under the supervision of the U.S. Probation Office for 12 years.

According to court records, Shands sold heroin to undercover officers, on multiple occasions, in early 2015.  Authorities conducted searches at multiple residences and found cash, heroin and fentanyl that belonged to Shands.  Shands pled guilty in July and admitted that he distributed between 100 and 400 grams of heroin.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky, and Howard S. Marshall, Special Agent in Charge, Federal Bureau of Investigation, jointly made the announcement.

The investigation was conducted by the FBI Safe Streets Task Force and the Covington Police Department.  Assistant U.S. Attorney Tony Bracke prosecuted this case on behalf of the federal government.

LONDON — A Wayne County man, previously convicted of producing child pornography, has been sentenced to 30 years in federal prison.

On Thursday, U.S. District Judge Gregory F. Van Tatehnove sentenced 31 year-old Brandon Lynn Jones.  Under federal law, Jones must serve at least 85 percent of his sentence.  And, upon his release from prison, Jones must immediately register as a sex offender and will be under the supervision of the U.S. Probation Office for the rest of his life.

According to court documents, in 2014, Jones produced and distributed photographs depicting his sexual abuse of a minor, under the age of twelve.

Jones’s conviction is the result of an undercover investigation conducted by the Federal Bureau of Investigation’s Child Exploitation Task Force, Washington, D.C. Field Division.                                             

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Howard S. Marshall, Special Agent in Charge, FBI Louisville; and, Assistant Director in Charge, Paul M. Abbate, FBI Washington, D.C., jointly announced the sentence.

Assistant U.S. Attorney Adam Reeves prosecuted the case on behalf of the federal government.

COVINGTON — A Kenton County man, who previously admitted to distributing images and videos of child pornography, through peer-to-peer files over the internet, was sentenced today to 147 months in federal prison.    

U.S. District Judge Amul Thapar sentenced Alan K. Newberry, 43, of Park Hills, Ky., for distribution of child pornography and also ordered him to pay $13,500 in restitution to victims.  Under federal law, Newberry must serve at least 85 percent of his prison sentence and he will be required to register as a sex offender for the remainder of his life.

According to Newberry’s plea agreement, authorities with the Kentucky Attorney General’s Office identified numerous images and videos of child pornography that had been made available for download on the internet.  They traced the source of those files to Newberry’s computer, which was located at his home in Park Hills.  Authorities executed a search warrant at the residence, searched his computer, and found 4,000 images and 700 videos of children engaged in sexually explicit conduct.  Many of the images depicted prepubescent children and sadistic abuse.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky, and Jack Conway, Kentucky Attorney General, jointly announced the sentence.                

The investigation was conducted by the Cyber Crimes Unit of the Office of the Kentucky Attorney General.

LONDON — A former Georgia physician has admitted in federal court that he conspired with the owner of a Georgia pain clinic, and others, to unlawfully distribute thousands of prescription pills to Kentuckians.

On Thursday, Michael Johnston, 58, pleaded guilty, before U.S. District Judge Amul Thapar, to conspiring to unlawfully distribute oxycodone. Pursuant to his plea agreement, which is still awaiting the Court’s approval, Johnston agreed to serve 10 years in prison, beginning on the date of his formal sentencing, January 12, 2016. Under federal law, he must serve at least 85 percent of his sentence.

Johnston admitted that, from May 2011 until November 2011, he conspired with Joel Shumrak, the owner of a Tucker, Ga., pain clinic, and others, to illegally distribute large quantities of oxycodone and Xanax to residents of numerous Kentucky counties, including Clay, Laurel, Rockcastle, Pulaski, Floyd, Knox, Bell, Pike, Jefferson, Whitley, Madison, Montgomery, Fayette, and Magoffin counties. Johnston further admitted that he ignored the fact that these Kentuckians were addicts and were likely selling the drugs for profit upon their return to Kentucky.

Johnston, who had previously practiced as a pediatrician, acknowledged that he had no formal training or experience in prescribing adult pain medication, prior to being hired by Shumrak. According to Johnson’s plea agreement, many of the patients were seen by non-physicians, who then recommended prescriptions, allowing the clinic to increase the number of patients that could be seen in a day.

Johnson also admitted that he provided little or no physical examination to many of these patients, before providing the prescriptions; he made no referrals for surgery or other medical exams; and he was encouraged to see as many patients, per day, as possible.

Court records also show that Shumrak’s clinic did not even accept medical insurance, operating on a cash-only basis. Shumrak has also pleaded guilty and was sentenced to 14 years imprisonment earlier this year.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky; Joseph Reagan, Special Agent in Charge, DEA, Detroit Field Division; A.D. Wright, Acting Special Agent in Charge, DEA, Miami Field Division; and Daniel Salter, Special Agent in Charge, DEA, Atlanta Field Division, jointly made the announcement.

The investigation was conducted by the DEA in Kentucky, Georgia, Florida and Ohio. Assistant U.S. Attorney Sam Dotson prosecuted this case on behalf of the federal government.

LEXINGTON — A Winchester, Ky., man has admitted to stealing over $3 million from his former employer, Apollo Oil, LLC.         

On Monday, Bradley E. Taylor, 38, pleaded guilty to wire fraud, before U.S. District Court Judge Danny C. Reeves.         

Taylor, who worked as Apollo’s operations manager, admitted that he created a fictitious supplier, called BCW, LLC, and falsified purchase orders, invoices, and other shipping documents, causing Apollo to issue checks to BCW for nonexistent products.  Taylor then stole the checks issued by Apollo, deposited them into a bank account he opened in the name of BCW, and converted the proceeds to his personal use.

According to the plea agreement, from 2004 to 2014, Taylor caused Apollo to issue 232 checks to BCW, totaling $3,055,422.33.  Taylor personally received all of this money.                   

Taylor waived his right to be indicted by a grand jury, was formally charged in court, and admitted to the charges.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and Howard Marshall, Special Agent in Charge, FBI, jointly announced the guilty plea.

The investigation was conducted by the FBI.  Assistant U.S. Attorney Andrew Boone is prosecuting this case on behalf of the federal government.

Taylor is scheduled to be sentenced on January 27, 2016.  He faces up to 20 years in prison and a maximum fine of $250,000.  However, any sentence will be imposed by the Court after consideration of the U.S. Sentencing Guidelines and the federal statutes.

LEXINGTON – Nurses’ Registry and Home Health Corporation (“Nurses’ Registry”) and the Estate of its former owner, the deceased Lennie House, have agreed to the entry of a judgment against them for $16,000,000 to resolve allegations of widespread healthcare fraud.

This civil judgment ends an investigation and False Claims Act litigation alleging that Nurses’ Registry, at the direction of Lennie House, fraudulently billed Medicare for medically unnecessary home health services, as well as services tainted by kickbacks provided by the company and House to local physicians and others who referred patients to Nurses’ Registry.

“For years, Nurses’ Registry abused its privileges as a provider in the Medicare program, and the trust of the medical community and general public,” said United States Attorney Kerry B. Harvey. “This settlement returns ill-gotten gains to the Medicare Trust Fund and ensures that Nurses’ Registry will have no further opportunity to defraud federal health care programs. Our office will continue to vigorously pursue health care fraud in this district, against companies and individuals, no matter how difficult or protracted the litigation may be.”

Under House’s direction, Nurses’ Registry engaged in systematic false billing that allowed them to wrongfully obtain millions of dollars from the Medicare program between 2004 and 2011. Medicare pays for home health services only when a physician signs a plan of care certifying that the patient is homebound and has a reasonable need for skilled nursing care or certain therapy services.

To advance its health care fraud, Nurses’ Registry falsified medical records to make it appear as if patients had a medical need for skilled nursing or therapy services, or appear as if the patients were homebound. At times, Nurses’ Registry employees even forged physician signatures on medical records to falsely “certify” that the patient required Nurses’ Registry’s services. Nurses’ Registry, at the direction of House, frequently re-certified patients for more and more home health services – and billed such services to Medicare – long after the patient ceased to meet Medicare’s eligibility requirements.

In addition to billing Medicare for unnecessary or non-reimbursable home health services, Nurses’ Registry and House provided tickets to athletic events and concerts, and provided other things of value, to doctors and referral sources in order to induce or reward patient referrals. This practice was so commonplace that physicians would contact the home health agency to ask for tickets to popular events, such as Taylor Swift concerts or the Kentucky Derby.

House instructed the company’s marketing employees to deliver bottles of liquor and other enticements to referral sources in order to ensure more valuable patient referrals that could be billed to Medicare. These transactions violated the federal Anti-Kickback Statute as well as the Stark Law, which prohibits home health agencies from billing for services referred to them by physicians with whom they have a financial relationship.

“We are focused on combatting fraud in the home health arena,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta. “Settlements like this one send a clear message that false claims to Medicare will not be tolerated.”

The United States filed a complaint against Nurses’ Registry, Lennie House, and Vicki S. House, House’s wife, in September 2011, following an investigation into a whistleblower lawsuit filed by former employees Alisia Robinson-Hill and David Price. After several years of litigation, this settlement, in conjunction with a prior settlement with Vicki House for $1,082,416, fully resolves that action in favor of the government. Under the terms of the settlement agreement, Nurses’ Registry will be sold to an independent third party within 90 days, and 70 percent of the net sale proceeds will be remitted to the federal government. In addition, the Estate of Lennie House will have one year to sell off all of its assets and will turn over 75 percent of those net sale proceeds to the government.

Ms. Robinson-Hill and Mr. Price will receive a share of the settlement proceeds pursuant to the qui tam provisions of the False Claims Act.

The investigation conducted prior to the government filing its complaint was conducted by the Department of Health and Human Services, Office of the Inspector General; the Office of the Kentucky Attorney General, Medicaid Fraud and Abuse Control Unit (“MFCU”); the Federal Bureau of Investigation; and the U.S. Attorney’s Office. The litigation was handled by Assistant United States Attorneys Christine Corndorf and Paul McCaffrey, with assistance from the Commercial Litigation Branch of the Department of Justice’s Civil Division.

            These are tumultuous times for law enforcement officers.  Tragic events in places like Ferguson, Missouri, and North Charleston, South Carolina have ignited a national debate concerning police methods.  The debate is entirely appropriate – the wholesale condemnation of law enforcement officers is not.  The recent horrific killing of a brave Kentucky State police trooper in Western Kentucky is a stark reminder of the risks willingly taken by our law enforcement officers in order to keep us safe.

             The law enforcement profession, like any other, is not populated by perfect people.  There are a few-very few- bad officers and there are times when good officers make bad decisions under the intense pressure of the moment.  Effective policing requires a high level of trust between law enforcement officers and the communities they serve.  A national discussion that serves to improve law enforcement methods and increase community trust is entirely appropriate and a valuable public dialogue.  No public servant is above criticism-including those of us who work in the criminal justice system.

            The national discussion concerning law enforcement methods should not, however, overlook a simple, but crucial fact – the overwhelming majority of law enforcement officers are good and dedicated people engaged in an incredibly difficult job.  Never has the work of a law enforcement officer been more complex, difficult, or dangerous.  Recent events in our Commonwealth  have made the nature of law enforcement work all too clear.  Every day thousands of men and women who wear the badge work diligently to make our communities better places to live.  They never know when a routine shift will immediately escalate into a life and death situation.  When that happens, our law enforcement officers are expected to stand tall, make good decisions in a split second, and protect the innocent from those who would do them harm. Sometimes, they make the ultimate sacrifice while doing so.

            Our law enforcement officers engage in many thankless and unseen tasks that are essential to protecting our homes, our families and our freedoms from all sorts of threats, both great and small.  As we go about our daily lives, we do so in relative safety because the men and women who wear the badge are willing to stand in the breach.  We know that those who choose this profession do it neither for wealth nor fame. They deserve our appreciation and respect.

            As United States Attorney for the Eastern District of Kentucky, I am privileged to work closely with local, state and federal law enforcement officers representing many agencies.  I am deeply honored to be associated with these truly admirable men and women and the outstanding work they do for us all.

            The national dialogue concerning police methods is important, and I encourage everyone to participate.  It is equally important that we acknowledge the bravery and sacrifice of our law enforcement officers as they go about their vital work.

           The next time you see a police officer would be a great time to simply say thanks.

           - Kerry B. Harvey, United States Attorney, Eastern District of Kentucky

LEXINGTON, Ky. — A Nicholasville man, who previously admitted that he made child pornography images available for download on the internet, has been sentenced to 84 months in federal prison.

On Thursday, Chief U.S. District Judge Karen Caldwell sentenced Jeffrey Treadway, 37, for distribution of child pornography. Under federal law, he must serve at least 85 percent of his prison sentence; and upon his release, he will be under the supervision of the U.S. Probation Office for 25 years.

According to court documents, in 2013, law enforcement identified several child pornography files available for download on the internet and traced the source of the images to Treadway’s computer, which was located at his home in Nicholasville.

The FBI searched Treadway’s computer and found over 20,000 thousand images of children, some of whom were under the age of 12, engaged in sexually explicit conduct. Treadway admitted that some of the images depicted adults sexually abusing children.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky and Howard S. Marshall, Special Agent in Charge, FBI, jointly announced the sentence.

The investigation was conducted by the FBI and the Kentucky Regional Computer Forensic Laboratory (KRCFL). The case was prosecuted by Assistant U.S. Attorney David A. Marye.

Defendant Claimed Hundreds of Thousands of Dollars in Tax Refunds

LEXINGTON, Ky. — A federal jury convicted Winona Jean Cox, of Lexington, Ky., of filing four false income tax returns and then obstructing the Internal Revenue Service from recovering a fraudulently-claimed refund check.

On Thursday, the jury convicted Cox, 40, of four counts of filing false tax claims and one count of interfering with the administration of the internal revenue laws. The jury reached its verdicts after three days of trial and two hours of deliberation.

At trial, the United States proved that Cox falsely claimed over $477,000 in tax refunds during tax years 2005 through 2008. Cox’s fraud involved over-reporting interest income and tax withholding, using counterfeit IRS 1099-OID forms. Cox then submitted claims for tax refunds based on those inflated amounts.

Evidence at trial also proved that, after Cox was mailed a tax refund check for one of the fraudulent returns, she attempted to obstruct the IRS from recovering that money, by assigning the titles of her three homes and her car to nominee trusts and wire transferring most of the refund into a bank account under a different name.

Cox faces a maximum sentence of five years in prison on the filing false claims counts, and three years in prison for interfering with the administration of the internal revenue laws. Sentencing is currently scheduled for December 14, 2015 before U.S. District Judge Joseph Hood. Any sentence imposed by the Court will come after careful consideration of the U.S. Sentencing Guidelines and the federal statutes governing imposition of sentences. Under federal law, Cox must serve at least 85 percent of her prison sentence.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; and Christopher A. Henry, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division, jointly made the announcement.

The investigation was conducted by the Internal Revenue Service, Criminal Investigation Division. Assistant U.S. Attorneys Neeraj Gupta and Ken Taylor prosecuted this case on behalf of the federal government.

COVINGTON, Ky. — A former paramedic, with the Carter County Emergency Medical Service (EMS), has been sentenced to 18 months in federal prison, for tampering with a consumer product.

On Monday, U.S. District Judge David L. Bunning sentenced 35 year-old Amanda Sturgill Jones and also ordered that she serve three years of supervised release following her prison term.

Jones admitted that on multiple occasions, between 2012 and June 2013, she stole fentanyl from the EMS storage center for her own personal use. To conceal her theft from the EMS and law enforcement, she replaced the empty vials of fentanyl with saline and then glued the caps back on the vials. Fentanyl is used to treat patients in severe pain.

Jones pleaded guilty in May of this year.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Antoinette V. Henry, Special Agent in Charge, U.S. Food and Drug Administration; and Rodney Brewer, Commissioner of the Kentucky State Police, jointly made the announcement.

The investigation was conducted by the U.S. Food and Drug Administration, Office of Criminal Investigations, the Kentucky State Police, and the Kentucky Board of Emergency Medical Services. Assistant U.S. Attorney Robert McBride prosecuted this case on behalf of the federal government.

FRANKFORT - Yesterday, a federal judge sentenced a California man to 13 years in federal prison for his role in an oil investment scheme in Kentucky that defrauded over 200 investors, nationwide, out of more than $3,000,000.

U.S. District Judge Gregory Van Tatenhove sentenced Henry Irving Ramer, 76, for mail fraud, securities fraud, and conspiracy to launder money. Under federal law, Ramer must serve at least 85 percent of his prison sentence. Upon his release, he will be under the supervision of the U.S. Probation Office for 3 additional years.

Ramer was convicted by a jury in May of this year. According to the evidence at trial, Ramer and others raised money from investors by making misrepresentations and failing to disclose material facts about the oil well investments in Barren, Monroe, and Cumberland Counties. Ramer’s role was as a salesman and manager of two Los Angeles-based telemarketing sales operations. In 2013 and 2014, he and his team cold-called potential investors around the country and fraudulently convinced many of them to invest. Ramer also created false offering memorandums and a promotional video. Every one of the investors lost all or nearly all of their investment.

In January 2015, John Westine, another leader of the scheme, was convicted of mail fraud, securities fraud, and money laundering conspiracy after a two-week jury trial. He is scheduled for sentencing on September 18. Another co-defendant, Mark Cornell, has pleaded guilty and is also set for sentencing later this month. A fourth defendant, Westine’s half-brother Michael Hicks, was sentenced in July to three years in prison for his role.

Kerry B. Harvey, U.S. Attorney for the Eastern District of Kentucky; Dugan Wong, Inspector in Charge of the U.S. Postal Inspection Service; and Charles Vice, Commissioner of the Kentucky Department of Financial Institutions, jointly made the announcement.

The investigation started when investors submitted complaints to the Kentucky Department of Financial Institutions, Division of Securities. The investigation was conducted by the U.S. Postal Inspection Service, including Postal Inspector Roberta Bottoms, and the Kentucky Department of Financial Institutions, Division of Securities.

Assistant U.S. Attorneys Ken Taylor and Neeraj Gupta prosecuted these cases on behalf of the federal government.