Western District of Michigan
Press releases recorded for this federal judicial district.
Missouri Hospital Agrees to Pay United States $5.5 Million to Settle Alleged False Claims Act ViolationsRead the Press Release
Two Southwest Missouri health care providers have agreed to pay the United States $5.5 million to settle allegations that they violated the False Claims Act by engaging in improper financial relationships with referring physicians, the Justice Department announced today. The two providers are Mercy Health Springfield Communities, formerly known as St. John’s Health System Inc., which owns and operates a hospital in Springfield, Missouri, and its affiliate, Mercy Clinic Springfield Communities, formerly known as St. John’s Clinic, which operates health care facilities in southwest Missouri.
“Financial relationships between heath care providers and their referral sources must be structured to comply with all applicable laws,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division. “When physicians are rewarded financially for referring patients to hospitals or other health care providers, it can affect their medical judgment, resulting in overutilization of services that drives up health care costs for everyone. In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”
“This settlement protects patients and the public by enforcing the federal protections against illegal profit incentives for physicians,” said U.S. Attorney Tammy Dickinson of the Western District of Missouri. “A bonus structure that rewards physicians based on the value of their referrals is detrimental to both the quality and the cost of health care. Patients deserve assurances that they are receiving appropriate medical care, unbiased by hidden incentives. And taxpayers deserve assurances that the cost of public health care programs is not inflated by unnecessary procedures and services.”
“Health care organizations paying physicians based on referrals – as alleged in this case – undermines public trust in medical institutions and the financial integrity of federal health care programs,” said Special Agent in Charge Gerald T. Roy of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “We will aggressively pursue organizations that engage in conduct detrimental to taxpayers and government health programs.”
The settlement announced today resolved allegations that the defendants submitted false claims to the Medicare program for services rendered to patients referred by physicians who received bonuses based on a formula that improperly took into account the value of the physicians’ referrals of patients to the clinic. Federal law restricts the financial relationships that hospitals and clinics may have with doctors who refer patients to them.
The allegations settled today arose from a lawsuit filed by a whistleblower, Dr. Jean Moore, a physician who is employed by one of the defendants, under the qui tam provisions of the False Claims Act. Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery. Dr. Moore will receive $825,000 from the recovery announced today.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24.9 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.
The case, United States ex rel. Moore v. Mercy Health Springfield Communities f/k/a St. John’s Health System, Inc., et al., Case No. 13-3019-CV (W.D. Mo.), was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Western District of Missouri and HHS-OIG. The claims settled by this agreement are allegations only, and there has been no determination of liability.
Kent County Tax Return Preparer, Yashica Toshian Tucker, Pleads Guilty to Filing A False Claim Against the U.S. GovernmentRead the Press Release
GRAND RAPIDS, MICHIGAN — Grand Rapids resident Yashica Toshian Tucker, 40, pled guilty to making a false claim against the U.S. Government, U.S. Attorney Patrick A. Miles, Jr. announced today. U.S. Attorney Miles was joined in the announcement by Jarod J. Koopman, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation.
Tucker was charged in April 2015 by a federal grand jury in a 10-count indictment that alleged she prepared and filed false federal tax refund claims between January 2011 and February 2013. The indictment alleged false claims totaling $71,606. Today, Tucker pled guilty to one of those counts before Chief U.S. District Judge Robert J. Jonker.
According to a written plea agreement filed with the Court, Tucker claimed to be a knowledgeable and experienced tax return preparer who filed federal income tax returns for others for a fee. In pleading guilty, Tucker admitted preparing and filing a false tax return in 2011 on behalf of an individual tax filer. The return falsely stated that the filer earned more than $16,000 of income in 2010 and sought a refund of $7,436. Tucker knew that the claim to the Department of the Treasury was false and fraudulent because she made up the income amount. Tucker successfully obtained the fraudulent refund from the government from that claim, of which she received $1,000 as payment for her services. Tucker further admitted that this was not the only time she knowingly filed a false and fraudulent federal tax return claiming a refund on behalf of another person.
Tucker will be sentenced by Chief Judge Jonker on November 3, 2015. The Court will determine the total amount of the loss to the government as a result of Tucker’s criminal activity. The maximum penalty for filing a false claim against the U.S. Government is imprisonment of not more than five years; a three-year period of supervised release; a fine of $250,000 or twice the gain or loss resulting from the offense, whichever is greater, and mandatory restitution to the government. The actual sentence will be determined by the Court after consideration of any applicable statutory factors and the advisory United States Sentencing Guidelines.
Tucker has agreed to be permanently barred from preparing or filing federal tax returns for anyone other than herself.
This case was investigated by Special Agents of Internal Revenue Service Criminal Investigation and the U.S. Postal Inspection Service. Assistant U.S. Attorney Christopher O’Connor is prosecuting the case.
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Plainwell Man, Benjamin James Cance, Charged with Illegal Arms Exportation, Other CrimesRead the Press Release
Benjamin James Cance Indicted For Shipping Gun Components Overseas, Money Laundering, and Illegal Possession of a Machinegun
GRAND RAPIDS, MICHIGAN — U.S. Attorney Patrick Miles announced today the indictment of Benjamin James Cance. Cance, age 30, is charged with three crimes. The first alleges that he illegally shipped gun components that are on the Federal Munitions List overseas. The second charge alleges that he engaged in money laundering by using the profits from this business to purchase a house. Finally, Cance is charged with illegal possession of an unregistered machinegun. International arms shipment is punishable by imprisonment for up to 20 years; the maximum penalty for money laundering and possession of a machinegun is ten years in prison.
In pretrial filings with the court, the government disclosed that Cance’s illegal dealings with his overseas customers were allegedly conducted through illegal internet sites, referred to as the "darknet." He also allegedly utilized electronic currencies, such as Bitcoin, to get paid for his services in an effort to hide the nature of his activities.
The case is assigned to U.S. District Judge Robert Holmes Bell for disposition. On August 11, 2015, Cance appeared before Magistrate Judge Phillip J. Green to answer the charges and entered a plea of not guilty. He was placed on bond at that time. No trial date has yet been set.
The case was assigned to Timothy VerHey, Assistant U.S. Attorney, for prosecution. Investigation of the case is being conducted by the Department of Homeland Security, Immigration and Customs Enforcement, the Internal Revenue Service, the U.S. Postal Inspection Service, and the Bureau of Alcohol, Tobacco, Firearms and Explosives.
The charges in an indictment are merely accusations, and a defendant is presumed innocent until and unless proven guilty in a court of law.
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Former Kincheloe Resident, Tommy Alan Cain, Sentenced for Sexual Assault of A MinorRead the Press Release
MARQUETTE, MICHIGAN — U.S. Attorney Patrick A. Miles, Jr., announced that Tommy Alan Cain, 62, a former resident of Kincheloe, Michigan, was sentenced in U.S. District Court to 180 months’ imprisonment for sexual abuse of a minor. In addition to the prison term, Cain was also ordered to serve ten years of supervised release following the completion of his term of incarceration and to have no contact with the victim.
Cain was indicted by a federal grand jury in July of 2014 and pled guilty on February 25, 2015 to sexually abusing a 12-year-old girl at a residence on the Sault Ste. Marie Tribe of Chippewa Indians reservation in the summer of 2007. The incident came to light in August of 2012 when the victim first disclosed that Cain had been sexually abusing her over the course of the preceding five years. In imposing the maximum sentence permitted under the statute, U.S. District Judge R. Allan Edgar emphasized the need to protect the public from Cain, whose conduct he described as "heinous."
The Sault Ste. Marie Tribal Police and the FBI investigated the case. Assistant U.S. Attorney Hannah N. Bobee prosecuted the case.
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Felon, Xavier Velvie McCarty, Sentenced to 70 Months in Federal Prison for Possessing Firearms He Stole from A Gun StoreRead the Press Release
GRAND RAPIDS, MICHIGAN — Xavier Velvie McCarty, 22, of Muskegon, Michigan, was sentenced to seventy (70) months in federal prison for possessing firearms as a convicted felon, U.S. Attorney Patrick A. Miles, Jr. announced today. In addition to the prison term, U.S. District Judge Paul L. Maloney imposed a three-year term of supervised release that will commence once McCarty is released from imprisonment.
McCarty pleaded guilty on April 9, 2015. The facts underlying his conviction were outlined in a written plea agreement and in the government’s sentencing memorandum. During the early morning hours of October 14, 2014, McCarty broke into a federally licensed firearms dealer in Robinson Township, Ottawa County, Michigan. He used a hammer to smash a display case, and he then removed approximately 30 handguns from the case and placed them into a duffel bag he had brought with him. While McCarty was stealing the handguns, a silent alarm alerted police to the burglary. Officers responded to the scene, and McCarty fled through a broken window, leaving the duffel bag of stolen handguns behind. Police apprehended him nearby a short time later.
McCarty had previously been convicted of a felony drug offense, and he was on probation for another drug offense at the time. He later admitted that he intended to sell the stolen handguns.
In imposing sentence, Judge Maloney emphasized the serious nature of McCarty’s conduct and the grave risk it posed to the community. Judge Maloney noted that McCarty’s sentence would serve as an appropriate deterrent for others contemplating similar conduct. He also ordered McCarty to pay $880 in restitution to repair the property that was damaged and destroyed during the break-in.
The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the Ottawa County Sherriff’s Office, and the Holland Police Department investigated the case. Assistant U.S. Attorney Sean M. Lewis prosecuted the case.
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Baraga Man Sentenced to 70 Months in Federal Prison for Distribution of CocaineRead the Press Release
MARQUETTE, MICHIGAN — U.S. Attorney Patrick A. Miles, Jr., announced that James Frederick Shelifoe, 43, of Baraga, Michigan, was sentenced in U.S. District Court to 70 months’ imprisonment for distribution of cocaine. In addition to the prison term, Shelifoe was also ordered to serve three years of supervised release upon the completion of his term of incarceration.
In 2014, the Safe Trails Taskforce, which is comprised of the Federal Bureau of Investigation, the Michigan State Police, and the Bureau of Indian Affairs, initiated an investigation into drug activity in the area of Baraga, Michigan. The investigation identified Shelifoe as a major cocaine dealer and established that during the preceding seven years he had distributed approximately 23 kilograms of cocaine in the western Upper Peninsula. He was indicted in December 2014 and pled guilty on February 19, 2015. In imposing the sentence, U.S. District Judge R. Allan Edgar emphasized the need to protect the public and to deter others from emulating Shelifoe’s criminal behavior.
The Keweenaw Bay Indian Community Tribal Police and the Safe Trails Taskforce investigated the case. Assistant U.S. Attorney Hannah N. Bobee prosecuted the case.
Pontiac Man, Robert Thomas Carlson, Sentenced for Possession of Child PornographyRead the Press Release
MARQUETTE, MICHIGAN — Robert Thomas Carlson, 40, of Pontiac, Michigan was sentenced to 41 months in federal prison for possession of child pornography, U.S. Attorney Patrick A. Miles, Jr. announced today. In addition to the prison term, U.S. District Judge R. Allan Edgar ordered Carlson to serve ten years of supervised release following the completion of his prison term and to register as a sexual offender.
On February 12, 2015, Carlson pleaded guilty to a federal indictment charging him with possession of child pornography. The investigation into Carlson’s activities began when agents from Immigration and Customs Enforcement, Homeland Security Investigations determined Carlson had paid for a subscription to a child pornography website. Agents eventually located Carlson, who had moved from lower Michigan to the Upper Peninsula to begin studies at Northern Michigan University. Agents retrieved a laptop Carlson had used while he was a student and discovered images and a video containing child pornography. Agents interviewed Carlson, and he surrendered another laptop computer, forensic examination of which revealed that Carlson was continuing to view and collect child pornography.
This case is part of Project Safe Childhood, a nationwide initiative designed to protect children from online exploitation and abuse. The U.S. Attorney's Office, county prosecutor's offices, Internet Crimes Against Children task force (ICAC), federal, state, and local law enforcement are working closely together to locate, apprehend, and prosecute individuals who exploit children. The partners in Project Safe Childhood work to educate local communities about the dangers of online child exploitation, and to teach children how to protect themselves. For more information about Project Safe Childhood, please visit the following web site: www.projectsafechildhood.gov.
Immigration and Customs Enforcement, Homeland Security Investigations, the Federal Bureau of Investigation, the Michigan State Police, and Northern Michigan University Public Safety investigated the case. The case was prosecuted by Assistant U.S. Attorney Paul D. Lochner.
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Federal Welfare Fraud Conviction Results in Prison and Deportation of Muhammad DalalliRead the Press Release
Muhammad Dalalli Sentenced for Role in Welfare Fraud Scheme
GRAND RAPIDS, MICHIGAN — U.S. Attorney Patrick Miles announced today that Muhammad Dalalli, 41, of Grand Rapids, was sentenced by Chief U.S. District Judge Robert J. Jonker for his scheme to defraud the federal government in connection with subsistence benefits.
On November 4, 2013, Dalalli and his wife were charged with defrauding the federal government of numerous subsistence benefits after arriving in the United States from Iraq. The programs defrauded included the Women, Infants and Children ("WIC") program, Temporary Assistance to Needy Families ("TANF"), HUD, and Medicaid benefits. Dalalli and his wife defrauded these programs by failing to reveal their ownership of Lebanese bank accounts and other assets, and by concealing their living arrangements in connection with their receipt of HUD-subsidized housing. The fraud scheme resulted in losses totaling $126,739. Dalalli, a naturalized U.S. citizen, was additionally charged with making false statements in connection with his citizenship application.
Dalalli’s trial commenced on January 13, 2015. After the first day of trial he entered a guilty plea to all counts. Shortly thereafter, he requested that his guilty pleas be set aside, claiming that he had been coerced into pleading guilty by his defense attorney. This request was denied by Judge Jonker, who noted that the court had inquired at length with Dalalli concerning his decision to plead guilty, and Dalalli had assured the court that his decision to plead guilty was voluntary.
On July 14, 2015, Judge Jonker sentenced Dalalli to serve a prison term of 27 months, followed by supervised release of 36 months. The sentence included restitution of $126,739. Dalalli was also stripped of his U.S. citizenship and ordered deported following the completion of his sentence. Dalalli’s wife, Rima Alame, will be sentenced on August 31, 2015.
This case was investigated by the Department of Agriculture, Office of Inspector General, the Federal Bureau of Investigation, and the Michigan Department of Health and Human Services, Office of Inspector General. The case was prosecuted by Assistant U.S. Attorney Timothy VerHey.
Wisconsin Man, Edward Joseph Peterson, Sentenced to Seven Years for Repeated Child Sexual Abuse on Indian Land Near PetoskeyRead the Press Release
GRAND RAPIDS, MICHIGAN – Edward Joseph Peterson, 61, of the Lac Du Flambeau Band of the Lake Superior Chippewa tribe in Wisconsin, received a seven-year sentence in federal prison for child sexual abuse on June 29, 2015. A grand jury charged Peterson with seven counts of abusive sexual contact with four different children under 12 years old from 2009 to 2011. Peterson pled guilty to one count, and the judge ordered him to pay $100,000 in restitution to the victims for counseling.
In 2009, two young girls in the Little Traverse Bay Band of Odawa Indians reported that Peterson touched them on their breasts and buttocks while they were visiting his house on tribal land in Emmet County, near Petoskey. In 2011, two more girls reported that Peterson touched their genitals and buttocks, also on tribal land. A fifth girl later reported that Peterson also sexually abused her. In 2012, the FBI interviewed Peterson about the allegations, which he denied. Following the interview, while the investigation continued, Peterson sexually abused another young girl in Wisconsin. As a result, Peterson pled guilty in Wisconsin state court in 2014 to First Degree Child Sexual Assault and is currently serving a four-year sentence. U.S. District Judge Robert Holmes Bell ordered the federal sentence to be served consecutively to the state sentence, totaling a combined sentence of 11 years. Peterson will be subject to a 10-year period of federal supervised release after prison and will be required to register as a sex offender.
At the sentencing hearing, U.S. District Judge Bell read aloud from a number of statements written by the victims and their parents. All the statements discussed both an intense sense of betrayal and anger, as well as the need for ongoing counseling on the girls’ road towards recovery. In delivering the sentence, Judge Bell stated that Peterson has "no respect for the law, or even for people." He noted the importance of protecting the public from Peterson, especially given that Peterson abused yet another child after being notified by the FBI of the investigation into child sexual abuse in Michigan.
In announcing the sentence, U.S. Attorney Patrick Miles stated, "I applaud the children in this case for having the bravery to report what happened to them rather than suffering in silence. The fact that all the children described the same type of abuse over time shows a disturbing pattern of pedophilia and conveys the danger that Peterson presents to communities everywhere."
"The defendant in this case sexually abused a number of children, displaying an utter disregard for human decency and the law," stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. "Those same children demonstrated remarkable courage, bravely reporting the crimes in the face of their abuser and helping to bring an end to the perpetrator’s abusive actions. The FBI and its tribal law enforcement partners continue working to protect our communities and combat sexual predators who commit such depraved criminal acts."
Leaders from the Little Traverse Bay Band of Odawa Indians, where the offenses took place, attended the sentencing. The tribe’s Chairperson and the Chief of Police stated, "Fortunately, we do not have a large number of criminal cases arising from our tribe, but when a crime like this occurs, we are glad to see tribal and federal law enforcement working together for justice and are committed to providing whatever services the victims might need as they heal."
The federal investigation was conducted by the FBI in collaboration with tribal law enforcement. Assistant U.S. Attorneys Jeff J. Davis and Tessa K. Hessmiller prosecuted the case.
This case is part of Project Safe Childhood, a nationwide initiative designed to protect children from exploitation and abuse. The U.S. Attorney’s Office; county prosecutor’s offices; and federal, state, and local law enforcement are working closely together to locate, apprehend, and prosecute individuals who exploit children. Individuals with information or concerns about possible child exploitation should contact local law enforcement. For more information about Project Safe Childhood in West Michigan, including resources for children and parents, visit: http://www.justice.gov/usao/miw/programs/psc.html.
Self-Styled "Sex Slave Trainer" Ryan Van Stevenson from Lansing Sentenced to 30 Years for Coercing and Enticing A 15-Year-Old Girl OnlineRead the Press Release
GRAND RAPIDS, MICHIGAN – Ryan Van Stevenson, 33, of Lansing, Michigan, received a 30-year sentence in federal prison on June 25, 2015, for coercing and enticing a minor online from 2012 to 2014. The judge ordered Stevenson to pay approximately $11,000 in restitution to the victim for counseling costs. Stevenson pled guilty in federal court in December 2014 and faced a possible sentence of 10 years to life.
While living with his wife and young children in Lansing in 2012, Stevenson met a 15-year-old girl from Oregon in a chatroom online. Over the next two and a half years, Stevenson molded her into being his "sex slave," giving her "assignments" to send him pornographic pictures of herself to his email handle of "sexslavetrainer." Stevenson sent her emails about how "slave training is future oriented," where the slave’s "job is to serve and make me look good." When she turned 18, Stevenson moved the victim into his family home to fill the role of "sex slave." It seemed that the teen moved voluntarily and was physically unharmed. The FBI executed a federal search warrant at Stevenson’s house soon thereafter, in August 2014, and found thousands of pornographic images of the victim as a child on Stevenson’s computers. The FBI also found photographs of Stevenson having sex with and molesting another child over a period of at least five years, starting when she was age 13 and Stevenson was 19. Additionally, agents discovered a briefcase filled with CDs of internet child pornography, screenshots of web camera chats with various other girls between approximately 14 and 17 years old, a large number of baggies containing individual pairs of girls’ or women’s underwear, a package from a now convicted child pornographer with a child’s picture in it, and videos Stevenson took of unknown women and teenage girls from the waist down out in public.
Stevenson told the judge at the sentencing hearing that he was a social misfit in high school, never had many friends, and was looking for acceptance. He could not answer why or how he believed that he could seek such acceptance from a child across the country. In delivering the 30-year sentence, U.S. District Judge Robert Holmes Bell described the offense as "reprehensible" and commented on Stevenson’s "complete lack of respect for the law."
In announcing the sentence, U.S. Attorney Patrick Miles stated, "The vast reach of the internet makes it easier than ever before for predators to find, befriend, and groom minors online for sexual behavior without the parents ever knowing. It is important to teach children in our community about the dangers of ‘fantasy’ relationships online, which can become all too real and beyond the child’s control."
"Online predators have become adept at leveraging the global reach and anonymity of the Internet to identify, contact, and exploit children," stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. "It is imperative that parents and loved ones educate children thoroughly regarding the dangers associated with ‘meeting’ strangers online. The FBI and its local, state, and federal law enforcement partners will continue to combat these depraved predators and bring to justice those who use technology to target our youth."
The federal investigation was conducted by the FBI. Assistant U.S. Attorney Tessa K. Hessmiller prosecuted the case. This case is part of Project Safe Childhood, a nationwide initiative designed to protect children from exploitation and abuse. The U.S. Attorney’s Office; county prosecutor’s offices; and federal, state, and local law enforcement are working closely together to locate, apprehend, and prosecute individuals who exploit children. Individuals with information or concerns about possible child exploitation should contact local law enforcement. For more information about Project Safe Childhood in West Michigan, including resources for children and parents, visit: http://www.justice.gov/usao/miw/programs/psc.html.
29-Year-Old Kent County Man, Clint Andrews Williamson, Receives 30-Year Sentence for Producing Child PornographyRead the Press Release
GRAND RAPIDS, MICHIGAN – Clint Andrews Williamson, 29, of Grand Rapids, Michigan, received a 30-year sentence in federal prison yesterday for producing a child pornography video of a toddler and live-streaming it to a couple in Georgia, who are currently facing state and federal charges related to child abuse and child pornography. The judge ordered Williamson to pay approximately $3,000 in restitution to the victim, as well as $2,000 in restitution to a child who appeared in a pornographic photograph Williamson downloaded from the internet. Williamson pled guilty in federal court in February 2015.
Williamson was a registered user of a secretive child pornography website, which has since been shut down by law enforcement, where he posted child pornography and connected with others about a sexual interest in children. The website had discussion boards on topics including bestiality, child rape, sex tourism, and child prostitution, as well as advice on how to molest children and avoid detection by law enforcement. Williamson also followed other online groups with topics that included rape and torture. He chatted with people online about having sexually abused the victim in this case and his desire to rape young girls. He admitted to live- streaming two sexually explicit videos of the toddler to the couple in Georgia. In a handwritten journal Williamson wrote after the FBI and Kentwood Police Department executed a search warrant at his residence, Williamson stated he had done things that he could not even bring himself to write down and described himself as "a monster."
The victim’s mother spoke at the sentencing and told the court, "The damage he has caused the victim is far worse than anything I could ever suffer. Nothing anyone or I can do can change what he did. There is no going back. No apology will ever be enough. Nothing will be enough. I am left to fear for the future." She continued, "I pray the victim will not remember what he did and that the trauma will not affect the victim’s future. I pray, and I wait."
U.S. District Judge Janet T. Neff handed down the maximum possible sentence – 30 years’ imprisonment followed by a lifetime of federal supervised release. In delivering the sentence, Judge Neff described Williamson as "a very dangerous person." "We need to protect the public, and in particular young girls" from Williamson, she said. Although the guidelines in this case called for a life sentence, the judge explained that she was "constrained by the statutory maximum of 30 years."
In announcing the sentence, U.S. Attorney Patrick Miles stated, "The FBI and U.S. Attorney’s Office in the Western District of Michigan are working hard to identify and bring to justice child perpetrators in our community. Thanks to their collaboration with law enforcement partners in Georgia, the people who received these abhorrent videos are also being held accountable."
The federal investigation was conducted by the FBI and the West Michigan Based Child Exploitation Task Force (WEBCHEX), a collaborative of state and local law enforcement in West Michigan. Assistant U.S. Attorney Tessa K. Hessmiller prosecuted the case.
This case is part of Project Safe Childhood, a nationwide initiative designed to protect children from exploitation and abuse. The U.S. Attorney’s Office; county prosecutor’s offices; and federal, state, and local law enforcement are working closely together to locate, apprehend, and prosecute individuals who exploit children. Individuals with information or concerns about possible child exploitation should contact local law enforcement. For more information about Project Safe Childhood in West Michigan, including resources for children and parents, visit: http://www.justice.gov/usao/miw/programs/psc.html.
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U.S. Attorney Miles Addresses Community Engagement at Annual Meeting of Chiefs of PoliceRead the Press Release
GRAND RAPIDS, MICHIGAN — U.S. Attorney Patrick Miles spoke today at the Michigan Association of Chiefs of Police Summer Professional Development Conference held at Boyne Highlands in Harbor Springs, Michigan. On the 21st Century policing panel, which also included local law enforcement police chiefs, U.S. Attorney Miles addressed the need for law enforcement to engage community members to avoid situations that occurred in Ferguson, Missouri and Baltimore, Maryland.
Specifically, U.S. Attorney Miles’s comments focused on the importance of outreach and communication to build relationships and trust with community leaders. "Law enforcement and the communities they serve share the same goals, namely peace, security, and safety," he noted. But tensions between law enforcement and the communities they serve can arise because of a lack of communication, relationships and mutual understanding, he explained.
U.S. Attorney Miles emphasized that the definition of community leader has changed and expanded. "Teens and young adults with a large social media following can reach and influence thousands of people just like a senior minister can with a congregation. Law enforcement leaders must engage those in the millennial generation prior to a crisis occurring."
U.S Attorney Miles offered suggestions on how to foster constructive communication, positive relationships and greater understanding. In Grand Rapids and Benton Harbor, for example, U.S. Attorney Miles spearheaded the development of Advocates and Leaders for Police and Community Trust (ALPACT). In roundtable format, community leaders and law enforcement meet to discuss topical subjects, including community awareness and perceptions, media portrayals, officer recruitment and how to respond to critical incidents. Originally launched by the Michigan Roundtable for Diversity and Inclusion in 1998 in Southeast Michigan, ALPACT programs likewise exist in Detroit, Saginaw and Flint.
In addition, U.S. Attorney Miles recently met with law enforcement leaders in Lansing, Grand Rapids, Kalamazoo, Battle Creek, Muskegon and Benton Harbor to discuss their protocols for dealing with officer-involved shootings and efforts to build relationships with community members of all ages and ethnicities. Planning ahead and building the right relationships today can allow communities to avoid in the future the harms recently seen elsewhere in the country.
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U.S. Attorney Notifies Manistique Residents of Mail DestructionRead the Press Release
MARQUETTE, MICHIGAN —U.S. Attorney Patrick Miles announced the indictment of Sarah Jane Paradise, a former U.S. Postal Service City Carrier, on charges of delaying, detaining and destroying U.S. Mail entrusted to her for delivery in Manistique, Michigan.
On the basis of an investigation by the U.S. Postal Service’s Office of Inspector General, the indictment alleges that Paradise, who was employed as a USPS City Carrier in Manistique, Michigan, delayed, detained and destroyed Standard A Mail, which is bulk business mail, that she was supposed to deliver to residences on her route from March 2013 until early March 2014. Her route in Manistique, which USPS identifies internally as "City Route 1," covered hundreds of residences in the heart of Manistique.
PARTS OF MANISTIQUE, MICHIGAN WITHIN CITY ROUTE 1
If you believe you are a victim of this alleged crime, you will be able to obtain court notices relating to this case by checking: http://www.justice.gov/usao-wdmi/victim-and-witness-assistance-program/vw-large-cases/Paradise.
The charges in an indictment are merely accusations, and a defendant is presumed innocent until and unless proven guilty in a court of law.
Virginia Man, Cary McEntee, Pleads Guilty in Lansing Mortgage Fraud ProbeRead the Press Release
GRAND RAPIDS, MICHIGAN — U.S. Attorney Patrick A. Miles announced today that Cary McEntee, 58, of Virginia Beach, Virginia, pled guilty today to a federal conspiracy charge stemming from fraudulent real estate transactions he engaged in during 2006 and 2007. The criminal conduct occurred in Lansing, Michigan and was related to real estate transactions in Newport News, Virginia.
On April 10, 2015, a felony information was filed against McEntee charging him with a conspiracy to commit bank fraud. The charge describes a scheme in which McEntee and his unnamed coconspirators in Lansing defrauded banks in connection with 35 mortgage transactions involving more than $4,000,000 in loans. The scheme involved the use of "straw buyers" who, for a fee, would pose as the borrower and apply for a mortgage loan, but who had no intention of paying the mortgage. Once the loan was made, the proceeds were turned over to the conspirators, who used them to enrich themselves. McEntee and his coconspirators falsified income and asset information for these straw buyers in order to induce the targeted banks to make the loans. The mortgage loans went unpaid and the lending banks lost over $2,600,000 when the properties went into foreclosure. The conspiracy charge carries a maximum possible penalty of five years in prison, three years of supervision after release, a fine, and restitution.
McEntee appeared before Magistrate Judge Hugh W. Brenneman today and admitted that he was guilty of the charge. The defendant acknowledged that he had reached a plea agreement with the government in which he would plead guilty to the charge in exchange for a chance at a more lenient sentence from Judge Robert Holmes Bell. McEntee described in detail how he participated in the scheme to defraud the banks induced to provide mortgage loans, and that led Magistrate Judge Brenneman to recommend that he be found guilty. The defendant was released on bond pending sentencing. No sentencing date has yet been set by Judge Bell’s chambers.
McEntee’s prosecution is the result of a continuing investigation by the Mortgage Fraud Task Force, comprised of federal investigators including the FBI, U.S. Secret Service, the U. S. Postal Inspection Service and the HUD Office of Inspector General. The task force also includes the Lansing Police Department, investigators employed by the Michigan Attorney General’s Office and other state agencies. To date, 16 individuals have been successfully prosecuted as a result of the grand jury probe into Lansing-area mortgage fraud.
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Jenison Woman, Renata Nicole Annese, Sentenced for Wire Fraud SchemeRead the Press Release
Renata Nicole Annese stole over $800,000.00 in a credit card fraud scheme
GRAND RAPIDS, MICHIGAN — U.S. Attorney Patrick Miles announced that Renata Nicole Annese, 39, of Jenison, Michigan, received a sentence of imprisonment of 60 months in U.S. District Court for the Western District of Michigan today. Her sentence followed her guilty plea in January, 2015, to one count of wire fraud arising out of her role in a credit card fraud scheme. "Bringing fraudsters to justice and deterring fraudulent conduct through vigorous prosecution of those who take advantage of others remains an important priority of this office. Ms. Annese selfishly took advantage of her position of trust and now must pay the price," said U.S. Attorney Miles.
As part of her judgment of conviction, the court ordered Annese to pay restitution in the amount of $872,929.23. Annese was additionally ordered to forfeit her equity interest in her home in Jenison, Michigan, because she used the proceeds of her fraud to make her mortgage payments. Annese paid the victim $30,000.00, representing her equity interest, prior to sentencing. In issuing her sentence, U.S. District Court Judge Robert J. Jonker noted that her conduct "was not just an isolated fraud, but a long-term pattern."
From October 2006 until April 2013, Annese used interstate wires to defraud the former owner of the Sleep Inn hotel in Allendale, Michigan, of nearly a million dollars. Annese did so by regularly accessing the Internet so that she could edit data related to the hotel’s credit card sales. Annese then inserted her own personal credit card and bank debit card numbers on the payment side of many of those transactions. This caused the hotel customers’ cards to be charged, but directed the customers’ banks to send the payments to Annese’s credit and debit cards, instead of to the hotel’s bank account. Defendant concealed her fraud by pairing her credit or bank debit card numbers with names and charge amounts actually associated with real hotel customers. This made it appear as if those customers were receiving a credit back to their cards, when in reality Annese was receiving the payments. The former owner of Sleep Inn sold the hotel in 2013 because of its struggling financial performance and did not learn of Annese’s fraud until shortly after the sale.
"Defendant Annese repeatedly used the Internet to siphon funds intended for her employer and divert them illegally to her own bank accounts," stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. "As reflected in this case, there are always very real victims on the other end of financial fraud crimes. The FBI remains committed to deterring this type of conduct and bringing justice to those who perpetrate fraudulent financial schemes in violation of federal law."
The Federal Bureau of Investigation conducted the investigation and Assistant United States Attorney Ronald M. Stella prosecuted the case.
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Decatur Woman, Melissa Sue Stamp, Sentenced on Bankruptcy FraudRead the Press Release
Former Apple Queen Pageant Winner hid hundreds of thousands of dollars.
GRAND RAPIDS, MICHIGAN — Melissa Sue Stamp, of Decatur, Michigan, was sentenced for bankruptcy fraud today by U.S. District Court Judge Gordon J. Quist. U.S. Attorney Patrick Miles was joined in the announcement by Special Agent in Charge Jarod J. Koopman, IRS Criminal Investigation, Special Agent in Charge Jeffrey Frost, U.S. Secret Service and Special Agent in Charge Anthony Mohatt, U.S. Department of Agriculture, Office of Inspector General.
Melissa Stamp, a former Apple Queen Pageant winner, was sentenced to serve twenty months in prison followed by twenty months of supervised release and $184,500 in restitution. As part her plea agreement, Melissa Stamp agreed to forfeit $151,915 that represents the proceeds of the bankruptcy fraud.
According to court records, in 2012, Michael David Stamp owned Stamp Farms, LLC and Northstar Grain LLC, two agri-businesses located in Decatur, Michigan. In late 2011, Michael David Stamp secured financing of more than $60 Million from Wells Fargo Bank for these businesses. The financing was secured by agreements and mortgages given by the companies as well as by personal guarantees of Michael David Stamp and Melissa Stamp. By the fall of 2012, the companies had defaulted on the loans and in November 2012, filed bankruptcy. Michael Stamp filed personal bankruptcy on the same day.
At the time of her guilty plea, Melissa Stamp admitted giving $75,000 to her brother and approximately $90,000 to her father to conceal the money from a bankruptcy case that was filed one month later by her husband, Michael David Stamp. Ms. Stamp also admitted concealing $50,000 of U.S. currency in a safe in her home. None of this money was disclosed to the bankruptcy court.
"Bankruptcy can be a haven for those in need of its protection. Individuals that abuse the bankruptcy process by concealing assets threaten the integrity of the system. The IRS will continue to work with the U.S. Attorney’s Office and our other law enforcement partners to ensure the public’s continued confidence in the system," said Jarod J. Koopman, Special Agent in Charge, IRS Criminal Investigation.
"The United States urges anyone holding grains, crops, cash, farm equipment or other assets related to the Stamp Farms or Michael Stamp bankruptcy cases to contact the U.S. Attorney’s Office at 616-808-2144. Persons who knowingly conceal assets belonging to a bankruptcy case are subject to criminal prosecution. Persons who voluntarily surrender concealed bankruptcy assets may avoid criminal charges," said Assistant U.S. Attorney Michael A. MacDonald.
This case was investigated by the U.S. Bankruptcy Trustee’s Office, the IRS Criminal Investigation, U.S. Secret Service and the USDA Office of Inspector General. Assistant U.S. Attorney Michael A. MacDonald is prosecuting the case.
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Sex Trafficker, Christopher T. Bryant, Gets 40 Years in Federal Prison for Trafficking Three Minors in West Michigan and One Woman in ArizonaRead the Press Release
GRAND RAPIDS, MICHIGAN –Patrick Miles, U.S. Attorney for the Western District of Michigan announced today that Christopher T. Bryant, 25, of Detroit was sentenced to 40 years in federal prison for sex trafficking three minor girls in Lansing, Michigan, and one woman in Phoenix, Arizona. This is the second ever federal conviction for sex trafficking in West Michigan, following Eddie Jackson’s 2014 trial for sex trafficking minor girls in Muskegon and Grand Rapids, for which he is serving a 30-year federal sentence.
Bryant faced a minimum possible sentence of 15 years and a maximum of life. At the sentencing hearing today, Bryant refused to take responsibility for his actions. In delivering the 40-year sentence, Chief United States District Judge Paul L. Maloney described Bryant as "a man who is totally self-absorbed," "narcissistic to the extreme," and "a major risk to reoffend."
U.S. Attorney Miles stated, "This case involved yet another predator who took advantage of young girls and forced them into the sex trade. This defendant will now answer for his crimes with a long prison term. The U.S. Attorney’s Office and law enforcement throughout Western Michigan will continue to aggressively fight crimes against children, sex trafficking and human trafficking and see that those who commit these crimes will be brought to justice."
"The sentence handed down today holds Mr. Bryant accountable for his depraved criminal behavior, which violated those who are most vulnerable," stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. "The West Michigan Based Child Exploitation Task Force is committed to safeguarding our children and protecting our communities from the ills of human trafficking."
Bryant’s four victims all testified at trial, along with other witnesses and federal agents. The first testified that she and Bryant were in a relationship in Michigan, and he was repeatedly violent towards her. He took her to Phoenix with him in 2012, where he checked them into a cheap motel, took her across the city to a busy highway intersection, and made her walk the streets for money. He told her how to attract the attention of passing cars and how to walk, but when she refused to get into cars with customers, Bryant became irate. He violently raped her at the motel, and she ran for help the next morning after escaping from him at a fast food restaurant. The other three victims, all minors, testified that Bryant recruited them through Facebook, at a bus station, or through another teenage girl in 2014. He posted photographs of them online advertising them as prostitutes and took them to cheap motels around Lansing, where customers responded to the ads and paid to have sex with them. Bryant told the girls he would split the money with them, but he only gave them drugs and alcohol. When one of the girls stayed out too late one night, Bryant choked her and threatened he could kill her and no one would know.
Bryant has a long criminal history, including violent assaults on other women, drug dealing, home invasion, and a high-speed chase in a stolen car. He made a video in a hotel that was posted on Facebook in late 2013 in which Bryant bragged about pimping "for a living" and how this was "only the beginning."
The FBI and the Ingham County Sheriff’s Office investigated the case jointly. Assistant U.S. Attorneys Tessa Hessmiller and Russ Kavalhuna prosecuted the case. Bryant is linked to an alleged sex trafficking ring in Lansing involving Mariah Haughton and Jonathan Purnell, whose cases are pending in Ingham County.
Community members can help stop child sex trafficking in West Michigan by recognizing the warning signs and reporting suspicious activity to police. Teens who are vulnerable to being targeted by pimps are often discontent in school, absent from school or home, suicidal or suffering from low self-esteem, defiant towards authority, seeking quick sources of income, and craving independence. They may have a history of drug and alcohol use that a pimp can exploit as a means of "payment" to the teen. Warning signs of child sex trafficking include seeing an adult man with multiple teenagers – particularly girls – buying condoms, alcohol, cigarettes, clothing, hair/nail supplies, or prepaid gift or debit cards. Community members may encounter these suspicious situations at pharmacies, convenience stores, gas stations, fast food restaurants, grocery stores, casinos, and hotels.
If you suspect illegal activity involving child exploitation, contact law enforcement immediately. If a child is in imminent danger, call 911. To report suspicious activity involving possible sex trafficking, call: West Michigan Based Child Exploitation Task Force (WEBCHEX) at 616-456-5489; Homeland Security Investigations, Grand Rapids, at 616-235-3936 (x. 2215); or 1-800-THE-LOST® (National Center for Missing and Exploited Children).
The case is part of Project Safe Childhood, a nationwide initiative designed to protect children from exploitation and abuse. The U.S. Attorney’s Office, county prosecutor's offices, and federal, state, and local law enforcement are working closely together to locate, apprehend, and prosecute individuals who exploit children. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov. Individuals with information or concerns about possible child exploitation should contact local law enforcement.
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Hollister, Republic Men Indicted for Producing Child PornRead the Press Release
SPRINGFIELD, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that a Hollister, Mo., man and a Republic, Mo., man have been indicted by a federal grand jury, in separate and unrelated cases, for producing child pornography.
USA v. Tyson
Michael Shane Tyson, 30, of Hollister, was charged in an indictment returned by a federal grand jury in Springfield, Mo., on Wednesday, May 13, 2015. The indictment replaces a federal criminal complaint that was filed against Tyson on April 24, 2015.
The federal indictment alleges that Tyson used a minor, identified as Jane Doe, to produce child pornography from Jan. 30 to April 7, 2015.
The indictment also contains a forfeiture allegation, which would require Tyson to forfeit to the government any property used to commit the alleged offense, including an Acer laptop computer and a Droid Razr Maxx cell phone.
This case is being prosecuted by Assistant U.S. Attorney Ami Harshad Miller. It was investigated by the FBI.
USA v. Hopper
Benjamin Michael Hopper, 22, of Republic, was charged in an indictment returned by a federal grand jury in Springfield, Mo., on Wednesday, May 13, 2015.
The federal indictment alleges that Hopper used a minor, identified as “Jane Doe #1,” to produce child pornography between Jan. 21 and 25, 2015.
This case is being prosecuted by Assistant U.S. Attorney James J. Kelleher. It was investigated by the FBI and the Republic, Mo., Police Department.
Dickinson cautioned that the charge contained in these indictments are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.
Project Safe Childhood
This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by the United States Attorneys' Offices and the Criminal Division's Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state, and local resources to locate, apprehend, and prosecute individuals who sexually exploit children, and to identify and rescue victims. For more information about Project Safe Childhood, please visit www.usdoj.gov/psc . For more information about Internet safety education, please visit www.usdoj.gov/psc and click on the tab "resources."
Lynn Michael Lavictor of Sault Ste. Marie Sentenced to 355 Months for Sexual AssaultRead the Press Release
MARQUETTE, MICHIGAN — U.S. Attorney Patrick A. Miles, Jr., announced today that Lynn Michael LaVictor, 44, of Sault Ste. Marie, Michigan, was sentenced by U.S. District Court Judge R. Allan Edgar to 355 months imprisonment for sexually assaulting his then- girlfriend in Sault Ste. Marie, attempting to tamper with a witness and contempt of court. The sentences will run concurrently. Judge Edgar also ordered LaVictor to have no contact with the victim in the case. Judge Edgar commented during the sentencing that there was a "manifest need to provide protection for the public and those who have been abused by [the defendant] in the past."
The assault took place last July. The victim’s injuries from the assault required her to be transported by ambulance to the hospital, where she underwent surgery later in the day. Nevertheless, LaVictor repeatedly contacted the victim and attempted to influence her testimony, even after his arrest and the placement of a no-contact order. A federal jury convicted LaVictor in December, following a four day trial.
"Fighting the victimization of women in Indian country is a main priority in the Western District of Michigan," stated U.S. Attorney Patrick A. Miles, Jr., "and those who engage in this behavior will be prosecuted to the fullest extent of the law."
The Sault Ste. Marie Tribal Police and the FBI investigated the case. Assistant U.S. Attorneys Jeff J. Davis and Hannah N. Bobee prosecuted the case.
Natural Gas Processor Merit Energy Agrees to Comprehensive Program to Reduce Harmful Air Pollution from Leaking Equipment to Resolve Clean Air Act Violations in MichiganRead the Press Release
WASHINGTON – Merit Energy Company, a Texas-based oil and natural gas exploration and production company, has agreed to pay an $885,000 civil penalty and to improve leak detection and repair work practices to settle alleged violations of the Clean Air Act at its natural gas processing facility in Kalkaska, Michigan, the Department of Justice and the Environmental Protection Agency (EPA) announced today. Emissions of volatile organic compounds (VOCs) from leaking equipment impact the environment and may cause serious health effects. VOCs are a key component in the formation of smog or ground-level ozone, a pollutant that irritates the lungs, exacerbates diseases such as asthma and can increase susceptibility to respiratory illnesses, such as pneumonia and bronchitis.
“This comprehensive compliance program continues our efforts to control fugitive emissions and will require Merit Energy to upgrade its monitoring and maintenance practices to help prevent future violations,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division. “Compliance with the clean air laws is essential to maintaining safe, responsible, and reliable sources of domestic energy.”
“People in northwest Michigan will breathe cleaner air as a result of this settlement,” said Regional Administrator Susan Hedman for EPA. “Merit Energy will be installing new equipment at the company's natural gas processing facility in Kalkaska that will prevent emissions of pollutants that pose risks for people with asthma and other respiratory diseases.”
“My office is pleased with this settlement. Prevention or immediate detection and repair are critical when protecting health and the environment,” said U.S. Attorney Patrick Miles Jr. for the Western District of Michigan. “We and the EPA are vigilantly ensuring compliance with the Clean Air Act and other environmental laws.”
In addition to paying a penalty, Merit Energy will implement a comprehensive leak detection and repair (LDAR) program to reduce emissions of VOCs from leaking equipment such as valves and pumps. These emissions, known as “fugitive” emissions because they are not discharged from a stack but rather leak directly from equipment, are generally controlled through work practices, like monitoring and repairing leaks. The settlement requires Merit Energy to implement enhanced work practices, including more frequent leak monitoring, better repair practices and innovative new efforts designed to prevent leaks. In addition, the enhanced LDAR program requires Merit Energy to replace valves with new “low emissions” valves or valve packing material, designed to significantly reduce the likelihood of future leaks of VOCs. This settlement imposes the first enhanced LDAR program at a natural gas processing facility.
According to the complaint, filed simultaneously with the settlement today in the Western District of Michigan, Merit Energy allegedly violated Clean Air Act requirements to monitor and repair leaking equipment and demonstrate compliance with regulations applicable to onshore natural gas processing plants.
The consent decree is subject to a 30 day comment period and final approval by the court. A copy of the consent decree is available on the Department of Justice web site at www.justice.gov/enrd/Consent_Decrees.html.
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Jury Finds Man Guilty of Motor Home Theft Conspiracy and Related ChargesRead the Press Release
GRAND RAPIDS, MICHIGAN –United States Attorney Patrick Miles announced today that a federal jury returned guilty verdicts on all counts against Ronald Bruce Myers, 56, a Nevada resident charged with conspiring with others to steal, transport, and sell motor homes throughout the United States, including the theft of three motor homes from businesses in Western Michigan. The jury also convicted him of transporting the stolen motor homes out of Michigan. Myers stole a Country Coach motor home from Holland Bus and Motor Homes on March 28, 2012. Myers returned to Michigan in early May 2012, at which time he stole two more motor homes from Midway RV Center of Kentwood. He faces up to 35 years in prison for the conspiracy and theft of the motor homes. Myers also stole two motor homes in Alabama, one in Missouri, one in North Carolina, and one in Florida.
The jury also convicted Myers of three counts related to money laundering. The evidence at trial showed that Myers used a series of aliases to obtain false title documents, open bank accounts and to forward mail as part of his criminal scheme. He moved hundreds of thousands of dollars through the bank accounts opened under false names and/or using purported corporations. IRS records showed that Myers and his corporations did not file tax returns from 2008 to 2012. He faces up to an additional sixty years in prison for the money laundering convictions. Myers had already been convicted in four previous federal prosecutions involving stolen vehicles.
Myers remains in custody pending his sentencing, which has been set for August 21, 2015 before the Honorable Robert Holmes Bell, United States District Court Judge.
ENDBattle Creek Man Convicted of Possessing Unregistered and Stolen FirearmsRead the Press Release
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick A. Miles, Jr. announced today the conviction of Scott Lynn Dillard, 26, of Battle Creek, Michigan on two felony charges following a two-day jury trial in Grand Rapids, Michigan. A federal jury found Dillard guilty of possessing unregistered firearms, including an MP5 machinegun and two silencers, and possessing stolen firearms, including a .308 caliber sniper rifle.
The firearms were stolen from a Battle Creek Police Department vehicle on June 21, 2013, and then sold by Dillard and an associate. Law enforcement recovered the weapons the next day. Dillard now faces a maximum sentence of ten years’ imprisonment and a $250,000 fine for each of the two charges.
The U.S. Attorney’s Office for the Western District of Michigan was assisted in the investigation by the Battle Creek Police Department, Michigan State Police, and the Bureau of Alcohol, Tobacco, Firearms and Explosives.U.S. Attorney Patrick Miles praised federal, state, and local authorities for quickly locating and recovering the stolen firearms. “Prompt action in recovering these weapons prevented this theft from turning into a tragedy. Mr. Dillard will now be held accountable for his role in possessing these unregistered and stolen firearms.”
The sentencing hearing for Dillard is scheduled for July 24, 2015. This case was prosecuted by Assistant U.S. Attorneys Russell A. Kavalhuna and Clay M. West.
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Marijuana Trafficker Sentenced After Fleeing to MexicoRead the Press Release
MARQUETTE, MICHIGAN –Pedro Andres Kobasic, age 45, formerly of Phoenix, Arizona, was sentenced to 87 months in prison followed by three years of supervised release, U.S. Attorney Patrick Miles, Jr. announced today. Kobasic was convicted of conspiracy to distribute more than 50 kilograms of marijuana after fleeing from justice and hiding in Mexico for about three years.
U.S. District Judge Robert Holmes Bell presided over the sentencing. Kobasic’s sentencing marks the end of a joint investigation by the U.S. Drug Enforcement Administration (DEA) and the Upper Peninsula Substance Enforcement Team (UPSET) that began in October 2009, when law enforcement learned that a package of marijuana was being sent via a parcel delivery service to Jason Scott Schwalbach in Escanaba. DEA and UPSET learned that a number of residents of the Escanaba area were receiving marijuana by mail and distributing it in the area. The investigation revealed that Pedro Kobasic was the source of this marijuana. Defendants who were previously convicted in this case were:
- Schwalbach, sentenced to 6 months in federal prison on December 14, 2010,
- Joshua Carl Harrison, sentenced to 30 months in prison on December 14, 2010,
- Jody Michael Williams, sentenced to 100 months in prison on March 24, 2011, and
- Nathan Peter Kobasic, sentenced to 78 months in prison on August 18, 2011.
Each of these defendants pled guilty to a federal drug charge. Pedro Kobasic was scheduled to appear in U.S. District Court in Marquette on April 20, 2011, to enter his guilty plea. He fled to Mexico instead. He was arrested upon returning to the United States in the summer of 2014, and entered his guilty plea on November 3, 2014.
Prosecution of this case was handled by Assistant U.S. Attorney Maarten Vermaat.
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Ishpeming Woman Sentenced to More Than 12 Years in PrisonRead the Press Release
MARQUETTE, MICHIGAN – Rachel Lynn Hansen, age 32, of Ishpeming, Michigan, was sentenced to 151 months in prison, U.S. Attorney Patrick A. Miles, Jr., announced today. After her release, she will serve three years of court supervision. Hanson, a mother of three, was convicted of possession of cocaine with intent to distribute. During the sentencing, U.S. District Judge Robert Holmes Bell found that Hanson was a “career offender” due to her extensive criminal history, which included three prior felony drug convictions. As a result, Hanson was subject to a significantly increased sentence.
The U.S. Drug Enforcement Administration (DEA) and the Upper Peninsula Substance Enforcement Team (UPSET) began their most recent investigation of Hanson in January 2014, when they learned that she was again involved in drug trafficking. The DEA and UPSET executed a search warrant at Hanson’s residence in Ishpeming on January 30, 2014. Police found drugs and money in the residence. Hanson was interviewed and admitted selling cocaine and heroin in the Ishpeming area during 2013 and 2014. Her prior convictions include delivery or manufacture of marijuana in 2005, possession of cocaine in 2007, and delivery or manufacture of crack cocaine in 2010.
Prosecution of this case was handled by Assistant U.S. Attorney Maarten Vermaat.
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Federal and Local Law Enforcement Along with Michigan Department of Corrections Officials Meet with State Parolees to Improve Kalamazoo Prisoner ReentryRead the Press Release
Officials encourage parolees to take advantage of services and make smart choices in leading law abiding lives or risk returning to prison
GRAND RAPIDS, MICHIGAN – In an effort to reduce the risk and rate of repeat offenses by recently released prisoners, U.S. Attorney for the Western District of Michigan Patrick Miles, in collaboration with the Michigan Department of Corrections (MDOC), has brought a new program called “Facing Choices” to Kalamazoo. As part of the Facing Choices Program, state and federal law enforcement officials met late last week with state parolees in the Kalamazoo area. Parolees also heard from several speakers who have successfully turned their lives around. Representatives of service providers and programs available to parolees were also in attendance. This is the third in a series of such meetings to be held throughout Western Michigan.
The program is intended to help parolees make decisions that keep them on a law-abiding path and away from offending again. “The goal of the Facing Choices program is to reduce recidivism. That means less crime which means fewer victims as well as lessening the burden on law enforcement, the judicial and prison systems, and taxpayers,” U.S. Attorney Miles stated. “Nationally, approximately two-thirds of ex-offenders are rearrested within three years of release and almost half are re-incarcerated. In Michigan, the recidivism rate is 28 percent. According to one report I read, if 93 percent of prisoners in the U.S. did not commit another offense, American taxpayers would save between $17.3 billion and $1.1 trillion.”
U.S. Attorney Miles, Kalamazoo Department of Public Safety Chief Jeff Hadley, Chief Prosecuting Attorney Jeff Getting, other law enforcement representatives and MDOC officials reminded the parolees that law enforcement, prosecutors, and the MDOC are prepared to see them sent back to jail if they make poor choices and re-offend. But, they prefer seeing them become productive members of society and succeed. A parolee who re-offends is a high priority target for law enforcement. “But the point of this meeting is not just to remind you that we’ll hold you accountable if you do wrong,” U.S Attorney Miles explained. “We’re here to remind you that parole is an opportunity for you. Take advantage of the resources and the contacts that your parole status affords you.”
MDOC Deputy Administrator Brian Shipman noted: “The mission of the Department of Corrections is to hold offenders accountable while promoting their success. The MDOC envisions the placement of an offender into the community as a carefully planned process. It is guided by a case plan which is meant to prepare him or her for a legally and socially acceptable adjustment to life in the community. Supported by experienced professionals in the public and private sectors, the offender will have the resources and guidance necessary to support successful community adjustment.”
Over 50 parolees attended the event. Following the comments and encouragement of the speakers, the parolees were directed to the attending service providers.
Representatives of the Kalamazoo County Sheriff’s Office, Kalamazoo County Prosecutor’s Office and Federal Bureau of Alcohol, Tobacco, Firearms and Explosives also spoke and shared in the message to the parolees. U.S. Attorney Miles praised the cooperation and collaboration that are critical to the Facing Choices program, “I am pleased that local, state, and federal law enforcement as well as County Prosecutors see the value in working together to reduce recidivism,” he said.
ENDFeds Combating Health Care Fraud on Multiple FrontsRead the Press Release
Civil, criminal and administrative sanctions combined with outreach to professionals netting positive results and millions in recoveries.
GRAND RAPIDS, MICHIGAN –United States Attorney for the Western District of Michigan Patrick Miles, Jr. announced this week that the multi-prong approach to combat health care fraud his office uses has achieved unprecedented results for the Western District. Miles said his office seeks to pursue criminal charges, civil penalties and administrative exclusions in health care fraud cases as well as educate health care providers and the public about detecting and avoiding health care fraud practices. “We made addressing financial frauds, such as a health care fraud, one of our top U.S. Attorney’s Office priorities,” U.S. Attorney Miles said. “We put additional resources into prosecuting health care fraud cases and warning practitioners of our emphasis on pursuing both health care fraud prosecutions and civil remedies. We hold corporations and individuals accountable for wrongdoing. Consequently, we are seeing very positive results.”
Specifically, U.S. Attorney Miles noted that over the past two years his U.S. Attorney’s Office has obtained 20 criminal convictions in cases involving health care fraud or health care practitioners, negotiated over $5,500,000 in civil health care fraud settlements, caused mandatory or voluntary federal health care program exclusions of doctors and other practitioners totaling over 50 years, and seen a $100,000,000 decrease in Medicare home health care expenditures in the Western District of Michigan largely due to federal investigations, prosecutions, and educational outreach efforts focused on home health care and home health care kickback payments.
U.S. Attorney Miles praised the collaborative efforts of the federal prosecutors in his office working along with law enforcement investigative partners such as the Drug Enforcement Agency (DEA), Federal Bureau of Investigation (FBI) and U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG). In the Western District of Michigan veteran Federal prosecutor Ray Beckering is the U.S. Attorney’s Office Criminal Health Care Fraud Coordinator and the Civil Health Care Fraud Coordinator is Assistant U.S. Attorney Adam Townshend. Miles stated, “AUSA Beckering, AUSA Townshend, and other AUSAs engage various Michigan health care communities through outreach efforts including speaking at annual conference sessions for the Michigan Academy of Physician Assistants, the Michigan Council of Nurse Practitioners, and physician groups to educate practitioners on illegal kickback schemes and diverting prescription drugs.”
“The partnership between the U.S. Attorney’s Office and the HHS-Office of Inspector General is very strong”, stated Lamont Pugh III, Special Agent in Charge, DHHS-OIG-OI-Chicago Region. “A significant part of the OIG’s mission is to protect the integrity of the Medicare and Medicaid programs and the health and welfare of the people they serve. The OIG continues to work diligently to identify, investigate, and seek the indictment and conviction of those who would attack these programs. We will continue to work in concert with the U.S. Attorney’s Office and other law enforcement agencies to hold wrongdoers accountable”.
U.S. Attorney Miles said that many health care frauds involve unnecessary procedures and tests. “Law enforcement and our Office continue to focus on unnecessary laboratory testing, including unnecessary blood, urine, and drug testing. We will also address improper relationships between practitioners and laboratory testing companies,” Miles said.
It is illegal to offer or request, or pay or receive, money or anything of value in exchange for referring Medicare and Medicaid patients for health care services. U.S. Attorney Miles observed that “kickbacks and other suspect arrangements are saturating the Western District of Michigan, particularly in the areas of home health care, diagnostic testing, and laboratory testing. Kickbacks also distort the competitive playing field, taking business away from providers who play by the rules.”
U.S. Attorney Miles says patients and health care consumers can help stop frauds by looking out for the following “Red Flags”:
• Benefit Statements: -- Check for services and procedures not rendered
-- Cost of procedures disproportionate with time or complexity• Waivers of Co-Payments: -- Blanket waivers of copays are generally not permitted
-- Good indication of fraud schemes because if patients are not paying, they are unlikely to scrutinize insurance billingsThe following are some recent health care fraud case highlights from the U.S. Attorney’s Office in the Western District of Michigan:
Civil Case Settlements
United States, et al., ex rel. Jahn, et al. v. Agility Health, Inc., et al.
The U.S. Attorney’s Office recovered $1,000,000 in a whistleblower lawsuit involving allegations of false claims to Medicare for skilled therapy services that were not provided or provided to beneficiaries who were incapable of participating in therapy programs. The whistleblowers recovered more than $200,000.
United States v. Portage Hospital LLC
The U.S. Attorney’s Office recovered $4,446,392.43 in a voluntary disclosure by Portage Hospital in Hancock, Michigan stemming from billings by the hospital’s home health care agency for physical therapy services -- purportedly performed by a single staff physical therapist -- that were medically unnecessary and/or lacked adequate documentation.
United States ex rel. Morgan v. Advanced Professional Home Health Care
The U.S. Attorney’s Office recovered $57,000 in an action brought by a whistleblower, and the home health care agency agreed to implement a compliance program to resolve allegations that the agency illegally altered physicians’ signature dates and other information on physician orders in order to bill home health care services to Medicare.
Criminal Convictions
United States v. Kim Mulder, et al.
Initiated by reports from former employees, the execution of federal search warrants and a DEA Immediate Suspension Order resulted in the cessation of operations and the subsequent filing of criminal charges against eighteen Kentwood Pharmacy officers and employees related to the dispensing and billing for adulterated and misbranded drugs to nursing homes and adult foster care homes. The convictions included felony charges for six licensed pharmacists and prison sentences of six years for the head pharmacist and fourteen years for the Vice President of Sales. The CEO Kim Mulder and one other pharmacist are pending sentencing. The district court found a Medicare fraud loss of over $80,000,000 stemming from payments for the recycled drugs and ordered over $8,000,000 in restitution.
United States v. Chyawan Bansil, Shannon Wiggins, Mohamad Abduljaber
Reports concerning the diversion of prescription drugs led to an investigation of the Lansing medical practice of Dr. Shannon Wiggins. Undercover patient visits revealed an illegal kickback scheme where Dr. Wiggins and her husband/ officer manager Mohamad Abduljaber were paid to refer patients for purported EMG and nerve conduction testing that was not necessary and often not performed. Dr. Wiggins also charged cash payments for medical marijuana certifications. The investigation exposed that Dr. Wiggins and Mr. Abduljaber did not report the cash income to the IRS. Global resolutions of civil claims and criminal kickback and tax charges resulted in: felony convictions and prison sentences for all three defendants; collection from Mr. Bansil of $2,250,000 in civil treble damages on behalf of Medicare and $350,000 in restitution paid to BCBSM; $150,000 in forfeiture from Mr. Bansil; and court-ordered restitution from Dr. Wiggins and Mr. Abduljaber of $285,781 to Medicaid and forfeiture of $550,000, including automobiles and real property. The pattern of Dr. Wiggins’ referrals demonstrates the costly impact of unnecessary testing as a result of illegal kickback payments.
United States v. Babubhai Rathod et al.
In an ongoing civil case and parallel criminal investigation stemming from the filing of a whistleblower lawsuit, the U.S Attorney’s Office has convicted nine individuals on felony kickback and health care fraud charges and reached civil settlements with an additional six practitioners that total over $1,200,000 and involve 25 years of individual exclusions from federal health care programs. To date, the whistleblower has received more than $200,000.
The lead defendant, Babubhai Rathod of Okemos, Michigan, was sentenced to four years’ imprisonment for coordinating illegal referral payments to physician assistants and doctors to refer patients to his physical therapy clinics and a home health care agency. Rathod lost his physical therapy license as a result of a criminal conviction and allegations of patient assaults, but he was able to open a home health agency based on the fact that there are no licensing or certificate of need requirements to opening a home health company in Michigan. The government collected $900,000 in a related civil False Claims Act settlement.
United States v. Anthony Kirk
United States v. Martin HoffmeisterAs part of a state-wide initiative, HHS-OIG separately investigated Grand Rapids podiatrists Anthony Kirk and Martin Hoffmeister for the billing of nail avulsions. Dr. Kirk pled guilty to felony health care fraud, was sentenced to six months in prison, and was ordered to pay $65,110 in restitution and a $15,000 fine. Dr. Hoffmeister pled guilty to a misdemeanor charge and was ordered to pay over $50,000. Both podiatrists were excluded from participation with Medicare and Medicaid for at least five years. The prosecution of these cases and others in the Eastern District of Michigan has resulted in an annual reduction of almost 30%, or $3,000,000, in nail avulsion payments by Medicare.
To report any kind of Health Care Fraud, people are encouraged to contact HHS through their tip line—1-800-HHS-TIPS.
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Portage Hospital Pays $4.44 Million to Resolve Voluntary Disclosure Regarding False Medicare Clains for Health Care ServicesRead the Press Release
GRAND RAPIDS, MICHIGAN – Portage Hospital, LLC, in Hancock, Michigan, has agreed to pay the United States $4,446,392.43 to settle allegations that a hospital-owned home health care agency, Portage Health Home Care & Hospice, violated the False Claims Act by submitting false claims to Medicare for home health care services purportedly rendered by a staff physical therapist.
The settlement stems from a self-disclosure to the U.S. Department of Health & Human Services, Office of Inspector General (“HHS-OIG”) by Portage Hospital. Based on information provided by Portage Hospital, the United States alleged that physical therapy services that the staff therapist provided to Medicare home health care patients between January 1, 2006 and November 30, 2013 were medically unnecessary, lacked adequate documentation of medical necessity, and/or did not qualify for payment by Medicare. The United States alleged that while the staff therapist claimed to be performing between 1,889 and 3,352 home health care visits each year, his documentation generally failed to establish, among other things, patients’ homebound status and the need for skilled therapy services.
“Portage Hospital is to be commended for disclosing this matter,” said U.S. Attorney Patrick A. Miles, Jr. “Self-disclosures by providers are critical to protecting the integrity of federal health care programs. My office is committed to bringing voluntary disclosures to resolution as quickly and efficiently as is reasonably possible.”
“A health care provider’s decision to self-disclose its improper behavior benefits both the provider, in this case a hospital, and Federal health care programs, and we will continue to work with our law enforcement partners and providers to reach prompt, appropriate settlement of conduct disclosed in good faith,” said Special Agent in Charge Lamont Pugh III, U.S. Department of Health & Human Services, Office of Inspector General.
The United States encourages health care providers to self-disclose any violations that have resulted in the submission of improper claims to federal health care programs. A timely voluntary disclosure can result in a significantly reduced penalty. This case was investigated by HHS-OIG and the U.S. Attorney’s Office for the Western District of Michigan. Assistant U.S. Attorney Adam B. Townshend represented the United States.
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Richland Man Sentenced to 15 Months for Tampering with Pill BottlesRead the Press Release
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick A. Miles, Jr. announced today that Brian Francis Conover, 35, of Richland, Michigan, was sentenced to serve 15 months in federal custody. He was also ordered to pay $13,396 in restitution to Meijer Stores and will serve a year under court supervision after he is released from prison.
On November 3, 2014, Conover pleaded guilty to adulterating dietary supplements. From July 27, 2014 to August 15, 2014, he purchased over-the-counter dietary supplements from Meijer stores located in Kalamazoo, Allegan, and Calhoun counties. He then removed and substituted the contents of the pill bottles and returned the bottles to the store shelves, which he had repackaged and resealed in the original product boxes. The over-the-counter dietary supplements included Schiff Mega Red Omega-3 Krill Oil, Bayer Women’s One-A-Day, and Nature’s Bounty Biotin. Once discovered, Meijer removed all of the products from its shelves in the affected counties. Law enforcement officials examined the packages, bottles, and contents and discovered foreign substances, including pet food, raisins, chocolate chips, aspirin, prescription strength pain medication, such as acetaminophen and ibuprofen, and the prescription drugs Coumadin and Sotalol. Coumadin is a blood thinner and Sotalol is a medication to regulate heartbeats. Upon executing a search warrant on Conover’s apartment, on August 28, 2014, law enforcement found large quantities of the over-the-counter products, packaging, and bottles. Conover was arrested on September 2, 2014, and has remained in custody. In imposing sentence, Chief U.S. District Judge Paul L. Maloney expressed dismay at Conover’s lack of concern for others and noted that Coumadin could be fatal if taken by the wrong person. Judge Maloney stated that Conover does what he wants to do with little or no concern for others and the rules. Judge Maloney further stated that the dollar amount loss did not fully reflect the impact on the public and Meijer. U.S. Attorney Miles echoed Judge Maloney’s concerns, “Tampering with over-the-counter supplements and adulterating food can seriously harm or even kill people. Conover’s criminal actions were a blow to our trust and confidence in what we consume and put in our bodies. Americans rightfully demand that trust and confidence. Along with our federal and state law enforcement partners, we will vigorously investigate and prosecute this sort of criminal behavior.” The sentence imposed by the court in this matter reflects the seriousness of the potential harm the defendant’s actions could have inflicted on innocent consumers,” said Special Agent in Charge John J. Redmond, FDA Office of Criminal Investigations (OCI) Chicago Field Office. “OCI will continue to work with our law enforcement partners to pursue those who choose to put the public health at risk for their own personal gain.” Investigation of this case was conducted by the FBI, Food and Drug Administration – Office of Criminal Investigations, Portage Public Safety, Kalamazoo County Sheriff’s Department, with the assistance of FBI and FDA-OCI in Minneapolis, Minnesota. Assistant United States Attorney Daniel Mekaru prosecuted the case. ENDMarketing Director for Local College Sentenced for Defrauding the CollegeRead the Press Release
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick A. Miles, Jr. announced today that Gregory A. DeRue of Granger, Indiana was sentenced to 21 months in prison for mail fraud. DeRue was also ordered to pay restitution of $208,133 to the victim of his scheme, Southwestern Michigan College, and agreed in a plea agreement that his asset forfeiture liability was $199,282. Following DeRue’s release from prison, he will serve a 24-month term of supervision by the Court. DeRue pleaded guilty to the charge before Chief U.S. District Judge Paul L. Maloney on November 17, 2014.
DeRue admitted in a plea agreement that while employed at Southwestern Michigan College as the Executive Director of Marketing, he contracted with DMG Media to handle all of the College’s television, radio, and billboard advertising. Unbeknownst to the College, DMG Media was a front company for DeRue himself, who invoiced the College for more than the gross amount of the services actually provided by DMG Media, invoiced the College for services DMG Media never provided, and failed to pay certain media outlets for services that had already been invoiced by DMG Media and paid by the College. The College discovered financial discrepancies in the summer of 2013 regarding DMG Media’s invoices, which totaled $487,427 over this period, and ultimately calculated the loss amount at $208,133 connected to DeRue’s mail fraud. Chief Judge Maloney adopted this loss amount number in calculating restitution owed and DeRue’s ultimate sentence.
The President of Southwestern Michigan College, Dr. David Mathews, spoke at sentencing about the negative impact on student enrollment and College finances from DeRue’s actions while Executive Director of Marketing.
U.S. Attorney Pat Miles commented that “People, like DeRue, who commit frauds not only face significant prison sentences and restitution orders, but they truly harm others. In this case, an institution of higher education and its students, faculty, and staff were harmed. I hope this conviction, sentence, and restitution will help deter others from committing selfish white collar crimes.”
“The defendant’s criminal actions, as a university employee, were selfish and inexcusable” stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. “The FBI, together with our local, state, and federal partners will continue to fight white collar crime and corruption, and hold perpetrators accountable for their greedy actions.”
The Dowagiac Police Department and the Federal Bureau of Investigation investigated this case, with assistance from Southwestern Michigan College. Assistant U.S. Attorney Clay M. West prosecuted the case.
Lansing Man Sentenced to 12 Months in Prison for Defrauding the Government of More Than $46,000Read the Press Release
Ahmad Elbast Lied that He Was Caring for His Father to Receive Benefits
for Over Six Years after His Father Had Returned to his Native LebanonGRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick A. Miles, Jr. announced today that Ahmad Jamil Elbast of Lansing, Michigan was sentenced to 12 months in prison for Supplemental Security Income (“SSI”) representative payee fraud. Elbast was also ordered to pay restitution of $46,625. Following Elbast’s release from prison, he will serve a 36-month term of supervision by the Court. Elbast pleaded guilty to the charge before U.S. District Judge Robert J. Jonker on October 1, 2014.
Ahmad Elbast’s father qualified for Supplemental Security Income benefits and Ahmad Elbast served as his father’s representative payee starting in April 2006, promising to accept the payments on his father’s behalf. In fact, Elbast’s father left the country in March 2006, but Ahmad Elbast continued to certify that his father lived with him and that the SSI payments were being used to care for his father. Elbast’s fraud cost the taxpayers approximately $46,625.
The case was investigated by the Social Security Administration’s Office of Inspector General. Assistant U.S. Attorney Clay M. West prosecuted the case.
Former Coast Guard Member Sentenced to 50 Years for Producing Child Pornography of Young GirlsRead the Press Release
GRAND RAPIDS, MICHIGAN – Eric Devin Masters, 28, of St. Ignace, Michigan, received a 50-year sentence in federal prison for producing child pornography of three young girls, ages 18 months to 12 years old. The judge ordered him to pay $76,640 in restitution for counseling costs to the youngest victim, whom Masters brutally sexually assaulted. Masters pled guilty in federal court in September 2014 to three counts of producing numerous child pornography videos and photographs between May 2012 and August 2013.
Over the course of five years, Masters molested five young girls in five West Michigan counties: Kent, Ionia, Muskegon, Grand Traverse, and Mackinac Counties. Three of the victims’ cases were resolved in this federal case, and the other two were addressed in separate state court charges. Starting in June 2011, when Masters was on active duty with the Coast Guard, Masters began making what he described in emails to others as “sleep rape” videos of him molesting young girls as they slept. The following year, in May 2012, Masters violently assaulted an 18-month-old girl in a Grand Rapids hotel room, recorded the abuse on video, and emailed the videos out to people in exchange for other child pornography. State charges for the sexual assault are pending in Kent County. Throughout that year and the next, Masters continued to make “sleep rape” videos of young girls, and he also took hidden video of one child exiting the shower, changing clothes in a bedroom, and using the bathroom. Masters was convicted in Ionia County in January 2014 of Criminal Sexual Conduct (Second Degree) for molesting a 17-year-old. While on bond for that offense and awaiting sentencing, he “friended” a 13-year-old in Muskegon County through a fake Facebook account and had sex with her. He pled no contest to Criminal Sexual Conduct (Third Degree) for that offense. His path of destruction came to an end in February 2014 when he was detained on the Ionia County conviction, and he has been detained since that time. The federal case arose out of two separate investigations by the Nashville Police Department in Tennessee and the FBI in Birmingham, Alabama, where child pornographic videos that Masters created were found on computers of other child pornography collectors. Masters admitted that he sent the explicit material to other people in the hopes that they would send him their own child pornography in return.
At the sentencing hearing today, the mothers of two of the victims in the federal case spoke. They emotionally described the pain Masters put them and their children through, as well as the fear and shame the children will live with for the rest of their lives. Masters then addressed the court and said he was “feeding an addiction” that he could not stop. In imposing the 50-year sentence, U.S. District Judge Robert Holmes Bell stated that this was one of the worst scenarios he could think of and one of the worst cases he had ever seen. Judge Bell told Masters, “I am stunned by your lack of understanding of yourself and why you did what you did.” He expressed concern for the lifetime impact on the children and the fact that nothing can stop the images and videos from being distributed around the world through the internet.
In announcing the sentence, U.S. Attorney Patrick Miles stated, “Thankfully state and federal agencies throughout the nation are working hard and collaborating to address the scourge of child pornography. Through such collaboration they found these horrific child pornography materials in Alabama and Tennessee, identified the perpetrator here in West Michigan, and helped bring Eric Masters to justice in federal court.”
FBIA Special Agent in Charge, Paul M. Abbate stated, “Today’s sentencing clearly reflects the FBI’s relentless efforts to combat child exploitation in all forms. Defendant Masters’ capture and ultimate sentencing should send the strongest of messages to child predators that the FBI and our law enforcement partners will bring them to justice and hold them accountable under the law.”
The federal investigation was conducted by the FBI and the West Michigan Based Child Exploitation Task Force (WEBCHEX), a collaborative of state and local law enforcement in West Michigan. Assistant U.S. Attorney Tessa K. Hessmiller prosecuted the case.
This case is part of Project Safe Childhood, a nationwide initiative designed to protect children from exploitation and abuse. The U.S. Attorney’s Office; county prosecutor’s offices; and federal, state, and local law enforcement are working closely together to locate, apprehend, and prosecute individuals who exploit children. Individuals with information or concerns about possible child exploitation should contact local law enforcement. For more information about Project Safe Childhood in West Michigan, including resources for children and parents, visit: http://www.justice.gov/usao/miw/programs/psc.html.
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Kalamazoo Woman Indicted on Multiple Counts of Tax FraudRead the Press Release
“#1 Tax Lady” charged with filing multiple phony tax returns
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick A. Miles announced today that Fontrice Lenee Charles, 39, of Kalamazoo, Michigan, appeared in federal district court today to be arraigned on 27 felony charges. The charges stem from Charles’s Kalamazoo business, “#1 Tax Lady.”
On March 6, 2015, a federal grand jury charged Charles with 27 federal felony offenses. Counts 1-25 allege that Charles filed false tax returns for others, and supplied false information designed to ensure hefty refunds, between January 17, 2011 and February 4, 2014. Further information disclosed on court records indicate that Charles prepared 482 such tax returns during this period, resulting in improper tax refunds of approximately $2,000,000. Each of these counts carries a maximum possible sentence of five years in prison and other penalties.
Counts 26 and 27 of the indictment allege that Charles’s own tax returns for 2010 and 2011 were false as well. The indictment alleges that these returns were false because they did not report the income that Charles earned as a result of her fraudulent tax preparation activity, and because she claimed a deceased person as a dependent. Filing false tax returns is a violation of federal law and each offense carries a maximum penalty of three years in prison.
Charles appeared in federal court today before Magistrate Judge Ellen Carmody. Charles requested court-appointed counsel, and the judge released Charles on bond. An arraignment and initial pretrial conference will be scheduled later this week. Chief U.S. District Judge Paul Maloney will preside over the resolution of the case. Prosecution of the matter has been assigned to Timothy VerHey, Assistant U.S. Attorney. The matter was investigated by the Grand Rapids office of the Internal Revenue Service Criminal Investigation.
The charges in an indictment are merely accusations, and a defendant is presumed innocent until and unless proven guilty in a court of law.
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Mason Woman Charged with Bank EmbezzlementRead the Press Release
Megan Kolberg regularly stole cash from Mason State Bank
GRAND RAPIDS, MICHIGAN – Megan Kolberg, age 36, of Mason, Michigan, was indicted by a federal grand jury for embezzling over $1,000.00 from Mason State Bank. The indictment, which was filed in the U.S. District Court for the Western District of Michigan on March 11, 2015, alleges that Kolberg worked as an employee of Mason State Bank and embezzled money from the bank from December 2009 until May 2013. According to the indictment, Kolberg regularly stole cash from the bank during this time period, deposited most of the cash to her personal bank accounts, and concealed her embezzlement by making false statements in the bank’s books and records. These false statements pertained to the balances she maintained in accounts under her control, including her teller drawer, head teller vault, and the automated teller machine.
Kolberg appeared before U.S. Magistrate Hugh W. Brenneman, Jr., on Friday, March 13, 2015, and was released on bond. If convicted of bank embezzlement, Kolberg faces a maximum prison term of 30 years, a fine of up to $1,000,000.00, and an order to make restitution to the bank for the full amount of its losses. The indictment additionally seeks forfeiture of any property that Kolberg obtained directly or indirectly as a result of her embezzlement and seeks a money judgment up to $160,000.00, constituting the amount of the proceeds from her embezzlement.
The investigation is being conducted by the Lansing office of the Federal Bureau of Investigation and the Mason Police Department. The prosecution is being handled by Assistant U.S. Attorney Ronald M. Stella.
The charges in an indictment are merely accusations, and a defendant is presumed innocent until and unless proven guilty in a court of law.
Marquette Felon Sentenced to Prison for Possessing FirearmRead the Press Release
MARQUETTE, MICHIGAN – Joseph Glenn Etheridge, 37, of Marquette, Michigan, was sentenced to 70 months (6 years) in prison followed by three years of supervised release, U.S. Attorney Patrick A. Miles, Jr. announced today. U.S. District Judge Robert Holmes Bell handed down the sentence.
On November 21, 2014, Etheridge pleaded guilty to an indictment charging him with being a felon in possession of a firearm. The charge arose from an investigation surrounding the discharge of a shotgun in Skandia, Michigan on February 10, 2014. Etheridge had been seen with a shotgun earlier in the day and was found hiding in a nearby residence he had broken into after firing the shotgun. Etheridge had previously been convicted of two felony home invasion charges in Michigan’s Third Circuit Court in Detroit.
The Bureau of Alcohol, Tobacco, Firearms and Explosives and Michigan State Police investigated the case. Assistant U.S. Attorney Paul D. Lochner prosecuted the case.
Battle Creek Man Convicted of School Shooting ThreatsRead the Press Release
GRAND RAPIDS, MICHIGAN – A federal judge convicted Timothy Siangdun of Battle Creek, Michigan of three counts of making interstate communications with threat to injure. U.S. District Judge Janet T. Neff heard the case without a jury on Thursday, February 26, 2015 and found Siangdun guilty as charged in the indictment of making three threatening Facebook postings regarding school shootings at Western Michigan University. A bond revocation motion filed the next morning alleged that upon returning home from the trial, Siangdun posted another school shooting threat to the Western Michigan University Facebook page. Siangdun was taken into custody and his bond subsequently revoked by the Court pending his sentencing on June 4, 2015. He faces a maximum sentence of five years’ imprisonment and a $250,000 fine.
The U.S. Attorney’s Office for the Western District of Michigan was assisted in the investigation by the Springfield Department of Public Safety, Western Michigan University Department of Public Safety, Calhoun County Sheriff’s Office, Calhoun County Prosecuting Attorney, Battle Creek Police Department, and the Federal Bureau of Investigation.
U.S. Attorney Patrick A. Miles praised the cooperation among federal, state, and local investigators in locating and prosecuting Siangdun. “Online threats of violence have no place in the Western District of Michigan. Our state and local partners worked long hours to see that these threats were fully investigated for possible prosecution.”
“Mr. Siangdun posted numerous messages on-line in which he threatened acts of violence at Western Michigan University, including threats of a school shooting. Immediately following his conviction on these serious charges, and after being cautioned by a federal judge, he engaged in the same conduct once again, making further threats on-line,” stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. “The FBI and our law enforcement partners investigate and address these types of threats with the highest priority. In our continuous efforts to ensure public safety and keep people safe, we will continue to identify, pursue, and hold accountable those who use the Internet or other means to communicate threats of this nature.”
This case is being prosecuted by Assistant U.S. Attorney Clay M. West.
53-Year-Old Battle Creek Woman Sentenced to 30 Years for Producing Child PornographyRead the Press Release
GRAND RAPIDS, MICHIGAN – Lori Ann Roth, 53, of Battle Creek, Michigan, received the maximum possible sentence of 30 years in federal prison for producing pornography of a child less than 12 years old, U.S. Attorney Patrick Miles announced today. Roth pled guilty in November 2014 to sexually exploiting the child in a conspiracy with Brandon Schroth, 41, a serial child molester who traveled around the world abusing and photographing children between 2009 and 2011. Roth was also ordered to pay a $25,000 fine and will spend ten years on supervised release after completing her 30-year prison term.
Roth met Schroth in a chatroom, where they discussed with each other and numerous other people their shared sexual interest in children. After several years of communicating online and by phone, Schroth traveled to Michigan three times in 2009 and 2010 to meet Roth and molest a child together. Roth and Schroth went to hotels, brought adult lingerie for the child to wear, gave the child alcohol, and on one occasion put a prescription sleep aid in the child’s drink to facilitate the sexual abuse. Both Roth and Schroth engaged in sexual conduct with the child and took pictures. Schroth sent the pictures to others, and the images were eventually discovered on another person’s computer during a separate investigation in Atlanta, which led back to Schroth. In 2012, Schroth pled guilty in federal court in California to 12 counts of producing child pornography and aggravated sexual abuse of various children, and he is currently serving a 40-year sentence. In pleading guilty, Schroth provided information to law enforcement that led to the identification and prosecution of Roth.
In imposing the sentence, Chief U.S. District Judge Paul L. Maloney stated that in his more than 20 years on the bench he had difficulty finding “another instance of depravity lower than this one. The depravity of this defendant is beyond words.” Noting that Roth had no explanation for her conduct, he described her actions as heinous and declared that she “does not deserve to be among free citizens again.” Chief Judge Maloney recommended that she cooperate with mental health professionals while incarcerated to help them better understand child sex offenders.
The investigation was conducted by the FBI. Assistant U.S. Attorney Tessa K. Hessmiller prosecuted the case.
This case is part of Project Safe Childhood, a nationwide initiative designed to protect children from exploitation and abuse. The U.S. Attorney’s Office; county prosecutor’s offices; and federal, state, and local law enforcement are working closely together to locate, apprehend, and prosecute individuals who exploit children. Individuals with information or concerns about possible child exploitation should contact local law enforcement. For more information about Project Safe Childhood in West Michigan, including resources for children and parents, visit: /usao-wdmi/project-safe-childhood.
Traverse City Man Charged with Fraud in Connection with Foreign Currency Trading OperationRead the Press Release
GRAND RAPIDS, MICHIGAN – Jerry M. Stauffer, 66, of Traverse City, Michigan has been indicted on charges of wire fraud and money laundering, U.S. Attorney Patrick Miles announced today.
The indictment alleges that Stauffer engaged in a fraudulent scheme between 2009 and 2015, with approximately $1,500,000 in funds obtained from approximately 15 individuals living in Traverse City and elsewhere. Stauffer allegedly advised these individuals that he could earn substantial profits with invested funds by trading in fluctuations in foreign currencies. In fact, the indictment alleges, Stauffer engaged in wire fraud by using the money given to him for his own purposes, or to pay “interest” to other investors in the manner of a Ponzi scheme. A fraudulent scheme that employs an interstate communication to make it succeed is punishable under the federal wire fraud statute, which carries a maximum penalty of 20 years in prison.
The indictment also alleges that Stauffer used a portion of the money he obtained as a result of the wire fraud scheme to purchase a boat. Any person who knowingly employs a financial institution to engage in a monetary transaction involving fraudulent proceeds over $10,000 is guilty of money laundering. The federal money laundering statute carries a maximum penalty of 10 years in prison.
The indictment seeks the forfeiture of approximately $60,000 in funds previously seized by federal agents in connection with the investigation.
Stauffer was brought before U.S. Magistrate Judge Phillip J. Green on for his initial appearance today and released on bond pending trial. Trial of the case has been assigned to U.S. District Judge Robert J. Jonker. No trial date has yet been set. Traverse City FBI and IRS offices are investigating the case. AUSA Timothy VerHey is prosecuting it. Those who believe they may be victims but have not yet been in contact with law enforcement should contact the FBI at 231-946-7201, or IRS at 231-932-2074.
The charges in an indictment are merely accusations, and a defendant is presumed innocent until and unless proven guilty in a court of law.
United States Recovers One Million Dollars in Connection with False Claims Act Allegations Relating to Skilled Therapy Services and Durable Medical EquipmentRead the Press Release
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick Miles announced today that Agility Health, LLC (“Agility Health”) and Oceana County Medical Care Facility (“OCMCF”) have entered into agreements to pay the federal government a total of $1,000,000 to resolve allegations that they submitted false claims to Medicare, or caused false claims to be submitted to Medicare, in violation of the federal False Claims Act. Agility Health, a Grand Rapids-based company that manages or provides health care services at inpatient and outpatient sites in twenty states, will pay a settlement amount of $850,000. OCMCF, a county-owned facility that provides inpatient and outpatient rehabilitation services in Hart, Michigan, will pay a settlement amount of $150,000. Neither Agility Health nor OCMCF admitted liability as part of their settlements.
Beginning in 2008, Agility Health managed OCMCF’s therapy department, provided therapy staffing services at OCMCF, and assisted OCMCF in preparing insurance claims for therapy services. The settlements announced today resolve allegations that between January 1, 2009 and December 31, 2013, Agility Health knowingly caused false claims to be submitted to Medicare, and OCMCF knowingly submitted false claims to Medicare, for inpatient skilled therapy services that were not provided, that were upcoded, and that were medically unnecessary. According to the United States, Agility Health and OCMCF billed Medicare or caused Medicare to be billed for, among other things, services that were purportedly rendered to patients who were mentally and physically unable to participate in therapy programs.
The settlement with Agility Health also resolves allegations that during its tenure at OCMCF, Agility Health caused false claims for durable medical equipment to be submitted to Medicare. According to the United States, an Agility Health employee at OCMCF improperly disclosed protected health information to an outside vendor in 2011 in violation of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). The vendor used that information to bill Medicare for unnecessary medical equipment that some patients never received.
This case resulted from a civil lawsuit filed by three whistleblowers who worked at OCMCF. The lawsuit, known as a qui tam action, was filed under the False Claims Act, which allows private whistleblowers to bring lawsuits on behalf of the United States and receive a share of any recoveries. In this case, the Government intervened in the whistleblowers’ lawsuit. The whistleblowers will collectively receive over $200,000 of the settlement proceeds, as well as additional amounts for attorney’s fees and costs. The qui tam case is docketed as United States, et al., ex rel. Jahn, et al. v. Agility Health, Inc., et al., No. 1:12-cv-449 (W.D. Mich.).
“Patients in skilled nursing facilities should receive therapy based on their clinical needs, not the financial incentives of the companies and facilities that provide their care,” said U.S. Attorney Miles. “Patients also trust providers to protect their sensitive personal information as required by law. My office will use all available options to hold providers accountable when they improperly disclose protected health information.”
This case was investigated by the U.S. Attorney’s Office for the Western District of Michigan. Assistant U.S. Attorney Adam B. Townshend represented the United States.
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CEO of Kentwood Pharmacy Pleads GuiltyRead the Press Release
GRAND RAPIDS, MICHIGAN – Kim Duron Mulder, 55, formerly of Grand Rapids, and Charles Wayne Brooks, 63, of Alma, entered guilty pleas today before United States District Judge Robert J. Jonker on charges related to the illegal restocking and re-dispensing of recycled drugs at Kentwood Pharmacy. Mr. Mulder, formerly the CEO of Kentwood Pharmacy, pled guilty to a conspiracy to commit health care fraud based on billing Medicare, Medicaid, and private insurance plans for misbranded and adulterated drugs. Mr. Brooks, a pharmacist at Kentwood Pharmacy’s facility in Alma, pled guilty to misbranding prescription drugs that had been previously dispensed and returned to pharmacy stock. Mr. Mulder faces up to ten years’ imprisonment; Mr. Brooks faces up to three years’ imprisonment.
The convictions of Messrs. Mulder and Brooks conclude the federal prosecution of individuals involved with Kentwood Pharmacy. A total of 18 people were convicted of criminal offenses stemming from the practices at Kentwood Pharmacy, including the felony convictions of six licensed pharmacists. Most recently, in December 2014, Judge Jonker sentenced Richard Clarke, formerly Kentwood Pharmacy’s Vice President of Sales, to 14 years in prison for his involvement in a conspiracy to commit health care fraud and a separate charge of possession of child pornography. In December 2014, Judge Jonker also sentenced pharmacist Lawrence Harden to six years’ imprisonment for his involvement in the conspiracy to commit health care fraud. As part of the sentencing hearings, Judge Jonker found that public and private insurers paid more $80,000,000.00 for adulterated and misbranded drugs. Judge Jonker found that Messrs. Clarke and Harden were responsible for restitution amounts of over $8,000,000.00 and $6,000,000.00, respectively.
The federal investigation revealed that Kentwood Pharmacy violated state pharmacy rules and federal law by recycling drugs that were returned from nursing homes and adult foster care homes. These included cross-contaminated drugs that were previously mixed together, drugs bearing foreign substances and residues, and discolored and expired medications. The process by which Kentwood Pharmacy returned drugs to pharmacy stock resulted in the improper labeling of drugs, the placement of different drug dosages into stock bottles, and the placement of the altogether wrong drugs into stock bottles. Because Kentwood Pharmacy did not trace the returned drugs, at least one defendant was able to take and sell controlled prescriptions on the street in northern Michigan.
U.S. Attorney Patrick Miles said, “The Federal Food Drug and Cosmetic Act provides an essential regulatory framework to safeguard the public’s use of prescription drugs. These federal regulations are buttressed by explicit state laws which strictly limit the reuse of drugs which have left the control of pharmacies. The public must be able rely on pharmacists who have both professional and statutory duties to ensure that pharmacies operate in compliance with these federal and state laws regulating the handling, packaging, and distribution of drugs.”
This case was investigated by the U.S. Food and Drug Administration, the Federal Bureau of Investigation, the U.S. Drug Enforcement Administration, the U.S. Department of Health and Human Services, and the Internal Revenue Service. Assistant U.S. Attorneys Raymond E. Beckering III and Adam B. Townshend prosecuted the cases on behalf of the United States.The investigation of this case was initiated by confidential tips. If Michigan residents or medical professionals suspect possible violations of law or other dangerous practices involving pharmacies or prescription drugs, they can contact the FDA or the DEA.
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Felon Sentenced to Seventeen Years in Federal Prison for Possessing a FirearmRead the Press Release
GRAND RAPIDS, MICHIGAN – Jamar Alonzo Quarles, 34, was sentenced today to seventeen years in federal prison for possessing a firearm as a convicted felon, U.S. Attorney Patrick A. Miles, Jr. announced. In addition to the prison term, U.S. District Judge Robert Jonker ordered Quarles to pay $2,500 in fines, and Judge Jonker imposed a five -year term of supervised release that will commence once Quarles is released from imprisonment.
Quarles pleaded guilty on September 9, 2014. The facts underlying his conviction were outlined in the government’s sentencing memorandum. On April 24, 2013, Quarles was released on parole in connection with a prior conviction for firing multiple rounds at another person. Thereafter, he acquired a pistol. On August 22, 2013, he menaced an ex-girlfriend with a “gun.” On or about August 24, 2013, Quarles became involved in a domestic dispute with his girlfriend. He prevented her from leaving his vehicle and then brought her to his home. He then prevented her from leaving his home, pointed a handgun at her head, and threatened to kill her. His girlfriend was ultimately able to escape and called the police. She directed police back to the defendant’s home, where they found the handgun, which had six rounds of ammunition in the magazine.
Quarles received a lengthy sentence because he was eligible for increased penalties under the Armed Career Criminal Act (“ACCA”). Under federal law, a person who possesses a firearm after sustaining at least three previous felony convictions of a certain type and severity must be sentenced to at least fifteen years in prison. Quarles’s prior convictions included incidents involving assault, battery, home-invasion, and firearms. In imposing sentence, Judge Jonker noted that Quarles was a model candidate for the increased penalties under the ACCA.
The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Grand Rapids Police Department (GRPD) investigated the case. Assistant U.S. Attorney Sean M. Lewis and former Assistant U.S. Attorney Sean Maltbie prosecuted the case.
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Three Plead Guilty to Violating the Clean Air Act at the Former Consumers Energy Facility in Comstock TownshipRead the Press Release
GRAND RAPIDS, MICHIGAN – Three individuals have pled guilty to violating the federal Clean Air Act for their roles in what environmental investigators believe may be the largest asbestos release in Michigan since it was declared a hazardous air pollutant in 1971.
LuAnne LaBrie of Kalamazoo, formerly known as LuAnne McClain; Cory Hammond of Hastings; and Robert “Mike” White of Kalamazoo each pled guilty in federal court to violating the Clean Air Act. LaBrie pled guilty to the felony offense of failing to notify federal or state authorities that asbestos material would be stripped and removed at the former power generation facility located at 6800 East Michigan Avenue in Comstock Township, Michigan. Hammond and White each pled guilty to failing to adequately wet asbestos material while stripping and removing asbestos inside that facility, also a felony violation.
In 2011, LaBrie, Hammond, and White agreed to salvage valuable material from the facility and share in the proceeds. All three defendants knew that asbestos was present inside of the facility. LaBrie supervised and controlled the facility, visited the site on a regular basis, and communicated with White and Hammond concerning the status of the salvage operation. Despite knowing that Hammond, White, and other laborers were stripping and removing asbestos insulation from pipes and facility components, LaBrie failed to notify the U.S. Environmental Protection Agency (EPA) or the State of Michigan that the salvage operation would involve the removal of asbestos inside the facility. Hammond and White admitted to failing to adequately wet asbestos material that had been stripped and removed until it was collected and sealed in a leak-tight container to prevent the release of asbestos particulates during the salvage operation. The defendants agreed to pay restitution to the EPA for remediation costs associated with the illegal asbestos removal at the facility.
The defendants face a maximum of 5 years in prison and a $250,000 fine for the offense, but the Court will determine the sentence after considering the federal sentencing guidelines and statutory sentencing factors. LaBrie will be sentenced in April 2015 by U.S. District Judge Gordon J. Quist. Hammond and White will be sentenced in July 2015 by U.S. District Judge Robert J. Jonker.
“Companies and individuals handling regulated asbestos material must follow basic workplace practices designed to protect both the workers who handle the hazardous material and the air we all breathe,” said U.S. Attorney Patrick Miles. “Those who attempt to evade the law by cutting corners to maximize profits and harm our environment will be held accountable for their actions.”
“Asbestos can cause cancer and other serious respiratory diseases and must be handled legally and safely,” said Randall Ashe, Special Agent in Charge of EPA’s criminal enforcement program in Michigan. “The defendants directed the break-up and removal of material containing asbestos, threatening not only the environment but the safety of their workers and the general public. Today’s pleas clearly show that anyone who tries to make money by breaking the law will ultimately pay the price.”
This case was investigated by the U.S. EPA Criminal Investigation Division, the Michigan Department of Natural Resources Environmental Investigation Section, and the Internal Revenue Service. Assistant U.S. Attorney Christopher O’Connor represented the United States.
Former Defense Contractor on His Way to Prison for Trying to Sell Defective Machine Gun Parts to Department of DefenseRead the Press Release
Colorado Resident Howard Cahn, Who Tried to Save His Michigan Manufacturing Business by Selling Defective Machinegun Components to DoD in 2009, Sentenced to 30 Months in Federal Prison
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick A. Miles, Jr. announced today that Colorado resident Howard “Jack” Cahn, was sentenced in federal court in Kalamazoo, Michigan, to 30 months in prison for attempting to sell the Department of Defense (DoD) machinegun replacement parts that were not only technically noncompliant with contract requirements, but that also included materially defective components.
The parts, which had been produced by Cahn’s manufacturing company “Aerospace Manufacturing Services (AMS),” located in Buchanan, Michigan until it closed in early 2010, were critical internal components for the “M-249” 5.56 mm Squad Automatic Weapon (SAW) and the “Mark 19” 40 mm grenade-machinegun. Both weapons systems are in wide use by all branches of the U.S. Armed Forces, and the components in question were essential to the reliable and safe functioning of those weapons systems. Cahn was convicted after a four-day jury trial during October 2014 in U.S. District Court in Kalamazoo, Michigan. The evidence at trial established that, with AMS in deep financial trouble and unable to fulfill its contracts with DoD, Cahn not only attempted to pass off Mark 19 parts that had actually been manufactured in Colorado without DoD oversight as AMS product, but also forced employees to add defective SAW parts that had been designated as scrap to a shipment of parts that was ready to be delivered to DoD. The evidence also established that, if they had made it into the supply chain and into the field, the defective SAW parts could have caused machineguns to become inoperable in combat.
Chief U.S. District Judge Paul L. Maloney sentenced Cahn to serve 30 months in Federal prison, after noting that Cahn’s offenses were “particularly egregious.” Cahn not only forced several young employees to participate in the offense at the fear of losing their jobs, but the offense itself could have endangered U.S. troops in combat if those same AMS employees had not decided to turn Cahn in to DoD quality-assurance inspectors when they realized the potential danger to U.S. troops. Commenting on the seriousness of Cahn’s crimes, Judge Maloney stated, “I don’t know how you could ever explain to the parents of a Marine or a Soldier that their loved one had been killed because their machinegun stopped firing when they needed it most.” The Chief Judge added that sending a strong deterrent message to any other defense contractor who might try to make a profit by evading DoD’s quality-control measures was also “at the top of the court’s list” among the various sentencing factors.
Commenting on the sentence, U.S. Attorney Miles stated, “Defense-procurement fraud is a serious offense that my office will vigorously pursue. When it involves misconduct that also can endanger U.S. troops in the field, it goes beyond serious to outrageous. Mr. Cahn tried to save his company and make a dollar even if it meant sending U.S. troops into battle with defective weapons during the height of combat operations in Iraq and Afghanistan. As a result, instead of being a businessman and defense contractor, he is now a federal felon and inmate.”
The case was investigated by special agents of the U.S. Army Criminal Investigation Division (Army CID) and the Defense Criminal Investigative Service (DCIS). It was prosecuted by Assistant U.S. Attorneys Hagen W. Frank and Russell A. Kavalhuna.
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Kalamazoo Man Sentenced to Life in Prison in Federal Crystal Methamphetamine and Witness Tampering ConspiracyRead the Press Release
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick Miles announced today that Francis Block, 45, of Kalamazoo, Michigan was sentenced to life in prison by Chief U.S. District Judge Paul Maloney for various drug and witness tampering charges. Block was convicted following a four-day jury trial that concluded on October 2, 2014.
In 2012 officers of the Kalamazoo Valley Enforcement Team (KVET), with the assistance of Drug Enforcement Administration (DEA) agents, initiated “Operation Roadblock,” an investigation of methamphetamine trafficking by Block and others known to associate with him. In January 2013, KVET officers executed a warrant to search Block’s then-residence in Cooper Township, Michigan, and seized methamphetamine lab components, $29,800 U.S. currency, and multiple firearms. Later in 2013, KVET officers learned that Block likely had connections with crystal methamphetamine suppliers from Mexican drug cartels.
In October 2013, investigators executed a series of multi-ounce controlled purchases of crystal methamphetamine directly from Block. On October 23, 2013, KVET and DEA investigators arrested Block during Block’s attempted sale of four ounces of crystal methamphetamine to the informant. Later that night, the officers executed five search warrants at homes and premises around Kalamazoo, including a storage unit on Stadium Drive where Block and several of his drivers made frequent stops before and after drug deals. At a residence on North Arlington Street, officers located and seized, among other items, more than a pound of crystal methamphetamine, handwritten drug ledgers, and nearly $20,000 U.S. currency. At the Stadium Drive storage unit they located and seized nine more pounds (over four kilograms) of crystal methamphetamine and a pill bottle bearing Block’s name. The Stadium Drive seizure was KVET’s largest-ever crystal methamphetamine seizure. The street value of the methamphetamine seized during the controlled purchases and raids exceeded $350,000.
The investigation continued and between late 2013 and early 2014, five additional confederates of Block’s were charged with federal and state drug felonies. One defendant, Scott Webber of Kalamazoo, Michigan, fled prosecution and remains a fugitive. The grand jury later indicted Block and his sister, Elizabeth McNett, on witness tampering charges, after Block and McNett plotted to hire a convicted murderer who shared a cell with Block to firebomb an informant’s car and intimidate government witnesses.
With the exception of Webber, all of Block’s co-defendants pled guilty to one or more federal charges. Chief Judge Maloney sentenced the following co-defendants as follows:
Jeffrey Starrett, 43, of Kalamazoo, Michigan: 60 months in custody;
Michael Head, 39, of Kalamazoo, Michigan: 84 months in custody;
Martin McCaul, 52, of Paw Paw, Michigan: 48 months in custody; and
Elizabeth McNett, 44, of Lawton, Michigan: 33 months in custody.
In a related case, U.S. District Judge Janet Neff sentenced Ben Alan Phelps, 29, of Kalamazoo, Michigan, to 36 months in custody.
Block was the only defendant to take his case to trial, which was handled by Assistant U.S. Attorneys Heath M. Lynch and Sean M. Lewis. Following the trial, at which Phelps and all of Block’s convicted co-defendants testified against him, the jury found Block guilty of all charges.
On Monday, February 9th, Chief Judge Maloney sentenced Block to serve life in prison. Judge Maloney stated that the case represented “one of the largest methamphetamine distribution operations in the history of our district, and Mr. Block was the leader of it.” Commenting on Block’s recorded phone calls introduced at trial as evidence of Block’s witness tampering efforts, Judge Maloney noted Block’s “contempt for the system” and described being “flabbergasted” that Block was “so self-centered and egotistical that he brought his own sister into the conspiracy.”
In sentencing Block to life in prison and denying Block’s motion for a shorter sentence, Judge Maloney stated that he “d[id] not find any mitigating factors” and described Block’s criminal history as that of “an individual who is either unwilling or unable to reform himself.” According to Judge Maloney, no criminal sentence Block previously served “managed to convey to Mr. Block that he should stop dealing drugs.”
Jenison Woman Pleads Guilty to Wire Fraud SchemeRead the Press Release
Renata Nicole Annese stole over $800,000.00 in a credit card fraud scheme
GRAND RAPIDS, MICHIGAN – Renata Nicole Annese, 39, of Jenison, Michigan, pled guilty on June 29 in U.S. District Court for the Western District of Michigan to one count of wire fraud as detailed in an indictment returned on November 12, 2014, U.S. Attorney Patrick Miles announced today. Annese agreed that she will pay restitution of approximately $872,000.00 and that she will forfeit her equity interest in her personal residence in Jenison, Michigan, because she used the fraud to make her mortgage payments.
“Deterring fraudulent conduct through vigorous prosecution of those who take advantage of others remains an important priority of this office. The repeated use of interstate wire transmissions to steal nearly a million dollars and to contribute to this victim’s decision that he had to sell his business makes this case especially appropriate for federal prosecution,” said U.S. Attorney Miles.
From October 2006 until April 2013, Annese used interstate wires to defraud the former owner of the Sleep Inn hotel in Allendale, Michigan, of nearly a million dollars. Annese did so by regularly accessing the Internet so that she could edit data related to the hotel’s credit card sales. Annese then inserted her own personal credit card and bank debit card numbers on the payment side of many of those transactions. This caused the hotel customers’ cards to be charged, but directed the customers’ banks to send the payments to Annese’s credit and debit cards, instead of to the hotel’s bank account. Defendant concealed her fraud by pairing her credit or bank debit card numbers with names and charge amounts actually associated with real hotel customers. This made it appear as if those customers were receiving a credit back to their cards,
when in reality Annese was receiving the payments. The former owner of Sleep Inn sold the hotel in 2013 because of its struggling financial performance and did not learn of Annese’s fraud until shortly after the sale.“Defendant Annese repeatedly used the Internet to siphon funds intended for her employer and divert them illegally to her own bank accounts,” stated Paul M. Abbate, Special Agent in Charge of the FBI Detroit Field Office. “As reflected in this case, there are always very real victims on the other end of financial fraud crimes. The FBI remains committed to deterring this type of conduct and bringing justice to those who perpetrate fraudulent financial schemes in violation of federal law.”
Annese will be sentenced on May 18, 2015, at which time she will face up to 20 years’ imprisonment and a fine of up to $250,000.00.
The Federal Bureau of Investigation is conducting the investigation and Assistant United States Attorney Ronald M. Stella is prosecuting the case.
Final Two Defendants Plead Guilty to Theft from Federally Licensed Firearms DealerRead the Press Release
The Defendants Stole 26 Firearms from U.S. Lumber Company in Battle Creek
GRAND RAPIDS, MICHIGAN – Matthew Cameron Day Bolden, 24, and William Henry Watson, 22, both of Battle Creek, Michigan, pled guilty on January 28 in the U.S. District Court for the Western District of Michigan to one count of theft of firearms from a federally licensed dealer as detailed in an indictment returned on October 16, 2014, U.S. Attorney Patrick Miles announced today. James Maurice Lucas, 19, also of Battle Creek, previously pled guilty to the theft on November 14, 2014.
Late in the evening on September 6, 2014, the three men, armed with two semiautomatic pistols, broke into U.S. Lumber Company in Battle Creek, which was closed for the day. They shattered display cases containing semiautomatic pistols and revolvers, and fled the store with 26 firearms. Officers from the Battle Creek Police Department, responding to an alarm, apprehended Bolden and Watson at the scene. Lucas was arrested at a later date. Twenty-four of the firearms have been recovered.
“Stealing firearms from a federally licensed dealer is not only a dangerous crime in and of itself, but those stolen firearms can later pose a deadly threat to the public,” said U.S. Attorney Miles. “This office continues to protect the public by enforcing federal firearms law.”
“Anytime guns are stolen, the community is placed at risk,” said ATF Special Agent in Charge Steven Bogdalek. “Theft of firearms from a federally licensed firearms dealer is one of the most serious federal crimes as the guns typically end up in the hands of violent criminals. ATF, along with our local, state and federal partners remain committed to aggressively investigating these crimes.”
Chief of Police Jim Blocker of the Battle Creek Police Department said, “This incident once again validates the importance of open and joint investigations with our Federal and State law enforcement agencies. The Battle Creek Police Department has retained a long-time position on the ATF Task Force, and this case demonstrates why this remains so vital to our mission. As a local department, we naturally operate with limited resources, and we remain grateful that our Federal and State partners are so willing to assist the Battle Creek Police Department.”
Bolden and Watson will be sentenced in June and Lucas will be sentenced in March. Each faces up to 10 years’ imprisonment and a fine of up to $250,000.00.
The Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) conducted the investigation along with the Battle Creek Police Department. Assistant U.S. Attorney Justin M. Presant is prosecuting the case. The prosecution was coordinated with the Calhoun County Prosecuting Attorney.
Traverse City Man Pleads Guilty to Willfully Failing to Timely File Income Tax ReturnRead the Press Release
GRAND RAPIDS, MICHIGAN – Scott Edward Carroll, 49, of Traverse City, Michigan, pled guilty on January 28, 2015, in United States District Court for the Western District of Michigan to a misdemeanor information filed on January 13, charging him with willfully failing to timely file an income tax return for the 2008 tax year, U.S. Attorney Patrick Miles announced today. Carroll will be sentenced on May 19, 2015, at which time he will face up to one year of imprisonment and a fine of up to $100,000.00. As part of his plea agreement, Carroll has agreed to pay restitution of $103,466.65, plus fraud penalties totaling an additional $44,241.00.
“In 2006 and 2007, Carroll underreported the gross sales from his business by over $180,000.00 on his federal tax returns, and then willfully failed to file tax returns in 2008, 2009 and 2010. This office will continue to vigorously prosecute those who willfully choose to cheat the tax system to avoid paying the same fair share of the tax burden dutifully paid by the taxpayers of this district,” said U.S. Attorney Miles.
From 2006 through 2010, Carroll operated a training and consulting business in Traverse City, Michigan. In 2006 and 2007, he substantially underreported his gross sales from that business on Schedule C of his federal tax returns, resulting in an underreporting of his tax liability in each year. Despite the fact that the Internal Revenue Service began an audit of his tax returns, Carroll willfully failed to timely file any personal tax returns for tax years 2008, 2009, and 2010, by the required deadlines. Instead, he did not file his income tax returns and pay his taxes for those years until 2012, long after the Internal Revenue Service informed him that it had commenced a criminal investigation of his conduct. As part of his guilty plea to the misdemeanor information for willfully failing to timely file his tax return for 2008, Carroll has
also agreed to pay his corrected tax liabilities ($65,666.00), along with fraud penalties ($44,241.00) and interest ($37,800.65), associated with tax years 2006 and 2007."IRS Criminal Investigation directs its efforts at the portion of taxpayers that willfully violate their known legal duty to timely file accurate income tax returns,” said Jarod J. Koopman, Special Agent in Charge, Internal Revenue Service Criminal Investigation. “Identifying and investigating these types of crimes is vital to maintaining public confidence in our tax system.”
The Internal Revenue Service-Criminal Investigation conducted the investigation, and Assistant United States Attorney Ronald M. Stella is the prosecutor.
KTM Industries, Inc. Resolves False Claims Act Allegations Involving National Science Foundation AwardRead the Press Release
GRAND RAPIDS, MICHIGAN – KTM Industries, Inc. (“KTM”), a Lansing-based company that develops and manufactures biodegradable engineered foam, has agreed to pay $170,923.65 to the federal government to resolve allegations that it fraudulently obtained funding under a National Science Foundation (“NSF”) award in violation of the federal False Claims Act. As part of the settlement, KTM’s CEO agreed to pay an additional $25,000 and submit to a three-year exclusion from participation in federal programs, grants, and contracts. The government previously received $54,076.35 from Michigan State University (“MSU”) in a related investigation into whether, under a subcontract with KTM, MSU spent NSF award funds on unallowable equipment. KTM, KTM’s CEO, and MSU did not admit liability as part of their respective settlements.
In September 2010, NSF awarded KTM Phase II funding under a Small Business Technology Transfer (“STTR”) grant to support the development of chemically-modified plastic starch bio-foams. The United States alleged that to obtain and maintain this funding, KTM and its CEO knowingly made a number of false statements and supplied NSF and NSF contractors with false documents. These false statements and false documents concerned, among other things, KTM’s accounting system and timekeeping records, the actual expenditure of NSF award funds, and the primary employment and payment of the principal investigator on the NSF project. The United States further alleged that during the investigation of this case, KTM produced 24 false and fraudulent employee timesheets in response to an administrative subpoena, the creation of which timesheets was directed by the company’s CEO.
“Those who seek federal funding must be truthful and accurate in their dealings with government agencies,” said U.S. Attorney Patrick Miles. “Companies and individuals that make misrepresentations to obtain such funding undermine the integrity of the grant process and unfairly divert funds from qualified grantees who will play by the rules.”
Allison Lerner, NSF’s Inspector General said, “STTR funding is a valuable tool for small businesses to develop innovative technologies. Unscrupulous individuals and companies who lie to fraudulently obtain these funds will not be tolerated. I commend the U.S. Attorney for his support in this case.”
This case was investigated by NSF’s Office of Inspector General. Assistant U.S. Attorney Adam B. Townshend represented the United States.
Former Traverse City Man Sentenced to Nine Years in Prison for Importing "Bath Salts" from ChinaRead the Press Release
GRAND RAPIDS, MICHIGAN – Joshua David Buerman, 27, formerly of Traverse City, Michigan, was sentenced in the U.S. District Court for the Western District of New York on a charge originally brought here in the Western District of Michigan. He received 9 years in prison for his involvement in a conspiracy to import into the State of Michigan more than 5 kilograms of methylone from China. Buerman also received a concurrent 9 year sentence on his plea of guilty to a separate criminal charge stemming from his involvement in a conspiracy to import and distribute more than 15 kilograms of methylone in the State of New York.
Methylone is a synthetic stimulant having a chemical structure which closely resembles 3,4 methyelenedioxymethamphetamine, known commonly as “MDMA” or “ecstasy.” Methylone is often sold generically by the street term “bath salts” or “research chemicals.” Methylone was permanently placed into Schedule I of the Controlled Substances Act in April 2013.
U.S. Attorney Patrick Miles said, “Synthetic drugs such as methylone are extremely dangerous. Users are often misled into believing synthetic drugs are less harmful than more commonly known street drugs, particularly by their innocuous sounding street name, ‘bath salts.’ In truth, synthetic drugs can lead to severe psychological dependence and death. Because synthetic drugs often have obscure origins, are imported from overseas, and contain misleading labeling, users often have no idea what kinds of chemicals they are putting in their bodies. We will vigorously prosecute those who illegally import and distribute these drugs.”
In February 2012, while living in Traverse City, Michigan, Joshua Buerman began purchasing quantities of methylone and several other synthetic drugs from a Chinese source of supply that he discovered over the internet. Over the course of the next several months, Buerman ordered more than 5 kilograms of methylone, all of which was delivered to him through the U.S. mail.
In June 2012, Buerman left the state Michigan and moved back to Rochester, New York where he continued to purchase and receive significant quantities of methylone online from the same Chinese supplier. In connection with the investigation of Buerman and his Chinese source of supply, law enforcement officials were able to determine that Buerman was actively ordering methylone from China and that he had recruited several local associates to assist him.
The investigation further revealed that the China-based supplier was shipping an assortment of controlled substances and controlled substance analogues to numerous customers located throughout the United States and abroad, including, but not limited to Austria, Canada, Finland, Spain, Germany, Italy, Belgium, Ireland, the United Kingdom, Sweden and Lithuania.
The investigation generated more than 450 leads which were disseminated to various police agencies across the United States, resulting in the nationwide seizure of more than 70 kilograms of methylone and numerous controlled substance analogues, all of which had been shipped from China. Investigative leads also resulted in at least 54 arrests nationwide, including Maine, Massachusetts, Connecticut, New Jersey, Maryland, Virginia, North Carolina, South Carolina, Georgia, Florida, Louisiana, Tennessee, Missouri, Ohio, Minnesota, Nevada, Oregon, California and Texas.
The Michigan portion of the investigation was handled by the Michigan State Police and Homeland Security Investigations. It was prosecuted by AUSA Clay Stiffler.
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Lansing Man Sentenced in Federal Mortgage Fraud ProbeRead the Press Release
Richard Hollern Sentenced for Conspiracy to Commit Bank Fraud
GRAND RAPIDS, MICHIGAN – U.S. Attorney Patrick Miles announced today that Richard Hollern, 39, of Grand Ledge, Michigan was sentenced for conspiracy to commit bank fraud. Hollern pled guilty before U.S. District Judge Robert Holmes Bell on August 18, 2014.
Hollern admitted that he conspired with others at CDC, a Lansing real estate and investment company, to process multiple fraudulent mortgage transactions involving real estate in the vicinity of Lansing, Michigan. The scheme enabled the perpetrators to use bank funds to enrich themselves as a result of the sham real estate transaction charged, as well as other similar transactions. Others associated with this organization, including Eric Williams, Aaron Teachout, Isaac Modert, Mario Giannandrea, Rick Artibee, Dennis Sare, Nicole Buda have already been sentenced for their roles in the conspiracy. Another conspirator, Craig DeHaven, has pled guilty and is awaiting sentencing.
Judge Bell imposed a prison sentence of 30 months, to be followed by 24 months of supervision following release from prison. Hollern was also ordered to pay restitution of $1,860,377 to the banks defrauded as a result of the scheme.
Hollern’s prosecution is the result of a continuing investigation by the Mortgage Fraud Task Force, comprised of federal investigators from the FBI, U.S. Secret Service, the U. S. Postal Inspection Service and the HUD Office of Inspector General. The task force also includes the Lansing Police Department, investigators employed by the Michigan Attorney General’s Office and other state agencies. To date, fifteen individuals have been convicted of mortgage fraud as part of this effort, resulting in prison sentences for all of the defendants, and restitution orders exceeding $14,000,000.
U.S. Attorney Miles praised the cooperation between federal, state and local investigators participating in the Mortgage Fraud Task Force. He also stated that the work of the group is not done: “Many of the people prosecuted worked with others who committed, and continue to commit, mortgage fraud. The defendants have told investigators who they are, and what they are doing. Those people who have not yet learned that crime does not pay will learn that lesson very soon.”
Albion Man Sentenced to 12 Months in Prison for Defrauding the Social Security Administration of More than $48,000Read the Press Release
Roger Dale Young Lied About His Income and Resources So That He Would Receive a Larger Disability Check Each Month
GRAND RAPIDS, MICHIGAN – Roger Dale Young, 55, of Albion, Michigan, was sentenced to 12 months in federal prison today for committing Social Security fraud. He was also ordered to pay restitution to the Social Security Administration. U.S. District Judge Janet T. Neff imposed the sentence.
Young, who had been receiving Supplemental Security Income disability benefits, pled guilty in September 2014 to lying about his assets and other financial resources in order to increase the amount of his monthly disability check. Young’s fraud occurred over the course of nearly 11 years and cost taxpayers more than $48,000.
U.S. Attorney Patrick A. Miles, Jr., said, “Protecting taxpayers is one of our primary missions. We will continue to vigorously prosecute those who defraud federal agencies like the Social Security Administration.”
The case was investigated by the Social Security Administration’s Office of Inspector General, the Albion, Michigan Police Department, and the Calhoun County Sheriff’s Department. It was prosecuted by Assistant United States Attorney Clay Stiffler.