District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
Federal Court Orders Tax Scheme Promoters to Disgorge $50 Million in Gains from Fraudulent Solar Energy Tax SchemeRead the Press Release
A federal court in Salt Lake City, Utah, ordered R. Gregory Shepard and Neldon Johnson and Utah companies RaPower-3 LLC, and International Automated Systems, Inc., to disgorge over $50 million in gross receipts from facilitating and promoting an abusive tax scheme involving false tax deductions and solar energy credits.
The court also barred defendants from promoting and marketing the scheme and ordered them to take steps to ensure that the public is not further harmed by their actions.
“We are gratified by the court’s decision, which mitigates the harm to the United States Treasury caused by defendants’ unlawful tax scheme,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. “As the court’s decision recognizes, a business model that is based on false and fraudulent conduct cannot be allowed to retain its income.”
Based upon evidence the government submitted to the court during a 12-day bench trial, the court found that the defendants engaged in a “massive fraud.” The court stated that the defendants “each knew, or had reason to know, that their statements about the tax benefits purportedly related to buying solar lenses were false or fraudulent.”
The court stated that “[b]ecause of the manner in which Defendants promoted the scheme, the court concludes that $50,025,480 in gross receipts from the solar energy scheme came from money that rightfully belonged to the U.S. Treasury.” The court found that the defendants “obstructed discovery about their gross receipts and other topics involving their finances.”
The court stated that the United States showed a “reasonable approximation” of the total gross receipts from lens sales. In addition, the court held that defendants would not be allowed any credit of operating expenses because such credits “are not consistent with principles of equitable disgorgement.”
According to the opinion, defendant Neldon Johnson claimed to have invented purported solar energy technology involving solar thermal lenses placed in arrays on towers. The court found that to “make money from this purported solar energy technology, Johnson decided to sell a component of the purported technology: the solar lenses.”
Under the proper circumstances, the Internal Revenue Code allows a taxpayer engaged in a trade or business certain tax deductions for expenses the taxpayer incurs while generating income. Likewise, if all of the requirements are met, the tax law allows an “energy credit” for certain “energy property.”
However, in this case, the court concluded that the defendants “knew, or had reason to know, that their customers were not in a trade or business of leasing out solar lenses and, therefore, that their customers were not allowed the depreciation deduction or solar energy tax credit.”
The opinion also concluded that the defendants made “gross valuation overstatements” when they sold lenses to customers. The court found that the defendants sold each lens for a total purported price of $3,500. The court stated that the evidence showed that the raw cost of each supposed “lens” was very low and found that “[d]efendants’ technology does not work, and is not likely to work to produce commercially viable electricity or solar process heat. Therefore, each ‘lens’ is just one component of an inoperable system. It is not a piece of sophisticated technology such that premium pricing is appropriate for it.”
The court also barred defendants from promoting and marketing the scheme. The court stated that the defendants sold lenses using a multi-level marketing approach, and encouraged distributors to “bring still more people in to the multi-level marketing system and build an extensive ‘downline.’” The court concluded that, in this case, “[t]he toxic combination of multi-level marketing and misleading information creates an urgent need [for] an injunction.”
The injunction requires, among other things, that the defendants stop making statements that a person who buys a lens is in a trade or business with respect to that lens; may lawfully claim a depreciation deduction or any other business expense deduction related to a solar lens; and may lawfully claim a solar energy credit related to a lens.
Further, the court ordered that the defendants disclose, in their marketing materials for lenses that the court “has determined that the solar energy technology of RaPower-3 in place from 2005 to 2018 is without scientific validation or substance and ineligible for tax credits or depreciation by individual purchasers of lenses.”
Principal Deputy Assistant Attorney General Zuckerman thanked Trial Attorneys Erin Healy Gallagher, Erin R. Hines, and Christopher R. Moran who litigated the case. He also thanked the many IRS attorneys and agents who participated in the investigation.
In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found here. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.
Department of Justice Announces Matt Dummermuth to Head the Office of Justice ProgramsRead the Press Release
The Department of Justice today announced Matt M. Dummermuth as the head of the Office of Justice Programs. Mr. Dummermuth replaces Laura L. Rogers, who now serves as Director of the Department’s Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking.
As Principal Deputy Assistant Attorney General, Mr. Dummermuth leads the Justice Department’s principal funding, research, and statistical component, overseeing more than $5 billion in grants and other investments intended to support state, local and tribal criminal and juvenile justice activities and victim services.
Mr. Dummermuth served as United States Attorney for the Northern District of Iowa from 2007 to 2009. Under his leadership, the office successfully orchestrated the nation’s most successful criminal immigration worksite enforcement action. The action resulted in the convictions of more than 300 hundred illegal immigrants for various document fraud, aggravated identity theft and other immigration-related offenses, as well as the convictions of the company’s day-to-day CEO, CFO, controller, operations supervisors and entire human resources department.
His office prosecuted record numbers of child exploitation defendants and launched an Internet-predator warning program that reached more than 42,000 students in 150 middle schools. In addition, he created the first human trafficking task force in Iowa, bringing together law enforcement agencies and victim assistance organizations to combat trafficking operations and provide services to trafficking survivors. During his tenure, the office also convicted 26 defendants, including 19 doctors, for illegally distributing more than 30 million prescription pills using half a million phony prescriptions, and shared with local law enforcement more than $4 million of the $7 million seized from the two Internet pharmacy companies and other defendants involved in the illegal scheme.
Mr. Dummermuth served on the Terrorism and National Security Subcommittee and the Child Exploitation and Obscenity Working Group of the Attorney General’s Advisory Committee. He was also a member of the Executive Board of the Midwest High Intensity Drug Trafficking Area.
Mr. Dummermuth previously served in the Justice Department as Counsel and Special Assistant to the Assistant Attorney General for Civil Rights, and as a Special Assistant United States Attorney in the Eastern District of Virginia. Prior to joining OJP, he was in private practice in Iowa where he focused primarily on civil litigation involving constitutional, governmental, agricultural and business matters.
He graduated from Harvard Law School, where he was editor-in-chief of the Harvard Journal of Law & Public Policy, and clerked for the Honorable Judge David R. Hansen of the U.S. Court of Appeals for the Eighth Circuit. Matt grew up on a crop and livestock farm in Iowa and graduated with a degree in agricultural engineering from Iowa State University.
Wisconsin Man Sentenced to 50 Years in Prison for Producing Child Pornography Involving Infant and ToddlerRead the Press Release
WASHINGTON – A Marshfield, Wisconsin man was sentenced today to 50 years in prison for producing child pornography involving an infant and toddler during the summer of 2017.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Scott C. Blader for the Western District of Wisconsin and Special Agent in Charge R. Justin Tolomeo of the FBI’s Milwaukee Field Office, made the announcement.
Mark E. Bartz, 48, was sentenced by U.S. District Judge William M. Conley of the U.S. District Court for the Western District of Wisconsin. Bartz pleaded guilty on July 3, to two counts of producing child pornography. In addition to his prison sentence, he was sentenced to 25 years of supervised release.
According to court documents, Bartz produced child pornography involving a toddler and infant, including visual depictions of himself engaging in sexually explicit conduct with the infant. Bartz was also the administrator of online chat groups devoted to the trading of child pornography and posted the sexually explicit images he produced to those groups. He also engaged in sexually explicit conduct with other minors over the course of decades.
FBI Milwaukee investigated the case with substantial assistance from the FBI’s Violent Crimes Against Children (VCAC) Section. Trial Attorney Jessica L. Urban of the Criminal Division’s Child Exploitation and Obscenity Section (CEOS) and Assistant U.S. Attorney Elizabeth Altman of the Western District of Wisconsin prosecuted the case.
This investigation was a part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and CEOS, Project Safe Childhood marshals federal, state, and local resources to better locate, apprehend, and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
U.S. Charges Russian GRU Officers with International Hacking and Related Influence and Disinformation OperationsRead the Press Release
A grand jury in the Western District of Pennsylvania has indicted seven defendants, all officers in the Russian Main Intelligence Directorate (GRU), a military intelligence agency of the General Staff of the Armed Forces of the Russian Federation, for computer hacking, wire fraud, aggravated identity theft, and money laundering.
According to the indictment, beginning in or around December 2014 and continuing until at least May 2018, the conspiracy conducted persistent and sophisticated computer intrusions affecting U.S. persons, corporate entities, international organizations, and their respective employees located around the world, based on their strategic interest to the Russian government.
Among the goals of the conspiracy was to publicize stolen information as part of an influence and disinformation campaign designed to undermine, retaliate against, and otherwise delegitimize the efforts of international anti-doping organizations and officials who had publicly exposed a Russian state-sponsored athlete doping program and to damage the reputations of athletes around the world by falsely claiming that such athletes were using banned or performance-enhancing drugs.
The charges were announced at a press conference by Assistant Attorney General for National Security John C. Demers, United States Attorney for the Western District of Pennsylvania Scott W. Brady, FBI Deputy Assistant Director for Cyber Division, Eric Welling, and Director General Mark Flynn for the Royal Canadian Mounted Police.
"State-sponsored hacking and disinformation campaigns pose serious threats to our security and to our open society, but the Department of Justice is defending against them," Attorney General Jeff Sessions said. "Today we are indicting seven GRU officers for multiple felonies each, including the use of hacking to spread the personal information of hundreds of anti-doping officials and athletes as part of an effort to distract from Russia’s state-sponsored doping program. The defendants in this case allegedly targeted multiple Americans and American entities for hacking, from our national anti-doping agency to the Westinghouse Electric Company near Pittsburgh. We are determined to achieve justice in these cases and we will continue to protect the American people from hackers and disinformation."
“The investigation leading to the indictments announced today is the FBI at its best,” said FBI Director Christopher Wray. “The actions of these seven hackers, all working as officials for the Russian government, were criminal, retaliatory, and damaging to innocent victims and the United States’ economy, as well as to world organizations. Their actions extended beyond borders, but so did the FBI’s investigation. We worked closely with our international partners to identify the actors and disrupt their criminal campaign - and today, we are sending this message: The FBI will not permit any government, group, or individual to threaten our people, our country, or our partners. We will work tirelessly to find them, stop them, and bring them to justice.”
“We want the hundreds of victims of these Russian hackers to know that we will do everything we can to hold these criminals accountable for their crimes,” said U.S. Attorney Brady. State actors who target U.S. citizens and companies are no different than any other common criminal: they will be investigated and prosecuted to the fullest extent of the law.”
The defendants, all Russian nationals and residents, are Aleksei Sergeyevich Morenets, 41, Evgenii Mikhaylovich, Serebriakov, 37, Ivan Sergeyevich Yermakov, 32, Artem Andreyevich Malyshev, 30, and Dmitriy Sergeyevich Badin, 27, who were each assigned to Military Unit 26165, and Oleg Mikhaylovich Sotnikov, 46, and Alexey Valerevich Minin, 46, who were also GRU officers.
The indictment alleges that defendants Yermakov, Malyshev, Badin, and unidentified conspirators, often using fictitious personas and proxy servers, researched victims, sent spearphishing emails, and compiled, used, and monitored malware command and control servers.
When the conspirators’ remote hacking efforts failed to capture log-in credentials, or if the accounts that were successfully compromised did not have the necessary access privileges for the sought-after information, teams of GRU technical intelligence officers, including Morenets, Serebriakov, Sotnikov, and Minin, traveled to locations around the world where targets were physically located. Using specialized equipment, and with the remote support of conspirators in Russia, including Yermakov, these close access teams hacked computer networks used by victim organizations or their personnel through Wi-Fi connections, including hotel Wi-Fi networks. After a successful hacking operation, the close access team transferred such access to conspirators in Russia for exploitation.
Among other instances, the indictment alleges that following a series of high-profile independent investigations starting in 2015, which publicly exposed Russia’s systematic state-sponsored subversion of the drug testing processes prior to, during, and subsequent to the 2014 Sochi Winter Olympics (according to one report, known as the “McLaren Report”), the conspirators began targeting systems used by international anti-doping organizations and officials. After compromising those systems, the defendants stole credentials, medical records, and other data, including information regarding therapeutic use exemptions (TUEs), which allow athletes to use otherwise prohibited substances.
Using social media accounts and other infrastructure acquired and maintained by GRU Unit 74455 in Russia, the conspiracy thereafter publicly released selected items of stolen information, in many cases in a manner that did not accurately reflect their original form, under the false auspices of a hacktivist group calling itself the “Fancy Bears’ Hack Team.” As part of its influence and disinformation efforts, the Fancy Bears’ Hack Team engaged in a concerted effort to draw media attention to the leaks through a proactive outreach campaign. The conspirators exchanged e-mails and private messages with approximately 186 reporters in an apparent attempt to amplify the exposure and effect of their message.
Each defendant is charged with one count of conspiracy to commit computer fraud and abuse, which carries a maximum sentence of five years in prison, one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering, both of which carry a maximum sentence of 20 years. Defendants Morenets, Serebriakov, Yermakov, Malyshev, and Badin are each also charged with two counts of aggravated identity theft, which carries a consecutive sentence of two years in prison. Defendant Yermakov is also charged with five counts of wire fraud, which carries a maximum sentence of 20 years.
Defendants Yermakov, Malyshev, and Badin are also charged defendants in federal indictment number CR 18-215 in the District of Columbia, and accused of conspiring to gain unauthorized access into the computers of U.S. persons and entities involved in the 2016 U.S. presidential election, steal documents from those computers, and stage releases of the stolen documents to interfere with the 2016 U.S. presidential election.
According to the indictment:
Context of the Hacking and Related Influence and Disinformation Efforts
In July 2016, the World Anti-Doping Agency’s (WADA) Independent Person Report (the “First McLaren Report”) was released, describing Russia’s systematic state-sponsored subversion of the drug testing process prior to, during, and subsequent to the 2014 Sochi Winter Olympics. This investigation had the support of advocates for clean sports, including the United States Anti-Doping Agency (USADA), the Canadian Centre for Ethics in Sport (CCES, Canada’s anti-doping agency). Eventually, in some instances only after arbitration rulings by the International Court of Arbitration for Sport (TAS/CAS), approximately 111 Russian athletes were excluded from the 2016 Summer Olympic Games, in Rio de Janeiro, Brazil, by a number of international athletics federations, including track-and-field’s International Association of Athletics Federations (IAAF). The International Paralympic Committee (IPC) further imposed a blanket ban of Russian athletes from the 2016 Paralympic Games, which were also held in Rio.
Intrusion Activities in Rio de Janeiro, Brazil
Days after the release of the First McLaren Report and the International Olympic Committee’s and IPC’s subsequent decisions regarding the exclusion of Russian athletes, the conspirators prepared to hack into the networks of WADA, the United States Anti-Doping Agency (USADA), and TAS/CAS. The conspirators, including specifically defendants Yermakov and Malyshev, procured spoofed domains (which mimicked legitimate WADA and TAS/CAS domains) and other infrastructure, probed such entities’ networks, and spearphished WADA and USADA employees. Although Yermakov and Malyshev are both alleged to have prepared to send spearphishing e-mails to TAS/CAS, the indictment does not allege that organization was compromised.
Likely as a result of the conspirators’ failure to capture necessary log-in credentials, or because those victim accounts that were successfully compromised did not have the necessary access privileges for the sought-after information, defendants Morenets and Serebriakov, in at least one instance with the remote support of Yermakov, deployed to Rio to conduct hacking operations targeting and maintaining persistent access to Wi-Fi networks used by anti-doping officials. As a result of these efforts, in August 2016, the conspirators captured that IOC official’s credentials and thereafter used them, and another set of credentials belonging to the same official to gain unauthorized access to an account in WADA’s ADAMS database and medical and anti-doping related information contained therein. (The broader ADAMS database was not compromised in the intrusion.)
Also in 2016, a senior USADA anti-doping official traveled to Rio de Janeiro for the Olympics and Paralympic games. While there, the USADA official used Wi-Fi at the hotel and other Wi-Fi access points in Rio to remotely access USADA’s computer systems and conduct official business. While the USADA official was in Rio, conspirators successfully compromised the credentials for his or her USADA email account, which included summaries of athlete test results and prescribed medications.
Intrusion Activities in Lausanne, Switzerland
In mid-September 2016, WADA hosted an anti-doping conference in Lausanne, Switzerland. On September 18, 2016, defendants Morenets and Serebriakov traveled to Lausanne with equipment used in close access Wi-Fi compromises. On or about September 19, 2016, Morenets and Serebriakov compromised the Wi-Fi network of a hotel hosting the conference and leveraged that access to compromise the laptop and credentials of a senior CCES official staying at the hotel. Other conspirators thereafter used the stolen credentials to compromise CCES’s networks in Canada, using a tool used to extract hashed passwords, the metadata of which indicated it was compiled by Badin.
Intrusion Targeting Anti-Doping Officials at Sporting Federations
In December 2016 and January 2017, conspirators successfully compromised the networks of IAAF and the Fédération Internationale de Football Association (“FIFA”) and targeted computers and accounts used by each organization’s top anti-doping official. Among the data stolen from such officials were keylogs, file directories, anti-doping policies and strategies, lab results, medical reports, contracts with doctors and medical testing labs, information about medical testing procedures, and TUEs.
Related GRU Influence and Disinformation Operations
On September 12, 2016, shortly after the compromise of the IOC official’s ADAMS credentials, but before the compromise of USADA’s and CCES’s networks, conspirators claiming to be the hacktivist group Fancy Bears’ Hack Team used online accounts and other infrastructure procured and managed by Unit 74455, as well as the website fancybears.net, to publicly release TUEs, other medical information, and emails stolen from anti-doping officials at WADA, USADA, CCES, IAAF, FIFA, and approximately 35 other anti-doping agencies or sporting organizations. In some instances, the WADA documents were modified from their original form. Ultimately, the Fancy Bears’ Hack Team released stolen information that included private or medical information of approximately 250 athletes from almost 30 countries.
The conspirators’ release of the stolen information was, in some instances, accompanied by posts and other communications that parroted or supported themes that the Russian government had used in its official narrative regarding the anti-doping agencies’ investigative findings. From 2016 through 2018, the conspirators engaged in a proactive outreach campaign, using Twitter and e-mail to communicate with approximately 186 reporters about the stolen information. After articles were published, conspirators used the Fancy Bears’ Hack Team social media accounts to draw attention to the articles in an attempt to amplify the exposure and effect of their message.
Other Targets of the Conspiracy
The conspiracy is also alleged to have targeted other entities in the Western District of Pennsylvania and abroad that were of interest to the Russian government. For example, as early as November 20, 2014, Yermakov performed reconnaissance of Westinghouse Electric Company’s (WEC) networks and personnel. In the following months, Yermakov and conspirators created a fake WEC domain and sent spearphishing emails to WEC employees’ work and personal email accounts, which were designed to harvest the employees’ log-in credentials.
More recently, in April 2018, Morenets, Serebriakov, Sotnikov, and Minin, all using diplomatic passports, traveled to The Hague in the Netherlands in furtherance of another close access operation targeting the Organisation for the Prohibition of Chemical Weapons (OPCW) computer networks through Wi-Fi connections. All four GRU officers intended to travel thereafter to Spiez, Switzerland, to target the Spiez Swiss Chemical Laboratory, an accredited laboratory of the OPCW which was analyzing military chemical agents, including the chemical agent that the United Kingdom authorities connected to the poisoning of a former GRU officer in that country. However, Morenets, Serebriakov, Sotnikov, and Minin were disrupted during their OPCW hacking operation by the Militaire Inlichtingen- en Veiligheidsdienst (MIVD), the Dutch defense intelligence service. As part of this disruption, Morenet’s and Serebriakov’s abandoned the Wi-Fi compromise equipment, which they had placed in the trunk of a rental car parked adjacent to the OPCW property. Data obtained from at least one item of this equipment confirmed its operational use at multiple locations around the world, including connections to the Wi-Fi network of the CCES official’s hotel in Switzerland (the dates the conspirators conducted the Wi-Fi compromise of the senior CCES official’s laptop at the same hotel), and at another hotel in Kuala Lumpur, Malaysia in December 2017.
***
In connection with the unsealing of the indictment, and in an effort to limit further exposure of the private lives of victim athletes, the FBI seized the fancybears.net and fancybears.org domains pursuant to court orders issued on October 3, 2018, in the Western District of Pennsylvania.
The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty. Moreover, the maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentence of a defendant will be determined by the assigned judge.
The FBI, led by the Pittsburgh and Philadelphia Field Offices, conducted the investigation that resulted in charges announced today. The FBI’s investigation was assisted by a parallel, independent Royal Canadian Mounted Police investigation. This case is being prosecuted by the U.S. Attorney’s Office for the Western District of Pennsylvania and the National Security Division’s Counterintelligence and Export Control Section. The Criminal Division’s Office of International Affairs provided assistance throughout this investigation, as did the MIVD, the Government of the Netherlands, Switzerland’s Office of the Attorney General, the U.K.’s National Security and Intelligence Agencies, and many of the FBI’s Legal Attachés and other foreign authorities around the world.
Note: More information can be found at https://www.justice.gov/opa/documents-and-resources-october-4-2018-press-conferenceTexas Patient Recruiter Sentenced to Nine Years in Prison for $3.6 Million Home Health Care Fraud SchemeRead the Press Release
WASHINGTON – A Houston, Texas-area patient recruiter was sentenced to 108 months in prison today for her role in a $3.6 million Medicare fraud scheme involving fraudulent claims for home health services.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ryan K. Patrick of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office, Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Dallas Region and the Texas Attorney General’s Medicaid Fraud Unit (MFCU) made the announcement.
Mercy O. Ainabe, 52, of Houston, was sentenced by U.S. District Judge Sim Lake of the Southern District of Texas, who presided over the trial. After a three-day trial in May 2018, Ainabe was convicted of one count of conspiracy to commit health care fraud, five counts of health care fraud and one count of conspiracy to pay health care kickbacks.
According to evidence presented at trial, Ainabe, a long-time patient recruiter in the Houston area, controlled a substantial population of Medicare patients whose personal information she sold to home health care companies in exchange for kickbacks. The evidence at trial showed that Ainabe and her co-conspirators used a home health care company called Texas Tender Care to submit claims to Medicare for home health services that were not medically necessary and/or were not provided. Ainabe paid beneficiaries, doctors, physical therapy companies and others for the paperwork, Medicare beneficiary information and services needed to facilitate the fraud. To cover up the fraud, Ainabe tried to make it look as though she was being paid an hourly wage as a legitimate marketing representative, the evidence showed.
The case was investigated by the FBI, HHS-OIG and MFCU, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas. The case is being prosecuted by Trial Attorneys Drew Pennebaker and Elizabeth Young of the Fraud Section.
The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. The Criminal Division’s Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in 12 cities across the country, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion.
Operator of Precious Metals Brokerage in New York Found Guilty of Tax EvasionRead the Press Release
A federal jury sitting in Brooklyn, New York, convicted a former Brooklyn resident today of tax evasion and aiding and assisting in the preparation of false tax returns, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
According to court documents and evidence presented at trial, in 2010 and 2011, Christopher Wolf operated Rothchild & Associates LLC, in Brooklyn, New York. Rothchild was in the business of selling precious metals to investors over the telephone. Wolf earned commissions from Rothchild, but took steps to conceal this income by directing that it be paid to shell corporations he created. Wolf then caused the filing of false individual and corporate income tax returns that underreported his commission income and claimed phony expense deductions. Wolf’s fraudulent conduct resulted in a tax loss of approximately $240,000.
Wolf faces a statutory maximum sentence of five years in prison for tax evasion and three years in prison for aiding and assisting the preparation or presentation of a false tax return. Wolf also faces a three-year period of supervised release, restitution and monetary penalties.
Principal Deputy Assistant Attorney General Zuckerman thanked special agents of IRS–Criminal Investigation, who conducted the investigation, and Trial Attorneys Sean Green and Mark Kotila of the Tax Division, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Deputy Assistant Attorney General Adam Hickey of the National Security Division Delivers Remarks at CyberNext DCRead the Press Release
Remarks as Prepared for Delivery
Thank you, to the Cybersecurity Coalition and the Cyber Threat Alliance, for the invitation to speak at CyberNext DC.
When I was preparing my remarks, I noticed that the theme of the conference is “Privacy, Partnerships, Protection.” That’s a helpful framework for my remarks today, because I want to talk about all three of those.
Protection
I will start with protection, which is at the core of law enforcement’s mission. Investigating crimes, building cases, and holding individuals, entities, and even nations, accountable, is a large part of how the Justice Department protects the public and contributes to cybersecurity.
It is fairly straightforward why: criminal prosecution is a means of reinforcing the difference between right and wrong, between acceptable state behavior, on the one hand, and that which violates accepted norms of conduct on the Internet.
And imposing consequences, whether through imprisonment, fines or sanctions, or other tools, is a way of deterring malicious conduct, by raising its costs (personal, reputational, financial, and otherwise). As the First Pillar of the Administration’s recent National Cyber Strategy puts it, “Law enforcement actions to combat criminal cyber activity serve as an instrument of national power by, among other things, deterring those activities.”
The last year has seen significant prosecutions of foreign hackers, including those acting on behalf of foreign governments, for computer intrusions and attacks. It is worth recounting some of them, for what they show about the Department’s priorities and the lengths we will go in doing our part to enforce the law and protect the public.
Boyusec
In October 2017, the Department announced charges against three Chinese nationals and residents who worked for a purported Internet security firm known as Guangzhou Bo Yu Information Technology Company Limited (a/k/a “Boyusec”).
The defendants are accused of computer hacking and trade secret theft between December 2015 and March 2016. Among other things, the indictment alleges they stole a prominent economist’s e-mail messages and trade secrets related to global navigation technology that “had no military application,” but was marketed to construction, land survey, and agricultural sectors.
Now, the Indictment does not allege action by the Chinese state. But what made the defendants’ alleged trade secret theft notable (besides the fact that they worked for a firm that marketed its cybersecurity services), was that it continued after China committed in September 2015 (1) not to steal trade secrets or confidential business information “with the intent of providing competitive advantages” to its own companies, and (2) to cooperate with requests to investigate cybercrimes emanating from its territory, which this did.
The September 2015 commitment ushered in broad, public acceptance of a norm against computer espionage for economic benefit (soon accepted by all of the other members of the G-20). And it was incumbent on the U.S. government to hold China to the commitments it made.
As we previously revealed, the Boyusec indictment was returned under seal, while we sought China’s assistance in investigating and putting a stop to Boyusec’s activities. When we received “no meaningful response” to those requests, there was no longer a basis to keep the charges sealed, and we made them public.
Thereafter, the U.S. Trade Representative cited the Boyusec indictment in its March 2018 study of China’s trade practices under Section 301 of the Trade Act of 1974, which concluded that a combination of China’s practices are unreasonable, including its outbound investment policies and sponsorship of unauthorized computer intrusions.
In this way, you can draw a direct line from the DOJ’s indictment of China’s military officers in 2014, through China’s commitments in 2015, to our monitoring for compliance with those commitments, and this Administration’s response to China’s economic aggression, which includes state-sponsored theft of intellectual property.
Mabna Institute
In March of 2018, the Department announced charges against nine Iranian nationals associated with the Mabna Institute in Iran for a massive coordinated hacking campaign that targeted intellectual property and other research at more than 300 colleges and universities around the world.
The very purpose of the Mabna Institute, according to the indictment, was to assist Iranian universities and scientific and research organizations obtain access to scientific resources outside Iran. It contracted with the Iranian government (including the Islamic Revolutionary Guard Corps.) as well as private organizations, and it sold some of the stolen data on websites marketed to Iranian customers.
The indictment alleges the campaign was executed in three phases:
- First, the defendants researched which university professors were doing work of interest to the Iranians. The defendants targeted data across all fields of research and academic disciplines, including science and technology, engineering, medicine, and the social sciences.
- Next, they e-mailed the authors, feigning interest in their work, and tricking them into clicking on malicious links, and stealing their credentials.
- Finally, they used those credentials to steal academic journals, theses, dissertations, and books they would not otherwise have access to.
Over the course of four years, the Mabna Institute and these nine individuals are accused of stealing more than 31 terabytes of academic data, intellectual property, and communications. That amounts to 7.75 trillion sheets of paper. (And that’s printing double-sided.) U.S. universities had collectively spent $3.4 billion to have access to that intellectual property.
The charges themselves virtually guarantee the defendants cannot leave Iran without arrest. And on the day they were announced, the Department of the Treasury, leveraging our investigation, sanctioned the Mabna Institute and the defendants “for engaging in malicious cyber-enabled activities related to the significant misappropriation of economic resources or personal identifiers for private financial gain,” under a provision of Executive Order 13694 (2015).
DPRK
In September, the Department unsealed a massive complaint, outlining some of the government’s proof behind its prior, higher-level attribution that North Korea launched a destructive malware attack against Sony Pictures Entertainment in 2014, stole $81 million from the Bank of Bangladesh in 2016 (and attempted to steal at least $1 billion from other banks), and created the malware used in the WannaCry 2.0 global ransomware attack last year.
The complaint lays out more than 170 pages of evidence that a single conspiracy, backed by the North Korean government, was responsible for those crimes among others, and it identifies one of the men who was a member of that conspiracy.
As the complaint makes clear, however, the U.S. government was not alone in this investigation. The complaint cites to security researchers whose expertise and dogged pursuit of the threat was critical to the allegations of the complaint. Our investigative efforts not only validate theirs, they yield specific information that expanded the security community’s understanding of the Lazarus Group (a popular name for the intrusion set) and how best to protect against it.
USADA, et al.
Finally, this brings me to this morning’s announcement of an indictment in Pittsburgh (where the first public national security cyber case was unsealed in 2014).
A grand jury there has indicted seven Russian GRU officers with an international hacking conspiracy targeting international anti-doping organizations, among others.
Among the conspiracy’s goals: to publicize stolen information as part of an influence and disinformation campaign designed to undermine, retaliate against, and otherwise delegitimize those organizations, which had publicly exposed Russia’s state-sponsored athlete doping program; and to damage the reputations of athletes around the world by falsely claiming that such athletes were using banned or performance-enhancing drugs.
The indictment also alleges how, when the efforts to obtain remote access failed to achieve their objectives, the GRU sent several of the defendants to locations where their targets were physically located. Then, using specialized equipment, those close access teams hacked the WiFi networks used by the victim organizations or their personnel (like hotel networks where they were staying).
There are some who question this approach, of criminally investigating and charging hackers sponsored by foreign states, often because we have not yet arrested the defendants I have described above.
It is probably easy to forget that, until relatively recently, such charges were unheard of, because for a long time, we viewed the problem of foreign state-sponsored hacking through the lens of intelligence collection alone, without regard to disruption and deterrence (which are our objectives in confronting terrorism, espionage, and other challenging national security threats).
But imagine a world in which there are no criminal charges, no detailed, formal allegation of wrongdoing (which the government is prepared to stand behind in court). The private sector would be left alone to accuse the guilty, without recourse. What message does that send to a foreign hacker?
Certainly not the same message we have sent to Karim Baratov, the 23-year-old hacker who worked with FSB officers to hack into e-mail accounts around the world, who was recently sentenced to five years’ imprisonment after being arrested in Canada and waiving extradition. Or to Ardit Firizi, the Kosovar who was arrested in Malaysia, pled guilty here, and was sentenced to 20 years in prison, for giving ISIS PII for 1,300 military and government personnel, which he stole from the network of a U.S. retailer. Or to countless other hackers arrested on purely criminal charges, who thought they were safe from the consequences for their actions, because they operated under regimes that ignored (if not sponsored) their crimes.
And even in the cases above (where we have yet to apprehend a defendant), the charges were never the end of the story: whether it is trade remedies, sanctions, contributions to network defense, or diplomatic efforts to rally likeminded nations to confront an adversary together, all of those charges served a greater purpose.
Privacy
So often, privacy is spoken about as if it is a value opposed to law enforcement. But each of the cases I described vindicates the right to privacy, whether it is the right of a company to control who has access to its trade secrets, or of professors to prevent their hard-earned research from being stolen, preempted, and plagiarized; the expectation of privacy we have in our e-mail communications or our medical records.
Privacy isn’t dead, but it is under attack, and much of what we are doing through law enforcement honors the privacy of innocent persons, by investigating those who would breach it. As the Sony case as well as the GRU cases illustrate, data breaches are not just trees that fall in forests when no one else is around; their consequences are often painfully visible to their victims (and the rest of the world).
But leaving aside these examples of DOXing, I want to shift gears for a moment, to talk about the Department of Justice’s changing approach to personal privacy, and why the privacy of your personal information can be a matter of national security.
This portion of my remarks comes from a different vantage point, from my experience with the Committee on Foreign Investment in the United States (or CFIUS), where I represent the Department.
Now CFIUS, for those of you who are not familiar, is a committee of federal departments that reviews foreign acquisitions of U.S. businesses for national security risk. When it finds risks that cannot be mitigated, it recommends actions to the President, who has the authority to prohibit a transaction.
CFIUS does not review the vast majority of foreign investments in the United States. Even among those transactions we do review, we usually conclude that there are no unresolved national security concern.
A classic example of the risk CFIUS examines arises when the target of an acquisition is in close proximity to a DOD facility. But an increasing focus of DOJ’s work on the committee relates to data security, to the potential national security consequences of personal information ending up in the wrong hands. The kind of information I am talking about is collected every day, from thousands or even millions of consumers. Transaction information, PII, health information, even smartphone habits.
Now you might ask why the security of that kind of consumer data would be relevant to CFIUS, whose mission is to protect national security. And ten years ago, or so, such information did not seem like it would be. But a few things have changed.
First, the volume and variety of data has increased exponentially. Information that was not previously stored in a digital form now is. And the rate at which data are being created, the velocity of data growth, is increasing.
Consider the increasing connectedness of physical devices and sensors, often referred to as the Internet of Things. Everything from medical devices, such as pacemakers, to fitness trackers, to the control systems that deliver water and power to our businesses and homes. One estimate predicts the number of Internet-connected devices will reach more than 20 billion by 2020. These Internet-connected devices have increased the volume, variety, and velocity of information.
Take cars, for example. Not long ago, a car was essentially a mechanical device, an engine with seats that moved you from point A to point B. Whatever limited electronic components it had were self-contained.
Today’s cars, by contrast, contain communication devices, sensors, GPS navigation, and other computers with a variety of functions. They allow drivers to check fuel levels and tire pressure on their cell phones, track a stolen vehicle over the Internet, call for help from the car in an emergency, and access the same entertainment they’re used to enjoying in their home.
Another example: the universe of health information is rapidly expanding. More people are taking advantage of DNA testing to learn about their health, longevity, paternity, and ancestry. According to one 2017 report, the market for testing has become an $830 million industry. Meanwhile, our smartphones and watches are accruing ever more precise information about our health and habits.
New forms and pools of data merely add to what has been collected for years, and it remains possible for a determined adversary to steal it, given enough time and resources.
A second insight we have developed is that information that seems unimportant, or purely personal, or irrelevant, can, in fact, be used to threaten national security.
In January, a 20-year-old Australian student discovered that open source maps of where Fitbit and other fitness device users frequently go could be used to identify military facilities in remote areas. As the Washington Post put it, “In war zones and deserts in countries such as Iraq and Syria, the heat map becomes almost entirely dark — except for scattered pinpricks of activity. Zooming in on those areas brings into focus the locations and outlines of known U.S. military bases, as well as other unknown and potentially sensitive sites — presumably because American soldiers and other personnel are using fitness trackers as they move around.”
Some data might be valuable, in and of themselves, like a military secret or the admin password to an industrial control system. But other data are valuable because they are part of what a hacker or other malicious actor needs to achieve their objective, to get to their target.
The information a modern car collects provides insight into the users’ network of contacts, entertainment preferences, driving habits, and locations visited on a regular basis.
In the aggregate, this information provides commercial and cultural insights that might have monetary or other use. But this information about the “pattern of life” of a company’s CEO or government official could also be used to target that individual.
By themselves, the music you favor, your children’s birthdates, your anniversary, and the addresses you’ve lived at—these are not national security secrets.
But with that information, a criminal hacker could answer password reset questions or use a password cracker to obtain control of your accounts. And even if it is a personal (as opposed to a professional) account, and I might not care about the last photo you posted from your vacation, masquerading as you online makes it that much easier to trick the people who know you into clicking on a link or otherwise compromising their network security.
Our third insight is this: the fact that most people in a data set might not be targets themselves (in fact, that only a few might be) provides little comfort. Anyone on any form of social media has learned that we are more connected than it seems. In 2016, Facebook reported that its American users were separated by fewer than 3.5 degrees of separation on average. Extrapolating what that means offline, anyone’s information can be useful more for what it tells us about her brother, the CISO at a major bank, or her aunt in the intelligence community.
Our concerns are exacerbated by the fact that traditional methods of de-identification of data (such as anonymization or encryption of content) may be defeated, by, for example, sensor and geolocation data, or by cross-referencing sanitized data sets against others.
Researchers from two studies several years ago reported that, with a sufficient pool of data, they could distinguish a unique user of a cellphone, or a credit card, based on just four geolocations or transactions, respectively, with at least 90 percent accuracy. I cannot vouch for the methodology of those studies, but they give me pause when I think about the potential that nefarious actors could have access to large pools of such data without legal process.
What does this mean for companies, and the way they should think about their data?
First, and most important, they should not assume that hackers are not interested in the data or that it cannot be used to threaten national security.
Second, cybersecurity policies and practices need to keep pace as businesses grow and deploy new technologies, such as biometric identification or artificial intelligence.
Third, joint ventures or other arrangements with foreign parties may provide network access or other elements of control over data. Businesses should consider the ways an aggressive foreign intelligence service could exploit that data, in light of other data it might have from other sources.
Fourth, and finally, report computer intrusions, because the breach you think is merely a private matter, may in fact be a matter of national security.
Partnerships
This brings me to the final theme, partnerships. The cases we bring require true partnerships, between law enforcement and the victims who cooperate with us; between us and the intelligence community and other components of the government; and, increasingly, between our government and the governments of likeminded nations, whether in gathering and sharing information, validating our conclusions, extraditing defendants, or imposing other consequences.
But as much as I believe in the value of criminal prosecutions, we have always known that we will not prosecute our way to cybersecurity. The partnership that may be most critical to our future is among the professionals in and out of government who share common goals. Which is why one of the National Security Division’s greatest successes this year did not result in a criminal charge.
In May, agents of the FBI were tracking a virulent botnet infecting home and office routers around the world, attributed to the same group responsible for today’s indictment, known to some as “Fancy Bear.”
The botnet was growing at an alarming rate by that point, and private sector researchers studying it told us they felt an increasing urgency to publish what they knew, so that affected router manufacturers, ISPs, and others could take steps to protect the public before it was too late.
There was no easy technical solution to this pernicious malware. Its second stage (which could steal information and even brick the device) could be cleared from memory with a simple restart, but if a router were infected, complete mitigation could be virtually impossible, short of replacement, because the first stage of malware (the actors’ toe-hold in the system) would just call out for instructions to reinfect.
With no time to waste, in little more than a week (including late nights and a weekend), agents and prosecutors devised the best mitigation plan they could under the circumstances.
In a coordinated action,
- one company would shut down the accounts that would be the primary means of reinfection, if the second stage of the malware were purged;
- the FBI obtained an order, allowing it to seize control of a domain that was the secondary means reinfection, and allowing it to record the IP addresses of routers that attempted to reinfect;
- finally, by partnering with the non-profit Shadowserver Foundation, FBI ensured that IPs of infected devices would be shared with those who could best assist their remediation, including foreign CERTs and ISPs.
Researchers drew attention to the botnet at the same time that the FBI executed the orders and blasted out a public service advisory to restart your router, purging the second stage of malware and causing the first stage to call out for instructions, now to the FBI’s server, so that help could be alerted. These efforts were our best effort to identify and remediate the infection worldwide in the time available, before Fancy Bear actors learned of the vulnerabilities in the C2 infrastructure through the research firm’s imminent announcement.
Last week, Cisco Talos, the research firm I mentioned, published a follow-up to its original report. It found that the VPNFilter malware possessed even greater capabilities than previously identified, in the form of third-stage malware modules that provide additional capabilities to map networks, exploit systems connected to infected devices, and obfuscate or encrypt malicious traffic.
But Cisco Talos also reported, based on information from partners as well as its own analysis, that “it appears that VPNFilter has been entirely neutralized since” the effort I described earlier by a coalition of international partners (which included the Cyber Threat Alliance). So far, they said, there have been no signs of the actors attempting to reconnect with the devices that remain infected with the pernicious first stage of the malware. Not bad, for the first (but I promise you, not the last) effort to mitigate a botnet tied to nation-state actors.
Once, there was no one. Attribution was whispered in classified channels alone. We spoke, haltingly at first, of cyber threats “emanating from Asia.” Then the U.S. led the way, calling out the malicious behavior of specific foreign states, first in speeches, then by indictment.
Today, we are joined by three other nations in attributing specific conduct to Russia.
I cannot tell you where our commitment to partnership will take us next. But I can tell you, based on this, that there is reason for hope, and to continue working together to maintain an “open, interoperable, reliable, and secure Internet.”
Attorney General Sessions Issues Statement in Support of the Administration’s National Counterterrorism StrategyRead the Press Release
WASHINGTON –Attorney General Jeff Sessions today issued the following statement in support of the Administration’s release of a National Counterterrorism Strategy:
“The first duty of any government is to keep its citizens safe,” Attorney General Jeff Sessions said. “The terrorist threat to this nation remains serious, but under President Donald Trump, the Department of Justice has done its part to protect the American people. Every day, our officers are working around the clock and around the world to identify, disrupt, and investigate terrorists and their enablers. This past Christmas we successfully thwarted an alleged planned attack on San Francisco. Today, the Trump administration takes an historic next step by releasing its National Counterterrorism Strategy. I applaud President Trump’s leadership on this issue as well as the principles laid out in the Strategy, and the American people can be assured that it will help this administration keep them safe.”
Statement of Assistant Attorney General Makan Delrahim Before the Senate Subcommittee on Antitrust, Competition Policy and Consumer RightsRead the Press Release
Chairman Lee, Ranking Member Klobuchar, and distinguished members of the Subcommittee, it is an honor for me to appear before you today on behalf of the Antitrust Division of the Department of Justice. I want to thank especially Chairman Lee and Ranking Member Klobuchar for your support of my efforts and those of the Department this past year. I am humbled by your support of my nomination, and am grateful for your public support of our work at the Antitrust Division to fairly and effectively enforce the antitrust laws. I appreciate the important role this Committee plays in our constitutional system of checks and balances. I view my position as the Assistant Attorney General for Antitrust as that of a protector of the rights of all American consumers to the fruits of vigorous competition. Free market competition is a bedrock principle of the American economy, and protecting, preserving and promoting competition through the enforcement of our antitrust laws is a vital function of our government. I, and all employees of the Antitrust Division, are dedicated to carrying out that mission to the very best of our abilities.
The Antitrust Division has been extraordinarily busy in our daily efforts to protect consumers, workers, and entrepreneurs through sound and vigorous antitrust enforcement and competition advocacy throughout the government. My testimony today will review our extensive efforts in criminal and civil enforcement and many of our recent new initiatives to promote competition.
The following are some highlights of the Division’s recent accomplishments and initiatives.
COMPETITION ADVOCACY AND OTHER NEW INITIATIVES:
- Engaged in advocacy regarding antitrust law and intellectual property in the context of standards setting organizations (SSOs): Advocated views on the analysis of antitrust law and intellectual property in the context of the adoption and implementation of SSO-developed standards, so as to maximize innovation incentives.
- Improved consent decree process, including a renewed emphasis on structural relief when possible, and the incorporation of standard provisions in all settlements to make consent decrees more enforceable and less regulatory.
- Announced Office of Decree Enforcement within the Division to better enforce the terms of consent decrees entered into with parties to a merger.
- Strengthened Amicus Program in the Division, and have filed amicus briefs and statements of interest as part of our competition policy and advocacy work.
- Hosted a series of three roundtable discussions this past spring on competition and deregulation. The discussions focused on exemptions and immunities from the antitrust laws, consent decrees, and the consumer cost of anticompetitive regulations. A report on these roundtables is in the process of being published. Planning for additional roundtables and workshops is underway as part of the Division’s competition and advocacy work.
- Promoted competition in the real estate industry by co-hosting a public workshop with the FTC in June to examine recent developments in residential real estate brokerage competition.
- Established James F. Rill Fellowship Program at the Division, and the inaugural fellow is currently being selected.
- Established Jackson-Nash Address Series to recognize the contributions of former Supreme Court Justice Robert H. Jackson and Nobel Laureate economist John Nash, and to honor the speaker, recognizing and celebrating the role of economics in the mission of the Division.
CIVIL HIGHLIGHTS:
- Protected and Restored Competition in a Number of Key Industries Impacting American Consumers and obtained significant civil settlements. A few of the markets impacted by the Division’s efforts include crop protection chemicals and seed treatments (one of the largest ever merger divestitures), radio stations, nationwide telecommunication fibers, and entertainment.
- Litigated matters in industries ranging from nuclear waste management and hospitals to aviation fuel products.
- Litigated first vertical merger case to judgment in 40 years in United States v. AT&T/DirecTV and Time Warner—what some in the press have dubbed the “antitrust trial of the century”—which continues on appeal.
- Launched Judgment Termination Initiative involving a comprehensive review of nearly 1,300 legacy judgments and filing motions in courts across the country to terminate ones that no longer serve to protect competition.
- Opened review of Paramount Consent Decrees, which have regulated how certain movie studios distribute films to movie theatres since the Supreme Court’s decision in United States v. Paramount, 334 U.S. 131 (1948).
- Modernizing merger review process, with recent announcement of series of improvements to enhance and speed up the merger review process.
CRIMINAL HIGHLIGHTS:
- Investigated and prosecuted criminal antitrust violations across many sectors of the economy, with over $3.243 billion in criminal fines imposed in FYs 2016-17. In fiscal year 2017, investigated and prosecuted individual cases that resulted, in the highest number of individuals sentenced to prison terms since 2012. (30 individuals were sentenced to prison terms in FY 2017.)
- Devoted substantial resources to individual prosecutions and sentencings.
- Over FYs 2016-17, 52 defendants in Antitrust Division cases have been sentenced to prison terms, totaling 15,110 days of incarceration.
- Many of the Division’s individual convictions were the result of investigations into anticompetitive conduct at public real estate foreclosure auctions. This conduct was widespread and harmed homeowners and others.
- Trial due to start on October 9 in a price-fixing case against three traders from major banks, who are charged with manipulating the foreign currency exchange spot market for U.S. dollars and Euros. This follows corporate pleas in 2015.
- A record-setting number of criminal cases (nine) went to trial in FY 2017—the highest number in the last two decades.
- Actively engaged in outreach and training for agents at offices of inspectors general at numerous federal agencies. Such engagement and training arms these agents with the ability to detect and report antitrust crimes. In many instances these agencies also join our investigative efforts.
- Implemented no-poach initiative, investigating and prosecuting “no-poach” and wage-fixing agreements.
- Updated Leniency Program information designed to increase transparency and self-reporting of cartel behavior.
- Held a public roundtable discussion on “the role that corporate antitrust compliance programs play in preventing and detecting antitrust violations and ways to further promote corporate antitrust compliance.”
- Hosted event on the 25th anniversary of the Division’s Leniency Program
INTERNATIONAL HIGHLIGHTS:
- Established Antitrust Division International Working Group, with representation from each section within the Division, with the goal of learning about new and ongoing international issues and discussing best practices.
- Increased International Engagement
- Advanced a core set of procedural norms through the Multilateral Framework on Procedures in Competition Law Investigation and Enforcement (or “MFP”), working in partnership with leading antitrust agencies around the world.
- Led the Department’s NAFTA negotiation team and continue to serve as the Departmental point on trade coordination issues.
- Promoted effective enforcement of antitrust and competition laws across the globe, visiting or hosting agencies in the following jurisdictions to discuss enforcement: Argentina, Australia, Brazil, Canada, China, the European Union, Germany, Hong Kong, India, Korea, Mexico, and the United Kingdom.
- Coordinated 21 technical assistance programs in FY 2018 to such diverse jurisdictions as Australia, El Salvador, Guatemala, Georgia, Honduras, Hungary, Hong Kong, India, Ireland, Korea, Mexico, the Philippines, Ukraine, and Vietnam. All but three of these programs were financed from outside sources (e.g., USAID, OECD, or the local competition authority) and many of them were coordinated with the FTC.
- Engagement in the Division’s Visiting International Enforcers’ Program (VIEP), a two-week intensive exchange program for senior agency personnel designed to deepen institutional and personal ties with our foreign counterparts.
Criminal Enforcement
The Division investigated and prosecuted antitrust violations across many sectors of the economy, with over $3.243 billion in criminal fines imposed in FYs 2016-17. In the most recent fiscal year, the Division investigated and prosecuted individual cases that resulted in the highest number of individuals sentenced to prison terms since 2012. The Division also has made efforts to increase self-reporting of cartel behavior through its clarification of its amnesty program.
Criminal enforcement has long been a vital tool to protect competition and consumers. The Sherman Act has been a criminal statute ever since it was signed into law in 1890. Antitrust violations such as price-fixing, bid-rigging, and market allocation unambiguously disrupt the integrity of the competitive process, harm consumers, and reduce faith in the free market system. Such harmful agreements among competitors are subject to a rule of per se illegality, and individuals who engage in such conduct appropriately face criminal accountability along with the corporations they serve. At the Division, we focus our criminal enforcement efforts on holding culpable corporations and individuals accountable, including high-level executives.
In an important example, the Division brought charges against and obtained guilty pleas from executives of a generic pharmaceutical company for price fixing, bid rigging, and customer allocation for an antibiotic and a drug used to treat diabetes. (E.g., Plea Agreement, U.S. v. Glazer, 2:16-cr-00506 (E.D. Pa. Jan. 9, 2017), /media/876731/dl?inline.) It is particularly galling that, when healthcare prices in the United States are already high, certain corporations and executives engaged in anticompetitive activities at the expense of individuals who depend on critical medications.
In another area that has a profound impact on American consumers, the Division actively prosecuted bid rigging and fraud relating to real estate foreclosure auctions. To date, 138 individuals and 3 companies have been charged as a result of the Division’s investigations of bid rigging and fraud relating to real estate foreclosure auctions in California, Alabama, North Carolina, Georgia, and Mississippi. (E.g., Press Release, U.S. Dep’t of Justice, Seventh Mississippi Real Estate Investor Pleads Guilty to Conspiring to Rig Bids At Public Foreclosure Auctions (July 19, 2018), https://www.justice.gov/opa/pr/seventh-mississippi-real-estate-investor-pleads-guilty-conspiring-rig-bids-public-foreclosure.) On an individual basis, each of these cases is relatively small, but on an aggregate basis, these cases are important to the economy, particularly because the convicted investors subverted competition and lined their pockets by illegal bid rigging and fraud while diverting money from the homeowners and mortgage holders entitled to any proceeds.
The Division has many open criminal investigations. The Division is trying more criminal cases than ever before and obtaining more prison sentences for individuals than in recent years. Corporate leaders and business executives who consider deviating from the rules of our free enterprise system should take notice.
Moreover, the American public should know that the Antitrust Division is looking out for their salaries, as well. We have put employers on notice that agreements between employers that eliminate competition for hiring employees in the form of no-hire or non-solicitation agreements (often referred to as “no-poach” agreements) are per se violations of the Sherman Act when they are not ancillary to legitimate collaborations. In October 2016, the Division reminded the business community that no-poach and wage-fixing agreements can be prosecuted as criminal violations when they are not reasonably necessary to a separate, legitimate transaction or collaboration between employers. As a matter of prosecutorial discretion, the Division will pursue no-poach agreements terminated before October 2016 through civil actions. Defendants should anticipate potential criminal enforcement actions for any such naked no-poach agreements we uncover that post-date our October 2016 guidance, although we reserve discretion as appropriate in making our ultimate determinations.
The Division will continue to be diligent in detecting and deterring collusion that harms American consumers, and we will remain focused on crucial industries that affect Americans deeply, such as real estate, food, financial services, and health care, just to name a few.
Civil Enforcement
Our merger review program is perhaps the best known of the Division’s many functions, as key mergers generate not only extensive media interest but also typically touch the everyday lives of the American public. Protecting American consumers and businesses from anticompetitive mergers is an essential element of the Division’s mission.
The Division has been confronting huge mergers that cover large swaths of the U.S. economy that touch nearly every consumer, including telecommunications and entertainment (AT&T/Time Warner), agriculture (Bayer/Monsanto, Dow/Dupont), and health care (CVS/Aetna), among many others. We invest large portions of our limited resources to evaluate these massive transactions to ensure that consumers remain protected and competition is preserved. As a result, we have been extraordinarily busy in our merger review program.
One prominent example of our efforts on behalf of the American consumer is our review and challenge of AT&T’s $108 billion acquisition of Time Warner, one of the largest transactions in U.S. history. After the matter did not settle, we litigated in the district court for the District of Columbia the first vertical merger case that went to judgment in 40 years. We have appealed the district court’s decision and are proceeding before the Court of Appeals for the District of Columbia Circuit on an expedited review schedule. (Proof Brief of Appellant United States of America, U.S. v. AT&T Inc., No. 18-5214 (D.C. Cir. Aug. 6, 2018), /media/973241/dl?inline.)
AT&T/Time Warner is only one of the mega-mergers we have focused on in the past year. In May, in response to Bayer’s proposed $66 billion acquisition of Monsanto, we secured a $9 billion divestiture to protect consumers. (Competitive Impact Statement, U.S. v. Bayer AG & Monsanto Co., No. 1:18- cv-01241 (D.D.C. May 29, 2018), /media/954026/dl?inline.) Bayer and Monsanto were two of the largest agricultural companies in the world, and they competed to provide farmers with a broad range of seed and crop protection products. After a thorough investigation, we concluded that the proposed merger would have likely resulted in higher prices, lower quality, and fewer choices to farmers, and ultimately American consumers, across a wide array of seed and crop protection products. The merger also threatened to stifle the innovation in agricultural technologies that has produced significant benefits to American farmers and consumers.
We were able to negotiate appropriate solutions to those competitive problems, including divestitures to BASF, a global chemical company with a multi-billion-dollar crop protection business. Through these divestitures, we achieved a robust structural solution that preserves competition from horizontal and vertical concerns raised by the merger. The settlement also addressed incentives to compete through innovation by requiring divestitures of certain intellectual property and research capabilities. These innovation-focused divestitures include “pipeline” R&D projects and Bayer’s nascent “digital agriculture” business. The settlement also reflected important efforts to strengthen the enforceability and effectiveness of our consent decrees.
In another large agricultural matter, the Division obtained important divestitures associated with Dow’s acquisition of DuPont. (Competitive Impact Statement, U.S. & Plaintiff States v. Dow Chemical Co. & E.I. Du Pont de Nemours & Co., No. 1:17-cv-01176 (D.D.C. June 15, 2017), /media/900176/dl?inline.) The Division’s structural remedies were focused on preserving viable, ongoing businesses that preserve needed competition in the agricultural sector.
For the foreseeable future, the Division’s merger enforcement activities will continue ahead at full steam. We continue to vigorously enforce the laws and review pending transactions in order to preserve robust competition for the millions of Americans who rely on private health insurance products.
I would note that these efforts, especially when we pursue litigation against very large mergers, which often involve threats to competition in multiple markets, are resource intensive. Not only do they require substantial devotion of personnel, but they also require increasingly large outlays for experts and document review.
Thanks to the hard work and dedication of the Antitrust Division staff, we have often been able to resolve large and significant transactions within six months, as illustrated in the recent Disney/Fox and Cigna/Express Scripts investigations. Nonetheless, doing all we can to modernize and speed up the process of merger review is a worthy goal. To that end, I recently announced a series of changes in how we approach the merger review process at the Division. As part of this improved process, we will post a model voluntary request letter and a model timing agreement on our website. Going forward, we will also make some changes to what we generally agree to in timing agreements. We will generally seek to collect documents from fewer custodians and to take fewer depositions. Provided the parties agree to faster and earlier productions, make certain commitments on privilege, and agree to longer post-complaint discovery (if necessary), we will shorten the time from the parties certifying compliance to the Division making a decision to 60 days or less, with the proviso that the responsible deputy can extend that time period if he or she deems it necessary. With respect to Civil Investigative Demand enforcement, we will bring enforcement actions if necessary to ensure timely and complete compliance. We are also withdrawing the 2011 Policy Guide to Merger Remedies. The 2004 Policy Guide to Merger Remedies will be in effect until we release an updated policy. (Makan Delrahim, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, It Takes Two: Modernizing the Merger Review Process, Remarks as Prepared for the 2018 Global Antitrust Enforcement Symposium (Sept. 25, 2018), /media/977416/dl?inline.)
In addition to our merger review program, the Division also expends substantial resources investigating and, when appropriate, challenging non-merger conduct that may have the unlawful effect of depriving consumers of the fruits of robust competition. Some of these conduct issues are straightforward applications of antitrust principles. For example, the Division has successfully challenged unlawful agreements among South Central Michigan hospitals to not market their services to customers in each other’s territories. In February, following almost three years of litigation, the Division entered into a resolution of its litigation with the last of these hospitals: Henry Ford Allegiance Health (“Allegiance”), which operates a 475-bed hospital in Jackson County, Michigan. (Competitive Impact Statement, U.S. & Mich. v. W.A. Foote Mem’l Hosp. D/B/A Allegiance Health, No. 5:15-cv-12311 (E.D. Mich. Feb. 27, 2018), /media/941606/dl?inline.)
Some conduct issues are complex and require close study for when and how they affect competition and how they should be analyzed under the antitrust laws. For example, I have given speeches focusing on how policies adopted by a standards setting organization (SSO) should ensure that a diversity of views are represented, that patent holders have adequate incentives to innovate and create new technologies, and that licensees have appropriate incentives to implement those technologies. (E.g., Makan Delrahim, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, The “New Madison” Approach to Antitrust and Intellectual Property Law (Mar. 16, 2018), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-keynote-address-university.) Because SSOs can promote innovation but also provide opportunities for competitors to harm competition, it is critical to examine closely the proper role of antitrust law and take enforcement or advocacy efforts that appropriately maximize incentives for innovation.
Along with our specific enforcement actions, the Division continues to pursue policy initiatives to strengthen our civil enforcement program. One such initiative is to streamline and improve the Division’s use of consent decrees and other remedies, guided by the view that antitrust enforcement is law enforcement, not regulation. (See Makan Delrahim, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Remarks at the Antitrust Division's Second Roundtable on Competition and Deregulation (Apr. 26, 2018), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-antitrust-divisions-second.) The Division will favor structural relief such as divestitures that rely on free market competitive processes to remedy competitive concerns with a merger rather than behavioral relief that regulates conduct. Doing so places risks of failure on the merging parties and relies on ongoing mechanisms to enforce settlement terms.
A crucial aspect of a consent decree is the ability to enforce it to ensure that the remedy that was necessary to preserve competition is fully implemented. In that regard, we have implemented a number of changes in the Division’s practices to strengthen our ability to ensure decree compliance. First, we are now incorporating a set of provisions as standard improvements in our consent decrees that will make decrees more enforceable. Under these provisions, negotiated with the settling parties, the Division may establish a violation of a consent decree by a preponderance of the evidence (rather than the more exacting clear and convincing evidence standard), thereby using the same standard in a decree violation lawsuit that applies to proving liability in a civil antitrust case in the first instance.
Another of the new provisions permits the government to apply for an extension of a decree’s term if the court finds a violation of the decree. An additional new term requires defendants to reimburse the taxpayers for attorneys’ fees, expert fees, and costs incurred in connection with any consent decree enforcement effort. After a certain number of years, typically five, another new provision gives the Division the ability to terminate a decree upon notice to the court and defendants if it concludes in its discretion the decree is no longer necessary to protect competition. We are also establishing a new Office of Decree Enforcement in the Division to dedicate Division personnel to ensuring proactive enforcement of consent decrees.
Last, but not least, we are in the midst of a robust effort to review nearly 1,300 so-called “legacy” judgments, some of which date back about a century. Our review considers changes in industry conditions, changes in economics, and changes in law to determine whether these decrees are necessary to protect competition and consumers. Some of them may be affirmatively harmful to competition. We have begun the process of filing motions in federal district courts to terminate decrees that are no longer needed to protect competition. In August, the D.C. District Court granted our first motion to terminate 19 such judgments. (Order Terminating Final Judgments, U.S. v. American Amusement Ticket Manufacturers Association, 1:18-mc-00091-BAH (D.D.C Aug. 15, 2018), /media/1183021/dl?inline.) This ongoing effort will continue to identify and eliminate unnecessary restrictions on individuals and businesses who remain subject to legacy decrees so that we may better focus the Division’s resources and attention on protecting competition.
As part of this effort, we also announced our review of the Paramount Consent Decrees, which for over seventy years have regulated how certain movie studios distribute films to movie theatres. The public is invited to comment on the Paramount Consent Decrees until the comment period closes tomorrow, October 4. (Press Release, U.S. Dep’t of Justice, Department of Justice Opens Review of Paramount Consent Decrees (Aug. 2, 2018), https://www.justice.gov/opa/pr/department-justice-opens-review-paramount-consent-decrees.)
Policy and Program Initiatives
Apart from our direct enforcement efforts, the Division has implemented a wide range of initiatives designed to advance competition both nationally and internationally. These efforts do not always draw the same interest as our enforcement cases, but can be just as essential, if not more so, to our efforts to protect American consumers and businesses. I will discuss briefly a few of them.
International: Multilateral Framework on Procedures
Today, companies must regularly navigate the antitrust and competition enforcement authorities that now exist across the globe. To promote competition and due process, the United States regularly reaches out to our international counterparts in efforts to harmonize practices around those that best promote competition and to help ensure that competition laws around the world are enforced efficiently, effectively, and fairly. In June, the United States, in partnership with leading antitrust agencies around the world, advanced an effort to better align with one another on a core set of procedural norms through the Multilateral Framework on Procedures in Competition Law Investigation and Enforcement (or “MFP”). (See Makan Delrahim, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Remarks on Global Antitrust Enforcement at the Council on Foreign Relations (June 1, 2018), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-global-antitrust-enforcement.) We are working closely with our international colleagues to achieve consensus on, and publicly commit to, fundamental procedural protections necessary to ensure due process such as non-discrimination, transparency, timely resolution, confidentiality, conflicts of interest, proper notice, opportunity to defend, access to counsel, and judicial review.
Given the complex array of antitrust issues we address with our sister competition agencies across the globe, we are also improving the way we tackle these issues internally. For example, we established formal internal working groups that incorporate staff from all sections in the Division. These working groups meet regularly, sometimes with input from outside speakers. The goal is to learn about new and ongoing international issues, share ideas, discuss best practices, forge consensus, and identify the people and resources that can help address these challenges.
Appellate: Amicus Initiative
The Division has recently expanded our amicus program to increase our participation in private litigation not only in the Supreme Court, but at the district and appellate courts as well. In that way, we can more proactively and more effectively promote appropriate use of antitrust and competition principles across the judiciary. So far, in 2018, the Division has filed five statements of interest at the district court and five amicus briefs in an appeals court in cases where the United States is not a party, as compared to just two amicus briefs in 2017.
Thought Leadership
Through workshops and roundtables, the Division provides a forum for industry participants, academics, consumer advocates, and other interested parties to discuss important developments in particular business sectors, the appropriate scope of various legal doctrines, or recent advancements in our understanding of relevant economic principles.
On three dates this spring, the Division held a series of public roundtable discussions to explore the relationship between competition and regulation and its implications for antitrust enforcement. (Public Roundtable Discussion Series on Regulation & Antitrust Law, Antitrust Div., U.S. Dep’t of Justice, https://www.justice.gov/atr/CompReg (last updated June 25, 2018).) Specific issues included exemptions and immunities from the antitrust laws, the most effective and appropriate scope for consent decrees, and the consumer costs of anticompetitive regulations. Our speakers spanned a diverse range of policy perspectives and stakeholder viewpoints. These were fruitful discussions that are already shaping our actions at the Division, such as recent improvements to the Division’s consent decree practices.
Moreover, in April, the Division hosted a public Roundtable on Criminal Antitrust Compliance to engage with inside and outside corporate counsel, foreign antitrust enforcers, international organization representatives, and other interested stakeholders on the topic of criminal antitrust compliance. (Public Roundtable on Criminal Antitrust Compliance, Antitrust Div., U.S. Dep’t of Justice, https://www.justice.gov/atr/public-roundtable-antitrust-criminal-compliance (last updated Sept. 10, 2018).) More than 100 participants attended and discussed the role that antitrust compliance programs play in preventing and detecting criminal antitrust violations, and ways to further promote corporate antitrust compliance.
In June, the Division also held a joint workshop with the FTC on competition in residential real estate brokerage markets. (Public Workshop: What’s New in Residential Real Estate Brokerage Competition, Antitrust Div., U.S. Dep’t of Justice, https://www.justice.gov/atr/events/public-workshop-competition-real-estate (last updated June 25, 2018).) The workshop drew a diverse array of industry participants, thought leaders, and stakeholders. This is a sector that has merited recent competition advocacy from the Division to state officials, and the diverse viewpoints from the workshop will inform the Division’s advocacy and enforcement efforts going forward. We continue to closely monitor industry developments and the state of competition.
In addition to workshops and roundtables, the Division has also established the Jackson-Nash Addresses, a new lecture series to inspire and educate Division staff and the public about cutting-edge issues and developments in the field. (Press Release, U.S. Dep’t of Justice, Antitrust Division Establishes the “Jackson-Nash Address” and Announces Professor Alvin Roth as Inaugural Speaker (Feb. 8, 2018), https://www.justice.gov/opa/pr/antitrust-division-establishes-jackson-nash-address-and-announces-professor-alvin-roth.) Through extraordinary, distinguished guest speakers, we recognize and celebrate the role of economics in advancing the objectives of the antitrust laws and the mission of the Division. In so doing, the series will honor the weighty contributions to the field of antitrust from former Supreme Court Justice Robert H. Jackson and Nobel laureate economist John Nash. We were proud to have our inaugural address feature Alvin Roth, also a Nobel Prize winning economist, who is lauded for his important contributions to game theory and market design that shaped the way medical students are matched with residency programs and patients are matched with kidney donors. Our second address featured George Akerloff, another Nobel Prize winning economist, who is lauded for his important contributions to markets characterized by asymmetric information, such as markets for lemons, and John Q. Barrett, a professor of law at St. John’s University who is writing a biography on Justice Jackson.
Looking to the Future
It is indeed an exciting time to be at the Antitrust Division as we work to achieve important results for American consumers. One of the not-so-secret secrets to our success is our talented and devoted staff. It is critical that the Division continues to attract and retain bright, talented, and passionate individuals—whether they be attorneys, economists, paralegals, or support staff.
One way we will draw talent is through the recently established James F. Rill Fellowship Program. (The James F. Rill Fellowship, Antitrust Div., U.S. Dep’t of Justice, https://www.justice.gov/oarm/james-f-rill-fellowship (last updated Aug. 13, 2018).) The Fellowship is designed to provide elite candidates of the Honors Program with a special opportunity to participate in antitrust enforcement actions and in the development and implementation of antitrust policy. I feel fortunate that through this fellowship I can honor one of the greats in the antitrust field, a man whose contributions span public service and private practice, administrations of all stripes, and the field of competition law not just domestically but across the globe. I hope that the fellowship will draw future great contributors to the field of antitrust. I look forward to working with this Committee on finding further means to ensure the Antitrust Division has the resources and talent it needs to protect and promote competition.
Conclusion
I have been the AAG of the Antitrust Division for one year and one week now, and it has been an exhilarating experience. I am honored to have the support of this Committee, and to be working with the dedicated women and men of the Antitrust Division to protect American consumers. We have done much, but much more remains to be done. I look forward to the coming challenges, knowing the importance of our work.
Mr. Chairman, thank you for the opportunity to speak here today. I look forward to further discussion of these issues.
Massachusetts Man Sentenced to More than 17 Years in Prison for Cyberstalking Former Housemate and Others, Computer Hacking, Sending Child Pornography and Making over 100 Hoax Bomb ThreatsRead the Press Release
A Massachusetts man was sentenced today to 210 months in prison for conducting an extensive cyberstalking campaign against his former housemate, her family members, co-workers, friends, and others, including hacking into her online accounts, posting fraudulent sexual solicitations in their names, sending unsolicited images of child pornography, and making over 120 hoax bomb threats.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Andrew E. Lelling for the District of Massachusetts, Special Agent in Charge Harold H. Shaw of the FBI Boston Field Office and Waltham Police Chief Keith MacPherson made the announcement today.
Ryan S. Lin, 25, formerly of Newton, Massachusetts, was sentenced today by U.S. District Judge William G. Young of the District of Massachusetts, who also ordered him to serve five years of supervised release following his prison sentence. Lin pleaded guilty in April 2018 to seven counts of cyberstalking, five counts of distribution of child pornography, nine counts of making hoax bomb threats, three counts of computer fraud and abuse and one count of aggravated identity theft. Lin was arrested in October 2017 and has been held in custody since. As part of Lin’s plea agreement, Lin agreed to be sentenced to a minimum of seven years and a maximum of 17 ½ years in prison.
According to admissions made in connection with his plea and evidence presented at sentencing, from about May 2016 through Oct. 5, 2017, Lin engaged in an extensive cyberstalking campaign against a 25-year-old female victim. Lin, the victim’s former housemate, hacked into the victim’s online accounts and devices and stole the victim’s private photographs, personally identifiable information, and private diary entries, which contained highly sensitive details about her medical, psychological and sexual history, and distributed the victim’s material to hundreds of people associated with her.
Lin also created and posted fraudulent online profiles in the victim’s name and solicited rape fantasies, including “gang bang” and other sexual activities, which in turn caused men to show up at the victim’s home. Lin engaged in a number of other activities targeting the female victim, including relentless anonymous text messaging and additional hoaxes, from shortly after he met her until October 2017.
In addition to his former housemate, Lin engaged in cyberstalking activity aimed at six additional individuals. Some were associated with the former housemate, and others were entirely unrelated. The additional victims include two female victims who were also Lin’s housemates in Newton at the time of his arrest. On multiple occasions, Lin sent sexually explicit images of prepubescent children on an unsolicited basis to the primary victim’s mother, the victim’s co-worker and housemate, a friend of the victim who resided in New Jersey, and two of Lin’s former classmates in New York.
In addition to the cyberstalking activity, Lin falsely and repeatedly reported to law enforcement that there were bombs at the primary victim’s Waltham, Massachusetts residence. Lin also created a false social media profile in the name of the primary victim’s housemate in Waltham and posted that he was going to “shoot up” a school in Waltham, stating that there would be “blood and corpses everywhere.” These threats expanded beyond Waltham and became part of an extensive and prolonged pattern of threats to local schools, private homes, businesses, and other institutions in the broader community. Ultimately, Lin pleaded guilty to having made over 100 bomb threats, including 24 in a single day.
The investigation was conducted by the FBI’s Boston Field Office and the Waltham Police Department. The Middlesex County District Attorney’s Office and Watertown, Newton and Wellesley Police Departments assisted in the investigation. Senior Trial Attorney Mona Sedky of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Amy Harman Burkart, Chief of Lelling’s Cybercrime Unit, prosecuted the case.
Leading Electrolytic Capacitor Manufacturer Ordered to Pay $60 Million Criminal Fine for Price FixingRead the Press Release
Nippon Chemi-Con was sentenced to pay a $60 million criminal fine for its role in a conspiracy to fix prices for electrolytic capacitors sold to customers in the United States and elsewhere, the Department of Justice announced today. The $60 million fine is the largest fine imposed in the Justice Department’s investigation into collusion in the capacitors industry. In addition to the $60 million criminal fine, Nippon Chemi-Con was also sentenced to a five-year term of probation during which the company must implement an effective compliance program and submit annual written reports on its compliance efforts.
"Today’s sentence affirms the Antitrust Division’s commitment to holding companies, whether foreign or domestic, accountable for conspiring to cheat American consumers,” said Assistant Attorney General Makan Delrahim of the Department of Justice’s Antitrust Division. “In addition to the significant fine, the five-year probation period promotes deterrence and will help to protect the public.”
In May 2018, Nippon Chemi-Con pleaded guilty to conspiring with others to suppress and eliminate competition for electrolytic capacitors from at least as early as November 2001 to January 2014. Nippon Chemi-Con was charged by indictment filed in October 2017 in the U.S. District Court for the Northern District of California. The indictment charged Nippon Chemi-Con with carrying out the conspiracy by agreeing with co-conspirators to fix prices of electrolytic capacitors during meetings and other communications. Capacitors were then sold in accordance with these agreements. As part of the conspiracy, Nippon Chemi-Con and its co-conspirators took steps to conceal the conspiracy, including the use of code names and providing misleading justifications for prices and bids submitted to customers in order to cover up their collusive conduct.
In total, eight companies and ten individuals have been charged for their participation in this conspiracy. All eight companies have pleaded guilty and have been sentenced to criminal fines collectively totaling over $150 million. Of the ten individuals charged, two have pleaded guilty, and eight remain under indictment, including four Nippon Chemi-Con executives: Takuro Isawa, Takeshi Matsuzaka, Yasutoshi Ohno, and Kaname Takahashi.
Electrolytic capacitors store and regulate electrical current in a variety of electronic products, including computers, televisions, car engine and airbag systems, home appliances, and office equipment.
This case results from ongoing federal antitrust investigations being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Field Office into price fixing, bid rigging and other anticompetitive conduct in the capacitor industry. Anyone with information related to the focus of this investigation should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit https://www.justice.gov/atr/report-violations, or call the FBI tip line at 415-553-7400.
Justice Department Awards More Than $30 Million to Project Safe Neighborhoods to Combat Violent CrimeRead the Press Release
Attorney General Sessions today commemorated the reinvigoration of Project Safe Neighborhoods (PSN), the centerpiece of the Department of Justice’s violent crime reduction efforts. In support of the Department’s PSN programs throughout the country, the Attorney General also announced awards of almost $28 million in grant funding to combat violent crime through PSN and another $3 million for training and technical assistance to develop and implement violent crime reduction strategies and enhance services and resources for victims of violent crime. Over the past year, the Department has partnered with all levels of law enforcement, local organizations, and members of the community to reduce violent crime and make American neighborhoods safer.
“Project Safe Neighborhoods is a proven program with demonstrated results,” Attorney General Jeff Sessions said. “We know that the most effective strategy to reduce violent crime is based on sound policing policies that have proven effective over many years, which includes being targeted and responsive to community needs. I have empowered our United States Attorneys to focus enforcement efforts against the most violent criminals in their districts, and directed that they work together with federal, state, local, and tribal law enforcement and community partners to develop tailored solutions to the unique violent crime problems they face. Each United States Attorney has prioritized the PSN program, and I am confident that it will continue to reduce crime, save lives, and restore safety to our communities.”
PSN is an evidence-based program proven to be effective at reducing violent crime. Through PSN, a broad spectrum of stakeholders work together to identify the most pressing violent crime problems in the community and develop comprehensive solutions to address them. As part of this strategy, PSN focuses enforcement efforts on the most violent offenders and partners with locally based prevention and reentry programs for lasting reductions in crime.
Through the enhanced PSN, the Department is targeting the most violent criminals in the most violent areas, utilizing policing tools that did not exist even a few years ago. Tools like crime gun intelligence centers (CGIC), which combine intelligence from gunshot detection systems, ballistics, gun tracing, and good old-fashioned police work, help to develop real-time leads on the “traffickers and trigger pullers” who are fueling the violence in their communities. By using modern technologies and cutting-edge police work, the Justice Department is deploying resources strategically to provide the greatest return on our community-based anti-violence efforts.
United States Attorneys across the country are using powerful federal laws against the criminals driving the violent crime in their communities. In fiscal year 2018, the Department brought cases against more violent criminals than ever before—increasing by approximately 15 percent than the Department’s previous record set just last year. Additionally, in 2018 the Department set another record by charging approximately 20 percent more criminals with federal firearms offenses than it had in 2017, which is the most in the Department’s history.
The Department has already started to observe positive signs of progress. The FBI’s official crime data for 2017 reflects that, after two consecutive, historic increases in violent crime, in the first year of the Trump Administration the nationwide violent crime rate began to decline. The nationwide violent crime rate decreased by approximately one percent in 2017, while the nationwide homicide rate decreased by nearly one and a half percent. The preliminary information for 2018 shows that the Department’s efforts are continuing to pay off. Public data from 60 major cities show that violent crime decreased by nearly five percent in those cities in the first six months of 2018 compared to the same period one year earlier.
The grants announced today build on Attorney General Sessions’ commitment to reducing violent crime in America, as directed by President Trump’s February 2017 Executive Order. The Department has distributed additional resources and built up strong partnerships with local law enforcement in communities plagued by violent crime. Since the announcement of the reinvigoration of the PSN program in October 2017, the Department of Justice has increased the number of federal prosecutors focused on violent crime by over 300, directed its resources to improving cooperation between federal and local law enforcement agencies, restored local control of police agencies by reining in excessive use of consent decrees, reformed civil asset forfeiture and restored asset-sharing with state and local law enforcement, and helped fund over 800 hundred officers in police departments across America.
Honduran Man Sentenced to More Than Three Years in Prison for Conspiring to Launder over $1 Million in Bribes and Funds Misappropriated from the Honduran Social Security AgencyRead the Press Release
A Honduran man was sentenced in federal court today to 46 months in prison for his role in a conspiracy to launder into the United States more than $1.3 million in foreign bribe payments and public funds from the Republic of Honduras, Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and Deputy Director and Acting Director Ronald D. Vitiello of U.S. Immigration and Customs Enforcement (ICE) announced.
On June 27, Carlos Zelaya, 47, a citizen of Honduras who was residing in the New Orleans area, pleaded guilty to one count of conspiracy to commit money laundering before U.S. District Judge Martin L.C. Feldman of the Eastern District of Louisiana, who imposed today’s sentence and ordered Zelaya to serve three years of supervised release following his prison sentence. The defendant consented to the forfeiture of his interest in over one million dollars in real estate obtained through the scheme as part of his plea.
According to admissions made as part of the plea agreement, Carlos Zelaya conspired with his brother, the former Executive Director of the Honduran Institute of Social Security, and others to launder over $1.3 million in bribe payments. These bribes were paid by two Honduran businessmen for the benefit of the Executive Director. The funds were then laundered into the New Orleans area through international wire transfers and used to purchase real estate, including a commercial property. Carlos Zelaya collected and spent the rental income derived from the properties, even after a federal judge ordered him to preserve the funds pending resolution of a federal civil forfeiture suit. During the course of the civil case, he also made false statements to the U.S. government in written discovery responses and to a federal judge in the Eastern District of Louisiana while testifying under oath. As part of the conspiracy, Carlos Zelaya also used his brother’s high-ranking official position to profit from lucrative Honduran government contracts and then laundered the misappropriated funds into the New Orleans area.
The investigation was conducted by ICE Homeland Security Investigations New Orleans and Miami. The case is being prosecuted by Trial Attorneys Stephen A. Gibbons, Marybeth Grunstra, and Michael B. Redmann of the Criminal Division’s Money Laundering and Asset Recovery Section with assistance from the U.S. Attorney’s Office for the Eastern District of Louisiana. Valuable assistance was provided by the Justice Department’s Office of International Affairs.
This case was brought under the Department of Justice’s Kleptocracy Asset Recovery Initiative by a team of prosecutors in the Criminal Division’s Money Laundering and Asset Recovery Section. These prosecutors partner with federal law enforcement agencies to prosecute those who engage in and facilitate foreign official corruption which has effects on the U.S. financial system, to forfeit assets purchased with the proceeds of that corruption, and, where appropriate, to repatriate the recovered funds for the benefit of the people of the country harmed by such abuse of public office. Individuals with information about possible proceeds of foreign corruption located in, or laundered through, the United States should contact federal law enforcement or send an email to [email protected].
Former Tallassee, Alabama, Police Officer Indicted for Civil Rights Violations and Obstruction of JusticeRead the Press Release
A federal grand jury unsealed an indictment today charging Michael Brandon Smirnoff, 25, a former officer at the Tallassee Police Department in Tallassee, Alabama, with federal civil rights and obstruction offenses. Smirnoff is charged with two counts of deprivation of rights under color of law, in violation of Title 18, United States Code, Section 242, and one count of obstruction of justice, in violation of Title 18, United States Code, Section 1519.
The indictment alleges that Smirnoff twice used unlawful force on arrestees and submitted a false report to cover up one of the incidents. In the first incident, on March 29, 2016, Smirnoff slammed a handcuffed man to the ground, then used unreasonable force while placing him into a police vehicle. In a second incident on July 5, 2015, Smirnoff tased a man who had already been placed in handcuffs and was not physically resisting. As a result of these unjustified uses of force, both victims sustained bodily injuries. The indictment further charges that Smirnoff obstructed justice by submitting a false report about the second incident.
If convicted, Smirnoff faces a maximum sentence of 10 years in prison for the deprivation of rights charges and 20 years in prison for the obstruction charge, three years of supervised release, and a fine of up to $250,000.
An indictment is a formal accusation of criminal conduct, not evidence of guilt. The defendant is presumed innocent unless and until proven guilty.
This case was investigated by the FBI, and is being prosecuted by Assistant U.S. Attorney Denise Simpson of the Middle District of Alabama and Civil Rights Division Trial Attorney Michael J. Songer.
Department of Justice Announces More Than $70 Million to Support School Safety and $64 Million to Improve State Criminal Record SystemsRead the Press Release
The Department of Justice today announced more than $70 million in grant funding to bolster school security, educate and train students and faculty, and support law enforcement officers and first responders who arrive on the scene of a school violence incident. These grants are in addition to the funding to the National Association of School Resource Officers (NASRO), announced by Attorney General Sessions last week, to expand and update their curriculum to better support training programs. These grants combined will better protect students, teachers, faculty, and first responders across the United States. Additionally, the Department is awarding more than $64 million to state agencies to improve the completeness, quality, and accessibility of the nation’s criminal record systems, which will help law enforcement and increase the effectiveness of background checks.
"President Trump and his administration will ensure the safety of every American school," Attorney General Jeff Sessions said. "Earlier this year he signed into law the STOP School Violence Act, which provides grant funding to develop anonymous school threat reporting systems, to implement school building security measures, and to train students, school personnel, and law enforcement on how to prevent school violence. Today I am announcing $70 million in these grants to hundreds of cities and states across America. These grants will go a long way toward giving young people and their families both safety and peace of mind."
The Office of Justice Program’s (OJP) Bureau of Justice Assistance (BJA) and the Office of Community Oriented Policing Services (COPS Office) together are making more than 220 awards to jurisdictions across the country to help make schools more secure. The awards, granted through three funding streams, will provide new technology for reporting systems and other threat deterrent measures and create school safety training and education programs for school administrators, staff, students, and first responders. This includes the support for existing crisis intervention teams and the creation of new ones.
- BJA’s STOP School Violence Threat Assessment and Technology Reporting Program will provide 68 awards valued at more than $19 million. This funding supports training to create and operate threat assessment and crisis intervention teams and to develop technology for local or regional anonymous reporting systems. This technology may be in the form of a mobile phone application, hotline, or website.
- The STOP School Violence Prevention and Mental Health Training Program, also managed by BJA, will provide training and education on preventing violence and effectively responding to related mental health crises. This program will fund 85 awards at nearly $28 million.
- The COPS Office School Violence Prevention Program (SVPP) will provide nearly $25 million to 91 jurisdictions for school safety measures including coordination with law enforcement, training for law enforcement to prevent student violence against others and self, target hardening measures, and technology for expedited notification of law enforcement during an emergency.
The grants are authorized by the STOP School Violence Act, which are intended to improve school security by helping students and teachers reduce exposure to risks, prevent acts of violence, and quickly recognize and respond to violent attacks.
The Department also announced that it has awarded more than $64 million to state agencies to improve the completeness, quality, and accessibility of the nation’s criminal record systems. These grants are administered by the Bureau of Justice Statistics, part of OJP. Approximately $43 million in funding will be administered through the National Criminal History Improvement Program (NCHIP), and nearly $21 million will be awarded under the National Instant Criminal Background Check System (NICS) Act Record Improvement Program. These grant programs help states automate and upgrade records accessed by the firearms background check system. This year, at the direction of the Attorney General, the Department prioritized funding for projects that improve accessibility of criminal history records, domestic violence convictions, and information on persons who are prohibited from possessing firearms for mental-health related reasons.
The Department is also investing over $1 million in research to better understand the factors behind mass shooting incidents. The grant awards, made by the Department’s National Institute of Justice (NIJ), part of OJP, support scientific investigations that will examine factors that contribute to mass violence, identify any patterns in mass shootings, analyze psychological and social life histories of mass shooters and community-level predictors of mass violence, and will examine firearm purchasing patterns of known mass shooters in order to create a risk prediction tool.
For addition information on today’s grant announcements, visit www.bja.gov or www.cops.usdoj.gov.
Department of Justice Announces Corey Amundson to Head the Office of Professional ResponsibilityRead the Press Release
The Department of Justice today announced Corey Amundson as the head of the Office of Professional Responsibility (OPR). Corey Amundson has replaced Robin Ashton, who left the position after almost a decade of service in the Office of Professional Responsibility.
As the head of the OPR, Mr. Amundson will lead a component of the U.S. Department of Justice that investigates misconduct allegations against Department attorneys, immigration judges, and law enforcement agents. He is the fourth permanent head since the office was founded.
Mr. Amundson previously served as Acting United States Attorney for the Middle District of Louisiana and Acting Executive Director of the National Center for Disaster Fraud, an agency within the Criminal Division of the U.S. Department of Justice. He also advised multiple administrations as a member of the Attorney General’s Advisory Committee, Criminal Chiefs Working Group, and enforced standards of conduct as a supervisor for more than a decade, including as First Assistant United States Attorney, Criminal Chief, Senior Deputy Criminal Chief, and Deputy Criminal Chief.
Mr. Amundson also served as lead counsel in more than 150 federal criminal matters at the district and appellate levels and has extensive courtroom experience successfully navigating complex prosecutions and trials, many involving misconduct by government officials and attorneys. He is the recipient of awards and commendations from the U.S. Attorney General, the Director of the Executive Office for United States Attorneys, the Director of the Federal Bureau of Investigation, the head of Criminal Investigations for the Internal Revenue Service, and the Inspectors General for the Departments of Health and Human Services, Homeland Security, and Treasury (Tax Administration).
Mr. Amundson frequently lectures at the National Advocacy Center and the Federal Law Enforcement Training Center and has served as an Adjunct Professor at the Louisiana State University Law Center teaching its corporate and white-collar crime course. Prior to joining the Department, Mr. Amundson practiced in the private sector handling white-collar criminal matters, internal investigations, and complex civil litigation. Mr. Amundson received his J.D. from Emory University and his B.A. in political science and criminal justice from Indiana University.Justice Department is Awarding Almost $320 Million to Combat Opioid CrisisRead the Press Release
WASHINGTON – On the first day of National Substance Abuse Prevention Month, the Department of Justice announced it is awarding almost $320 million to combat the opioid crisis in America. The unprecedented funding will directly help those most impacted by the deadliest drug crisis in American history, including crime victims, children, families, and first responders.
"President Trump has made ending the opioid crisis a priority for this administration, and under his leadership, the Department of Justice has taken historic action," said Attorney General Jeff Sessions. "Today we are announcing our next steps: investing $320 million into all three parts of the President’s comprehensive plan to end the epidemic: prevention, treatment, and enforcement. We are attacking this crisis from every angle—and we will not let up until we bring it to an end."
In 2017, more than 72,000 Americans lost their lives to drug overdoses, an increase from the 64,000 overdose deaths in 2016, according to the Centers for Disease Control and Prevention. The majority of these deaths can be attributed to opioids, including illicit fentanyl and its analogues. October marks two important anti-drug events: Red Ribbon Week and National Prescription Drug Takeback Day. Red Ribbon Week takes place every year between October 23-31 and encourages students, parents, schools, and communities to promote drug-free lifestyles. The Drug Enforcement Administration’s (DEA) National Prescription Drug Take Back Day on October 27 aims to provide an opportunity for Americans to prevent overdose deaths and drug addictions before they start. DOJ expanded on DEA's Drug Takeback Days and collected more than 2.7 million pounds of expired or unused prescription drugs since April 2017.
The Attorney General has been resolute in the fight against the drug crisis in America. The Department assigned more than 300 federal prosecutors to U.S. Attorneys’ offices and hired more than 400 DEA task force officers, announced the formation of Operation Synthetic Opioid Surge, a new program to reduce the supply of deadly synthetic opioids in high impact areas, and created a new data analytics program called the Opioid Fraud and Abuse Detection Unit to assist 12 prosecutors sent to drug “hot spot districts.” In addition, the Department charged more than 3,000 defendants with trafficking in heroin, fentanyl, or prescription drugs in FY 2017, announced the first-ever indictments of Chinese nationals for fentanyl trafficking, and scheduled variants of fentanyl to prevent illicit drug labs from circumventing the law. In addition, DOJ executed the largest ever health care fraud enforcement action charging more than 600 defendants and proposed rules consistent with President Trump's "Safe Prescribing Plan," requiring a reduction of ten percent in 2019 in manufacturing quotas. The Department dismantled AlphaBay, the largest criminal marketplace on the Internet and has already generated prosecutions in the fight against online drug trafficking through the Joint Criminal Opioid Darknet Enforcement Team (J-CODE).
The approximately $320 million awarded by the Department’s Office of Justice Programs (OJP) will be distributed in order to maximize effectiveness over the country. A breakdown of the grant funding can be found here.
- Innovative Prosecution Solutions for Combating Violent Crime and Opioid Abuse ($2.8 Million)
- Help prosecutors develop strategies to address violent crime caused by illegal opioid distribution and abuse
- Comprehensive Opioid Abuse Site-based Program ($162 Million)
- Help jurisdictions plan and implement programs aimed at reducing opioid abuse and mitigating its impact on crime victims, including training and technical assistance
- Justice and Mental Health Collaboration Program ($5.9 Million)
- Address the treatment needs of people using opioids under the Justice and Mental Health Collaboration Program
- Helping Children and Youth Impacted by Opioids ($46.6 Million)
- Help children and youth impacted by the opioid crisis, including training and technical assistance
- Drug Courts ($81.2 Million)
- Assist adult, juvenile, and family drug courts and veterans treatment courts, including training and technical assistance
- Paul Coverdell Forensic Science Improvement Grant Program ($17 Million)
- Address the dramatic increase in deaths and the backlogs of seized drugs as a result of the opioid crisis
- Opioid-Related Research for Criminal Justice Purposes ($4.1 Million)
- Development of new tools to enforce the law, ensure public safety, prevent and control crime, and ensure fair and impartial administration of justice
OJP provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice, and assist victims. OJP has six bureaus and offices: the Bureau of Justice Assistance; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime; and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking. More information about OJP and its components can be found at: www.ojp.gov.
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- Innovative Prosecution Solutions for Combating Violent Crime and Opioid Abuse ($2.8 Million)
Justice Department is Awarding Almost $320 Million to Combat Opioid CrisisRead the Press Release
On the first day of National Substance Abuse Prevention Month, the Department of Justice announced it is awarding almost $320 million to combat the opioid crisis in America. The unprecedented funding will directly help those most impacted by the deadliest drug crisis in American history, including crime victims, children, families, and first responders.
"President Trump has made ending the opioid crisis a priority for this administration, and under his leadership, the Department of Justice has taken historic action," said Attorney General Jeff Sessions. "Today we are announcing our next steps: investing $320 million into all three parts of the President’s comprehensive plan to end the epidemic: prevention, treatment, and enforcement. We are attacking this crisis from every angle—and we will not let up until we bring it to an end."
In 2017, more than 72,000 Americans lost their lives to drug overdoses, an increase from the 64,000 overdose deaths in 2016, according to the Centers for Disease Control and Prevention. The majority of these deaths can be attributed to opioids, including illicit fentanyl and its analogues. October marks two important anti-drug events: Red Ribbon Week and National Prescription Drug Takeback Day. Red Ribbon Week takes place every year between October 23-31 and encourages students, parents, schools, and communities to promote drug-free lifestyles. The Drug Enforcement Administration’s (DEA) National Prescription Drug Take Back Day on October 27 aims to provide an opportunity for Americans to prevent overdose deaths and drug addictions before they start. DOJ expanded on DEA's Drug Takeback Days and collected more than 2.7 million pounds of expired or unused prescription drugs since April 2017.
The Attorney General has been resolute in the fight against the drug crisis in America. The Department assigned more than 300 federal prosecutors to U.S. Attorneys’ offices and hired more than 400 DEA task force officers, announced the formation of Operation Synthetic Opioid Surge, a new program to reduce the supply of deadly synthetic opioids in high impact areas, and created a new data analytics program called the Opioid Fraud and Abuse Detection Unit to assist 12 prosecutors sent to drug “hot spot districts.” In addition, the Department charged more than 3,000 defendants with trafficking in heroin, fentanyl, or prescription drugs in FY 2017, announced the first-ever indictments of Chinese nationals for fentanyl trafficking, and scheduled variants of fentanyl to prevent illicit drug labs from circumventing the law. In addition, DOJ executed the largest ever health care fraud enforcement action charging more than 600 defendants and proposed rules consistent with President Trump's "Safe Prescribing Plan," requiring a reduction of ten percent in 2019 in manufacturing quotas. The Department dismantled AlphaBay, the largest criminal marketplace on the Internet and has already generated prosecutions in the fight against online drug trafficking through the Joint Criminal Opioid Darknet Enforcement Team (J-CODE).
The approximately $320 million awarded by the Department’s Office of Justice Programs (OJP) will be distributed in order to maximize effectiveness over the country. A breakdown of the grant funding can be found here.
- Innovative Prosecution Solutions for Combating Violent Crime and Opioid Abuse ($2.8 Million)
- Help prosecutors develop strategies to address violent crime caused by illegal opioid distribution and abuse
- Comprehensive Opioid Abuse Site-based Program ($162 Million)
- Help jurisdictions plan and implement programs aimed at reducing opioid abuse and mitigating its impact on crime victims, including training and technical assistance
- Justice and Mental Health Collaboration Program ($5.9 Million)
- Address the treatment needs of people using opioids under the Justice and Mental Health Collaboration Program
- Helping Children and Youth Impacted by Opioids ($46.6 Million)
- Help children and youth impacted by the opioid crisis, including training and technical assistance
- Drug Courts ($81.2 Million)
- Assist adult, juvenile, and family drug courts and veterans treatment courts, including training and technical assistance
- Paul Coverdell Forensic Science Improvement Grant Program ($17 Million)
- Address the dramatic increase in deaths and the backlogs of seized drugs as a result of the opioid crisis
- Opioid-Related Research for Criminal Justice Purposes ($4.1 Million)
- Development of new tools to enforce the law, ensure public safety, prevent and control crime, and ensure fair and impartial administration of justice
OJP provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice, and assist victims. OJP has six bureaus and offices: the Bureau of Justice Assistance; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime; and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking. More information about OJP and its components can be found at: www.ojp.gov.
- Innovative Prosecution Solutions for Combating Violent Crime and Opioid Abuse ($2.8 Million)
Justice Department Requires UTC to Divest Two Aerospace Businesses to Proceed with Acquisition of Rockwell CollinsRead the Press Release
The Department of Justice announced today that it will require United Technologies Corporation (UTC) to divest two businesses critical to the safe operation of aircraft to proceed with its acquisition of Rockwell Collins. First, UTC will divest Rockwell Collins’s pneumatic ice protection systems business. Pneumatic ice protection systems remove ice from the wing of an aircraft by means of an inflatable rubber de-icing boot. Second, UTC will divest Rockwell Collins’s trimmable horizontal stabilizer actuators (THSAs) business. THSAs ensure that an aircraft maintains altitude during flight by adjusting the angle of the horizontal tail surface.
“Today’s remedy ensures that customers continue to benefit from competition in the supply of these two aircraft components that are critical to safety,” said Assistant Attorney General Makan Delrahim of the Antitrust Division. “The remedy allows the divestiture buyers to compete vigorously to provide high quality systems and service to customers.”
The Department’s Antitrust Division today filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to enjoin the proposed acquisition, along with a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.
The Department said that, without the divestitures, the proposed acquisition would lessen competition substantially in the market for ice protection systems, by combining two of the world’s three suppliers of pneumatic ice protection systems, and in the market for THSAs, by combining two of the world’s leading producers of THSAs.
Under the terms of the proposed settlement, UTC must divest Rockwell Collins’s ice protection systems business to an acquirer approved by the United States. UTC also must divest Rockwell Collins’s THSA business to Safran S.A., an established aerospace supplier, or an alternate acquirer approved by the United States.
The Antitrust Division, the European Commission, and the Competition Bureau of Canada cooperated closely throughout the course of their respective investigations.
UTC is incorporated in Delaware and has its headquarters in Farmington, Connecticut. UTC produces a wide range of products for the aerospace industry and other industries. In 2017, UTC had revenues of approximately $59.8 billion.
Rockwell Collins is incorporated in Delaware and is headquartered in Cedar Rapids, Iowa. Rockwell Collins is a major provider of aerospace and defense electronics systems. In 2017, Rockwell Collins had revenues of approximately $6.8 billion.
As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Maribeth Petrizzi, Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the final judgment upon finding it is in the public interest.
Justice Department Files Net Neutrality Lawsuit Against the State of CaliforniaRead the Press Release
The Justice Department today filed a lawsuit against the state of California alleging that Senate Bill 822, an Internet regulation bill signed into law earlier today by Governor Jerry Brown, unlawfully imposes burdens on the Federal Government’s deregulatory approach to the Internet, announced Attorney General Jeff Sessions, Acting Associate Attorney General Jesse Panuccio, Assistant Attorney General Joseph H. Hunt for the Justice Department’s Civil Division, and Federal Communications Commission (FCC) Chairman Ajit Pai.
In 1996, a bipartisan Congress decided that the Internet should remain “unfettered by Federal or State regulation.” Since 2002, the FCC has accordingly classified broadband Internet access as an “information service” that is exempt from public-utility regulations. The FCC briefly departed from this classification in a 2015 Order, which imposed restrictions on the freedom of the Internet. In 2018, the FCC returned to its prior light-touch framework, ensuring that Internet access services are free and guided by a uniform set of federal rules, rather than by a patchwork of state and local regulations. The United States concluded that California, through Senate Bill 822, is attempting to subvert the Federal Government’s deregulatory approach by imposing burdensome state regulations on the free Internet, which is unlawful and anti-consumer.
In filing the complaint, Attorney General Jeff Sessions issued the following statement:
“Under the Constitution, states do not regulate interstate commerce—the federal government does. Once again the California legislature has enacted an extreme and illegal state law attempting to frustrate federal policy. The Justice Department should not have to spend valuable time and resources to file this suit today, but we have a duty to defend the prerogatives of the federal government and protect our Constitutional order. We will do so with vigor. We are confident that we will prevail in this case—because the facts are on our side.”
FCC Chairman Ajit Pai issued the following statement:
“I’m pleased the Department of Justice has filed this suit. The Internet is inherently an interstate information service. As such, only the federal government can set policy in this area. And the U.S. Court of Appeals for the Eighth Circuit recently reaffirmed that state regulation of information services is preempted by federal law.
“Not only is California’s Internet regulation law illegal, it also hurts consumers. The law prohibits many free-data plans, which allow consumers to stream video, music, and the like exempt from any data limits. They have proven enormously popular in the marketplace, especially among lower-income Americans. But notwithstanding the consumer benefits, this state law bans them.
“The Internet is free and open today, and it will continue to be under the light-touch protections of the FCC’s Restoring Internet Freedom Order. I look forward to working with my colleagues and the Department of Justice to ensure the Internet remains ‘unfettered by Federal or State regulation,’ as federal law requires, and the domain of engineers, entrepreneurs, and technologists, not lawyers and bureaucrats.”
Justice Department Hosts Cybersecurity Industry RoundtableRead the Press Release
The Justice Department’s Criminal Division hosted a cybersecurity roundtable discussion yesterday on the challenges in handling data breach investigations. Assistant Attorney General Brian A. Benczkowski of the Criminal Division delivered opening remarks and served as moderator for the event. Deputy Attorney General Rod J. Rosenstein, Assistant Attorney General John C. Demers of the Department’s National Security Division and officials from the FBI, U.S. Secret Service, the White House’s National Security Council and U.S. Department of Homeland Security also delivered remarks at the event. The audience included many of the nation’s leading private-sector practitioners in the field of data breach response and representatives from premier cybersecurity and incident response firms in the country.
The Criminal Division held its inaugural cybersecurity roundtable in 2015, shortly after the creation of the Cybersecurity Unit within the Computer Crime and Intellectual Property Section (CCIPS). The goal of the first roundtable was to spur a conversation within the legal community about how the government can work more effectively with companies, firms, and organizations to prosecute and prevent data breaches. Three years later, the Department continues to exchange ideas with and look to the private sector’s expertise and insight about how to improve cooperation between law enforcement agencies and data breach victims.
In February of this year, Attorney General Jeff Sessions established a Cyber-Digital Task Force, which published its first report in July. The report provides a comprehensive assessment of the cyber-enabled threats confronting the nation, and catalogs ways in which the Justice Department combats those threats, including by partnering with the private sector.
“Public-private partnerships addressing cybercrime play a critical role in our efforts to hold criminals accountable for data breaches,” said Deputy Attorney General Rosenstein. “We depend on the private sector to help us maintain the rule of law in cyberspace at every stage of our work. That includes working together to obtain critical evidence for investigations and trials, and collaborating on developing the legal authorities needed to protect our 21st century economy. Today’s discussion aims to share best practices, common challenges, and emerging threats, and identify how the Department of Justice and our law enforcement partners can help private industry to protect Americans from harm while safeguarding privacy. Through roundtables like this and the continuing collaboration they fuel, we will meet emerging threats, protect America’s technological innovations, and preserve public safety and security.”
“The Criminal Division has long been recognized for its innovative and aggressive pursuit of the most sophisticated cybercriminals,” said Assistant Attorney General Benczkowski. “Active engagement with the private sector through events like the Cybersecurity Industry Roundtable is essential to our effectiveness as prosecutors because it allows us to draw upon a broad range of experience to get better at what we do. The Criminal Division’s commitment to fighting cybercrime is unwavering, and we look forward to continued close cooperation in that fight with our counterparts in the private sector.”
The Criminal Division created the Cybersecurity Unit within CCIPS in December 2014 to help channel CCIPS’s expertise and experience combatting cybercrime into the prevention of cybercrime. The Unit’s contributions during its brief existence have included issuing groundbreaking guidance to help organizations create vulnerability disclosure programs to improve detection of cyber vulnerabilities. The Unit’s outreach to the private sector has included participation by members of CCIPS in well over 100 cybersecurity events since 2015, such as RSA, Black Hat, DEFCON, and International CES, which has helped the Unit build relationships with and gather input from incident responders, potential victims, and key information security experts. This input has been put to good use. The Criminal Division released a document at the first roundtable providing guidance to help organizations prepare for a cyber incident, called “Best Practices for Victim Response and Reporting Cyber Incidents.”
As part of Thursday’s event, the Cybersecurity Unit released a new document providing even more comprehensive guidance that reflects input the Unit received during its outreach efforts. The revised guidance addresses new issues like working with incident response firms, cloud computing, ransomware, and information sharing. It is an example of the type of assistance that the Cybersecurity Unit was designed to provide—to help elevate cybersecurity efforts and build better channels of communication between law enforcement and industry.
INTERPOL Washington Attends 12th Annual International Intellectual Property (IP) Crime ConferenceRead the Press Release
Held September 25-26, the International Law Enforcement IP Crime Conference sought to shape effective enforcement strategies in fighting international property violations. INTERPOL Washington—the U.S. National Central Bureau—was represented by the Assistant Director for Transnational Crime, Paul Layman.
The conference participants used operational case studies, best practices, and industry perspectives to address key IP issues related to artificial intelligence, crypto currencies, organized crime, money laundering, and free trade zones. The United States estimates the costs of intellectual property theft to the U.S. economy to be as high as $600 billion per year. These thefts damage American companies and threaten national security.
“The IPR conference provides INTERPOL Washington an opportunity to collaborate with our law enforcement counterparts across the globe to address international cooperation in enhancing international property protection, said Layman. “Sharing best practices in this crucial area of transnational crime will enable us to better support our U.S. law enforcement partners as they fight intellectual property crimes.”
Co-organized by the Dubai Police, the UAE Ministry of Interior and INTERPOL, in partnership with UL (Underwriters Laboratories), the International AntiCounterfeiting Coalition and the Emirates IP Association (EIPA), this gathering marked the first time the conference was held in the Middle East.
A component of the U.S. Department of Justice, INTERPOL Washington is co-managed by the U.S. Department of Homeland Security. As the designated representative to INTERPOL on behalf of the Attorney General, INTERPOL Washington serves as the national point of contact for all INTERPOL matters, coordinating international investigative efforts among member countries and the more than 18,000 local, state, federal, and tribal law enforcement agencies in the United States.
INTERPOL Washington was one of the participants in the recent International IP Crime ConferenceEOIR Announces Largest Ever Immigration Judge InvestitureRead the Press Release
The Executive Office for Immigration Review (EOIR) announces the investiture of 46 immigration judges, including two assistant chief immigration judges, marking for the second month in a row the largest class in the agency’s history.
“At this point in history your work is vitally important. The case backlog has reached more than 760,000. Great effort is surely needed,” said Attorney General Jeff Sessions at today’s investiture. “This situation is unacceptable. It cannot continue. Our nation’s chief executive supports you and all who strive to make our immigration system work.”
Attorney General Jeff Sessions appointed these new judges after a thorough application process and welcomed them during a ceremony held Sept. 28, 2018. Chief Immigration Judge MaryBeth Keller presided over the investiture held at the Department of Justice’s Great Hall in Washington, D.C.
“EOIR continues to make great progress in hiring the immigration judges needed to reduce a backlog of more than 760,000 pending immigration court cases,” said James McHenry, Director of EOIR. “Alongside our efforts to improve immigration judge productivity and modernize our information technology systems, growing our immigration judge corps remains a top agency priority.”
In 2017, Attorney General Sessions announced a “streamlined hiring plan” promoting the use of clear deadlines and efficient hiring processes, resulting in a reduction of 74 percent in the time it takes to onboard immigration judges since then. Since the end of January 2017, 128 immigration judges have been sworn in. EOIR anticipates two additional hiring classes this fall which will make for over 100 immigration judges hired during 2018.
“EOIR now has 395 immigration judges, an increase of 30 percent since January 2017,” said McHenry. “While we are pleased to welcome this historic class of judges, we are not done and expect additional hiring before the end of this year.”
The names of each new judge along with their assigned courts and biographical information is found in a notice issued by EOIR here.Amite Woman Pleads Guilty to Conspiring to Obtain Forced Labor from Woman with DisabilitiesRead the Press Release
Bridget Lambert, 21, pleaded guilty on Thursday, Sept. 27 in the Eastern District of Louisiana to one count of a forced labor conspiracy for conspiring with members of her family to obtain forced labor from D.P., a woman with cognitive disabilities.
At the plea hearing, Lambert admitted that, between Aug. 13, 2015, and June 30, 2016, in Amite, Louisiana, she conspired with other members of her family to obtain D.P.’s uncompensated household labor and services by a number of means, including by force and threat of force. Lambert admitted that, as part of the conspiracy, she and the other conspirators forced D.P. to live in a locked shed in the backyard and to perform housework and yard work in exchange for food and water. The defendant admitted that the conspirators subjected D.P. to routine physical abuse, threats, and verbal and psychological abuse designed to ensure her continued compliance with the family’s orders. The defendant further admitted that, on one occasion, she advanced the conspiracy by striking D.P. in the head with a wooden board, causing D.P. to bleed from her head, and on another occasion advanced the conspiracy by holding D.P.’s arm in place so that a fellow conspirator could punish D.P. by burning her with a cigarette lighter.
“Lambert conspired to brutally coerce a vulnerable victim with disabilities to work long hours in despicable conditions and no monetary compensation,” said Acting Assistant Attorney General John Gore. “The Department of Justice continues to combat human trafficking by forced labor and today’s guilty plea reflects our commitment to seeking justice for victims.”
“Human trafficking is modern day slavery and the U.S. Attorney’s Office is committed to seeking justice on behalf of all victims including vulnerable individuals such as D.P.,” said U.S. Attorney Peter G. Strasser of the Eastern District of Louisiana. “We will continue to partner with federal, state and local law enforcement to hold these human traffickers accountable for their crimes.”
“FBI New Orleans strives every day to protect the civil rights of all, however we make a concerted effort to defend those who cannot defend themselves,” said Special Agent in Charge Eric J. Rommal for the FBI New Orleans Field Office. “In this case the offender’s actions are inexcusable.”
Lambert will be sentenced on Dec. 20, and faces a maximum sentence of five years in prison.
This case was investigated by the FBI’s Field Office in New Orleans, Louisiana, the Tangipahoa Parish Sheriff’s Office and the Tangipahoa District Attorney’s Office. The case is being prosecuted by Trial Attorneys Risa Berkower and Nicholas Reddick of the Justice Department’s Civil Rights Division, Assistant United States Attorney Julia Evans, of the U.S. Attorney’s Office for the Eastern District of Louisiana, and by the Tangipahoa Parish District Attorney’s Office.
Statement of Jonathan D. Brightbill, Deputy Assistant Attorney General, Environment and Natural Resources Division, Before the House Oversight and Government Reform Subcommittee on the Interior, Energy, and EnvironmentRead the Press Release
Remarks as Prepared for Delivery
Chairman Gianforte, Ranking Member Plaskett, and Members of the Subcommittee, thank you for the opportunity to discuss this important topic. I also would like to recognize and thank Chairman Gowdy and/or Ranking Member Cummings.
I have the great privilege to serve as a Deputy Assistant Attorney General in the Environment and Natural Resources Division in the Department of Justice. The Division has broad responsibilities: enforcing the nation’s civil and criminal pollution control laws; representing the United States in matters concerning the stewardship of the nation’s environment and natural resources, wildlife, and public lands; and litigating cases concerning the resources and rights of Indian tribes and their members.
I personally supervise a stellar team of lawyers and other staff responsible for defending rulemakings and policies arising under a broad range of pollution control statutes and for acquiring property on behalf of the federal government.
The Division routinely handles attorney’s fee claims. Congress has authorized private-party litigation against federal agencies and has generally established two avenues by which opposing parties may seek the payment of attorney’s fees through taxpayer dollars in our cases.
First, the citizen suit and judicial review provisions in most environmental protection and some natural resources laws expressly provide for recovery of attorney’s fees against the United States.
Second, attorney’s fees may be payable under the Equal Access to Justice Act (known as “EAJA”) when not available under these statutes.
Under the leadership of Attorney General Sessions, ENRD is strongly committed to the rule of law and takes seriously the solemn obligation to protect taxpayer dollars. We closely scrutinize all demands for attorney’s fees to ensure that they are lawful, justified, and reasonable.
The Division does not, however, and cannot, challenge the payment of attorney’s fees in all cases. Some fee applications may be substantially justified and reasonable. But where it is appropriate to contest a claim of fees, my written statement chronicles some of our recent efforts in controlling their costs.
I would like to highlight five recurrent challenges the Division faces in handling attorney’s fee claims. Each is discussed in more detail in my written statement.
In some areas, it seems fee litigation and recoveries may have moved beyond Congress’s original intentions for providing reasonable access to the courts, without encouraging excessive litigation and enriching lawyers. Federal courts also are not consistent in their standards for awarding fees across the country.
(1) First, ineffective limits on hourly fee rates. Because most attorney-fee provisions do not contain a maximum hourly rate, we frequently see lawyers seek taxpayer-funded fee payments with exorbitant hourly rates. While EAJA does contain a presumptive cap on attorney’s fee payments of $125 per hour (plus inflation adjustment), it is subject to enhancement based on special factors.
In our experience, courts routinely award EAJA fees at more than $500 per hour to as high as $700 per hour.
(2) Second, no case cap. Most statutes under which ENRD litigates do not contain a maximum amount of fees the United States will subsidize on a matter. The Division has paid a number of multi-million dollar attorney fee awards in the past ten years.
(3) Third, low eligibility requirements. Under EAJA, large tax-exempt organizations with net worth exceeding $200 million can be eligible for—and have received—taxpayer-funded fees. And there are no qualification requirements at all under the environmental protection and natural resource statutes noted in my written statement.
As the D.C. Circuit has recognized, “Congress did not intend to subsidize the purchase of legal services by large entities easily able to afford legal services.” Yet many organizations are funded by outside contributions, and don’t require taxpayer subsidies.
(4) Fourth, fees on fees. Because parties can recover attorney’s fees for seeking payment of attorney’s fees, there is incentive for parties to claim exorbitant fees and then litigate the issue. In deciding whether to challenge a claim for attorney’s fees, the Division must weigh the cost and risk of the prospect of “fees on fees” if it is not entirely successful opposing.
(5) Fifth, inconsistent burden of proof. The United States is frequently successful defending litigation. However, courts have inconsistently interpreted the facially-neutral language of attorney’s fee provisions to more-readily permit attorney’s fee payments to prevailing plaintiffs than the United States.
Addressing these challenges would enhance the consistency, predictability, transparency, and efficiency of fee awards under the environmental statutes.
I would be happy to answer your questions concerning these challenges.
Officials from U.S. and European Commission Participate in Bilateral Meetings in Washington D.C. to Discuss Antitrust EnforcementRead the Press Release
Antitrust agency heads from the United States and the European Union met today at the Department of Justice in Washington D.C., to discuss current competition policy issues and increased cooperation in enforcement and policy matters.
The meeting included Assistant Attorney General Makan Delrahim of the U.S Department of Justice’s Antitrust Division, Chairman Joseph Simons of the U.S. Federal Trade Commission, and Commissioner Margrethe Vestager of the European Commission.
The discussions covered a wide range of topics, including digital markets, the proposed Multilateral Framework on Procedures, two-sided markets and platforms, data protection rules and cooperation, vertical mergers, and merger cooperation issues.
“Robust cooperation, convergence around sound economic principles, and leadership regarding the use of fair procedures in enforcement are key international priorities for the Antitrust Division,” said Assistant Attorney General Makan Delrahim. “We are always pleased to meet with our counterparts from Brussels, and to have an opportunity to discuss these important issues. Our working relationship with the European Commission’s DG Competition is essential to ensuring competitive markets in the increasingly interconnected global economy.”
“Our high-level engagement with our European colleagues enables us to deepen mutual understanding of our enforcement policies, facilitating greater convergence and efficiency in the review of trans-Atlantic transactions and conduct,” said Chairman Simons. “Our discussions also contribute to the FTC’s consideration of our approaches to key competition issues that we are evaluating through our current hearings on Competition and Consumer Protection in the 21st Century.”
The U.S. and EU competition agencies have met regularly at the most senior level to promote cooperation and convergence and enhance their close relationship enshrined in the 1991 U.S.-EU agreement on the application of their competition laws.
Justice Department Reaches Settlement with Northwest Trustee Services of Bellevue, Washington, for Illegally Foreclosing on Servicemembers’ HomesRead the Press Release
The Department of Justice today announced a settlement with Northwest Trustee Services Inc. (Northwest) of Bellevue, Washington, to resolve a lawsuit alleging that the foreclosure services company violated the Servicemembers Civil Relief Act (SCRA). The complaint, filed in November 2017, alleges that Northwest foreclosed on homes owned by servicemembers without obtaining the required court orders. Under the terms of the settlement, servicemembers who had their homes illegally foreclosed on may each receive compensation of up to $125,000, with a total payout to servicemembers of up to $750,000. Northwest ceased operations in December 2017 and is now being liquidated in state court receivership proceedings. This is the Department’s first SCRA lawsuit against a foreclosure trustee company.
The SCRA protects the rights of servicemembers in military service by suspending or modifying certain civil obligations. The law prohibits foreclosing on the home of a servicemember during military service and one year thereafter without a court order if the mortgage originated prior to the servicemember’s period of military service.
“The Civil Rights Division will never waver in our commitment to vindicating the rights of those who devote themselves to the service of our country,” said Acting Assistant Attorney General John Gore of the Civil Rights Division. “We hope this case sends a strong message to foreclosure trustee companies and others that all foreclosures must comply with the Servicemembers Civil Relief Act.”
“Those who serve in our military deserve zealous representation of their rights,” said U.S. Attorney Annette L. Hayes. “We are working to ensure that servicemembers whose homes were illegally foreclosed on by Northwest Trustee receive up to $125,000 in compensation. Northwest Trustee may have shuttered its foreclosure business, but that does not end its obligation to do right by servicemembers.”
The Department of Justice launched an investigation into Northwest’s practices after United States Marine Corps veteran Jacob McGreevey of Vancouver, Washington submitted a complaint to the Department’s Servicemembers and Veterans Initiative in May 2016. Northwest had foreclosed on Mr. McGreevey’s home in August 2010, less than two months after he was released from active duty in Operation Iraqi Freedom. McGreevey sued both PHH Mortgage (his mortgage servicer) and Northwest in 2016, but a U.S. District Court Judge accepted PHH and Northwest’s argument that McGreevy had waited too long to file his complaint and dismissed the case. The Department’s investigation revealed that, in addition to McGreevey, Northwest had unlawfully foreclosed on other SCRA-protected servicemembers since 2010.
Before entering into receivership, Northwest described itself as a full-service trustee company providing foreclosure services to mortgage lenders in the Western United States. On March 28, Northwest was placed into a General Receivership under Washington State law. The company no longer provides foreclosure services. If it were to reenter the business of providing foreclosure services, the settlement requires the company to implement Department-approved policies, procedures, and training to prevent further SCRA violations.
This case was jointly handled by the Civil Rights Division of the Department of Justice and the United States Attorney’s Office for the Western District of Washington.
The Department’s enforcement of the SCRA is conducted by the Civil Rights Division’s Housing and Civil Enforcement Section, often in partnership with local United States Attorney’s Offices. Since 2011, the Department has obtained over $468 million in monetary relief for servicemembers through its enforcement of the SCRA. The SCRA provides protections for servicemembers in areas such as evictions, rental agreements, security deposits, prepaid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance and income tax payments. For more information about the department’s SCRA enforcement, please visit www.servicemembers.gov.
Servicemembers and their dependents who believe that their rights under the SCRA have been violated should contact the nearest Armed Forces Legal Assistance Program Office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php.
Justice Department Reaches Settlement with New Jersey Military Housing Provider for Charging Unlawful Lease Termination Fees to U.S. ServicemembersRead the Press Release
The Justice Department today announced that United Communities, LLC, a private company that manages military housing at Joint Base McGuire-Dix-Lakehurst (JB-MDL), has agreed to pay $62,501.78 to resolve allegations that it violated the Servicemembers Civil Relief Act (SCRA) by imposing early termination charges on 13 servicemembers who had exercised their right to terminate their residential leases upon receipt of qualifying military orders. The early termination charges ranged from $138 to $3,100. This case and the settlement with another company in United States v. Twin Creek, announced on Sept. 11, are the first two SCRA cases the Department has brought involving lease incentives.
The Department launched an investigation into United Communities’ leasing practices after receiving a referral from Air Force Community Legal Services. Army Captain Gregory Funk had sought to terminate his lease with United Communities after he received military orders to deploy to Qatar for up to 365 days as a part of Operation Inherent Resolve. United Communities agreed to release Captain Funk from the remainder of his lease term, but required him to pay back the $899.20 lease incentive that he had received when he signed the lease because he had not completed the 24-month term of the lease. The investigation revealed 12 other instances where SCRA-protected servicemembers were required to pay back their lease incentives.
Under the terms of the settlement, United Communities must pay a total of $45,001.78 in damages to 13 servicemembers. United Communities will also pay a civil penalty of $17,500 to the United States. In addition, United Communities must develop policies to ensure it complies with the SCRA, train its employees on the protections afforded by the SCRA, and report future SCRA-related complaints to the government.
“Members of the Army, Navy, and Air Force at Joint Base McGuire-Dix-Lakehurst, and servicemembers nationwide, have the right to terminate their leases without penalty when their military orders send them elsewhere,” said Acting Assistant Attorney General John Gore. “We appreciate United Communities’ cooperation with the Department to compensate affected servicemembers. We are resolute in our commitment to vigorously enforce the SCRA on behalf of our men and women in uniform.”
“When the brave men and women of our armed services answer the call of duty, they should be confident that they and their families will receive every protection the SCRA offers,” said U.S. Attorney Craig Carpenito. “With this settlement agreement, I am proud to continue our robust enforcement of the SCRA in New Jersey.”
The SCRA extends various protections to servicemembers to allow them to devote their entire energy to the national defense. The SCRA provides protections for servicemembers in areas such as evictions, security deposits, pre-paid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance and income tax payments. The SCRA also allows servicemembers to terminate their residential leases after entering military service or receiving military orders for a permanent change of station, deployment, or retirement. Landlords are prohibited from imposing an early termination charge on servicemembers who terminate their leases under the SCRA.
The agreement resolves a suit filed by the United States in the United States District Court for the District of New Jersey.
The Department’s enforcement of the SCRA is conducted by the Civil Rights Division’s Housing and Civil Enforcement Section and U.S. Attorney’s Offices throughout the country. Since 2011, the Department has obtained over $468 million in monetary relief for servicemembers through its enforcement of the SCRA. For more information about the Department’s SCRA enforcement, please visit www.servicemembers.gov.
Servicemembers and their dependents who believe that their rights under the SCRA have been violated should contact the nearest Armed Forces Legal Assistance Program Office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php.
Individuals who believe their civil rights have been violated in the District of New Jersey may also file a complaint with the U.S. Attorney’s Office for the District of New Jersey at: http://www.justice.gov/usao-nj/civil-rights-enforcement/complaint or may call the U.S. Attorney’s Office’s Civil Rights Complaint Hotline at (855) 281-3339.
Justice Department Files Sexual Harassment Lawsuit Against Owners of Oklahoma City Rental PropertiesRead the Press Release
The Justice Department today announced that it has filed a lawsuit alleging that female tenants and applicants in residential rental properties in or around Oklahoma City were subjected to sexual harassment, coercion, intimidation, and threats in violation of the federal Fair Housing Act. The complaint names four defendants: the Executor of the Estate of Walter Ray Pelfrey; Rosemarie Pelfrey, as Trustee of the W. Ray Pelfrey Revocable Trust and the Rosemarie Pelfrey Revocable Trust; Omega Enterprises, LLC; and Pelfrey Investment Company, LLC.
Today’s lawsuit, filed in the U.S. District Court for the Western District of Oklahoma, alleges that Walter Ray Pelfrey sexually harassed female tenants and applicants of rental properties from at least 2001 through 2017. According to the complaint, he engaged in harassment that included, among other things, making unwelcome sexual advances and comments, engaging in unwanted sexual touching, demanding or pressuring female applicants to engage in sexual acts to obtain rental housing, offering to reduce rent and overlooking or excusing late or unpaid rent in exchange for sex, evicting or threatening to evict female tenants who objected to or refused sexual advances, and entering the homes of female tenants without their consent. The lawsuit further alleges that, upon the death of Walter Ray Pelfrey on July 15, the Estate of Walter Ray Pelfrey assumed liability for discriminatory housing practices. In addition, the lawsuit alleges that Rosemarie Pelfrey in her role as trustee, Omega Enterprises, LLC, and Pelfrey Investment Company, LLC are liable under the Fair Housing Act because Walter Ray Pelfrey managed the rental properties on their behalf when he engaged in the harassment, coercion, intimidation, and threats.
“Female tenants should not be subjected to illegal harassment and demands for sex,” said Acting Assistant Attorney General John Gore. “The Justice Department will continue to enforce the Fair Housing Act against landlords who engage in this misconduct and cause women to feel unsafe in their own homes.”
“Tenants have the right to be free from unwanted sexual harassment and intimidation by their landlord under the federal Fair Housing Act,” said Robert J. Troester of the U.S. Attorney’s Office for the Western District of Oklahoma. “Today’s civil complaint represents a significant step toward achieving justice and compensation for vulnerable victims of civil rights violations.”
In October 2017, the Justice Department launched an initiative to combat sexual harassment in housing. In April 2018, the Department announced the nationwide rollout of the initiative, including three major components: a new joint Task Force with the Department of Housing and Urban Development to combat sexual harassment in housing, an outreach toolkit to leverage the Department’s nationwide network of U.S. Attorney’s Offices, and a public awareness campaign, including the launch of a national Public Service Announcement.
Since launching the initiative, the Justice Department has filed six lawsuits alleging a pattern or practice of sexual harassment in housing – more than it has filed in any previous fiscal year. The Justice Department has filed or settled 11 sexual harassment cases since January 2017, and has recovered over $1.6 million for victims of sexual harassment in housing.
Today’s lawsuit seeks monetary damages to compensate the victims, civil penalties and a court order barring future discrimination. The complaint contains allegations of unlawful conduct. The allegations must be proven in federal court.
The federal Fair Housing Act prohibits discrimination in housing based on race, color, religion, national origin, sex, disability and familial status. More information about the Civil Rights Division and the laws it enforces is available at http://www.justice.gov/crt. Individuals who believe that they may have been victims of sexual harassment or other types of housing discrimination at rental dwellings previously owned or operated by Walter Pelfrey, or who have other information that may be relevant to this case, can contact the Housing Discrimination Tip Line:
- English language: Call 1-800-896-7743, then press 1 to continue in English and select mailbox 991 to leave a message; or
- Spanish language: Call 1-800-896-7743, then press 2 to continue in Spanish and select mailbox 9 to leave a message.
Individuals can also report sexual harassment and other forms of housing discrimination by e-mailing the Justice Department at [email protected].
FDA-Approved Drug Epidiolex Placed in Schedule V of Controlled Substances ActRead the Press Release
The Department of Justice and Drug Enforcement Administration (DEA) today announced that Epidiolex, the newly approved medication by the Food & Drug Administration (FDA), is being placed in schedule V of the Controlled Substances Act (CSA), the least restrictive schedule of the CSA.
In June 2018, the FDA announced it approved Epidiolex for the treatment of seizures associated with two rare and severe forms of epilepsy, Lennox-Gastaut syndrome and Dravet syndrome, in patients two years of age and older.
Epidiolex contains cannabidiol (CBD), a chemical constituent of the cannabis plant (commonly referred to as marijuana). The CBD in Epidiolex is extracted from the cannabis plant and is the first FDA-approved drug to contain a purified extract from the plant.
“DEA will continue to support sound and scientific research that promotes legitimate therapeutic uses for FDA-approved constituent components of cannabis, consistent with federal law,” said Acting DEA Administrator Uttam Dhillon. “DEA is committed to continuing to work with our federal partners to seek ways to make the process for research more efficient and effective.”
“The FDA is committed to advancing scientific research and drug development programs that properly evaluate the active ingredients contained in marijuana,” said FDA Commissioner Scott Gottlieb, M.D. “Adequate and well-controlled clinical studies supported Epidiolex’s approval, so prescribers can have confidence in the drug’s uniform strength and consistent delivery that support appropriate dosing needed for treating patients with these complex and serious epilepsy syndromes. The FDA will continue to support rigorous scientific research on the potential medical uses of marijuana-derived products and stand ready to work with product developers who are interested in bringing patients safe and effective, high quality products.”
Marijuana and CBD derived from marijuana remain against the law, except for the limited circumstances that it has been determined there is a medically approved benefit. In those instances, such as here, the drug will be made appropriately available to the public for medical use.U.S. Trustee Program Files Objection to the Appointment of the Debtor’s Proposed Future Claimants’ Representative for Future Asbestos Claimants in Duro Dyne National Corp., No. 18-27963 (Bankr. D.N.J.)Read the Press Release
Today—for the first time—the Justice Department’s U.S. Trustee Program (USTP) filed an objection to a debtor company’s proposed candidate for appointment as the Future Claimants’ Representative (FCR) in a case involving an asbestos bankruptcy trust. An FCR is appointed to represent the possible future interests of individuals who are not yet, but may become, sick from exposure to asbestos from a company’s operations. The interests of future claimants can be adverse to the interests of current claimants who are paid first and may deplete trust funds available to pay to future claimants.
In the objection filed in the Duro Dyne case, the USTP asserts that the candidate’s apparent conflicts of interest and close connections with lawyers representing current claimants may compromise his independence in serving as the FCR. The proposed FCR was selected by the plaintiffs’ and debtors’ lawyers under a pre-negotiated trust plan that lacks protections against fraudulent claims (allowing depletion of the trust funds), but that provides the FCR with a long-term position that will continue long after confirmation of a bankruptcy plan. The USTP seeks further discovery to determine if the apparent conflicts and connections are disqualifying.
According to Principal Deputy Associate Attorney General Jesse Panuccio, “In recent years, evidence has emerged that asbestos trusts lack the transparency and rigorous auditing necessary to prevent fraud, waste, and abuse. To best protect all victims, those appointed in asbestos cases should be held to the same conflicts prohibitions and standards of independence that are required of other fiduciaries appointed under the Bankruptcy Code.”
The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The Program has 21 regions and 92 field office locations. Learn more on the Program at: https://www.justice.gov/ust.
Long Island Companies and Owners Charged with Falsely Labeling Squid as OctopusRead the Press Release
A federal grand jury indicted two Long Island corporations and their owners for their scheme to falsely label seafood that was later sold across the country. The indictment accuses Roy Tuccillo Sr., 58, and his son, Roy Tuccillo Jr., 31, both of Jericho, and two of their Westbury food processing and distribution companies, Anchor Frozen Foods Inc., and Advanced Frozen Foods Inc., of importing giant squid from Peru and marketing and selling it to grocery stores as octopus. The four defendants are charged with conspiracy to commit wire fraud and violate the Lacey Act, as well as four substantive Lacey Act violations.
Acting Assistant Attorney General Jeffrey H. Wood for the Justice Department’s Environment and Natural Resources Division and Director James Landon of the National Oceanic and Atmospheric Administration’s (NOAA) Office of Law Enforcement (OLE) announced the indictment today.
“NOAA’s Office of Law Enforcement is dedicated to enforcing federal marine resource laws, including the Lacey Act and its provisions on mislabeling,” said James Landon, OLE’s Director. “This investigation is a great example of how we collaboratively work with other federal partners, such as the Food and Drug Administration, to combat seafood fraud.”
Octopus and squid are distinct species of fish with great variance in their taxonomy, habitat, and physical characteristics. The U.S. Food and Drug Administration permits that food companies selling squid market it by its name or as calamari, while octopus is the only acceptable name when selling octopus. In general, octopus has a greater retail price than squid. The indictment alleges that for over three years the defendants fraudulently imported, processed, marketed, sold, and distributed over 113,000 pounds of octopus that was actually squid.
The Lacey Act prohibits submitting false descriptions of fish that were transported and sold in interstate commerce. The defendants are charged with four counts of defrauding grocery stores in New Jersey and Massachusetts.
This case was investigated by the Department of Commerce’s National Oceanic and Atmospheric Administration Office of Law Enforcement with assistance from the U.S. Food and Drug Administration. It is being prosecuted by Trial Attorney Ryan Connors and Senior Trial Attorney David Kehoe of the Justice Department’s Environmental Crimes Section.
An indictment is merely an allegation, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Statement by Attorney General Sessions Supporting Proposed Legislation to Counter Unmanned Aircraft SystemsRead the Press Release
Attorney General Sessions today issued the following statement of support for legislation to counter threats from unmanned aircraft systems:
“From the Wright Brothers to John Glenn to today, Americans have been at the leading edge of aeronautics and made breakthroughs that have changed our world for the better. Drone technology, one of the latest of these inventions, promises to strengthen us economically by creating American jobs and transforming American industry. Unfortunately, however, this new tool can also be used to wreak havoc by criminals, terrorists and other bad actors. That is why the Trump administration has worked on legal reforms to enable law-abiding people to use this technology for good while protecting them from those who would use it for ill.
“Bipartisan legislation in Congress called the Preventing Emerging Threats Act would finally give federal law enforcement the authority we need to counter the use of drones by drug traffickers, terrorists and criminals while protecting the freedom to use drones lawfully. We need this authority today — and so I urge my former colleagues in Congress to send this legislation to President Trump’s desk. That will let us get to work, fight this new threat and keep the American people safe.”
Former Sergeant Sentenced to Prison for Violating Civil Rights of DetaineeRead the Press Release
David Prejean, a former Sergeant in the K-9 Unit of the Iberia Parish Sheriff’s Office (IPSO), was sentenced yesterday to serve 30 months in prison and one year supervised release on his guilty plea to violating the civil rights of a detainee, announced John Gore, the Acting Assistant Attorney General of the Justice Department’s Civil Rights Division, David C. Joseph, the United States Attorney for the Western District of Louisiana, and FBI New Orleans Division Special Agent in Charge Eric J. Rommal. Prejean previously admitted, during a guilty plea hearing, that he acted without legal justification on Dec. 6, 2012, when he commanded his K-9 to bite the detainee, and then struck the detainee, resulting in bodily injury.
According to statements made in court and filings made in connection with the guilty plea, Prejean was a K-9 Sergeant on the IMPACT Unit, a specialized unit at IPSO, when he was called to the Iberia Parish Jail on Dec. 6, 2012, to assist with a shakedown. During the course of the shakedown, an inmate turned to look at Prejean after being told not to, at which point Prejean threw the inmate to the ground and then commanded his dog to bite him. Prejean also struck the inmate several times. Despite the fact that the inmate had complied with Prejean’s commands and did not pose a threat to anyone on the rec yard, Prejean allowed the dog to bite the inmate for several seconds before pulling the K9 away. Prejean’s unlawful use of force resulted in injury to the inmate. Following the assault, Prejean wrote false report designed to cover up his unjustified use of force.
“The United States Constitution protects all individuals, including those who are incarcerated,” said Acting Assistant Attorney General John Gore. “The Justice Department will uphold the rule of law and aggressively prosecute any violation of an inmate’s civil rights.”
“Law enforcement officers face danger in the field every day protecting the rights and safety of those in our communities,” said U.S. Attorney Joseph. “It is necessary that they follow the laws they are sworn to protect. Our district takes violations of the law seriously and will hold those accountable those who ignore those laws, especially those who tasked with their enforcement.”
“FBI New Orleans vigorously investigates all credible allegations of civil rights violations, including those who are incarcerated,” FBI New Orleans Division Special Agent in Charge Eric J. Rommal stated. “Violations of one’s civil rights will not be tolerated.”
This case was investigated by the Lafayette Resident Agency of the FBI, and was prosecuted by Assistant United States Attorney Mary Mudrick of the Western District of Louisiana and Trial Attorney Tona Boyd of the Civil Rights Division.
Department of Justice Announces the Rollout of an Updated United States Attorneys’ ManualRead the Press Release
The Department of Justice announced the rollout of an updated United States Attorneys’ Manual, now titled the Justice Manual. It is the first comprehensive review and overhaul of the Manual in more than 20 years. The Department-wide effort involved the dedicated work of over 200 Department of Justice employees.
“This was truly a Department-wide effort, involving hundreds of employees collaborating from many different Department components,” said Deputy Attorney General Rod Rosenstein. “To mark this significant undertaking, and to emphasize that the Manual applies beyond the United States Attorneys’ Offices, we have renamed it the Justice Manual. Though the name has changed, the Manual will continue as a valuable means of improving efficiency, promoting consistency, and ensuring that applicable Department policies remain readily available to all employees as they carry out the Department’s vital mission.”
By 2017, many provisions of the Manual no longer reflected current law and Department practice. This diminished the Manual’s effectiveness as an internal Department resource, and reduced its value as a source of transparency and accountability for the public. To bring the Manual up to date, employees from around the country, primarily career attorneys, undertook a yearlong, top-to-bottom review. The Department’s goals were to identify redundancies, clarify ambiguities, eliminate surplus language, and update the Manual to reflect current law and practice.
Some specific changes include expanding the Principles of Federal Prosecution to incorporate current charging and sentencing policies, and adding new policies on religious liberty litigation, third-party settlement payments, and disclosure of foreign influence operations.U.S. Trustee Program Reaches $5 Million Settlement with Citibank to Protect Debtors in BankruptcyRead the Press Release
The Department of Justice’s U.S. Trustee Program (USTP) has entered into a national settlement agreement with Citibank N.A. (Citibank), Department Stores National Bank (DSNB) (collectively Citi), and FDS Bank requiring Citi to pay $5 million to remediate robo-signed proofs of claim filed in consumer bankruptcy cases in connection with more than 71,000 Macy’s-branded credit card accounts, Director Cliff White of the Executive Office for U.S. Trustees announced today.
The proposed settlement has been filed in the U.S. Bankruptcy Court for the Northern District of Georgia, where it is subject to court approval. In the settlement, Citi acknowledges that its affiliate DSNB issued Macy’s-branded consumer credit card accounts. FDS Bank was responsible for account servicing activities and contracted certain bankruptcy-related services to vendors. Between 2012 and 2015, tens of thousands of proofs of claim were filed in bankruptcy cases across the country on DSNB’s behalf. These proofs of claim were improperly signed, under the penalty of perjury, by employees of a third-party vendor who had not reviewed and/or lacked knowledge of the contents of the proof of claim. In some cases, the electronic credentials of the vendor’s employees were used to file claims where the employee did not review the claim. These improper practices were identified when Citibank took over the servicing of the accounts in late 2015 from the third parties. Citi self-reported the errors to the USTP.
“I am pleased that Citi has acted responsibly by self-reporting these deficient bankruptcy practices and agreeing to remediate affected borrowers to address the errors,” said USTP Director White. “I am also encouraged that Citi has instituted internal bankruptcy procedures to ensure that the vendor’s errors should not be repeated. When creditors fail to comply with the bankruptcy laws and rules, they must be held accountable. The U.S. Trustee Program remains diligent in its effort to ensure that creditors as well as debtors who disregard the law will be held accountable for their actions.”
Settlement Terms
Citi agrees to pay $5 million to remediate DSNB account holders in whose bankruptcy cases improperly signed proofs of claim may have been filed. Using the former vendor’s data, Citi has undertaken a review and identified more than 71,000 eligible accounts. Each eligible account will receive a pro rata share of the $5 million dollar payment. Citi will also send a notice to eligible accounts informing the account holder of the reason for the payment.
Citi’s independent internal compliance group will perform an audit to ensure that Citi has met its obligations under the settlement. Citi will then file a report with the Court certifying that it has completed its corrective action obligations under the settlement.
While the settlement resolves any actions that could be brought by the USTP for the covered conduct, it does not impact the rights of borrowers or other third parties, including trustees.
The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws. The Program has 21 regions and 92 field office locations. Learn more information on the Program at: https://www.justice.gov/ust.
Newly-Released FBI Crime Data Shows Violent Crime Decline in 2017Read the Press Release
The Federal Bureau of Investigation today released the 2017 edition of its Crime in the United States (CIUS) report, a part of the FBI’s Uniform Crime Reports (UCR). The report, which covers January-December 2017, reflects that after two consecutive, historic increases in violent crime, in the first year of the Trump Administration the nationwide violent crime rate began to decline. The report estimates that the nationwide violent crime rate decreased by approximately one percent in 2017, while the nationwide homicide rate decreased by nearly one and a half percent.
“After historic increases in violent crime in 2015 and 2016, we are beginning to see encouraging signs,” Attorney General Jeff Sessions said. “But our work is not done. While we have made progress, violent crime and drug trafficking continue to plague our communities and destroy the lives of innocent, law-abiding Americans. Under the Trump administration, the Department of Justice has restored common sense criminal charging and sentencing policies, surged resources to jurisdictions facing some of the highest levels of violence and drug abuse, targeted enforcement efforts against the most violent offenders, and developed innovative approaches to address pervasive crime problems. And we are continuing our steadfast commitment to work with our state, local, and tribal partners across the country to confront the lawlessness, deter violent crime, dismantle criminal organizations and gangs, eradicate the scourge of drug trafficking, and restore the rule of law. The American people deserve no less.”
The report released today also adjusts and corrects numbers for 2016, showing that the nationwide homicide rate actually increased by 8.8 percent (as opposed to 7.9 percent, as previously reported) in 2016. In 2017, the rate of rapes increased by 2.2 percent, while the aggravated assault rate increased by 0.3 percent and the robbery rate decreased by 4.7 percent. Aggravated assaults were 65 percent of violent crimes reported to law enforcement in 2017, while robberies and rapes were 25.6 percent and 8 percent, respectively. Murder accounted for 1.4 percent of violent crimes reported to law enforcement in 2017.
For the full report click here.Former Owner of Marble Mining Company in Afghanistan Convicted for Defrauding U.S. government Agency and Defaulting on a $15.8 Million LoanRead the Press Release
The former owner of a now-defunct marble mining company in Afghanistan was found guilty today by a federal jury for his role in defrauding the Overseas Private Investment Corporation (OPIC), a U.S. government agency, and defaulting on a $15.8 million loan.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, Special Inspector General for Afghanistan Reconstruction (SIGAR) John F. Sopko and Assistant Director in Charge Nancy McNamara of the FBI’s Washington Field Office made the announcement.
After a seven-day trial, Azam Doost, aka “Adam Doost,” “Mohammad Azam Doost” and “Mohammad Azim” (Doost), 40, most recently of Freemont, California, was found guilty of three counts of major fraud against the United States, eight counts of wire fraud, four counts of false statements on loan applications or extensions and five counts of money laundering. Doost is scheduled to be sentenced on Dec. 14 by U.S. District Judge Amit P. Mehta of the District of Columbia, who presided over the trial.
The evidence admitted at trial showed that in February 2010, while working at his company, Equity Capital Mining LLC, Doost, along with his brother, obtained a $15.8 million loan from OPIC for the development, maintenance and operation of a marble mine in western Afghanistan. The loan proceeds were paid directly from OPIC to the alleged vendors who provided equipment for the mine, as reported to OPIC by Doost or his consultant. Doost was required to deal with these companies in arms-length transactions or, to the extent any transactions were other than at arms-length, he was required to report to OPIC any affiliation he had with a vendor. Instead, Doost falsely informed OPIC that he had no affiliation with any of the vendors with whom he dealt, when in fact he had financial relationships with several of them. The evidence further showed that Doost’s business partner was listed on the bank accounts for a number of these vendors and, upon receipt of money from OPIC into the respective accounts, significant amounts of this money were then transferred from that respective account to companies and individuals with whom Doost was associated, or to pay debts Doost owed. For example, Doost’s consultant received a commission of $444,000 for his purported consulting services with the first of three disbursements from OPIC, yet $40,000 was transferred from the consultant’s account to a Doost company in California.
The evidence at trial further showed that when the time came for Equity Capital Mining LLC to repay the loan to OPIC, Doost provided purported reasons to OPIC why it was not able to make those repayments at a time when Doost had control of sufficient funds to make those repayments. Ultimately, Doost and his brother failed to repay any of the principal on the OPIC loan, paying only a limited amount of interest, and ultimately defaulted on the loan, the evidence showed.
SIGAR, with assistance from the FBI, investigated the case. The Criminal Division’s Office of International Affairs also provided important assistance in this case. Trial Attorneys Daniel Butler and Michael McCarthy of the Criminal Division’s Fraud Section are prosecuting the case.
Department of Justice, EPA Settle with Derive Systems over Aftermarket Emissions Defeat Devices in VehiclesRead the Press Release
Today, the U.S. Department of Justice and U.S. Environmental Protection Agency (EPA) announced a settlement with Derive Systems (Derive) addressing the sale of approximately 363,000 aftermarket products which the United States alleges were designed, in part, to defeat the emissions control systems of cars and trucks in violation of the Clean Air Act.
Over a span of multiple years, Derive sold products, including custom engine tuning software and parts, online and at distributers across the nation under the brand names of “Bully Dog” and “SCT” for use in many types of gasoline and diesel-fueled cars and trucks. Under the terms of the settlement, Derive will spend approximately $6.25 million to bring the company and its products into compliance with the Clean Air Act. Derive will also pay a civil penalty of $300,000.
“For decades, Americans have worked hard to significantly reduce harmful emissions from cars and trucks. Tremendous progress has been made and the air is much cleaner today across the nation. Unfortunately, not everyone is playing by the rules. Today’s settlement will bring Derive Systems and its aftermarket products into compliance with the Clean Air Act, and demonstrates to other manufacturers that products designed to unlawfully thwart vehicle emissions control systems will not be tolerated,” said Acting Assistant Attorney General Jeffrey H. Wood for the Justice Department’s Environment and Natural Resources Division. “The Department of Justice will continue to work with our partners at EPA to hold companies who violate environmental laws accountable, and to protect clean air for all Americans.”
“Manufacturers and sellers of automotive emissions control defeat devices should stand up and take notice of this settlement,” said Susan Bodine, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “EPA will protect air quality by vigorously enforcing the Clean Air Act’s prohibition on these devices.”
Derive manufactured and sold custom tuning software designed to access and overwrite the original vehicle manufacturer’s software. Vehicle manufacturers design vehicle software to reduce air pollution, monitor the vehicle’s on-board diagnostics of emissions controls, and otherwise comply with the Clean Air Act. Derive’s software enabled the user to remove emission control components that reduce tailpipe emissions, including catalysts, diesel particulate filters, exhaust gas recirculation systems, elements of on-board diagnostic systems, and other elements of design certified by vehicle manufacturers to comply with the Clean Air Act.
In addition, Derive sold parts or components for motor vehicles and motor vehicle engines that bypass, defeat, or render inoperative elements of design that were installed by the vehicle or engine manufacturer to comply with Clean Air Act emission standards. These handheld products—commonly known as “tuners”—enabled the user to easily turn off emission controls installed and certified by vehicle manufacturers to comply with the Clean Air Act.
Under the terms of the settlement, Derive must stop introducing new noncompliant tuners into commerce and retrofit existing tuners so that they comply with the Clean Air Act. All new and existing tuners offered for sale must have a reasonable basis demonstrating that the use of the products will not adversely affect vehicle emissions. Besides tuners, Derive must limit access to key emission control parameters in their custom tuning software and create a customer verification program for users of the custom tuning software, which includes training about vehicle functions, emission controls, and the Clean Air Act requirements. Derive must stop any marketing that would provide information on how consumers can defeat emission controls in their vehicles, and work with their national distributors to prevent the packaged sale of their products with companion defeat devices. Derive must train their employees to comply with the Clean Air Act. Derive must also pay a penalty of $300,000 based on the company’s demonstrated limited ability to pay a larger amount.
The proposed settlement is subject to a 30-day public comment period and final court approval, and will be lodged in the U.S. District Court for the District of Columbia. To view the consent decree or to submit a comment, visit the department’s website at: www.justice.gov/enrd/Consent_Decrees.html.
Department of Justice Will Award More Than $10 Million to Support Crime Reduction EffortsRead the Press Release
Attorney General Jeff Sessions today announced grant awards to Public Safety Partnership member sites as part of $10 million in funding to support state, local and tribal law enforcement departments and agencies and their partners who are fighting violent crime in jurisdictions across the United States.
The Office of Justice Programs’ Bureau of Justice Assistance, in partnership with the Bureau of Alcohol, Tobacco, Firearms, and Explosives, is awarding $5 million under the Local Law Enforcement Crime Gun Intelligence Center Integration Initiative to encourage local jurisdictions to use intelligence, technology and community engagement to identify unlawfully used firearms and to prosecute those who commit violent crimes.
Grant recipients include the PSP cities of Indianapolis, Indiana, $798, 866; Memphis, Tennessee, $714,055; Tulsa, Oklahoma, $800,000 and Baton Rouge, Louisiana, $634,971. Other locations include Detroit, Michigan, $800,000; the Albuquerque, New Mexico, Police Department, $452,108, and the City/County of San Francisco, California, $800,000. The jurisdictions will use these awards to hire personnel to utilize the National Integrated Ballistic Information Network (NIBIN), to purchase technology required to operate a Crime Gun Intelligence Center and ammunition for ballistic tests of recovered weapons.
The Attorney General also announced awards for BJA’s Technology Innovation for Public Safety (TIPS): Addressing Precipitous Increases in Crime program.
This program supports the Department’s priorities of reducing violent crime and supporting law enforcement officers, including prosecutors. While many jurisdictions are making significant progress implementing justice information sharing solutions to address critical gaps in crime prevention and response activities across organizations and jurisdictions, there remain challenges for the criminal justice system to respond to threats to public safety. This is especially true for efforts addressing significant increases in crime.
Justice information sharing technology refers to any hardware and software, hosted residentially or remotely, that plays a role in the collection, storage, sharing and analysis of criminal justice data. Funding under this program is provided to help state, local, territorial, and tribal jurisdictions use innovative technological solutions to enhance their justice information-sharing capacity.
Grant recipients include the PSP cities of Memphis, Tennessee, $417,224; Toledo, Ohio, $492,553; Flint, Michigan, $499,694 and Houston, Texas, $500,000. Other locations include Arizona Criminal Justice Commission, $317,834; City of Boynton Beach, Florida, $465,860; Clark County Social Service, Nevada, $500,000; New Mexico Second Judicial District Attorney, $500,000; State of Connecticut Department of Emergency Services and Public Protection; $419,804; Bergen County Prosecutor’s Office, New Jersey, $500,000; and Georgia Bureau of Investigation, $499,339. Additional information on the grant awards can be found at: www.bja.gov
Attorney General Jeff Sessions made the announcement during today’s National Public Safety Partnership Symposium on Violent Crime in Birmingham, Alabama. The National Public Safety Partnership is a DOJ-wide initiative that enables cities to consult with and receive a coordinated array of resources from DOJ’s programmatic and law enforcement components: the Bureau of Justice Assistance; United States Attorneys’ Offices; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the Federal Bureau of Investigation; the U.S. Drug Enforcement Administration; the U.S. Marshals Service; the Office on Violence Against Women; the Office of Justice Programs; the Office of Community Oriented Policing Services; and other federal agencies in order to improve local violence reduction strategies.Justice Department Seeks to Shut Down Tax Return Preparer Operating Stores in FloridaRead the Press Release
The United States filed a civil injunction suit seeking to bar Phillip Mott Harris II and his Florida-based business, 24/7 Tax Services, LLC from owning, operating, or franchising a tax return preparation business or preparing tax returns for others, the Justice Department announced today.
The complaint, filed in United States District Court in Florida, also requests that the court require Harris and the LLC to disgorge ill-gotten fees that they obtained from the U.S. Treasury through the alleged false tax return preparation.
According to the complaint, Harris and his tax preparation business prepare and file tax returns to falsely increase their customers’ refunds, and profit through exorbitant, often undisclosed fees, at the expense of their customers and the U.S. Treasury.
The complaint alleges that Harris and the LLC engage in misconduct, including:
- Falsely claiming the Earned Income Tax Credit;
- Claiming improper filing status (e.g., head of household even though the person is not entitled to that status);
- Fabricating businesses and related business income and expenses; and
- Charging deceptive and unconscionable fees.
According to the complaint, Harris previously worked at LBS Tax Services. Since September 2014, the United States has filed over 20 similar lawsuits in Florida, North Carolina, and Georgia, including suits against the franchisor of LBS and numerous former LBS franchisees and managers, many of whom allegedly rebranded and continued to operate tax preparation businesses. Through these lawsuits, the United States has obtained permanent injunctions and money judgments disgorging millions in ill-gotten tax preparation fees.
The IRS has a list of steps on its website that you can take and ten tips for choosing a tax preparer. Each year, the IRS releases the top 12 scams, known as the Dirty Dozen. Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2018, and taxpayers seeking a return preparer should remain vigilant. The IRS has some information on its website for choosing a return preparer and has launched a free directory of federal tax preparers.
In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division at [email protected] with details.
Colorado Man Pleads Guilty to Filing False Tax ReturnsRead the Press Release
A resident of Colorado pleaded guilty yesterday in U.S. District Court for the District of Colorado to four counts of filing a false income tax return, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division.
According to court documents, Jason Tammen falsified his income tax returns for tax years 2012, through 2015, by fraudulently inflating his federal and state tax withholdings. By claiming inflated federal and state withholding amounts, Tammen received tax refunds he was not entitled to and avoided paying taxes that he owed.
Sentencing is scheduled for November 29, 2018. Tammen faces a statutory maximum sentence of three years in prison on each count, as well as a term of supervised release, restitution and monetary penalties.
Principal Deputy Assistant Attorney General Zuckerman thanked special agents of IRS Criminal Investigation, who conducted the investigation, and Tax Division Trial Attorneys Sarah A. Kiewlicz and Lee F. Langston, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Houston Physician and a Pain Management Clinic Owner Each Sentenced to 35 Years in Prison for Running Pill Mill That Provided Unlawful Prescriptions for Millions of Doses of Opioids and Other Controlled SubstancesRead the Press Release
A Houston physician and the owner of a pain management clinic were each sentenced to 420 months in prison today for their roles in running a pill mill that provided tens of thousands of unlawful prescriptions for millions of doses of opioids and other controlled substances.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ryan Patrick of the Southern District of Texas and Special Agent in Charge Will R. Glaspy of the U.S. Drug Enforcement Administration’s (DEA) Houston Field Office made the announcement.
Gazelle Craig D.O., 42, and Shane Faithful, 49, both of Houston, Texas, were sentenced by U.S. District Judge David Hittner of the Southern District of Texas. Craig and Faithful were convicted at trial in March 2018 of one count of conspiracy to unlawfully distribute controlled substances and three counts of unlawfully distributing and dispensing controlled substances. The defendants were charged in an indictment returned on July 6, 2017.
“Today’s sentences should serve as a stark warning to any medical professional considering exploiting the opioid crisis for profit: you will be caught, you will be prosecuted, and you will pay a steep price for abusing your prescription power for personal gain,” said Assistant Attorney General Benczkowski. “In the midst of the deadliest drug crisis in our country’s history, Gazelle Craig and Shane Faithful sold millions of opioids and endangered the safety of an untold number of Americans. We should all be proud of the hard work being done by DEA’s Tactical Diversion Squad and the prosecutors in the Department of Justice’s Fraud Section.”
“Dr. Craig, along with clinic owner Shane Faithful, used their position of trust to illegally distribute over 2 million dosage units of hydrocodone into local communities across Houston,” said DEA Special Agent in Charge Glaspy. “It is this kind of illegal distribution of prescription drugs that feed the opioid epidemic and destroys families. The sentencing of Dr. Craig and Mr. Faithful is a victory for our communities while at the same time making a nationwide statement that the DEA and DOJ will not tolerate this type of illegal activity.”
According to evidence presented at trial, from March 2015 through July 2017, Craig and Faithful ran Gulfton Community Health Center (Gulfton), which operated as an illegal pill mill. The evidence showed that Craig unlawfully wrote approximately 18,252 prescriptions for over 2.1 million dosage units of hydrocodone, a Schedule II controlled substance, and approximately 15,649 prescriptions for over 1.3 million dosage units of carisporodal, a Schedule IV controlled substance. The combination of hydrocodone and carisoprodol is a dangerous drug cocktail with no known medical benefit, the evidence showed.
Craig regularly issued unlawful prescriptions for controlled substances to more than 60 patients a day, the evidence showed. “Crew leaders” ferried numerous patients to Gulfton so that Craig could provide them with unlawful prescriptions for controlled substances. Faithful and Craig charged approximately $300 for each prescription and required payment in cash. The defendants divided each day’s cash proceeds, often in excess of $15,000, from the sale of the unlawful prescriptions.
This case was investigated by the DEA. Trial Attorneys Scott Armstrong and Devon Helfmeyer of the Criminal Division’s Fraud Section are prosecuting the case.
The Fraud Section leads the Medicare Fraud Strike Force. Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in 12 cities across the country, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion. In addition, the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services, working in conjunction with the HHS Office of Inspector General, are taking steps to increase accountability and decrease the presence of fraudulent providers.
Houston Attorney Charged in Offshore Tax Evasion SchemeRead the Press Release
A federal grand jury sitting in Houston, Texas returned an indictment today charging a Houston attorney with one count of conspiracy to defraud the United States and three counts of tax evasion, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Department of Justice’s Tax Division and U.S. Attorney Ryan K. Patrick for the Southern District of Texas.
According to the indictment, Jack Stephen Pursley, also known as Steve Pursley, conspired with another individual to repatriate more than $18 million in untaxed earnings from the co-conspirator’s business bank account located in the Isle of Man. Knowing that his co-conspirator had never paid taxes on these funds, Pursley allegedly designed and implemented a scheme whereby the untaxed funds were made to appear to be stock purchases in United States corporations owned and controlled by Pursley and his co-conspirator.
The indictment alleges that Pursley received more than $4.8 million and an ownership interest in the co-conspirator’s ongoing business for his role in the fraudulent scheme. The indictment further alleges that for tax years 2009 and 2010 Pursley evaded the assessment of and failed to pay the incomes taxes due on this money by, amongst other means, withdrawing the funds as purported non-taxable loans or returns of capital. Pursley allegedly used the money he received to purchase personal assets, including a vacation home in Vail, Colorado and property in Houston.
If convicted, Pursley faces a statutory maximum sentence of five years in prison for the conspiracy count, and five years in prison for each count of tax evasion. He also faces a period of supervised release, monetary penalties, and restitution.
An indictment merely alleges that a crime has been committed. A defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Patrick commended special agents of IRS-Criminal Investigation, who investigated the case, and Senior Litigation Counsel Nanette Davis, Trial Attorney Grace Albinson, and Trial Attorney Sean Beaty of the Tax Division, who are prosecuting this case.Former Missouri County Executive and His Chief of Staff Sentenced to Prison for Stealing Campaign ContributionsRead the Press Release
A former elected county executive for Jackson County, Missouri and his chief of staff were sentenced to 27 months and six months in prison, respectively, for engaging in a scheme to steal campaign contributions, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.
Michael Sanders, 51, of Independence, Missouri, and Calvin Williford, 60, of St. Joseph, Missouri, were sentenced by U.S. District Judge Roseann A. Ketchmark of the Western District of Missouri. Sanders was sentenced on Wednesday to serve 27 months in prison followed by three years of supervised release and ordered to pay $40,000 in forfeiture. Williford was sentenced today to serve six months in prison followed by three years of supervised release and ordered to pay $36,000 in forfeiture. The defendants each pleaded guilty to a one-count information charging them with conspiracy to commit wire fraud on Jan. 26.
According to admissions made in connection with their pleas, Sanders was the elected County Executive for Jackson County from January 2007 until December 2015. Prior to serving as County Executive, Sanders was the elected Prosecuting Attorney for Jackson County. Williford was a senior staff member for Sanders, and then later chief of staff, in the Office of the County Executive from 2007 to December 2015. Prior to then, Williford served as Sanders’s Director of Public Affairs at the Jackson County Prosecuting Attorney’s Office. Sanders and Williford defrauded political committees with which Sanders was affiliated by converting campaign contributions for their personal use. Sanders and Williford misappropriated the money by directing the political committees to issue checks to certain individuals who performed little or no campaign-related work. Instead, the individuals cashed the checks and then returned a portion of the money to Sanders or Williford, who used the cash at times to pay for personal expenses.
The case was investigated by the FBI’s Kansas City Division. The case is being prosecuted by Trial Attorneys Lauren Bell and Edward P. Sullivan of the Criminal Division’s Public Integrity Section.
Tulsa Woman Pleads Guilty to Conspiracy to Distribute Methamphetamine and HeroinRead the Press Release
TULSA, Okla.— United States Attorney Trent Shores announced that Cherie Michelle Kelley, 36, of Tulsa, pleaded guilty in United States District Court, Tuesday, to participating in a methamphetamine and heroin distribution conspiracy and to possession of methamphetamine and heroin with intent to distribute.
From August 2017 to April 2018, Kelley conspired with Dannie Dill, 47, of Tulsa, along with others, to distribute illegal narcotics, including heroin and methamphetamine, in the greater Tulsa area. Dill was labeled by law enforcement as a “Top Ten” suspect of Operation Alpha, a Project Safe Neighborhoods initiative targeting northern Oklahoma’s most dangerous criminals.
As part of their scheme, Kelley and Dill stored narcotics and drug proceeds at two different houses where they lived together, one in Broken Arrow and one in Tulsa. Kelley would receive narcotics, including heroin, from her source of supply in Tulsa and use some of the heroin herself. Then she and Dill would resell the remainder of the narcotics. Kelley also agreed to allow her narcotics supply source to send illegal drug shipments for distribution from outside the state of Oklahoma to the Broken Arrow location.
“Methamphetamine and heroin continue to plague neighborhoods in northeastern Oklahoma because of criminals like Kelley and Dill. Drug dealers should know that our community is not open for their business,” said U.S. Attorney Trent Shores.
Project Safe Neighborhoods is a nationwide initiative that brings together federal, state, local and tribal law enforcement officials, prosecutors, and community leaders in an effort to identify the most pressing violent crime problems in a community and develop comprehensive solutions to address them.
The initiative originally started in 2001 but was revitalized in October 2017 as a result of the rise in violent crime the two previous years. Project Safe Neighborhoods has been upgraded and enhanced with new technologies, better accountability, and stronger partnerships within communities.
Several law enforcement agencies were involved in a coordinated effort to bring Kelley and Dill into custody in connection with the crime, including the Tulsa Police Department, the Federal Bureau of Investigation, the U.S. Marshals Service, and the Bureau of Alcohol, Tobacco, Firearms and Explosives. Assistant U.S. Attorneys Joel-lyn A. McCormick and Thomas E. Duncombe prosecuted the case.
Texas Couple Indicted on Forced Labor and Related ChargesRead the Press Release
Defendants Mohamed Toure, 57, and Denise Cros-Toure, 57, of Ft. Worth, Texas, were charged today in a five-count indictment with forced labor, alien harboring for financial gain, and conspiracies to commit forced labor and alien harboring, announced Acting Assistant Attorney General John Gore of the Justice Department’s Civil Rights Division, U.S. Attorney Erin Nealy Cox of the Northern District of Texas, and Special Agent in Charge Jeffrey McGallicher of the Department of State, Diplomatic Security Services’ Houston Field Office. Defendant Toure was also charged with making false statements to federal agents. The defendants were arrested on April 26, 2018, after being charged by criminal complaint.
According to the indictment, in January 2000, the defendants arranged for the victim, then a minor child, to travel alone from her village in Guinea, West Africa, to Southlake, Texas, to work for them in their home. For more than 16 years, the Toures allegedly forced her to work long hours – demanding she handle childcare, cook, clean, and perform yardwork. Although the victim was close in age to their five biological children, the couple denied her access to schooling, medical care, and other opportunities they afforded their own children, and on several occasions Denise Cros-Toure slapped or struck her as punishment. Until neighbors helped the victim escape in August 2016, the defendants allegedly denied her any pay, isolated her from her family and threatened serious harm if she refused to work.
As part of their scheme to compel the victim’s labor, the defendants confiscated her official documents and caused her to remain unlawfully in the United States after her tourist visa expired in March 2000 and threatened to send her back to Guinea if her work was unsatisfactory.
An indictment is merely an accusation, and the defendants are presumed innocent unless and until proven guilty. If convicted of forced labor, the defendants face a maximum sentence of 20 years in prison, a $250,000 fine, and mandatory restitution. If convicted of alien harboring, the defendants face a maximum sentence of 10 years in prison and a $250,000 fine.
The case is being investigated by Diplomatic Security Services’ Houston Field Office. It is being prosecuted by Trial Attorneys Rebekah Bailey and William Nolan of the Civil Rights Division’s Criminal Section and Human Trafficking Prosecution Unit and Assistant U.S. Attorney Chris Wolfe for the Northern District of Texas.
Justice Department Will Award up to $246 Million in Grants to Improve Public Safety in American Indian and Alaska Native CommunitiesRead the Press Release
WASHINGTON – United States Attorney Trent Shores joined the Department of Justice today in announcing more than $113 million in grant awards to improve public safety, serve victims of crime, combat violence against women, and support youth programs in American Indian and Alaska Native communities, including the Cherokee Nation, the Eastern Shawnee Tribe of Oklahoma, the Miami Tribe of Oklahoma, the Muscogee (Creek) Nation, the Osage Nation of Oklahoma, the Quapaw Tribe of Oklahoma, and the Wyandotte Nation.
“I am proud of the productive partnership forged between my office and tribal nations. Our collaborative enforcement model delivers fair, impartial, and effective justice to tribal communities in the Northern District of Oklahoma. These justice focused grants will strengthen priority areas for each of the tribal recipients,” said U.S. Attorney Trent Shores. “Implementing the programs and services supported by this funding will have a lasting impact in Indian Country. As United States Attorney, I will uphold the federal trust responsibility to the federally recognized tribes in northeastern Oklahoma.”
Nationwide, grants were awarded to 133 American Indian tribes, Alaska Native villages, and other tribal designees through the Coordinated Tribal Assistance Solicitation, a streamlined application for tribal-specific grant programs. Of the $113 million, just over $53 million comes from the Office of Justice Programs, more than $35 million from the Office on Violence Against Women, and more than $24.7 million from the Office of Community Oriented Policing Services.
In addition, the Department is in the process of allocating up to $133 million in a first-ever set aside program to serve victims of crime in American Indian and Alaska Native communities. The awards are intended to help tribes develop, expand and improve services to victims of crime by providing funding, programming and technical assistance. Recipients will be announced in the near future.
“With these awards, we are doubling the amount of grant funding devoted to public safety programs and serving victims of crime in Native American communities,” said Principal Deputy Associate Attorney General Jesse Panuccio, who made the announcement during his remarks at the 26th Annual Four Corners Indian Country Conference in Santa Fe, New Mexico. “There is an unacceptable level of violent crime and domestic abuse in American Indian and Alaska Native communities. This increase in resources, together with our aggressive investigation and prosecution of crimes, shows how seriously Attorney General Sessions and the entire Department of Justice take these issues. We are committed to reducing violent crime and improving public safety.”
The Four Corners Conference is facilitated annually by U.S. Attorneys from Arizona, Colorado, New Mexico and Utah to provide a forum for discussion of justice-related topics with a large number of populous and diverse tribal nations located in the region.
CTAS awards cover nine purpose areas: public safety and community policing; justice systems planning; alcohol and substance abuse; corrections and correctional alternatives; children’s justice act partnerships; services for victims of crime; violence against women; juvenile justice; and tribal youth programs. CTAS funding helps tribes develop and strengthen their justice systems’ response to crime, while expanding services to meet their communities’ public safety needs.
Today’s announcement is part of the Justice Department’s ongoing initiative to increase engagement, coordination and action on public safety in American Indian and Alaska Native communities.
A listing of today’s announced CTAS awards is available at: www.justice.gov/tribal/page/file/1095161/download.
Justice Department Seeks to Shut Down Tax Return Preparer Operating Stores in Florida and MississippiRead the Press Release
The United States filed a civil injunction suit seeking to bar Lakeesha Tucker, Lakeesha Tucker LLC, and Simplified Financial Services LLC, from owning, operating, or franchising a tax return preparation business and preparing tax returns for others, the Justice Department announced today.
The complaint, filed in United States District Court in Florida, also requests that the court require Tucker and the LLCs to disgorge ill-gotten fees that they obtained from the U.S. Treasury through the alleged false tax return preparation.
According to the complaint, Tucker and her tax preparation businesses, Lakeesha Tucker LLC and Simplified Financial Services LLC, which in 2018 operated stores in Florida and Mississippi, but in the past have also operated stores in North Carolina and Tennessee, prepare and file tax returns to falsely increase their customers’ refunds and profit through exorbitant and often undisclosed fees, at the expense of their customers and the U.S. Treasury.
The complaint alleges that Tucker and the businesses engage in misconduct, including:
- Falsely claiming the Earned Income Tax Credit;
- Claiming improper filing status (e.g., head of household even though the person is not entitled to that status);
- Fabricating businesses and related business income and expenses;
- Fabricating deductions, such as charitable contributions and unreimbursed, employee business expenses; and
- Charging deceptive and unconscionable fees.
According to the complaint, Tucker previously worked at LBS Tax Services. Since September 2014, the United States has filed 20 similar lawsuits in Florida, North Carolina, and Georgia, including suits against the franchisor of LBS and numerous former LBS franchisees and managers, many of whom allegedly rebranded and continued to operate tax preparation businesses. Through these lawsuits, the United States has obtained permanent injunctions and money judgments disgorging millions in ill-gotten tax preparation fees.
The IRS has a list of steps on its website that you can take and ten tips for choosing a tax preparer. Each year, the IRS releases the top 12 scams, known as the Dirty Dozen. Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2018, and taxpayers seeking a return preparer should remain vigilant. The IRS has some information on its website for choosing a return preparer and has launched a free directory of federal tax preparers.
In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers. Information about these cases is available on the Justice Department’s website. An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division at [email protected] with details.
Superseding Indictment Filed Against Man Charged for Attempted Manslaughter of a U.S. Airforce Airman on Military Base in JapanRead the Press Release
A federal grand jury in Little Rock, Arkansas, returned a seven-count superseding indictment against a man who was residing on the Misawa Air Base, a military base in Japan, charging him with multiple counts relating to the assault of three U.S. Air Force airmen. The federal grand jury also returned a two-count indictment against his son, charging him with two counts relating to his role in the assault.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Cody Hiland of the Eastern District of Arkansas and Colonel Kirk B. Stabler of the U.S. Air Force Office of Special Investigations made the announcement.
Rodrigo Pineda Gomez, 44, who was residing in Japan, is charged with one count of attempted voluntary manslaughter, one count of assault with a dangerous weapon, three counts of assault by striking, beating, or wounding, one count of resisting a federal officer, and one count of making a false statement to law enforcement. Miguel Gomez, 21, is charged with one count of resisting a federal officer and one count of assault by striking, beating, or wounding. The defendants had their initial court appearance earlier today before Magistrate Judge Patricia S. Harris in the Eastern District of Arkansas.
The superseding indictment, which was returned on Aug. 7, alleges that on Dec. 31, 2016, on Misawa Air Base in Japan, the defendants, Rodrigo Gomez and his son, Miguel Gomez, assaulted three U.S. Air Force airmen. The superseding indictment alleges that defendant Rodrigo Gomez attempted to kill one of the airmen, resisted arrest after law enforcement arrived, and then later made a false statement about the incident. Defendant Miguel Gomez assaulted one of the airmen and also resisted arrest after law enforcement arrived at the scene. At the time of the assault, defendant Rodrigo Gomez was the dependent spouse and Miguel Gomez the son of an active duty service member assigned to the base. Their last known U.S. address is alleged to be Jacksonville, Arkansas.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
The investigation was conducted by the U.S. Air Force Office of Special Investigations. The prosecution is being handled by Trial Attorney Frank Rangoussis of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Stacy Williams of the Eastern District of Arkansas.