District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
Alabama Resident Sentenced to Prison for Involvement in Stolen Identity Tax Refund Fraud SchemeRead the Press Release
Conspired with Others, Including Her Son, to Claim Fraudulent Tax Returns Claiming More Than $4 Million in Tax Refunds Using Stolen Names and Social Security Numbers
An Alabama woman was sentenced today to serve 51 months in prison for her role in a stolen identity refund fraud (SIRF) conspiracy, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck, Jr. of the Middle District of Alabama announced.
According to court documents and evidence presented at the sentencing hearing, between 2007 and 2012, Pamela Ann Smith, 56, of Lanett, Alabama, led a large-scale SIRF scheme from her tax preparation business, Jaycal Tax Service, in Phenix City, Alabama. Smith recruited her son, Calvin Perry and his friend, Ernest Simmons Jr., to participate in the scheme. As part of the conspiracy, Smith, Perry and Simmons opened multiple bank accounts and post office boxes. They filed more than 1,200 federal income tax returns using the stolen personal identification information of actual individuals, which included their names and social security numbers. The tax returns filed by Smith and her co-conspirators sought more than $4 million in fraudulent refunds from the Internal Revenue Service (IRS). U.S. Treasury checks were mailed to physical addresses and post office boxes under Smith’s control and subsequently deposited into multiple bank accounts controlled by Smith, Perry and Simmons. Smith personally received more than $300,000 from this scheme.
Smith pleaded guilty in November 2015 to one count of conspiracy to defraud the government with respect to filing false income tax refund claims and one count of aggravated identity theft. Perry and Simmons also pleaded guilty in December 2015 for their involvement in this SIRF scheme and are scheduled to be sentenced in April.
In addition to the prison term, U.S. District Judge John Antoon, II ordered Smith to serve three years of supervised release and pay restitution in the amount of $340,057.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Gregory P. Bailey, Michael C. Boteler and Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Jonathan Ross of the Middle District of Alabama, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Virginia Man Pleads Guilty to Employment Tax FraudRead the Press Release
An Ashland, Virginia, man who operated two masonry contractor construction companies pleaded guilty today in the U.S. District Court for the Eastern District of Virginia to one count of failing to collect, account for and pay over employment taxes to the Internal Revenue Service (IRS), announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia.
According to court documents, Michael Manning, 52, was the President of Manning Construction and Manning-Carhen Construction. Manning controlled the businesses’ finances and was responsible for filing the Employer’s Quarterly Federal Tax Returns, Forms 941 and paying over to the IRS the federal income, social security and Medicare taxes withheld from the wages of the businesses’ employees. For the third and fourth quarters of 2014, Manning willfully failed to comply with these legal obligations by failing to pay over more than $800,000 in withheld taxes to the IRS. Additionally, as part of his plea, Manning admitted that Manning Construction, regularly and deliberately created false financial statements for submission to financial institutions in order to comply with that business’s existing loan covenants, to encourage banks to lend new funds to the company, or to enable the renewal of existing loans.
Manning faces a statutory maximum sentence of five years in prison and a fine of $250,000. As part of his plea agreement, Manning also agreed to pay restitution to the IRS. The sentencing hearing is set for May 31.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Boente commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorney Melanie Smith of the Tax Division and Assistant U.S. Attorneys Jasmine Yoon and Thomas Garnett of the Eastern District of Virginia, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website
North Carolina Grocery Store Owner Sentenced to Prison for ConspiracyRead the Press Release
A Wendell, North Carolina, man was sentenced to 20 months in prison today following his plea of guilty to commit theft of government funds, Acting Assistant Attorney General Caroline D. Ciraolo of the Department of the Justice’s Tax Division and Acting U.S. Attorney John Stuart Bruce of the Eastern District of North Carolina announced.
According to court documents, Jose Alfonso Rodriguez Collado, 54, operated two grocery stores in Middlesex and Siler City, North Carolina. In 2012, co-conspirators brought Rodriguez fraudulently obtained U.S. Treasury checks, which Rodriguez cashed without receiving identification for the individuals listed on the checks, or any other source of authority for the co-conspirators to cash the checks. Rodriguez initially was not a licensed check casher, but one co-conspirator gave him $50,000 to qualify for a check-cashing license. In exchange for cashing the fraudulently obtained U.S. Treasury checks, Rodriguez was paid a fee for cashing the checks in excess of that allowed for under North Carolina law. In addition, Rodriguez cashed checks in excess of $10,000 and failed to file Currency Transaction Reports as required by law. The conspiracy caused a loss to the government of $2,502,348.
In addition to the prison term, U.S. District Court Judge Louise W. Flanagan of the Eastern District of North Carolina ordered Rodriguez to serve three years of supervised release following his prison term, and pay restitution to the IRS in the amount of $2,502,348.
Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Bruce commended special agents of Internal Revenue Service Criminal Investigation who investigated the case and Trial Attorneys Lauren Castaldi and Nathan Brooks of the Tax Division, who prosecuted the case.
More information about the Tax Division and its enforcement efforts can be found on the division’s website.
Missouri Tax Preparation Business Owner Indicted for Tax EvasionRead the Press Release
The owner of a St. Louis, Missouri, tax return preparation business was arrested today after a federal grand jury sitting in St. Louis returned an indictment on February 18 charging two counts of tax evasion, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
According to the indictment, from 2005 to 2011, Semere Tsehaye, 38, was the owner and operator of at least 20 Instant Tax Service (ITS) franchise locations operating in and around East Saint Louis, Illinois; Kansas City, Kansas; Kansas City and Saint Louis, Missouri. ITS was a brand name of ITS Financial LLC, a nationwide tax preparation business headquartered in Dayton, Ohio. Tsehaye owned and operated his ITS franchise locations using two entities named A&S Tax Service LLC (A&S) and ERI Enterprises, LLC (ERI).
During the years 2010 and 2011, Tsehaye generated fraudulent financial summaries that understated the gross receipts generated by A&S and ERI and provided them to his tax return preparer. Tsehaye’s tax return preparer used these financial summaries to prepare Tsehaye’s individual income tax returns, which Tsehaye then filed with the Internal Revenue Service (IRS). These tax returns were false in that they underreported A&S and ERI’s gross receipts by a total of approximately $506,000 in 2010 and $1.03 million in 2011.
If convicted, Tsehaye faces a statutory maximum sentence of five years in prison and a $250,000 fine on each count of tax evasion.
An indictment merely alleges that crimes have been committed. Defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Acting Assistant Attorney Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Senior Litigation Counsel Corey Smith and Trial Attorney Mark McDonald of the Tax Division, who are prosecuting the case. Acting Assistant Attorney Ciraolo also thanked the U.S. Attorney’s Office for the Eastern District of Missouri for their assistance.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Alfredo Beltran Leyva Pleads Guilty to International Drug Trafficking Conspiracy ChargesRead the Press Release
Attorney General Loretta E. Lynch announced today that Alfredo Beltran Leyva, also known as Mochomo, one of the leaders of the Beltran Leyva Organization, a Mexican drug-trafficking cartel responsible for importing multi-ton quantities of cocaine and methamphetamine into the United States, pleaded guilty to participating in an international narcotics trafficking conspiracy.
Assistant Director Joseph S. Campbell of the FBI’s Criminal Investigative Division, Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA) and Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) joined the Attorney General in making the announcement.
“For decades, Alfredo Beltran Leyva helped to lead one of the world’s most notorious drug cartels, causing widespread violence and disrupting lives,” said Attorney General Lynch. “With this guilty plea, justice has been done, and Beltran Leyva will be held accountable for his crimes. This conviction is the result of our close partnership with the Mexican government, and it should serve as a reminder that our countries will not rest in the fight against drug trafficking and violent crime.”
“This plea is the result of the unwavering commitment to aggressively investigate the leaders of transnational criminal organizations throughout world,” said Assistant Director Campbell. “The significant and constant cooperation between our domestic and international law enforcement partners aided significantly in this successful outcome.”
“Alfredo Beltran Leyva and his criminal network destroyed families and communities,” said Acting Administrator Rosenberg. “He oversaw a violent organization responsible for pushing dangerous drugs like cocaine and methamphetamine onto the streets of America and his guilty plea marks the end of his criminal reign and the beginning of his life behind bars.”
“Today’s guilty plea sends the strongest possible message to drug traffickers,” said Executive Associate Director Edge. “HSI and our law enforcement partners, both in the United States and around the world, will continue to work tirelessly to disrupt and dismantle international drug trafficking organizations and bring them to justice.”
Leyva, 45, was indicted on Aug. 24, 2012, for conspiracy to distribute cocaine and methamphetamine for importation into the United States. The defendant was extradited from Mexico to the United States on Nov. 15, 2014, and pleaded guilty before U.S. District Judge Richard J. Leon of the District of Columbia.
In court, the defendant admitted that he was part of a conspiracy to import large quantities of drugs into the United States. At the hearing, the government proffered evidence that from 1990 until his arrest in January 2008, the defendant was a leader of the Beltran Leyva Organization, a global criminal enterprise that was responsible for importing multi-ton quantities of cocaine and methamphetamine into the United States. Beltran Leyva admitted that he and his organization obtained tonnage quantities of cocaine from South American suppliers, which the defendant and his organization helped finance and which were transported to Mexico via air, land and sea. Once the cocaine reached Mexico, the defendant’s organization transported it to central key points in Mexico, including to Culiacan, Sinaloa, which was also the central point for the collection of billions of dollars from drug trafficking proceeds in the United States. Additionally, the government’s evidence would have shown that the organization carried out acts of violence, including murders, kidnappings, tortures and violent collections of drug debts, in order to sustain the drug importation operation. Further, the government’s evidence would have shown that the organization made payments to public officials to ensure that the organization’s drug shipments passed through Mexico uninhibited.
On May 30, 2008, the president added the Beltran Leyva Organization to the Department of Treasury’s Office of Foreign Asset Control’s Specially Designated Nationals and Blocked Persons list pursuant to the Foreign Narcotics Kingpin Designation Act. On Aug. 20, 2009, the president specifically designated Beltran Leyva as a specially designated drug trafficker under the same Kingpin Act.
The FBI’s El Paso Office led the investigation in partnership with the DEA’s New York Field Division and HSI’s New York Office as part of the Organized Crime Drug Enforcement Task Force. Deputy Chief Andrea Goldbarg, Assistant Deputy Chief Amanda Liskamm and Trial Attorney Adrian Rosales of the Criminal Division’s Narcotic and Dangerous Drugs Section and Assistant U.S. Attorney Marcia M. Henry of the Eastern District of New York are prosecuting the case. The Criminal Division’s Office of International Affairs and the U.S. Attorneys’ Offices of the Eastern District of New York, the Southern District of Florida, the Southern District of Texas, the Northern District of Georgia and the Northern District of Illinois provided substantial assistance. The Justice Department thanks the government of Mexico for their assistance in this matter.
Justice Department Sues to Shut Down Houston Tax PreparerRead the Press Release
Before Incarceration, Defendants Used False Art Appraisals to Purportedly Reduce Customers’ Liabilities
The United States has filed a lawsuit asking a federal district court in Houston, Texas, to permanently bar two men from preparing false tax returns, the Justice Department announced today. The defendants named in the lawsuit are John E. Carter, individually and doing business as Midwestern Financial Group Inc., and Sulayman Mamadou Jarra, individually and doing business as African Art Appraisal Services.
According to the complaint, Carter promoted a tax evasion scheme to his clients, telling them they could reduce their federal tax liability by supposedly donating African tribal art to an educational institution or museum. The complaint states that Carter provided his clients with an appraisal by Jarra that substantially overvalued the art, and that for many of the returns, the signature was forged on the Internal Revenue Service (IRS) form where the institution purportedly acknowledged receipt of the art. Carter then used the false appraisal to prepare tax returns for his customers, claiming false deductions for charitable donations, according to the complaint.
Carter was convicted in 2014 of five counts of willfully aiding and assisting in the preparation and presentation of false tax returns. He was sentenced to 41 months in prison. In 2013, Jarra pleaded guilty to one count of aiding and assisting in the preparation and presentation of false tax returns; he received a sentence of probation.
Return preparer fraud is one of the Internal Revenue Service’s Dirty Dozen Tax Scams for 2016. The IRS has some tips on their website for choosing a tax 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 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 with details.
Four Pennsylvania-Based Companies and Two Individuals Agree to Pay $3 Million to Settle False Claims Act Suit Alleging Evaded Customs DutiesRead the Press Release
Corporation Pleads Guilty to Criminal Charges and Sentenced
The Department of Justice announced today that three importers and their owners – Ameri-Source International Inc., Ameri-Source Specialty Products Inc., Ameri-Source Holdings Inc., Ajay Goel and Thomas Diener – and a related importer, SMC Machining LLC, incorporated at Goel’s direction and formerly owned by his wife, have agreed to pay $3 million to resolve a lawsuit brought by the United States under the False Claims Act. The lawsuit alleged that the defendants had engaged in a scheme to evade customs duties on imports of small-diameter graphite electrodes from the People’s Republic of China (PRC). Small-diameter graphite electrodes are columns of synthetic graphite with diameters of around 16 inches or less that are used as fuel in electric arc and ladle furnaces, such as those used in steel manufacturing. The companies are all based in Pennsylvania.
“The nation’s customs laws are designed to protect domestic manufacturers from foreign products that enter the country at below-market prices due to unfair practices abroad,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This settlement shows that the Department of Justice is committed to pursuing claims against anyone involved in a scheme to seek an unfair advantage in U.S. markets by evading duties on imported goods, including the individuals who run the companies and knowingly participate in such schemes.”
The Department of Commerce assesses and the U.S. Department of Homeland Security’s Customs and Border Protection (CBP) collects duties to protect U.S. manufacturers from unfair competition abroad by leveling the playing field for domestic products. The particular duties at issue in this case are antidumping duties, which protect domestic manufacturers against foreign companies’ “dumping” products on U.S. markets at prices below cost. Imports of PRC-manufactured small-diameter graphite electrodes have been subject to antidumping duties since Aug. 21, 2008.
The settlement announced today resolves claims that Ameri-Source International Inc. evaded antidumping duties on 15 shipments of small-diameter graphite electrodes from the PRC from December 2009 to March 2012. The United States contended that Ameri-Source International misclassified the size of the electrodes to avoid paying the duties. There are no antidumping duties on larger diameter graphite electrodes. The United States also alleged that Goel, Diener and the other companies caused and conspired in the misrepresentation to evade duties. Ameri-Source International also waived indictment and pleaded guilty today to two counts of smuggling goods into the United States. In U.S. District Court in the Western District of Pennsylvania, Ameri-Source International admitted that on April 27, 2011 and June 9, 2011, the company falsely declared imported cargo from the PRC as being graphite rods greater than 16 inches in diameter. Chief Judge Joy Flowers Conti immediately sentenced the corporation to pay a $250,000 criminal fine within 10 days and applied the payment of the $3 million to the loss of antidumping duties of $2,137,420.00.
“We are committed to protecting U.S. jobs and industries from those who seek an unfair advantage in the U.S. marketplace,” said U.S. Attorney David J. Hickton for the Western District of Pennsylvania. “This office’s aggressive criminal and civil enforcement efforts to combat and prosecute the evasive practices of both the corporations and individuals who perpetrated this scheme demonstrate our resolve to ensure a level playing field for all.”
“Antidumping duties level the playing field for U.S. manufacturers,” said CBP Commissioner R. Gil Kerlikowske. “This is a prime example of how U.S. Customs and Border Protection partners with the Department of Justice, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI) and the U.S. Department of Commerce to enforce antidumping duty laws.”
“This settlement underscores one of HSI’s primary efforts, which is to ensure a level playing field for companies engaged in legitimate trade and commerce with the United States,” said Special Agent in Charge John Kelleghan of Homeland Security Investigations (HSI) Philadelphia. “HSI special agents will continue to protect the revenue of the United States and aggressively investigate individuals and companies who attempt to operate outside our laws and regulations.”
“The Department of Commerce Office of Inspector General is dedicated to supporting bureaus such as the International Trade Administration in protecting the U.S. economy from the type of criminal activity disclosed in this case,” said Special Agent in Charge Duane E. Townsend of the U.S. Department of Commerce Office of Inspector General. “We greatly appreciate the cooperation and efforts of HSI and the U.S. Attorney’s Office that resulted in this agreement.”
The allegations resolved by the settlement were originally brought by whistleblower Graphite Electrode Sales Inc. under the qui tam provisions of the False Claims Act. The act permits private parties to sue on behalf of the government those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct. The United States may intervene in and take over the lawsuit, as it has done here. The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit. Graphite Electrode Sales Inc. will receive approximately $480,000 as its share of today’s settlement.
The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Pennsylvania, CBP, ICE HSI and the Department of Commerce’s International Trade Administration and Office of Inspector General.
The lawsuit is captioned United States ex rel. Graphite Electrode Sales, Inc. v. Ameri-Source Holdings, Inc., et al., Case No. 13-cv-0474 (W.D. Pa.). The claims resolved by this settlement are allegations only; there has been no determination of liability except as admitted in the criminal proceedings.
Former CNMI Firefighter Sentenced to 30 Years for Sexual Exploitation of a ChildRead the Press Release
Saipan, CNMI – ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced that U.S. District Court Chief Judge Ramona V. Manglona sentenced Richard Sullivan Benavente, age 45, today, to the statutory maximum of 360 months in prison followed by three years of supervised release for sexual exploitation of a child. The Court also ordered him to pay restitution to the two minor victims.
In July 2013, the CNMI Department of Public Safety received a video file from an anonymous source depicting Benavente and a minor female engaging in sexually explicit conduct. The minor was later identified. The same video file was found on Defendant’s cell phone pursuant to a search warrant. Benavente was arrested on a complaint on August 14, 2013. On August 22, 2013, a federal grand jury returned an indictment against Benavente charging him with two counts of sexual exploitation of a child and one count of attempted sexual exploitation of a child in violation of 18 U.S.C. § 2251(a). He pleaded guilty to count one of the indictment on February 10, 2014, pursuant to a plea agreement requiring him to cooperate with the United States and provide truthful information about his criminal conduct, as well as the conduct of others. However, on October 9, 2015, the Court ruled that Benavente breached his plea agreement by committing perjury at the trial of another defendant at which Benavente testified, when he claimed to own a cell phone the prosecution argued was used by that other defendant to contact minors for purposes of prostitution.
Following the sentencing, United States Attorney for the Districts of Guam and the Northern Mariana Islands, Alicia A.G. Limtiaco, stated, “Consistent with the Department of Justice’s efforts to combat child sexual exploitation, the United States Attorney’s Office, together with its federal and local law enforcement partners, will vigorously investigate and prosecute individuals who prey on children, and strive to rid our islands of this unconscionable crime. We encourage and urge members of our community to report to authorities any and all forms of abuse, exploitation and violence; and remind ourselves, that it is all of our responsibility to protect others, especially the most vulnerable such as our children and minors, from those who perpetrate these heinous crimes.”
This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
The case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorneys Rami S. Badawy, Ross K. Naughton, and Garth R. Backe.
Two Executives Charged for Conspiring to Eliminate Competition to Supply Water Treatment ChemicalsRead the Press Release
Two water treatment chemicals executives were indicted in Newark, New Jersey, for their roles in a conspiracy to eliminate competition among suppliers of liquid aluminum sulfate to municipalities and pulp and paper companies in the United States, the Department of Justice announced today.
Vincent J. Opalewski, former president, vice president and general manager of a water treatment chemicals manufacturer headquartered in Parsippany, New Jersey, and Brian C. Steppig, director of sales and marketing of a water treatment chemicals manufacturer headquartered in Lafayette, Indiana, are the second and third executives charged in connection with the conspiracy, which sought to eliminate competition for contracts to supply liquid aluminum sulfate. Liquid aluminum sulfate is a coagulant used by municipalities to treat drinking and waste water and by pulp and paper companies in their manufacturing processes.
“Municipalities and pulp and paper companies deserve competitive prices for water treatment chemicals,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “These charges reflect our ongoing efforts to hold accountable those who conspire to cheat their customers responsible for their crimes.”
“These charges send a message that anyone intent on corrupting the free market will be identified and brought to justice,” said Acting Special Agent in Charge Andrew Campi of the FBI’s Newark Division. “Our mission is to protect victims who don't see these crimes occurring, but who always end up paying the price.”
The indictment, returned by a grand jury in the U.S. District Court for the District of New Jersey, alleges that Opalewski, from 2005 to 2011, and Steppig, from 1998 until 2011, and their co-conspirators participated in the conspiracy by meeting to discuss each other’s liquid aluminum sulfate business, agreeing to stay away from each other’s historical customers, submitting intentionally losing bids to favor the intended winner of the business, withdrawing inadvertently winning bids and discussing with each other prices to be quoted to municipalities and pulp and paper companies.
The charges contained in the indictment are allegations and not evidence of guilt. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
The investigation into collusion in the liquid aluminum sulfate industry is being conducted by the New York Office of the Antitrust Division and the FBI’s Newark Division. Anyone with information regarding price fixing, bid rigging or customer allocation in the sale and marketing of liquid aluminum sulfate should contact the Antitrust Division’s New York Office at 212-335-8000, call the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, or visit www.justice.gov/atr/contact/newcase.htm.
Opalewski Steppig Indictment (313.51 KB)
Ship Captain Pleads Guilty to Felony Obstruction Related to Pollution from Tanker Ship Traveling to CharlestonRead the Press Release
A Filipino citizen and the captain of the tanker ship, T/V Green Sky, pleaded guilty today to one felony count in federal court in Charleston, South Carolina, for obstructing a U.S. Coast Guard investigation into pollution crimes aboard the vessel.
Genaro Anciano, 52, who was the highest ranking officer aboard the ship, pleaded guilty to one count of Obstruction of an Agency Proceeding. The charge stems from a Coast Guard investigation in late August 2015 into the bypass of pollution prevention equipment, including the use of a “magic device,” on the Green Sky. In court papers, the defendant stated that members of the ship’s engine room, including a senior officer, admitted to illegally discharging overboard. These admissions occurred prior to the August 2015 Coast Guard inspection at the Port of North Charleston. During the investigation, Anciano made several false and misleading statements to the Coast Guard to cover up the illegal conduct.
The T/V Green Sky is a 30,263 gross ton, ocean-going vessel that operates as a petroleum and chemical tanker. The vessel is approximately 600 feet in length and is registered in Liberia. The vessel is owned by an entity incorporated in the Marshall Islands. Over the course of several days, the normal operation of the Green Sky generates thousands of gallons of bilge wastes that are contaminated with petroleum products and oil residues. These bilge wastes must be removed for the vessel to operate safely.
Both the United States and Liberia are parties to the MARPOL treaty, which regulates the overboard discharge of bilge waste. It was prohibited to discharge bilge wastes from the T/V Green Sky without first running that effluent through the ship’s oily water separator. According to the MARPOL treaty, all overboard discharges from the vessel’s bilges had to be recorded in the T/V Green Sky’s oil record book. A bypass of the oily water separator, which is not recorded in the oil record book, jeopardizes the accuracy and integrity of that document. It is a separate federal crime for oceangoing vessels to enter a U.S. port with a false oil record nook.
Anciano’s sentencing has not been scheduled.
The case was investigated by the U.S. Coast Guard Investigative Service with assistance from inspectors from Sector Charleston as well as Legal from U.S. Coast Guard in Miami. The case is being prosecuted by Christopher L. Hale of the Justice Department’s Environmental Crimes Section of the Environment and Natural Resources Division and Assistant U.S. Attorney Matt Austin of the U.S. Attorney’s Office for the District of South Carolina in Charleston.
Oregon Husband and Wife Plead Guilty to Crimes Related to Filing False Retaliatory Liens Against Federal Judges and Other Federal OfficialsRead the Press Release
An Oregon husband and wife pleaded guilty today to crimes related to filing false retaliatory liens against two federal judges, a clerk of court and a federal prosecutor for performing their official duties, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Ronald D. Joling, 72, formerly of Coquille, Oregon, pleaded guilty to one count of conspiracy to file false retaliatory liens against government officials. His wife, Dorothea J. Joling, 73, also formerly of Coquille, pleaded guilty to one count of filing a false retaliatory lien. In October 2014, the Jolings were convicted on various criminal charges related to their federal income taxes. As part of their guilty pleas today, the Jolings admitted that while they were on pretrial release in the criminal tax case they filed false retaliatory liens claiming that multiple federal officials each owed the Jolings $100.003 million.
Ronald Joling admitted that between August 2013 and February 2014 he conspired with his wife to file and cause the filing of false liens against the real and personal property of two federal judges assigned to the criminal tax case, the Clerk of Court for the U.S. District Court for the District of Oregon and the Assistant U.S. Attorney who prosecuted the tax case. These liens were filed in the public records of the State of California. He also admitted to filing false liens against a former federal judge and the former U.S. Attorney for the District of Oregon. As part of her guilty plea, Dorothea Joling admitted to filing and causing the filing of a false lien against the judge who presided over the Jolings’ criminal tax case.
The Jolings were scheduled to be sentenced in the tax case on April 22, 2015, but did not appear in court. They were fugitives until they were arrested on Oct. 5, 2015 in Arizona. On Dec. 11, 2015, the Jolings were sentenced in the criminal tax case; Ronald Joling was sentenced to 97 months in prison and Dorothea Joling was sentenced to 48 months in prison.
The Jolings each face a statutory maximum sentence of 10 years in prison and a $250,000 fine on the retaliatory lien charges. U.S. District Judge Michael J. McShane set sentencing for June 22.
Acting Assistant Attorney General Ciraolo thanked special agents of the Internal Revenue Service – Criminal Investigation, who investigated the case and Senior Litigation Counsel Jen Ihlo and Trial Attorney Thomas Agnello, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
North Carolina Man Pleads Guilty in U.S. Treasury Check SchemeRead the Press Release
A Smithfield, North Carolina, man pleaded guilty today to one count of a dual object conspiracy to defraud the United States and commit theft of public money, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney John Stuart Bruce of the Eastern District of North Carolina.
According to court documents, Oscar Barahona Fiallos, 52, owned and operated a tax preparation business in Smithfield. In 2011 and 2012, Fiallos cashed large numbers of U.S. Treasury checks issued as a result of fraudulent tax returns filed with the Internal Revenue Service (IRS) in the names of third parties. The checks were provided to Fiallos by co-conspirators and Fiallos never met the third-party payees, who purportedly lived in New York, New Jersey and North Carolina. Fiallos deposited the checks into his bank account and then provided co-conspirators with cash equal to the value of the check, less a check cashing fee. After a bank account was closed, Fiallos obtained a check cashing license so that he could continue cashing checks for his co-conspirators. He also prepared Individual Taxpayer Identification Number applications and false tax returns for third parties he did not meet and who did not sign the documents.
Fiallos faces a statutory maximum sentence of five years in prison. In his plea agreement, he has agreed to pay restitution to the United States in the amount of $2,802,496. The sentencing hearing is set for June.
Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Bruce commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Lauren M. Castaldi and Nathan P. Brooks of the Tax Division, who are prosecuting this case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
North Carolina Man Pleads Guilty in Tax Refund Fraud SchemeRead the Press Release
A Raleigh, North Carolina, man pleaded guilty today to one count of conspiracy to commit theft of public money and one count of theft of public money, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney John Stuart Bruce for the Eastern District of North Carolina announced.
According to court documents, in 2011 and 2012 Wilfredo Acosta Hidalgo, 47, conspired with check cashers to cash U.S. Treasury refund checks issued as a result of fraudulently-filed income tax returns. Hidalgo provided the check cashers with U.S. Treasury checks issued to third-parties in whose name the fraudulent returns were filed. The check cashers deposited the U.S. Treasury checks into their business bank accounts and provided Hidalgo with cash equal to the value of the U.S. Treasury checks, less a check-cashing fee. The third-party payees were not present when the Treasury checks were cashed.
Hidalgo faces a statutory maximum sentence of five years in prison for the conspiracy charge and 10 years in prison for the charge of theft of public funds. In his plea agreement, he has agreed to pay restitution to the United States in the amount of $4,280,871. Hidalgo’s sentencing has not been scheduled.
Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Bruce commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Lauren Castaldi and Nathan Brooks of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Department of Justice and Federal Trade Commission Encourage Massachusetts to Consider Expanding Treatment Options for GlaucomaRead the Press Release
Agencies Submit Joint Statement Regarding Proposed Legislation Addressing Glaucoma Care by Optometrists in Massachusetts
The Department of Justice’s Antitrust Division and the Federal Trade Commission (FTC) have issued a joint statement encouraging the Massachusetts legislature to consider expanding the services that optometrists can provide to glaucoma patients. The statement describes the potential benefits to patients of enhanced competition among glaucoma care providers, including greater access to timely and cost competitive care. It recommends that the legislature only maintain restrictions on the ability of optometrists to treat glaucoma that are necessary to ensure patient health and safety.
The joint statement is in response to a request by Massachusetts State Representative Bradley H. Jones for views on the possible competitive effects of Massachusetts House Bill 1973 (HB 1973), which would expand the scope of practice for optometrists in Massachusetts and permit them to treat glaucoma and other optical diseases.
“Patients suffering from glaucoma – which affects 2.7 million Americans nation-wide – deserve safe, effective and affordable treatment options,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “As our statement explains, increasing competition among glaucoma care providers in Massachusetts, consistent with patient safety, can help provide greater access to care that is also more timely and cost competitive.”
The agencies’ comments are limited to HB 1973’s effect on glaucoma care. Glaucoma is the second leading cause of blindness worldwide, but early diagnosis and managed treatment offer protection against the risk of vision loss or blindness. With respect to glaucoma care, HB 1973 would allow optometrists in Massachusetts – like optometrists in other states – to treat glaucoma patients using medications, subject to certain training and referral requirements. Providing optometrists a role in glaucoma care, with conditions the legislature finds appropriate to ensure patient safety, has the potential benefit to bring the benefits of competition to Massachusetts health care consumers.
Attorney General Lynch Attends Five Country Ministerial and Quintet of Attorneys GeneralRead the Press Release
Recognizing the continuing challenges to the security of our peoples and our countries, and that a collective approach is required to address these challenges, on February 16-17, 2016 United States Attorney General Loretta Lynch and United States Secretary of Homeland Security Jeh Johnson jointly hosted the Five Country Ministerial and the Quintet of Attorneys General meetings with their counterparts: Australian Attorney-General George Brandis; Australian Minister for Immigration and Border Protection Peter Dutton; Canadian Public Safety Minister Ralph Goodale; Minister of Justice and Attorney General of Canada Jody Wilson-Raybould; Canadian Minister of Immigration, Refugees and Citizenship John McCallum; New Zealand Attorney General Christopher Finlayson; United Kingdom Home Secretary Theresa May; and United Kingdom Attorney General Jeremy Wright.
On the first day, the Attorneys General and Ministers jointly discussed a range of topics including: information sharing for counterterrorism purposes while respecting privacy; countering violent extremism; cybercrime; encryption; and foreign investment in critical infrastructure. They agreed on the importance of expanding efforts to counter the threat of Daesh, al-Qaeda and their affiliates particularly by strengthening border and aviation security. They also agreed that violent extremism poses a critical threat for all five countries and decided to coordinate activity to counter violent extremism, including by engaging with communities and with social media and other high-tech industries. They further agreed to share best practices and evaluation of the impact of this work. They also agreed that while Government engagement is important, government itself cannot and should not be the only actor to counter violent extremism, and needs to partner with communities to reach isolated and vulnerable individuals and address the drivers of extremism in our societies. While recognizing the value of strong encryption and the need to protect civil liberties and privacy rights, Attorneys General and Ministers shared concerns about the challenges encryption presents to law enforcement agencies seeking to fight terrorism and serious and organized crime.
On the second day, the Attorneys General of the Quintet met separately to discuss cybercrime, criminal justice reform, and the need to uphold the rule of law and individual liberties in the face of national security threats. They shared their countries’ experiences concerning reforms to national security laws and reaffirmed the critical importance of meeting security imperatives while protecting civil liberties. The Attorneys General agreed to continue to discuss the application of the international law requirements for self-defense, including imminence.
On the same day, immigration and national security Ministers met separately and recognized the benefits of legitimate travelers and migrants and discussed ways to address challenges posed by mass migration and refugee flows, information sharing to facilitate travel and to enhance each country’s ability to identify and prevent the travel of criminals and terrorists across borders, and ways to enhance visa processes for certain travelers. The Ministers also recognized the value of trusted traveler programs.
The Attorneys General and Ministers agreed to continue discussions on enhancing cooperation on screening of refugees and asylum seekers. They agreed to explore opportunities for greater sharing of security and law enforcement information amongst the five countries.
The Attorneys General and Ministers reaffirmed the importance of working collaboratively on law enforcement and national security issues. They agreed to continue to coordinate efforts to more effectively address issues of mutual concern, and to ensure the security and prosperity of our citizens consistent with respect for individual rights and freedoms.
Fifty-One Hospitals Pay United States More Than $23 Million to Resolve False Claims Act Allegations Related to Implantation of Cardiac DevicesRead the Press Release
The Department of Justice has reached settlements with 51 hospitals in 15 states for more than $23 million related to cardiac devices that were implanted in Medicare patients in violation of Medicare coverage requirements, the Department of Justice announced today. These settlements represent the final stage of a nationwide investigation into the practices of hundreds of hospitals improperly billing Medicare for these devices. With these additional agreements, the Justice Department’s investigation has now yielded settlements with more than 500 hospitals totaling more than $280 million.
“These settlements demonstrate the Department’s continued vigilance in pursuing hospitals and health systems that violate Medicare’s national coverage rules,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “We will hold accountable those who do not abide by the government’s rules in order to protect the federal fisc and, more importantly, patient health.”
An implantable cardioverter defibrillator, or ICD, is an electronic device that is implanted near and connected to the heart. It detects and treats chaotic, extremely fast, life-threatening heart rhythms, called fibrillations, by delivering a shock to the heart, restoring the heart’s normal rhythm. It is similar in function to an external defibrillator (often found in offices and other buildings) except that it is small enough to be implanted in a patient’s chest. Only patients with certain clinical characteristics and risk factors qualify for an ICD covered by Medicare.
Medicare coverage for the device, which costs approximately $25,000, is governed by a National Coverage Determination (NCD). The Centers for Medicare and Medicaid Services implemented the NCD based on clinical trials and the guidance and testimony of cardiologists and other health care providers, professional cardiology societies, cardiac device manufacturers and patient advocates. The NCD provides that ICDs generally should not be implanted in patients who have recently suffered a heart attack or recently had heart bypass surgery or angioplasty. The medical purpose of a waiting period - 40 days for a heart attack and 90 days for bypass/angioplasty - is to give the heart an opportunity to improve function on its own to the point that an ICD may not be necessary. The NCD expressly prohibits implantation of ICDs during these waiting periods, with certain exceptions. The Department of Justice alleged that from 2003 to 2010, each of the settling hospitals implanted ICDs during the periods prohibited by the NCD.
“The settlements announced last October and today demonstrate the Department of Justice’s commitment to protect Medicare dollars and federal health benefits,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida. “Guided by a panel of leading cardiologists and the review of thousands of patients’ charts, the extensive investigation behind the settlements was heavily influenced by evidence-based medicine. In terms of the number of defendants, this is one of the largest whistleblower lawsuits in the United States and represents one of this office’s most significant recoveries to date. Our office will continue to vigilantly protect the Medicare program from potential false billing claims.”
“We will not stand idly by while Medicare coverage rules are ignored,” said Inspector General Daniel R. Levinson of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “OIG worked closely with the Department of Justice to ensure such violators made substantial payments to settle these false billing claims.”
The department previously settled with 457 hospitals for more than $250 million.
The settlements announced today involve 51 hospitals, which are listed on the attached chart. Most of the settling defendants were named in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant. The lawsuit was filed in federal district court in the Southern District of Florida by Leatrice Ford Richards, a cardiac nurse and Thomas Schuhmann, a health care reimbursement consultant. The whistleblowers have received more than $3.5 million from the settlements announced today.
The settlements were the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Southern District of Florida and HHS-OIG’s Office of Investigations and Office of Counsel to the Inspector General.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $27.4 billion through False Claims Act cases, with more than $17.4 billion of that amount recovered in cases involving fraud against federal health care programs.
The claims resolved by these settlements are allegations only and there has been no determination of liability.
This lawsuit is captioned U.S. ex rel. Ford et al. v. Abbott Northwestern et al. No. 08-cv-20071 (S.D. Fla.)
Federal Government Contractor Sentenced to Prison for Accepting Kickbacks and Tax EvasionRead the Press Release
Concealed Receipt of Approximately $2 Million in Kickbacks from IRS
An Enterprise, Alabama, resident was sentenced today in the Southern District of Florida to 48 months in prison to be followed by three years of supervised release for accepting unlawful kickbacks and tax evasion, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
According to court documents and statements made in open court, Victor Villalobos, 47, worked for a federal prime contractor at Fort Rucker, Alabama. In 2009, Villalobos approached Maxim Silinsky, a Florida-based subcontractor for this company, and solicited illegal kickbacks on the federal subcontracts that Silinsky held in connection with the federal prime contractor. Villalobos agreed that in exchange for kickback payments he would refrain from conduct that would unfavorably affect Silinsky’s business relationship with the federal prime contractor and help ensure that he obtained additional business.
As part of his plea, Villalobos admitted that from June 2009 to December 2014, he received approximately 57 separate wire transfers totaling more than $1.9 million in kickback payments from various foreign and domestic bank accounts controlled by Silinsky. At two separate meetings in 2015, Villalobos accepted envelopes from Silinsky containing cash kickbacks totaling $60,000. Between June 2009 and February 2015, Villalobos attempted to conceal his receipt of the kickbacks by forming nominee entities and opening nominee bank accounts. Villalobos also admitted that he evaded paying income taxes on the kickback payments by causing false federal income tax returns to be filed with the Internal Revenue Service (IRS).
In addition to his prison sentence, U.S. District Judge Daniel T.K. Hurley ordered Villalobos to pay $542,562 in restitution to the IRS. As part of his plea agreement, Villalobos also agreed to be permanently debarred from federal government contracting.
Silinsky pleaded guilty to filing a false tax return in November 2015 and cooperated in the investigation and prosecution of Villalobos. Silinsky was sentenced to one year and one day in prison on Feb. 2. Silinsky also cooperated in the investigation and prosecution of Trevor Smith, a retired U.S. Air Force Master Sergeant who pleaded guilty in October 2015 to unlawfully disclosing confidential procurement information and filing a false tax return. On Jan. 28, Smith was sentenced to 18 months in prison.
Acting Assistant Attorney General Ciraolo commended special agents of IRS Criminal Investigation, the U.S. Air Force’s Office of Special Investigations, the Department of Defense’s Office of the Inspector General and the U.S. Army’s Criminal Investigation Division, who investigated this case and Trial Attorneys Charles M. Edgar Jr. and Jason H. Poole of the Tax Division, who prosecuted this case. Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Southern District of Florida for their substantial assistance.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Tribunal Federal Cierra Las Operaciones De Empresa De Preparación De Declaraciones De Impuestos De Extensión NacionalRead the Press Release
Un tribunal federal en Chicago ordenó a Servicios Latinos Inc. cerrar su empresa de preparación de declaraciones de impuestos en todo el país, anunció hoy el Departamento de Justicia. La orden surge después de que el Departamento de Justicia entablara una demanda civil contra la empresa y sus propietarios, Georgina Lopez, Pamela Miranda y Jorge A. Miranda, en la que alegaba que los demandados falsamente declararon obligaciones tributarias inferiores de sus clientes y exageraron el derecho de sus clientes a reembolsos tributarios. El interdicto también prohíbe a Lopez, Pamela Miranda y Jorge Miranda actuar como preparadores de declaraciones de impuestos federales, ser propietarios u ocuparse de las operaciones de empresas de preparación de declaraciones de impuestos y emplear a preparadores de declaraciones de impuestos. Los demandados aceptaron la presentación del interdicto, pero no admitieron los alegatos en la demanda.
De acuerdo con la demanda, Servicios Latinos atendía en alrededor de 84 locales en hasta 30 estados, con ubicaciones que incluían Kennet Square, Pensilvania; Kansas City, Misuri, y Las Vegas, Nevada. La demandaba alegaba que los empleados de los acusados prepararon declaraciones de impuestos a la renta que:
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Falsamente alegaban tener derecho a créditos tributarios por hijo;
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Falsamente alegaban tener derecho al Crédito Tributario por Ingresos del Trabajo;
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Declaraban categorías de contribuyentes falsas; y
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Declaraban cifras de ingresos y gastos incorrectas.
La demanda alega que Servicios Latinos ha preparado más de 42.000 declaraciones de impuestos a la renta federales desde 2012. El Servicio de Impuestos Internos [Internal Revenue Service (IRS)] estima que la pérdida sufrida por el Tesoro de EE.UU. debido a la conducta de los demandados supera los 4.7 millones de dólares solo para 2014, de acuerdo con la demanda.
El fraude de preparador de declaraciones de impuestos ha sido nombrado uno de los Doce ardides tributarios sucios del Servicio de Impuestos Internos [Internal Revenue Service (IRS)]. El IRS tiene en su portal algunos consejos para elegir un preparador de impuestos y ha lanzado un directorio sin cargo de preparadores de declaraciones de impuestos federales. En la última década, la División de Impuestos ha obtenido interdictos contra cientos de preparadores de impuestos inescrupulosos. Existe información sobre estos casos disponible en el portal del Departamento de Justicia. Se encuentra una lista alfabética de personas prohibidas de preparar declaraciones de impuestos y promover ardides tributarios en esta página. Si usted cree que una de las personas o empresas bajo prohibición puede estar violando un interdicto, por favor comuníquese con la División de Impuestos con detalles.
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PTC Inc. Subsidiaries Agree to Pay More Than $14 Million to Resolve Foreign Bribery ChargesRead the Press Release
Two subsidiaries of Massachusetts software company PTC Inc. entered into a non-prosecution agreement and agreed to pay a $14.54 million penalty today to resolve the government’s investigation into whether the companies improperly provided recreational travel to Chinese government officials in violation of the Foreign Corrupt Practices Act (FCPA), announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.
According to admissions made in the resolution documents, Parametric Technology (Shanghai) Software Company Ltd. and Parametric Technology (Hong Kong) Ltd. (collectively, PTC China), through local business partners, arranged and paid for employees of various Chinese state-owned enterprises to travel to the United States, ostensibly for training at PTC Inc.’s headquarters in Massachusetts, but primarily for recreational travel to other parts of the United States, including New York, Los Angeles, Las Vegas and Hawaii. PTC China paid a total of more than $1 million through its business partners to fund these trips, while during the same time period, PTC China entered into more than $13 million in contracts with the Chinese state-owned entities. Company employees typically accompanied the Chinese officials on these trips. PTC China admitted that the cost of these recreational trips was routinely hidden within the price of PTC China’s software sales to the Chinese state-owned entities whose employees went on the trips.
As part of the non-prosecution agreement, PTC China agreed to pay the criminal penalty, to continue to cooperate with the department, to enhance its compliance program and to periodically report to the department on the implementation of its enhanced compliance program. The department reached this resolution based on a number of factors. Among other factors, PTC China did not receive voluntary disclosure credit or full cooperation credit because, at the time of its initial disclosure, it failed to disclose relevant facts that it had learned in connection with a prior internal investigation and did not disclose those facts until the department uncovered additional information independently and brought them to PTC China’s attention. By the conclusion of the investigation, however, the companies had provided to the department all relevant facts known to them, including information about individuals involved in the FCPA misconduct.
In a related matter, PTC Inc. reached a settlement today with the U.S. Securities and Exchange Commission (SEC) under which it agreed to pay $11,858,000 in disgorgement plus $1.764 million in prejudgment interest. Thus, the approximately $28 million in combined penalty and disgorgement far exceeds the $13 million in contracts associated with the improper payments.
The FBI’s Boston Field Office investigated the case. Trial Attorney Aisling O’Shea of the Criminal Division’s Fraud Section prosecuted the case. The U.S. Attorney’s Office of the District of Massachusetts and the SEC also provided assistance during the investigation.
Justice Department Settles Employment Discrimination Lawsuit Against City of Chicago Police DepartmentRead the Press Release
The Department of Justice announced today that it has reached a settlement agreement with the city of Chicago to resolve allegations that the Chicago Police Department (CPD) discriminated against entry-level police officer applicants on the basis of national origin, in violation of Title VII of the Civil Rights Act of 1964.
In a joint motion filed today in the U.S. District Court for the Northern District of Illinois, the Justice Department and the city requested that the court enter a provisional order that sets forth the terms of the settlement agreement, including more than $2 million in back pay, a number of priority hires and pension benefits. The motion also asks the court to schedule a fairness hearing, an opportunity provided by Title VII for those affected by the proposed agreement to comment on the settlement.
The proposed settlement, once approved by the district court, will resolve the complaint filed on Feb. 5, 2016. In that complaint, the Justice Department alleged that during its 2006 hiring cycle, the city used a 10-year continuous U.S. residency requirement to screen entry-level police officer applicants. The department further alleged that the residency requirement disproportionately removed applicants born outside of the United States from consideration in the hiring process and was not related to the job. Title VII prohibits discrimination in employment on the basis of race, color, sex, national origin or religion, whether the discrimination is intentional or involves the use of employment practices that have a disparate impact and are not job related and consistent with business necessity. This settlement is distinct from the department’s investigation into allegations concerning the Chicago Police Department’s methods of policing and its practices with respect to the use of force; that investigation remains ongoing.
“When brave men and women aspire to serve their communities as police officers, hiring procedures must evaluate the skills they need on the job, not where they come from or what they look like,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “This agreement avoids costly litigation, provides relief for job applicants who suffered from discrimination and helps the Chicago Police Department refocus on fair hiring practices going forward.”
“Removing unlawful barriers to employment continues to be a top priority of the EEOC,” said Director Julianne Bowman of the EEOC’s Chicago District. “We are pleased that the successful collaboration between the Justice Department and the EEOC removed one such barrier and produced positive results for those who were unjustly denied police officer positions in the Chicago Police Department.”
Chicago no longer uses the 10-year continuous U.S. residency requirement challenged by the department. In addition to back pay and priority hiring relief for some applicants, the settlement agreement would require the city to evaluate whether its current five-year continuous U.S. residency requirement complies with Title VII and to provide Title VII compliance training to personnel involved in Chicago Police Department hiring. All priority hires must meet the city’s lawful selection criteria for qualified entry level police officers.
The case was brought by Trial Attorneys Valerie Meyer, Kathleen Lawrence and Carol Wong of the Civil Rights Division’s Employment Litigation Section. Enforcement of federal employment discrimination laws is a top priority for the Justice Department. Additional information about Title VII and other federal employment laws is available on the Civil Rights Division’s website at www.justice.gov/crt.
Chicago Proposed Consent Judgment
Illinois Woman Charged in Stolen Identity Tax Fraud SchemeRead the Press Release
A Poplar Grove, Illinois resident was indicted by a federal grand jury today on six counts of mail fraud, six counts of aggravated identity theft and one count of access device fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Zachary T. Fardon of the Northern District of Illinois.
According to the indictment, Shameka Carr filed fraudulent tax returns with the Internal Revenue Service (IRS) in the names of individuals whose identities she had stolen. Carr is alleged to have directed the IRS to issue the tax refunds requested on these fraudulent returns in the form of prepaid debit cards and U.S. Treasury checks, both of which were mailed to addresses she had access to in Rockford, Illinois, and surrounding areas. It is further alleged that Carr used the debit cards and U.S. Treasury checks for her personal benefit.
If convicted, Carr faces a statutory maximum sentence of 20 years in prison for each mail fraud count, 15 years in prison for the charge of access device fraud and a mandatory sentence of two years in prison for each count of aggravated identity theft, which would be in addition to any other term of imprisonment she receives. Carr also faces potential fines and restitution.
An indictment merely alleges that crimes have been committed. Defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Acting Assistant Attorney General Ciraolo commended the U.S. Postal Inspection Service, IRS Criminal Investigation and the Boone County Sheriff’s Department, who investigated the case and Trial Attorneys Michael C. Boteler and John T. Mulcahy of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Federal Court Shuts Down Nationwide Tax Preparation BusinessRead the Press Release
A federal court in Chicago has ordered Servicios Latinos Inc. to close its nationwide tax preparation business, the Justice Department announced today. The order comes after the Justice Department filed a civil lawsuit against the business and its owners, Georgina Lopez, Pamela Miranda and Jorge A. Miranda, alleging that the defendants falsely understated their customers’ tax liabilities or overstated their customers’ entitlement to a tax refund. The injunction also prohibits Lopez, Pamela Miranda and Jorge Miranda from acting as federal tax preparers, owning or operating tax preparation businesses and employing tax preparers. The defendants agreed to entry of the injunction, but did not admit the allegations in the complaint.
According to the complaint, Servicios Latinos operated out of approximately 84 stores in as many as 30 states, with locations including Kennet Square, Pennsylvania; Kansas City, Missouri; and Las Vegas, Nevada. The complaint alleged that the defendants’ employees prepared income tax returns that:
- Falsely claim child tax credits;
- Falsely claim the Earned Income Tax Credit;
- Claim incorrect filing statuses; and
- Report incorrect income and expense figures.
The complaint alleges that Servicios Latinos has prepared more than 42,000 federal income tax returns since 2012. The Internal Revenue Service (IRS) has estimated that the loss to the U.S. Treasury from the defendants’ conduct exceeds $4.7 million for 2014 alone, according to the complaint.
Return preparer fraud has been named one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams for 2016. The IRS has some tips on their website for choosing a tax 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 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 with details.
Two Mail Thieves Sentenced to 34 Months and 12 Months, Respectively, forRead the Press Release
ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced that JON MICHAEL MAPOTE VILLENA, age 29, of Mangilao, and ANNALIN MARIE PEREZ ALDAN, age 20, of Dededo, were sentenced on February 12, 2016, before District Judge Alex R. Munson, in the U.S. District Court of Guam. VILLENA received 34 months imprisonment with a three year supervised release term. ALDAN received 12 months and one day imprisonment with a three year supervised release term. The pair were also ordered to pay over $12,000 in restitution to their victims and ordered to forfeit proceeds of their crimes. Their sentences follow convictions for access device fraud and aggravated identity theft.
In June and July 2015, VILLENA and ALDAN, engaged in a crime spree, burgling several United States Post Offices in Guam. The defendants stole undelivered United States Mail from over
30 different post office boxes. A First Hawaiian Bank MasterCard debit card belonging to a postal customer was among the items of stolen United States Mail. VILLENA and ALDAN then used that debit card to purchase goods, including Apple electronics, at local and national retailers all over Guam.U.S. Attorney Alicia A.G. Limtiaco stated, “The United States Attorney’s Office, along with our law enforcement partners, will vigorously pursue those who vandalize and obstruct the operations of the United States Postal Service. We will also aggressively pursue and prosecute those who would victimize the residents of Guam through identity theft.”
This incident was investigated by the United States Postal Inspection Service. The case was prosecuted by Assistant United States Attorney Mohammad Khatib.
Attorney General Lynch and Solicitor General Verrilli Statements on the Passing of Supreme Court Justice Antonin ScaliaRead the Press Release
Attorney General Loretta E. Lynch and Solicitor General Donald B. Verrilli Jr. released the following statements regarding the passing of Supreme Court Justice Antonin Scalia:
“Justice Antonin Scalia was, and will always be remembered as, one of the most influential and eloquent Justices ever to serve on the U.S. Supreme Court,” said Attorney General Lynch. “His indomitable conviction and his fierce intelligence left a lasting imprint – not just on the way the Supreme Court resolves cases, but on the legal landscape that he helped to transform. A lion of American law has left the stage, and it is up to all of us – every American – to keep our national constitutional dialogue as lively and as learned as he left it.”
“I am saddened by the passing of Justice Antonin Scalia,” said Solicitor General Verrilli. “He was a great jurist and a great man who served the Court and the country with honor and distinction. We will miss him very much. On behalf of my colleagues in the Office of the Solicitor General, I extend our deepest condolences to Mrs. Scalia and to the rest of his family.”
U.S. Attorney Alicia Limtiaco Guest Speaker at PATA MeetingRead the Press Release
ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), was invited to be the guest speaker at the Pacific Asia Travel Association (PATA) meeting, which was held on December 2, 2015, at the office of the Guam Visitors Bureau. U.S. Attorney Limtiaco presented information to the PATA membership about our Pacific Regional Response to Combat Human Trafficking Initiative, how human trafficking relates to the visitor and tourism industry, and what the tourism industry can do to prevent human trafficking and identify and support victims of trafficking.
The Pacific Regional Response to Combat Human Trafficking Initiative (the “Initiative”), which is a collaborative effort of the U.S. Attorney’s Office for the Districts of Guam and the NMI; the U.S. Department of State, Office to Monitor and Combat Trafficking in Persons; the U.S. Department of Labor; the U.S. Department of Interior, Office of Insular Affairs; the Guam HTTF; the NMI HTIC; and other community partners. U.S. Attorney Limtiaco also elaborated on the intersection and relationship between human trafficking, sexual assault, child abuse and domestic and family violence, and prevention and enforcement efforts in the Pacific region.
The Initiative employs a multidisciplinary model, including participation, coordination, and collaboration among law enforcement, prosecution, victim service providers, social services, medical, mental and public health professionals, faith based organizations, educational institutions, Consulates, and other community stakeholders. The Initiative calls for the establishment and provision of victim services, investigation and prosecution of human trafficking, training opportunities, community outreach/ public awareness and prevention programs, and creation of human trafficking task forces and coalitions in the Pacific region island communities. The Initiative also provides fundamental training in human trafficking, including victimization, investigation and prosecution, prevention efforts, and other related topics to law enforcement, prosecution, victim service providers, social services, medical, mental and public health professionals, faith based organizations, educational institutions, Consulates, and other community stakeholders in our Pacific region island communities, which is critical to effective prevention and enforcement efforts in the region.
As taken from their website, PATA was founded in 1951, and “is a not-for profit association that is internationally acclaimed for acting as a catalyst for the responsible development of travel and tourism to, from and within the Asia Pacific region. Its member organizations comprise of 88 government, state and city tourism bodies, nearly 22 international airlines, airports and cruise lines, 62 educational institutions, and hundreds of travel industry companies in Asia Pacific and beyond. Thousands of travel professionals belong to 43 active PATA chapters worldwide.”
Monty McDowell, Member, PATA Board of Directors/Assistant Secretary Education Committee Co-Chair, U.S. Attorney Alicia Limtiaco and Pilar Laguana, President of PATALaw Enforcement Sensitive Training Conducted by IRS-Criminal Investigation in the Districts of Guam and the NMIRead the Press Release
Alicia A.G. Limtiaco, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), announced that the U.S. Attorney’s Office sponsored law enforcement sensitive training on Guam on February 3, 2016, and in Saipan, Northern Mariana Islands, on February 5, 2016. The presenters at the training were Teri Alexander, Special Agent in Charge, IRS-Criminal Investigation (IRS-CI); Jean Song, IRS Attorney; Ryan Thompson, Special Agent from the Seattle IRS Office; IRS-CI Special Agents Todd Peterson and Sith Khamvongsa from the Guam IRS Office; and Guam Department of Revenue and Taxation (DRT) Special Agents Carolyn Aguon Rivera and Jerome Aguon.
The law enforcement sensitive training topics included an Overview of IRS-CI; Money Laundering; Bank Secrecy Act; Financial Crimes (Ponzi Schemes, Bank Fraud, Investment Fraud); Mirror System of Taxation; Tax Crimes (Dual Filers, Identity Theft, Law Enforcement Assistance Program, Employment Tax, FBAR); and case studies. The Special Agents from DRT provided an overview of the DRT Criminal Investigation Branch (CIB), DRT and Identity Theft, and DRT and Dual Filer Issues.
The trainings in Guam and the NMI were attended by over 80 law enforcement officers. The IRS-CI trainers also presented at the U.S. District Conference held on February 4, 2016 in Guam, and the U.S. District Conference held on February 6, 2016 in Saipan, NMI.
Photos taken at both training events.
Participants at the law enforcement sensitive training in Guam IRS-CI Special Agent in Charge Teri Alexander, U.S. Attorney Alicia Limtiaco and Special Agent Carolyn Aguon from the Department of Revenue and Taxation in Guam at a media event in Guam Participants at the law enforcement sensitive training in Saipan, NMI Presenters from the IRS-CI pictured here with U.S. Attorney Alicia Limtiaco in the center Participants at the law enforcement sensitive training in Saipan, NMI U.S. Attorney Alicia Limtiaco and IRS-CI Special Agent in Charge Teri Alexander at a media event in Saipan, NMIDistrict Court Enters Permanent Injunction Against Maine-Based Seafood Company and Its Owner to Prevent Distribution of Adulterated ProductsRead the Press Release
The U.S. District Court for the District of Maine entered a consent decree of permanent injunction against Hancock, Maine-based Mill Stream Corporation (doing business as Sullivan Harbor Farm) and its owner, Ira J. (Joel) Frantzman, to prevent the distribution of adulterated seafood products, the Department of Justice announced today.
The department filed a complaint in the U.S. District Court for the District of Maine at the request of the U.S. Food and Drug Administration (FDA), alleging that the defendants’ seafood products are adulterated in that they have been prepared, packed, or held under insanitary conditions whereby the products may have become contaminated with filth or have been rendered injurious to health.
“The failure to plan for and control the presence of bacteria and neurotoxins commonly found in seafood-processing facilities can pose a significant risk to the public health,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to work aggressively with FDA to prevent the distribution of adulterated food.”
The complaint alleges that the defendants prepare, process, pack, hold, and distribute refrigerated, vacuum-packed, ready-to-eat, cold and hot smoked fish or fishery products, such as smoked salmon, trout and char, for distribution to cities across the country, including Boston, Massachusetts, and Washington, D.C. The complaint also alleges that Frantzman is Mill Stream’s owner and has the authority and responsibility to prevent and correct the violations of federal law at the company.
In conjunction with the filing of the complaint, the defendants agreed to settle the case and be bound by a consent decree of permanent injunction that requires the defendants to cease all manufacturing operations and provides that, in order for defendants to resume distributing their products, FDA first must determine that the defendants’ manufacturing practices comply with the federal Food, Drug and Cosmetic Act (FDCA).
According to the complaint, an FDA inspection of defendants’ facility in March and April 2015 identified significant, recurring violations of seafood Hazard Analysis and Critical Control Point (HACCP) regulations and current Good Manufacturing Practices (cGMP) requirements. As alleged in the complaint, the HACCP violations included inadequate plans to control risks of Clostridium botulinum (C. bot), which produces a potent neurotoxin that can cause botulism. Though the incidence of botulism is rare, its effect can be severe. Botulism can cause paralysis or death if not promptly treated.
The complaint also alleges that FDA documented insanitary conditions at the defendants’ facility in violation of cGMP requirements. FDA investigators observed, among other things, rodent excreta pellets too numerous to count in the area of the facility where smoker trays are cleaned, apparent black mold and water staining on the doorframe of the walk-in freezer where fish is stored, an open rack of salmon stored beneath a pipe with frozen condensate build-up, and water splashing from the processing floor onto a cutting board and into bins where fish is stored.
Additionally alleged in the complaint, FDA’s testing of samples collected from the defendants’ facility during a December 2011 inspection revealed Listeria monocytogenes (L. mono) in the facility’s environment and on a fish-skinning machine. As noted in the complaint, as a result of that finding, FDA issued to defendants an Administrative Detention Order and defendants subsequently had the affected products destroyed and recalled. L. mono is the bacterium that causes listeriosis, a disease commonly contracted by eating food contaminated with L. mono. Listeriosis can be serious, even fatal, for vulnerable groups such as newborns and those with impaired immune systems. The most serious forms of listeriosis can result in meningitis and septicemia. Pregnant women may contract flu-like symptoms from listeriosis, and complications from the disease can result in miscarriage or septicemia in the newborn.
The complaint alleges that, for more than a decade, FDA repeatedly warned the defendants about HACCP and cGMP violations at the defendants’ facility. The complaint also alleges that FDA communicated these warnings through regulatory meetings, teleconferences, an Administrative Detention Order, Lists of Inspectional Observations and a Warning Letter. Yet, the complaint alleges, FDA continued to observe HACCP and cGMP violations at the defendants’ facility.
The government is represented by Trial Attorney Thomas E. Ross of the Civil Division’s Consumer Protection Branch and Andrew K. Lizotte of the U.S. Attorney’s Office for the District of Maine, with the assistance of Associate Chief Counsel Yen Hoang of the Department of Health and Human Services’ Office of General Counsel – Food and Drug Division.
Un Hombre de Elk Grove Arrestado y Acusado de Defraudar Inmigrantes Indocumentados en una Estafa de Adopción de AdultosRead the Press Release
SACRAMENTO, Calif. — Helaman Hansen, de 63 años de edad, y residente de Elk Grove fue arrestado hoy después de que un gran jurado federal dictara una acusación formal de 13 cargos inculpándolo de conspirar para cometer fraude por correo y fraude por telegrama, 11 cargos de fraude por correo y uno cargo de fraude por telegrama para operar un programa de adopción de adultos fraudulento que se dirigía a personas indocumentadas, ha anunciado el Procurador Federal Benjamín B. Wagner.
Según los documentos del tribunal, entre los meses de octubre de 2012 y enero de 2016, Hansen y otras personas utilizaron varias entidades como la organización Americans Helping America (AHA) para vender afiliaciones a miembros de comunidades de inmigrantes para lo que él llamaba un “Programa de Migración.” Un distintivo central del programa era el reclamo fraudulento de que los inmigrantes adultos podrían conseguir la ciudadanía americana si eran legalmente adoptados por un ciudadano americano y después de cumplir con una lista de cometidos adicionales. Al principio, las afiliaciones eran vendidas por una cuota anual de $150 dólares, pero esa cuota aumentó gradualmente hasta que eventualmente alcanzó la elevada cifra de $10,000 dólares.
Según la acusación formal, ni una sola persona obtuvo la ciudadanía aunque algunas de las víctimas habían completado la fase de adopción del “Programa de Migración.” Tan pronto como octubre de 2012, Hansen había sido informado por los Servicios de Ciudadanía e Inmigración que aquellas personas indocumentadas adoptadas después de cumplir los 16 años no podrían obtener la ciudadanía de la manera en la que lo estaba promoviendo Hansen. A pesar de ello, Hansen y sus co-conspiradores indujeron a aproximadamente 500 víctimas a pagar más de $500,000 dólares en cuotas para hacerse socios del programa fraudulento.
Este caso es el producto de una investigación llevada a cabo por la Oficina Federal de Investigaciones (FBI) y de las Investigaciones para la Seguridad Nacional (HSI) del Servicio del Orden Público de Inmigración y Aduanas de los Estados Unidos (ICE). El Procurador Federal Auxiliar André M. Espinosa está procesando el caso.
Si es declarado culpable, Hansen se enfrentaría a una pena máxima establecida por la ley de 20 años de prisión y una multa de $250,000 dólares. No obstante, cualquier sentencia sería determinada según la discreción del tribunal después de considerar cualquier factor establecido por la ley aplicable y las Normas para Sentenciar Federales. Los cargos son solo alegaciones; el demandado es presunto inocente hasta y a menos de que sea encontrado culpable sin duda razonable.
Se urge a las víctimas a llamar al FBI al 916-977-2479.
Readout of Attorney General Lynch's Meeting with Major County Sheriffs' AssociationRead the Press Release
Today, Attorney General Loretta E. Lynch met with representatives from the Major County Sheriffs’ Association (MCSA) at their Winter Meeting at the JW Marriott Hotel, in Washington, D.C. The meeting began with a moment of silence led by Sandra Hutchens, President of the MCSA, in honor of law enforcement officials killed in the line of duty, including Harford County, Maryland Senior Sheriff’s Deputies Mark Logsdon and Patrick Dailey, who were killed yesterday.
Attorney General Lynch remarked that yesterday’s tragic events highlighted the dangers public safety officers face every day – and the courage and commitment they routinely demonstrate in the fulfilment of their duties. She thanked the sheriffs and their deputies for their hard work, acknowledging the difficulty of their jobs and the immense sacrifices they have made for the people they serve.
During the meeting, Attorney General Lynch also discussed challenges facing law enforcement officials today, such as countering violent extremism, treatment of mental health issues, and challenges presented by technology. She noted with appreciation the work that MCSA had done with the Stepping Up Initiative, which exemplifies goals identified in the final report of the President’s Task Force on 21st Century Policing.
The MCSA is a professional law enforcement association of elected sheriffs representing counties or parishes with populations of 500,000 or more. MCSA is dedicated to preserving the highest integrity in law enforcement and the elected office of the Sheriff. The association identifies and works to address challenges facing law enforcement. It also pursues the development of innovative education along with prevention and enforcement strategies and programs.
Morgan Stanley Agrees to Pay $2.6 Billion Penalty in Connection with Its Sale of Residential Mortgage Backed SecuritiesRead the Press Release
The Justice Department today announced that Morgan Stanley will pay a $2.6 billion penalty to resolve claims related to Morgan Stanley’s marketing, sale and issuance of residential mortgage-backed securities (RMBS). This settlement constitutes the largest component of the set of resolutions with Morgan Stanley entered by members of the RMBS Working Group, which have totaled approximately $5 billion. As part of the agreement, Morgan Stanley acknowledged in writing that it failed to disclose critical information to prospective investors about the quality of the mortgage loans underlying its RMBS and about its due diligence practices. Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued by Morgan Stanley in 2006 and 2007.
“Today’s settlement holds Morgan Stanley appropriately accountable for misleading investors about the subprime mortgage loans underlying the securities it sold,” said Acting Associate Attorney General Stuart F. Delery. “The Department of Justice will not tolerate those who seek financial gain through deceptive or unfair means, and we will take appropriately aggressive action against financial institutions that knowingly engage in improper investment practices.”
“Those who contributed to the financial crisis of 2008 cannot evade responsibility for their misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This resolution demonstrates once again that the Financial Institutions Reform, Recovery and Enforcement Act is a powerful weapon for combatting financial fraud and that the department will not hesitate to use it to hold accountable those who violate the law.”
An RMBS is a type of security comprised of a pool of mortgage loans created by banks and other financial institutions. The expected performance and price of an RMBS is determined by a number of factors, including the characteristics of the borrowers and the value of the properties underlying the RMBS. Morgan Stanley was one of the institutions that issued RMBS during the period leading up to the economic crisis in 2007 and 2008.
As acknowledged by Morgan Stanley in a detailed statement of facts that is a part of this agreement (and is quoted below), the company made representations to prospective investors about the characteristics of the subprime mortgage loans underlying its RMBS – representations with which it did not comply:
- In particular, Morgan Stanley told investors that it did not securitize underwater loans (loans that exceeded the value of the property). However, Morgan Stanley did not disclose to investors that in April 2006 it had expanded its “risk tolerance” in evaluating loans in order to purchase and securitize “everything possible.” As Morgan Stanley’s manager of valuation due diligence told an employee in 2006, “please do not mention the ‘slightly higher risk tolerance’ in these communications. We are running under the radar and do not want to document these types of things.” As a result, Morgan Stanley ignored information – including broker’s price opinions (BPOs), which are estimates of a property’s value from an independent real estate broker – indicating that thousands of securitized loans were underwater, with combined-loan-to-value ratios over 100 percent. From January 2006 through mid-2007, Morgan Stanley acknowledged that “Morgan Stanley securitized nearly 9,000 loans with BPO values resulting in [combined loan to value] ratios over 100 percent.”
- Morgan Stanley also told investors that it did not securitize loans that failed to meet originators’ guidelines unless those loans had compensating factors. Morgan Stanley’s offering documents “represented that ‘[the mortgage loans originated or acquired by [the originator] were done so in accordance with the underwriting guidelines established by [the originator]’ but that ‘on a case-by-case-basis, exceptions to the [underwriting guidelines] are made where compensating factors exist.’” Morgan Stanley has now acknowledged, however, that “Morgan Stanley did not disclose to securitization investors that employees of Morgan Stanley received information that, in certain instances, loans that did not comply with underwriting guidelines and lacked adequate compensating factors . . . were included in the RMBS sold and marketed to investors.” So, in fact, “Morgan Stanley . . . securitized certain loans that neither comported with the originators’ underwriting guidelines nor had adequate compensating factors.”
- Likewise, “Morgan Stanley also prepared presentation materials . . . that it used in discussions with potential investors that described the due diligence process for reviewing pools of loans prior to securitization,” but “certain of Morgan Stanley’s actual due diligence practices did not conform to the description of the process set forth” in those materials.
- For example, Morgan Stanley obtained BPOs for a percentage of loans in a pool. Morgan Stanley stated in these presentation materials that it excluded any loan with a BPO value exhibiting an “unacceptable negative variance from the original appraisal,” when in fact “Morgan Stanley never rejected a loan based solely on the BPO results.”
- Through these undisclosed practices, Morgan Stanley increased the percentage of mortgage loans it purchased for its RMBS, notwithstanding its awareness about “deteriorating appraisal quality” and “sloppy underwriting” by the sellers of these loans. The bank has now acknowledged that “Morgan Stanley was aware of problematic lending practices of the subprime originators from which it purchased mortgage loans.” However, it “did not increase its credit-and-compliance due diligence samples, in part, because it did not want to harm its relationship with its largest subprime originators.” Indeed, Morgan Stanley’s manager of credit-and-compliance due diligence was admonished to “stop fighting and begin recognizing the point that we need monthly volume from our biggest trading partners and that . . . the client [an originator] does not have to sell to Morgan Stanley.”
“In today’s agreement, Morgan Stanley acknowledges it sold billions of dollars in subprime RMBS certificates in 2006 and 2007 while making false promises about the mortgage loans backing those certificates,” said Acting U.S. Attorney Brian J. Stretch of the Northern District of California. “Morgan Stanley touted the quality of the lenders with which it did business and the due diligence process it used to screen out bad loans. All the while, Morgan Stanley knew that in reality, many of the loans backing its securities were toxic. Abuses in the mortgage-backed securities industry such as these helped bring about the most devastating financial crisis in our lifetime. Our office is committed to dedicating the resources necessary to hold those who engage in such reckless actions responsible for their conduct.”
The $2.6 billion civil monetary penalty resolves claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). FIRREA authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Morgan Stanley, and likewise does not release any individuals from potential criminal or civil liability. In addition, as part of the settlement, Morgan Stanley promised to cooperate fully with any ongoing investigations related to the conduct covered by the agreement.
In conjunction with today’s announcement of the federal government’s settlement with Morgan Stanley, the states of New York and Illinois – also members of the RMBS Working Group – have announced settlements with Morgan Stanley for $550 million and $22.5 million, respectively, arising from its sale of RMBS. Among other resolutions, Morgan Stanley previously paid $225 million to resolve claims brought by the National Credit Union Administration arising from losses related to corporate credit unions’ purchases of RMBS; $1.25 billion to resolve claims by Federal Housing Finance Agency (FHFA) for Morgan Stanley’s alleged violations of federal and state securities laws and common law fraud in connection with RMBS purchased by Fannie Mae and Freddie Mac; and $86.95 million to resolve federal and state securities laws claims brought by the Federal Deposit Insurance Corporation as receiver on behalf of failed financial institutions. Morgan Stanley also previously entered into a consent decree with the U.S. Securities and Exchange Commission (SEC) to pay $275 million to resolve certain RMBS claims. With today’s announcement, Morgan Stanley will have paid nearly $5 billion to members of the RMBS Working Group in connection with its sale of RMBS.
Today’s settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered billions of dollars arising from misconduct related to the financial crisis. The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the SEC, the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA Office of Inspector General (OIG), the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and five co-chairs: Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, U.S. Attorney John Walsh of the District of Colorado and New York Attorney General Eric Schneiderman.
“The securitization of defective mortgages and the billions of dollars that were lost as a result caused such a hardship to our economy, the housing industry and our nation as a whole that we are still feeling the effects years after,” said Deputy Inspector General for Investigations Rene Febles of FHFA-OIG. “Morgan Stanley is responsible for their role, which caused enormous losses to investors. This settlement is one step in recovering from those losses. We are proud to work with the RMBS Working Group and the U.S. Department of Justice on this and all RMBS matters.”
The settlement was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Northern District of California, with investigative support from FHFA-OIG and the Special Inspector General for the Troubled Asset Relief Program.
Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov
Attorney General Loretta E. Lynch Statement on Fatal Shooting of Two Law Enforcement Officials in Hartford County, MarylandRead the Press Release
Attorney General Loretta E. Lynch released the following statement regarding yesterday’s fatal shooting of Harford County, Maryland Senior Sheriff’s Deputies Mark Logsdon and Patrick Dailey:
“I am deeply saddened by the shooting in Harford County, Maryland, that took the lives of two long-serving sheriff’s deputies. This was an appalling and senseless crime, carried out against two dedicated guardians of the public. Losses like these are a tragic reminder of the dangers our public safety officers face every day – and the courage and commitment they routinely demonstrate in the fulfilment of their extraordinary charge. My thoughts and prayers – and those of my colleagues throughout the law enforcement community – are with the families and loved ones of our fallen friends.”
Statement from Head of the Civil Rights Division Vanita Gupta Regarding Ferguson, Missouri, City Council Vote on Proposed Consent DecreeRead the Press Release
Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division, released the following statement regarding the Ferguson, Missouri, City Council vote on the proposed consent decree with the Department of Justice:
“The Ferguson City Council has attempted to unilaterally amend the negotiated agreement. Their vote to do so creates an unnecessary delay in the essential work to bring constitutional policing to the city, and marks an unfortunate outcome for concerned community members and Ferguson police officers. Both parties engaged in thoughtful negotiations over many months to create an agreement with cost-effective remedies that would ensure Ferguson brings policing and court practices in line with the Constitution. The agreement already negotiated by the department and the city will provide Ferguson residents a police department and municipal court that fully respects civil rights and operates free from racial discrimination.
“The Department of Justice will take the necessary legal actions to ensure that Ferguson’s policing and court practices comply with the Constitution and relevant federal laws.”
Justice Department Files Lawsuit to Bring Constitutional Policing to Ferguson, MissouriRead the Press Release
Attorney General Loretta E. Lynch announced today that the Department of Justice filed a lawsuit in U.S. District Court against the city of Ferguson, Missouri, alleging a pattern or practice of law enforcement conduct that violates the First, Fourth and 14th Amendments of the Constitution and federal civil rights laws.
“Today, the Department of Justice is filing a lawsuit against the city of Ferguson, Missouri, alleging a pattern or practice of law enforcement conduct that violates the Constitution and federal civil rights laws,” said Attorney General Lynch. “The residents of Ferguson have waited nearly a year for their city to adopt an agreement that would protect their rights and keep them safe. They have waited nearly a year for their police department to accept rules that would ensure their constitutional rights and that thousands of other police departments follow every day. They have waited nearly a year for their municipal courts to commit to basic, reasonable rules and standards. But residents of Ferguson have suffered the deprivation of their constitutional rights – the rights guaranteed to all Americans – for decades. They have waited decades for justice. They should not be forced to wait any longer.”
“Our investigation found that Ferguson’s policing and municipal court practices violate the Constitution, erode trust and undermine public safety,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “As shown by our lawsuit today, the Justice Department will continue to vigorously enforce the law to ensure that Ferguson implements long-overdue reforms necessary to create constitutional, effective and accountable policing. Ferguson residents and police officers deserve a law enforcement system that productively and fairly serves the entire community.”
The lawsuit, filed pursuant to Section 14141 of the Violent Crime Control and Law Enforcement Act of 1994 and Title VI of the Civil Rights Act of 1964 (Title VI), alleges that the city of Ferguson, through its police department and municipal court:
- conducts stops, searches and arrests without legal justification, and uses excessive force, in violation of the Fourth Amendment;
- interferes with the right to free expression in violation of the First Amendment;
- prosecutes and resolves municipal charges in a manner that violates due process and equal protection guaranteed by the 14th Amendment; and
- engages in discriminatory law enforcement conduct against African Americans in violation of the 14th Amendment and federal statutory law.
The lawsuit follows a comprehensive investigation of Ferguson’s police department and municipal court conducted by the Civil Rights Division. In March 2015, the department detailed its investigative findings in a 104-page report. The department found that Ferguson’s focus on generating revenue over public safety, together with racial bias, has a profound effect on Ferguson’s police and court practices, resulting in conduct that routinely violates the Constitution and federal civil rights laws.
The complaint alleges that from October 2012 to October 2014, African Americans were more than twice as likely to be searched, to receive a citation or to be arrested, than other stopped individuals. Of all incidents from 2010 to August 2014, African Americans account for 88 percent of all incidents in which a Ferguson police officer reported using force. For municipal offenses where Ferguson police officers have a high degree of discretion in charging, African Americans were again disproportionately represented as compared to their relative representation in Ferguson. While African Americans make up 67 percent of the Ferguson’s population, they make up 95 percent of manner of walking in roadway charges; 94 percent of failure to comply charges; 92 percent of resisting arrest charges; 92 percent of disturbing the peace charges; and 89 percent of failure to obey charges. The department also found that Ferguson’s law enforcement conduct has created a lack of trust between the police department and the community members it serves, especially African Americans.
On Feb. 9, the Ferguson City Council voted to reject the consent decree that the city’s negotiating team had negotiated. Unable to reach a mutually agreed upon court-enforceable settlement to remedy the department's findings, the lawsuit was filed today in order to seek declaratory and injunctive relief to remedy the unlawful conduct identified by the department’s investigation.
This matter was investigated by attorneys from the Civil Rights Division.
Maryland Return Preparer Convicted of Aiding and Assisting in the Preparation of False Tax ReturnsRead the Press Release
A Baltimore, Maryland, man was convicted by a federal jury yesterday in the U.S. District Court for the District of Maryland of preparing false income tax returns for clients of his tax return preparation business, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Charles Imariagbe was convicted of 15 counts of aiding and assisting in the preparation of false income tax returns after a five day jury trial. According to court documents and testimony at trial, between 2008 and 2012, the defendant operated a tax preparation business called JC Tax Service Inc., in Baltimore. During that time, the defendant prepared false individual income tax returns for at least seven clients for submission to the Internal Revenue Service (IRS). These tax returns claimed false and fraudulent income and expenses from Schedule C businesses and grossly inflated or wholly fictitious mileage expenses. The false items on these returns resulted in the clients receiving larger tax refunds than they were entitled to receive.
“Yesterday’s verdict sends a clear message that tax return preparers who knowingly prepare and file false returns will be investigated and prosecuted, and will face substantial incarceration,” said Acting Assistant Attorney General Ciraolo. “As we enter the 2016 filing season, U.S. taxpayers are entitled to seek assistance from honest and competent professionals, and the Tax Division is committed to holding these return preparers accountable for their conduct.”
U.S. District Judge Ellen L. Hollander for the District of Maryland set sentencing for May 12. The defendant faces a statutory maximum sentence of three years in prison and a maximum fine of $250,000 on each count of conviction.
Acting Assistant Attorney General Ciraolo commended agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Brittney Campbell and Andrew J. Kameros, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Department of Justice FY 2017 Budget RequestRead the Press Release
President’s Request Invests in Department of Justice Criminal Justice Priorities, Including National Security, Cyber Security, Smart on Crime, Building Community Trust, Among Other Priority Initiatives
President Obama’s FY 2017 Budget proposal totals $29 billion for the Department of Justice to support federal law enforcement priorities and the criminal justice priorities of our state, local and tribal law enforcement partners. The request represents a comprehensive investment in the Justice mission and includes increases in funding for countering violent extremism and other national security areas, civil rights and advancing equality under the law, Smart on Crime activities, including increased funds for prisoner reentry initiatives and other key enforcement initiatives.
“The Department of Justice is committed to ensuring the safety of our communities and the strength of our nation and the resources laid out in President Obama’s budget are vital to our efforts,” said Attorney General Loretta E. Lynch. “With investments in priority areas from national security and cybercrime to community policing, this budget will allow us to protect the progress we have made and build on our success in the years to come.”
The Department of Justice’s areas of investment include:
- +$1.1 billion for the department’s law enforcement components, including the Federal Bureau of Investigation, Drug Enforcement Administration, Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Marshals Service and the Organized Crime Drug Enforcement Task Force program.
- +$70 million for our litigating components, including the U.S. Attorneys, National Security Division, Criminal Division, Civil Rights Division, Civil Division and the Environment and Natural Resources Division.
- +$214 million for the prisons and detention functions of the Federal Bureau of Prisons and U.S. Marshals Service.
- +$47 million for immigration, administration, technology and other support functions; includes the Executive Office for Immigration Review, Office of the Pardon Attorney, Office of the Inspector General, Community Relations Service, General Administration and Justice Information Sharing Technology.
- +$443 million for Justice Department grant programs overall (Office of Justice Programs, Office of Community Oriented Policing Services and Office on Violence Against Women), for a total grant program request of $4.7 billion.
National Security
As the Attorney General remarked in December 2015, “my highest priorities are the security of our country and the safety of the American people.” National security threats are constantly evolving, requiring additional investments to adapt to those threats in innovative ways. The FY 2017 Budget request provides $780.7 million in program increases to counter violent extremism, improve intelligence collection and analysis, strengthen foreign partnerships and address critical law enforcement technology challenges.
Today’s national security and crime threats require that the Federal Bureau of Investigation (FBI) maintain an interconnected and nimble workforce. The complexities of today’s National Security work dictate that the FBI be in an interconnected workspace to promote internal information sharing. A new modern FBI facility will consolidate disparate worksites in to one common location and exploit synergies previously stovepiped in the FBI. The men and women of the FBI are critical to protecting national security, and this request demonstrates our commitment to invest in their safety and provide them with an appropriate environment conducive to their important work.
The FY 2017 request supports a comprehensive national security strategy towards countering violent extremism (CVE) in U.S. communities. The recent tragedy in San Bernardino is a painful reminder that this work is critical to achieving a peaceful society, and the department is committed to addressing the multi-faceted nature of this crime problem in FY 2017. Supported by Community Oriented Policing Services (COPS) and the Office of Justice Programs (OJP) grants, the department will foster community-led CVE efforts and emphasize trusted partnerships between public safety agencies and local residents and community organizations. Grant funding through the OJP will also provide training and assistance to local efforts and continue to support research to better understand violent extremism and advance evidence-based strategies for prevention and intervention. U.S. Attorneys will expand their community presence and enhance federal engagement and support to local communities. These efforts will work to counter violent extremism encouraged by both international and homegrown actors.
The department must continue to address worldwide threats by enhancing its intelligence capacity and capabilities and strengthening coordination with foreign partners. The FY 2017 request includes resources for the FBI to improve collaboration with the Intelligence Community (IC) through enhanced intelligence programs and leveraging the common IC information technology (IT) infrastructure. The request also supports the FBI’s new Biometrics Technology Center, which will enhance biometric investigations. The request will also improve the FBI ability to conduct physical surveillance on the highest priority targets. The FY 2017 request includes resources to improve evidence sharing and extraditions with our foreign partners and overseas security sector assistance programs operations. The department’s foreign experts are best situated to build the strong overseas partnerships that are essential to joint efforts to fight terrorism and transnational crime.
The FBI must also adapt to evolving communication technologies, anonymization, and encryption. Law enforcement faces an increased threat of Going Dark – the degradation of law enforcement’s ability to lawfully access, collect, and intercept real-time communications and stored data. The FY 2017 request includes critical resources to develop and acquire tools to address the challenges Going Dark poses to law enforcement and national security.
For more information, view the National Security Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
Cyber Security
The Department of Justice has a unique and critical role in cyber security that emphasizes countering and mitigating cyber threats, including by investigating, prosecuting, and providing legal and policy support to other departments for intrusion and cybercrime cases. The FY 2017 Budget provides $121.1 million in additional resources to investigate and address computer intrusions and cybercrimes, defend the security of the department’s critical information networks, and protect against insider threats. This request provides resources to enhance the technical capabilities of FBI investigative personnel, increase the number of cyber investigations, and improve cyber collection and analysis.
Building on the significant investments made in FY 2015 and FY 2016, this request also provides additional resources for the Justice Information Sharing Technology (JIST) account to maintain and strengthen the department’s cyber security environment: to counter cyber threats and to ensure its personnel have unimpeded access to the Information Technology (IT) systems, networks, and data necessary to achieve their missions. Similarly, the department requests additional resources for the Drug Enforcement Administration (DEA), to enhance its ability to combat insider threats and to enhance its cyber security posture.
For more information, view the Cyber Security Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
Smart on Crime
While we must remain vigilant in our efforts to stop violent crime, we cannot simply prosecute and incarcerate our way into becoming a safer nation. The FY 2017 budget invests an additional $246.9 million to support Smart on Crime programs. The Smart on Crime initiative focuses on effectively using federal resources for the most significant federal law enforcement priorities—including violent crime—and implementing a series of commonsense reforms to reduce unnecessarily long sentences for low-level, nonviolent drug offenders. The Smart on Crime policies also bolster prevention and reentry programs to deter crime, reduce recidivism, and create pathways of opportunity for eligible candidates.
The department’s plan focuses federal resources on, and directs prosecutors to pursue, cases implicating the most substantial federal interests, rather than prioritizing the sheer number of prosecutions. Considering alternatives to incarceration for low-level, non-violent offenses also strengthens our justice system and places a lower financial burden on the budget. This means increased use of diversion programs, such as drug courts, that reduce taxpayer expense and have the potential to be successful at preventing recidivism. When imprisonment is appropriate, sentencing should reflect the individualized circumstances of the case.
We must also provide necessary care for inmates by expanding mental health services, medical treatments, and reducing the use and need for restrictive housing. To better prevent recidivism, it is important to reduce barriers to reentry for formerly incarcerated individuals. This includes emphasizing reentry programs, and revisiting rules and regulations that make it harder for these individuals to find a job, an education, or affordable housing.
For more information, view the Smart on Crime Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
Building Community Trust
The FY 2017 Budget includes $129.4 million in increases to further the efforts the department and its state and local law enforcement partners have made to build and sustain community trust.
Building trust and nurturing legitimacy on both sides of the police/citizen divide is the foundational principle underlying the nature of relations between law enforcement agencies and the communities they serve. Law enforcement cannot build community trust if it is seen as an occupying force coming in from outside to impose control on the community.
Through the Office of Community Oriented Policing Services (COPS) and other components, the department is making good on its pledge to provide law enforcement with access to the tools and support they need to do their jobs as safely and effectively as possible. With the launch of its National Initiative for Building Community Trust and Justice, the department is striving to strengthen the partnerships between community members and law enforcement professionals at every level of government.
Through the President’s Task Force on 21st Century Policing, the department is bringing law enforcement leaders and experts together to provide strong, national direction on a scale not seen in nearly half a century. And going forward, the department intends to continue to use every tool at its disposal to enhance its capacity to combat crime while restoring public trust.
For more information, view the Building Community Trust Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
Enhancing Public Safety
The department’s mission and responsibility is to investigate and prosecute those who break federal laws. Continued investments to uphold its commitments are needed to strengthen the department’s ability to protect the health and well-being of our Nation’s citizens, and have the flexibility to address threats as they emerge. Simply maintaining existing law enforcement capacity is not sufficient to meet the demands of this commitment. For FY 2017, the department requests $164.2 million in additional investments to address the threats of violent crime and illicit drugs, and to strengthen the litigating divisions of the department.
In FY 2017, the department is requesting additional resources to respond to the recent increase in heroin abuse and support increased prosecution of drug trafficking organizations along the Southwest Border. The funding will create four new enforcement groups, including support personnel and operational funding, to counteract growing heroin abuse in the United States.
The Budget request supports significant investments that focus on combatting violent crime in the U.S. and support the President’s initiatives on reducing gun violence. The request includes funding to enhance the enforcement of existing federal firearms laws and expand the Bureau of Alcohol, Tobacco, Firearms and Explosives’ (ATF) regulatory capacity. Funding is also requested for the FBI to maintain FY 2016 investments in the National Instant Criminal Background Check System (NICS).
The investments to combat violent crime also include resources for the U.S. Marshals Service (USMS) to support hiring of additional Deputy U.S. Marshals and the creation of a new Regional Fugitive Task Force to apprehend violent fugitives.
The department’s request also invests funding in litigating divisions to enforce laws that address economic competition, animal welfare, immigration, and to ensure public safety. The department seeks to improve the Antitrust Division’s ability to promote economic competition, strengthen the Environment and Natural Resources Division’s ability to enforce animal welfare laws through the development of a new animal welfare enforcement program, augment the Civil Division’s immigration litigation capabilities, and to provide security services at U.S. Trustee meetings.
For more information, view the Enhancing Public Safety Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
Protecting Vulnerable Populations
The department’s priority of upholding the civil and constitutional rights of all Americans, particularly the most vulnerable members of our society, remains vital importance. Accomplishing this requires resources to investigate, litigate, conduct outreach, and provide capacity-building education, training, and technical assistance. The FY 2017 President’s Budget will address these needs by dedicating an additional $80.7 million to these tasks, thereby enhancing the lives of the country’s vulnerable populations.
The nation’s vulnerable populations deserve the same rights, opportunities, and protections from injustices as the rest of society. The Administration and the department are committed to accomplishing this goal. The FY 2017 President’s Budget requests funding to prevent and investigate elder abuse and fraud, particularly health care fraud, which remains a top priority for the department. The Budget will also address environmental concerns in Indian Country.
Our nation’s children and youth are a vulnerable demographic group. At a national summit on Youth Violence Prevention last year, the Attorney General spoke of the importance of providing services to children exposed to violence in order to break the cycle of violence. The FY 2017 request includes additional funding to do just that. Additional resources are requested to ensure the nation’s police are properly trained to interact with children and people with disabilities, and to support enforcement, technical assistance, and the issuance of guidance and regulations related to the Americans with Disabilities Act.
For more information, view the Vulnerable Populations Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
Mission Critical Infrastructure
In order to maintain an effective and efficient Department of Justice, the department must maintain a robust infrastructure to support its investigative and prosecutorial enterprises. The department’s request of $179.1 million addresses gaps in critical infrastructure, including information technology (IT) system improvements that support law enforcement and litigating components, facility construction and maintenance, policy oversight, and personnel security investments.
Resources are requested to upgrade outdated IT systems, enhance capabilities of existing systems, and construct and maintain facilities. Resources for the USMS Office of Professional Responsibility and the department’s policy offices are included to enhance policy analysis, coordination, and compliance functions. Finally, resources are requested to address the department’s current backlog of security investigations of both federal employees and contractors and future security investigation needs.
For more information, view the Mission Critical Infrastructure Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
State, Local and Tribal Law Enforcement
The Department of Justice strongly supports its partnerships with state, local, and tribal entities. The FY 2017 Budget maintains its commitments to state, local, and tribal law enforcement partners without reducing the department’s federal operational role. Simultaneously, efficiencies are identified to ensure that federal resources are being targeted to the most effective grant programs. The FY 2017 discretionary and mandatory request for state, local, and tribal law enforcement assistance is $4.7 billion, including discretionary enhancements of $442.7 million.
The FY 2017 request for OJP totals $4.2 billion, including $1.6 billion for discretionary grant programs and $2.6 billion for mandatory grant programs. It includes $326.2 million in discretionary enhancements, including increased funding for an indigent defense initiative, Second Chance Prisoner Reentry, Justice Reinvestment, and juvenile justice programs, and new funding to support the Violence Reduction Network.
The FY 2017 request for COPS totals $286 million, including $88 million in enhancements. The COPS request includes an increase of $42 million for the COPS Hiring Program.
The FY 2017 request for the Office on Violence Against Women (OVW) totals $489 million. OVW’s Budget includes a total of $28.5 million in enhancements. The Budget includes enhancements of $11.25 million for Improving Criminal Justice Responses to Sexual Assault, Domestic Violence, Dating Violence and Stalking Program (Arrest), $7.5 million for Legal Assistance to Victims and $6 million for OVW’s Campus Violence Program.
For more information, view the State, Local and Tribal Law Enforcement Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
Public Safety In Indian Country
The United States has a unique legal and political relationship with American Indian tribes and Alaska Native communities as provided by the Constitution, treaties, court decisions, and federal statutes. The Department of Justice has an important legal and moral responsibility to prosecute violent crime in Indian Country because under current law, in much of Indian Country, the department alone has the authority to seek an appropriate sentence when a major crime has been committed. Federal investigation and prosecution of serious violent crime in Indian Country is often the primary avenue of protection for the victims of these crimes.
The FY 2017 President’s Budget requests $417.6 million in total resources for public safety initiatives in Indian Country. Investments support activities across many Department of Justice components that address a range of criminal and civil justice issues facing Native American communities. A highlight is the COPS Tribal Resources Grant Program, which facilitates tribal access to critical information sharing systems. The increase will support the department’s Tribal Access Program for National Crime Information that was launched in August 2015 allowing tribes to more effectively serve and protect their tribal members by ensuring the exchange of critical data across systems, such as those managed by the Criminal Justice Information Services Division of the Federal Bureau of Investigation. The department is also requesting resources to strengthen the enforcement of environmental laws on tribal lands, and to support consultation with tribes and coordination of tribal policies through the Office of Tribal Justice.
For more information, view the Public Safety in Indian Country Fact Sheet at http://www.justice.gov/about/fy17-budget-fact-sheets.
FY 2017 Budget Rollout PowerPoint (683.85 KB)
North Carolina Man Charged in Fraudulent U.S. Treasury Check SchemeRead the Press Release
A Clayton, North Carolina, resident was arrested yesterday after being indicted on Dec. 2 by a federal grand jury sitting in Raleigh, North Carolina, on one count of conspiracy to commit theft of public money, 25 counts of theft of public money and two counts of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney John Stuart Bruce of the Eastern District of North Carolina.
Felipe Hurtado aka “Juan de Dios” is alleged to have conspired with check cashers during the years 2011 and 2012 to cash U.S. Treasury checks issued as a result of fraudulent tax returns filed in the names of third parties. According to the allegations in the indictment, Hurtado provided the check cashers with U.S. Treasury checks in the names of payees purportedly living in New York. These checks ranged in value from approximately $5,000 to $10,000. The indictment alleges that the check cashers deposited the U.S. Treasury checks into their business bank accounts and then provided Hurtado with cash equal to the value of the check minus a check cashing fee. The third party payees were not present when the checks were cashed. The indictment further alleges that Hurtado cashed U.S. Treasury checks in the names of individuals whose identities had been stolen.
If convicted, Hurtado faces a statutory maximum sentence of five years in prison for the conspiracy charge, 10 years in prison for each count of theft of public funds and a two year mandatory sentence for the counts of aggravated identity theft. He also faces substantial monetary penalties, supervised release and restitution.
Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Bruce commended special agents of Internal Revenue Service-Criminal Investigation, who investigated the case and Trial Attorneys Nathan Brooks and Lauren Castaldi of the Tax Division, who are prosecuting this case. Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Eastern District of North Carolina for their assistance.
An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Justice Department Sues to Permanently Shut Down Liberty Tax Service Franchise OwnerRead the Press Release
South Carolina Man Allegedly Owns Three Liberty Tax Service Stores Accused of Preparing Fraudulent Tax Returns
Three Columbia-area, South Carolina Liberty Tax Service franchises deliberately prepare false federal income tax returns in order to increase their customers’ refunds, according to a civil lawsuit filed today by the Justice Department. The United States’ complaint asks the U.S. District Court for the District of South Carolina to permanently bar the alleged franchisee for all three locations, Christopher Paul Haynes of Irmo, South Carolina, from preparing federal tax returns for others.
According to the suit, Haynes and his employees prepare tax returns that include misstatements such as false or inflated Schedule C (Profit or Loss From Business) income and expenses, bogus dependents, false filing statuses and improper unreimbursed employee business expenses. For example, the complaint alleges that Haynes’s employees included a bogus “arts and crafts” business on one customer’s tax return and a bogus “hair care” businesses on another’s. In each case, according to the complaint, the false statements purported to allow the customer to qualify for a larger Earned Income Tax Credit and receive inflated tax refunds from the Internal Revenue Service (IRS).
The lawsuit states that Haynes’s Liberty Tax Service offices have prepared more than 9,700 federal income tax returns since 2010. Based on adjustments the IRS has made to tax returns prepared and filed by Haynes’s Liberty Tax Service offices for 2010 to 2013, the average tax deficiency for tax returns audited in connection with the IRS’s investigation of Haynes is $3,834 per tax return, according to the suit.
The complaint also alleges that Haynes does not report to the IRS the wages he pays some of his employees, even though the report is required by law. According to the complaint, Haynes also fails to withhold and pay over to the IRS federal employment taxes for those same employees.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2016. The IRS has some tips on its website for choosing a tax preparer and has launched a free directory of federal tax preparers. In the past decade, the Justice Department’s 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 on this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.
Former South Bend, Indiana, Police Officer Pleads Guilty to Violating Civil Rights of ArresteeRead the Press Release
The Justice Department announced today that Theodore Robert, 41, a former police officer with the South Bend, Indiana, Police Department (SBPD), pleaded guilty today in federal court to violating the civil rights of an arrestee.
During his guilty plea before U.S. Magistrate Judge Christopher A. Nuechterlein of the Northern District of Indiana, Robert admitted that, acting under his authority as an SBPD officer, he punched a handcuffed victim in the face, as multiple officers attempted to intervene. He also admitted that, prior to punching the victim in the face, he forcefully pushed the victim into a wall and pressed his arm against the victim’s head and throat. Robert’s actions caused the victim to suffer a laceration above the eye. According to information presented in court, the incident occurred at the St. Joseph County Jail in South Bend and was recorded by the jail’s surveillance cameras.
“When police officers violate the laws they swear to uphold, it threatens the credibility of our criminal justice system,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “The Justice Department will continue to vigorously prosecute and hold accountable those officers who violate the constitutional rights of people in their custody.”
A sentencing hearing has been scheduled for May 19, 2016. Robert faces a maximum sentence of 10 years in prison.
This case was investigated by the FBI Indianapolis Division’s South Bend Resident Agency. The case is being prosecuted by Trial Attorneys Stephen Curran and Sanjay Patel of the Civil Rights Division, with the assistance of the U.S. Attorney’s Office of the Northern District of Indiana.
Robert Plea Agreement
Attorney General Lynch Expands National Community Policing Tour with Trip to Miami-Dade County, FloridaRead the Press Release
Second Phase to Highlight Six Jurisdictions Effectively Implementing Recommendations from the President’s Task Force on 21st Century Policing Final Report
Attorney General Loretta E. Lynch will travel to Miami-Dade County, Florida, on THURSDAY, FEBRUARY 11, 2016, and FRIDAY, FEBRUARY 12, 2016, to launch the second phase of her national Community Policing Tour. In this phase, the Attorney General will visit six jurisdictions around the country that have excelled in each of the six pillars discussed in the President’s Task Force on 21st Century Policing final report: (1) Building Trust and Legitimacy; (2) Policy and Oversight; (3) Technology and Social Media; (4) Community Policing and Crime Reduction; (5) Officer Training and Education; and (6) Officer Safety and Wellness. The trip to Miami Dade County will highlight Pillar 1 – Building Trust and Legitimacy. As part of the tour, Attorney General Lynch will also visit Portland, Oregon; Indianapolis; Fayetteville, North Carolina; Phoenix; and Los Angeles in the coming months.
“One of my top priorities as Attorney General is strengthening relationships between law enforcement officers and the communities we serve and protect,” said Attorney General Lynch. “During the second phase of my Community Policing Tour, I will be highlighting some of the innovative efforts underway around the country to build trust, foster cooperation and enhance public safety. I look forward to meeting with law enforcement officers, local leaders and residents in the weeks and months ahead to discuss how we can ensure that every American benefits from neighborhoods that are supportive, safe and strong.”
“We in South Florida are proud of the work we have done to implement the recommendations outlined in the President’s Task Force on 21st Century Policing,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida. “Through active engagement and meaningful dialogue, members of law enforcement work hard to build trust with the communities they serve. As an example of this approach, the city of Doral Police Department has adopted the Blue Courage initiative, a training and leadership development course which focuses on how to enhance their officers’ effectiveness and relationships with the citizens they serve. Many other local departments have also developed robust community policing initiatives. During Attorney General Loretta Lynch’s visit this week, we will share strategies and continue to identify and cultivate the best practices for creating stronger and safer communities.”
While in Miami-Dade County, the Attorney General will be joined by U.S. Attorney Ferrer, Director Ronald Davis of the Office of Community Oriented Policing Services (COPS Office), Assistant Attorney General Karol V. Mason of the Office of Justice Programs and Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division for a convening with law enforcement, local officials and other members of the community at Miami Dade College’s Wolfson Campus in downtown Miami.
The Attorney General will also host a youth town hall with student “Peace Ambassadors" to discuss police-community relations and visit the Doral Police Department to recognize the department’s commitment to community policing strategies through the Blue Courage initiative. Also during her visit, Attorney General Lynch will hold a press availability at the historic Freedom Tower, visit with Miami-Dade Police Department officers and thank them for their service to the community, tour the Black Police Precinct & Courthouse Museum and visit staff at the U.S. Attorney’s Office of the Southern District of Florida.
The Attorney General’s national Community Policing Tour builds on President Obama’s commitment to engage with law enforcement and other members of the community to implement key recommendations from the President’s Task Force on 21st Century Policing final report. The first phase of the tour launched on May 19, 2015, in Cincinnati and also included visits to Birmingham, Alabama; Pittsburgh; East Haven, Connecticut; Seattle; and Richmond, California.
Two Louisiana Residents Indicted for Involvement in Stolen Identity Tax Fraud SchemeRead the Press Release
A federal grand jury sitting in New Orleans returned an indictment on Jan. 29 against two Tangipahoa Parish, Louisiana residents, charging them with federal crimes related to filing false income tax returns using stolen identities, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana announced today. The indictment was unsealed today after the last defendant was arrested.
Alicia Washington aka Alicia Keith, 40, and Jackie Chaney aka Jackie Scott, 47, were charged with one count of a multi-prong conspiracy to defraud the United States and to commit theft of public money, wire fraud and aggravated identity theft; five counts of wire fraud and 11 counts of aggravated identity theft. Washington was arrested Thursday and Chaney was arrested today.
As alleged in the indictment, Washington and Chaney conspired together and with others to prepare false tax returns using stolen identities. Washington is alleged to have obtained several Electronic Filing Identification Numbers and used them to electronically file false tax returns with the Internal Revenue Service (IRS) that requested tax refunds. Washington, Chaney and others received the fraudulently obtained tax refunds in the form of U.S. Treasury checks or on prepaid debit cards in the names of other individuals. It is further alleged that Washington and Chaney conspired with others to convert the U.S. Treasury checks into cash.
If convicted, Washington and Chaney face a statutory maximum sentence of five years in prison for the conspiracy charge, 20 years in prison for each count of wire fraud and a mandatory two years in prison for each count of identity theft, which will be imposed in addition to any other term of imprisonment they receive. They also face substantial monetary penalties, supervised release, and restitution.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Polite commended special agents of IRS Criminal Investigation, who investigated the case and Assistant U.S. Attorney Hayden Brockett of the Eastern District of Louisiana and Trial Attorney Lauren Castaldi of the Tax Division, who are prosecuting this case.
An indictment merely alleges that crimes have been committed and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.
Additional information about the Tax Division and its enforcement efforts may be found on the Division’s website.
Justice Department Reaches $470 Million Joint State-Federal Settlement with HSBC to Address Mortgage Loan Origination, Servicing and Foreclosure AbusesRead the Press Release
The Justice Department, the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau, along with 49 state attorneys general and the District of Columbia’s attorney general, have reached a $470 million agreement with HSBC Bank USA NA and its affiliates (collectively, HSBC) to address mortgage origination, servicing and foreclosure abuses.
“This agreement is the result of a coordinated effort between federal and state partners to hold HSBC accountable for abusive mortgage practices,” said Acting Associate Attorney General Stuart F. Delery. “This agreement provides for $370 million in creditable consumer relief to benefit homeowners across the country and requires HSBC to reform their servicing standards. The Department of Justice remains committed to rooting out financial fraud and holding bad actors accountable for their actions.”
“This settlement illustrates the department’s continuing commitment to ensure responsible mortgage servicing,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The agreement is part of our ongoing effort to address root causes of the financial crisis.”
“Even as the mortgage crisis recedes, the U.S. Trustee Program will continue to combat mortgage servicer abuse of the federal bankruptcy laws so that homeowners are given their legal right to try to save their homes,” said Director Cliff White of the Justice Department’s U.S. Trustee Program. “Homeowners in financial distress sometimes depend on chapter 13 bankruptcy to help them catch up on their payments. When banks violate bankruptcy laws at the expense of homeowners and other creditors, they must pay a price. This settlement holds HSBC accountable for its actions and helps to protect the most vulnerable homeowners.”
“Mortgage servicers have a responsibility to help struggling borrowers remain in their home, not to push them into foreclosure,” said General Counsel Helen Kanovsky of HUD. “This agreement is another example of how multiple agencies in the federal government and state attorneys general across the country are working to make sure the mortgage industry treats consumers fairly.”
“This agreement not only provides relief to borrowers affected by HSBC’s past practices, it puts in place protections for current and future homeowners through tough mortgage servicing standards,” said Iowa Attorney General Tom Miller. “For years we’ve worked together to hold mortgage servicers responsible for their past conduct. We’re doing that here through this settlement and we’ll continue to address bad conduct in the future.”
The settlement reflects a continuation of enforcement actions by the department and its federal and state enforcement partners to hold financial institutions accountable for abusive mortgage practices. The settlement parallels the $25 billion National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general and the District of Columbia’s attorney general and the five largest national mortgage servicers, as well as the $968 million settlement reached in June 2014 between those same federal and state partners and SunTrust Mortgage Inc. This settlement with HSBC is the result of negotiations that, as has been reported in HSBC Holdings plc’s Annual Report and Accounts, began following the announcement of the NMS.
Under the agreement announced today, HSBC has agreed to provide more than $470 million in relief to consumers and payments to federal and state parties, and to be bound to mortgage servicing standards and be subject to independent monitoring of its compliance with the agreement. More specifically, the settlement provides that:
- HSBC will pay $100 million: $40.5 million to be paid to the settling federal parties; $59.3 million to be paid into an escrow fund administered by the states to make payments to borrowers who lost their homes to foreclosure between 2008 and 2012; and $200,000 to be paid into an escrow fund to reimburse the state attorneys general for investigation costs.
- By July 2016, HSBC will complete $370 million in creditable consumer relief directly to borrowers and homeowners in the form of reducing the principal on mortgages for borrowers who are at risk of default, reducing mortgage interest rates, forgiving forbearance and other forms of relief. The relief to homeowners has been underway and will likely provide more than $370 million in direct benefits to borrowers because HSBC will not be permitted to claim credit for every dollar spent on the required consumer relief.
- HSBC will be required to implement standards for the servicing of mortgage loans, the handling of foreclosures and for ensuring the accuracy of information provided in federal bankruptcy court. These standards are designed to prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections. The standards provide for oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court. The servicing standards ensure that foreclosure is a last resort by requiring HSBC to evaluate homeowners for other loss-mitigation options first. In addition, the standards restrict HSBC from foreclosing while the homeowner is being considered for a loan modification.
The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia. Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr., who is also the monitor for the NMS and SunTrust settlement. Smith has served as the North Carolina Commissioner of Banks and is also the former chairman of the Conference of State Banks Supervisors. Smith will oversee implementation of the servicing standards required by the agreement, will certify that HSBC has satisfied its consumer relief obligations and will file regular public reports that identify any quarter in which HSBC fell short of the standards imposed in the settlement. The parties may seek penalties for non-compliance.
The agreement resolves potential violations of civil law based on HSBC’s deficient mortgage loan origination and servicing activities. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by HSBC, or from punishing wrongful securitization conduct that is the focus of President Barack Obama’s Financial Fraud Enforcement Task Force Residential Mortgage-Backed Securities Working Group. State attorneys general also preserved, among other things, all claims against Mortgage Electronic Registration Systems. Additionally, the agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.
The Department of Treasury, the Federal Trade Commission, the Department of Agriculture, the Veterans Administration and the Special Inspector General for the Troubled Asset Relief Program also made critical contributions to reaching this settlement.
Virginia Electrician Arraigned on Tax ChargesRead the Press Release
A former Cumberland, Virginia, resident was arraigned in federal court in Roanoke, Virginia, on Feb. 3, on a seven-count indictment charging him with tax evasion, corruptly endeavoring to impede and impair the due administration of the internal revenue laws and failure to file tax returns, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S Attorney John P. Fishwick, Jr. of the Western District of Virginia announced today.
According to the indictment, which was returned in June 2015 and unsealed in December 2015, Richard Alex, a self-employed low-voltage electrician, had not filed a timely or valid federal income tax return in more than a decade. For tax years 1998 and 2000 through 2003, Alex filed a tax return on which he falsely claimed that he had not earned any income. For tax years 2004 through 2013, Alex failed to file any tax returns despite earning gross income in excess of the filing requirement and receiving numerous warnings and notices from the Internal Revenue Service (IRS).
The indictment further alleges that, to prevent the IRS from collecting his unpaid taxes, Alex attempted to conceal his assets and income by establishing nominee businesses to conceal his gross income and using bank accounts held in the names of nominees to receive income. Alex also provided false information to a tax return preparer for the purpose of preparing federal tax returns for Alex’s nominee entity, Cole Data Services.
Alex’s detention hearing is tomorrow before U.S. Magistrate Judge Robert S. Ballou. Trial is set for April 11 before U.S. District Judge Norman K. Moon. If convicted, Alex faces a statutory maximum sentence of five years in prison for the tax evasion count, three years in prison for the charge of corruptly endeavoring to impede and impair the due administration of the internal revenue laws and one year in prison for each count of failure to file a tax return. He is also subject to a fine and restitution.
An indictment merely alleges that crimes have been committed and the defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Fishwick Jr. commended special agents of IRS Criminal Investigation, who investigated the case and Trial Attorney Sean Beaty of the Tax Division and Assistant U.S. Attorney C. Patrick Hogeboom of the Western District of Virginia, who are prosecuting the case.
Minnesota Chiropractor Indicted for Tax EvasionRead the Press Release
A federal grand jury sitting in Minneapolis returned an indictment on Feb. 1, which was unsealed today, charging a chiropractor with one count of tax evasion and one count of passing a fictitious obligation, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Andrew Luger of the District of Minnesota announced today.
According to the allegations in the indictment, Donald Gibson failed to file federal income tax returns with the Internal Revenue Service (IRS) for the years 2004 through 2010 to report his income from his work as a chiropractor. In May 2012, the IRS informed Gibson that he owed approximately $330,000 in federal income taxes for those years. Gibson allegedly evaded paying his federal income taxes for 2004 through 2010 by, among other things, cashing his business checks at a check-cashing facility, purchasing money orders and directing his income onto stored-value debit cards. Gibson is further alleged to have used Sovereign Christian Mission, a nonprofit corporation he registered with the Oregon Secretary of State, to hide his income and pay his personal expenses. The indictment also charges Gibson with submitting a fake bond that he claimed to be valued at $300 million to the Department of the Treasury to pay off his tax liabilities.
If convicted, Gibson faces a statutory maximum sentence of five years in prison for the tax evasion charge and a statutory maximum sentence of 25 years in prison for the passing a fictitious obligation charge.
An indictment is not a finding of guilt. The individual charged in the indictment is presumed innocent until proven guilty beyond a reasonable doubt.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Luger thanked special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorney Ryan R. Raybould of the Tax Division and Assistant U.S. Attorney Joseph Thompson of the District of Minnesota, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website
Federal Court Orders Delaware Donut Business and Its Owner to Pay Federal Payroll Taxes on TimeRead the Press Release
A federal court has ordered Chel-C Ventures Inc., which operated Donut Connection stores in Milford, Georgetown, and Harbeson, Delaware, to file its federal payroll tax returns on time and pay federal payroll taxes as they become due, the Justice Department announced. Although Chel-C Ventures has said that it closed the stores after the United States filed its civil complaint in this case, the court’s order directs Chel-C Ventures and its owner, Elva Davidson of Sussex County, Delaware, to file the returns and pay the taxes on time if the business starts operating again. The injunction is effective immediately.
According to the United States’ civil complaint in the case, Chel-C Ventures repeatedly failed over a period of years to fully pay its payroll taxes. The court’s order also determined that Chel-C Ventures was liable for more than $645,000 in federal payroll taxes, penalties and interest and that Davidson was personally liable to the United States for more than $250,000. Chel-C Ventures and Davidson agreed to entry of the court’s order, but did not admit to the allegations in the United States’ civil complaint in the case.
Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division thanked the revenue officer of Internal Revenue Service’s Field Collection for investigating and preparing the civil case.
Additional information about the Tax Division and its enforcement efforts may be found on the Division’s website.
Criminal Charges Filed Against Bank Julius Baer of Switzerland with Deferred Prosecution Agreement Requiring Payment of $547 Million, as Well as Guilty Pleas of Two Julius Baer BankersRead the Press Release
Bank Admits to Helping U.S. Taxpayer-Clients Hide Billions of Dollars in Offshore Accounts
Bankers Daniela Casadei and Fabio Frazzetto, Fugitives Since 2011, Surrender and Plead Guilty to Felony Tax Charges
Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Preet Bharara of the Southern District of New York, and Chief Richard Weber of the Internal Revenue Service – Criminal Investigation, (IRS-CI), announced the filing of criminal charges against Bank Julius Baer & Co. Ltd. (Julius Baer or the company), a financial institution headquartered in Zurich, Switzerland. Julius Baer is charged with conspiring with many of its U.S. taxpayer-clients and others to help U.S. taxpayers hide billions of dollars in offshore accounts from the IRS and to evade U.S. taxes on the income earned in those accounts.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Bharara also announced a deferred prosecution agreement with Julius Baer (the agreement) under which the company admits that it knowingly assisted many of its U.S. taxpayer-clients in evading their tax obligations under U.S. law. The admissions are contained in a detailed Statement of Facts attached to the agreement. The agreement requires Julius Baer to pay a total of $547 million by no later than Feb. 9, 2016, including through a parallel civil forfeiture action also filed today in the Southern District of New York.
The criminal charge is contained in an Information (the information) alleging one count of conspiracy to (1) defraud the IRS, (2) to file false federal income tax returns and (3) to evade federal income taxes. If Julius Baer abides by all of the terms of the agreement, the government will defer prosecution on the Information for three years and then seek to dismiss the charges.
In addition, two Julius Baer client advisers, Daniela Casadei and Fabio Frazzetto, pleaded guilty in Manhattan federal court today. Casadei and Frazzetto were originally charged in 2011 and remained at large until Feb. 1, when they each made initial appearances before the Honorable Gabriel W. Gorenstein, U.S. Magistrate Judge for the Southern District of New York.
Casadei and Frazzetto each pleaded guilty to an Information (collectively, with the Julius Baer information, the informations) before U.S. District Judge Laura Taylor Swain charging them with conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide their assets in offshore accounts and to evade U.S. taxes on the income earned in those accounts.
“Today’s resolution with Bank Julius Baer and the guilty pleas entered by two bank employees reflect the department’s continued commitment to hold accountable those financial institutions who conspired with U.S. taxpayers to conceal assets abroad and evade U.S. tax obligations, as well as those individuals responsible for such crimes,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “The deferred prosecution agreement filed today makes it clear that there is a heavy price to pay for this conduct, and that there is a significant benefit in fully cooperating with the department.”
“Bank Julius Baer not only turned a blind eye to tax avoiders, but actually conspired with them to break the law,” said U.S. Attorney Bharara. “Together with our partners at the IRS, we will continue to prosecute financial institutions and individuals who facilitate tax evasion.”
“In taking responsibility for their actions, Bank Julius Baer has agreed to cooperate and pay a substantial penalty for their role in circumventing offshore disclosure laws, said IRS-CI Chief Weber. “The agreement – as well as the guilty pleas of client advisors Daniela Casadei and Fabio Frazzetto – sends a strong message to the international banking community as well as U.S. taxpayers who think they can outsmart the system by hiding their money in these international banks. The consequences of not reporting your foreign accounts and paying the taxes you owe will be significant for those who do not heed the warnings that agreements like this yield.”
According to the informations, statements made during the proceedings today and other documents filed in Manhattan federal court, including the statement of facts to the agreement:
The Offense Conduct
From at least the 1990s through 2009, Julius Baer helped many of its U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns with the IRS and otherwise hide accounts held at Julius Baer from the IRS (hereinafter, undeclared accounts). Julius Baer did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at Julius Baer. Casadei and Frazzetto, bankers who worked as client advisers at Julius Baer, directly assisted various U.S. taxpayer-clients in maintaining undeclared accounts at Julius Baer in order to evade their obligations under U.S. law. At various times, Casadei, Frazzetto and others advised those U.S. taxpayer-clients that their accounts at Julius Baer would not be disclosed to the IRS because Julius Baer had a long tradition of bank secrecy and no longer had offices in the United States, making Julius Baer less vulnerable to pressure from U.S. law enforcement authorities than other Swiss banks with a presence in the United States.
In furtherance of the scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, Julius Baer undertook, among other actions, the following:
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Entering into “code word agreements” with U.S. taxpayer-clients under which Julius Baer agreed not to identify the U.S. taxpayers by name within the bank or on bank documents, but rather to identify the U.S. taxpayers by code name or number, in order to reduce the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers.
- Opening and maintaining accounts for many U.S. taxpayer-clients held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, structures) or non-U.S. relatives, thereby helping such U.S. taxpayers conceal their beneficial ownership of the accounts.
Julius Baer was aware that many U.S. taxpayer-clients were maintaining undeclared accounts at Julius Baer in order to evade their U.S. tax obligations, in violation of U.S. law. In internal Julius Baer correspondence, undeclared accounts held by U.S. taxpayers were at times referred to as “black money,” “non W-9,” “tax neutral,” “unofficial,” or “sensitive” accounts.
Julius Baer also advised its bankers to take certain steps to avoid scrutiny from U.S. authorities when travelling to the United States, as well as steps to avoid U.S. law enforcement identifying Julius Baer clients. In a memo entitled “U.S. Clients Do’s & Don’ts,” circulated internally in 2006, a Julius Baer employee provided client advisers with advice regarding travel to the United States, including:
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“At Immigration . . . When asked by Officer what will you do while in the USA, say Business and of course some leisure, trying to take some time to enjoy your beautiful country. Proud government employees usually love this type of statement.One can throw in skydiving or another fun sport/activity.This tends to shift the questioning away from the business purpose to the ‘fun time’ part of the trip (carrying a tennis racket also puts the emphasis on “fun and games,” and not on business).”
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In regard to communicating while in the U.S.:“Only use mobile phone[s] registered in and operating from Switzerland.Avoid phone calls from hotel to clients.It is recommended to purchase a telephone calling card from the post office, grocery stores, or electronic shops.This allows you to use practically any phone with no specific link left behind.The best is to pay for the calling card in cash.For ex: a 400 minutes local calling card costs less than $50, but the rates can vary.Most cards can also be used to call anywhere abroad.”
At its high-water mark in 2007, Julius Baer had approximately $4.7 billion in assets under management relating to approximately 2,589 undeclared accounts held by U.S. taxpayer-clients. From 2001 through 2011, Julius Baer earned approximately $87 million in profit on approximately $219 million gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures.
Julius Baer’s Blocked Effort to Self-Report, Acceptance of Responsibility, and Cooperation in the Government Investigation
Notwithstanding its lucrative criminal conduct, by at least 2008, Julius Baer began to implement institutional policy changes to cease providing assistance to U.S. taxpayers in violating their U.S. legal obligations. For example, by November 2008, the company began an “exit” plan for U.S. client accounts that lacked evidence of U.S. tax compliance. In that same month, Julius Baer imposed a prohibition on opening accounts for any U.S. clients without a Form W-9.
Additionally, in November 2009, before Julius Baer became aware of any U.S. investigation into its conduct, Julius Baer decided proactively to approach U.S. law enforcement authorities regarding its conduct relating to U.S. taxpayers. Prior to self-reporting to the Department of Justice, Julius Baer notified its regulator in Switzerland of its intention to contact U.S. law enforcement authorities. This Swiss regulator requested that Julius Baer not contact U.S. authorities in order not to prejudice the Swiss government in any bilateral negotiations with the United States on tax-related matters. Accordingly, Julius Baer did not, at that time, self-report to U.S. law enforcement authorities.
After ultimately engaging with U.S. authorities, Julius Baer has taken exemplary actions to demonstrate acceptance and acknowledgement of responsibility for its conduct. Julius Baer conducted a swift and robust internal investigation, and furnished the U.S. government with a continuous flow of unvarnished facts gathered during the course of that internal investigation. As part of its cooperation, Julius Baer also, among other things, (1) successfully advocated in favor of a decision provided by the Swiss Federal Council in April 2012 to allow banks under investigation by the U.S. Department of Justice to legally produce employee and third-party information to the department, and subsequently produced such information immediately upon issuance of that decision; and (2) encouraged certain employees, including specifically Frazzetto and Casadei, to accept responsibility for their participation in the conduct at issue and cooperate with the ongoing investigation.
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Casadei, 52, a Swiss citizen, and Frazzetto, 42, an Italian and Swiss citizen, each pleaded guilty to one count of conspiracy to defraud the IRS, to evade federal income taxes and to file false federal income tax returns. Casadei and Frazzetto each face a statutory maximum sentence of five years in prison. The statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentences imposed on the defendants will be determined by the judge.
Casadei and Frazzetto are each scheduled to be sentenced before Judge Swain on Aug. 12, 2016.
This case is being handled by the U.S. Attorney’s Office of the Southern District of New York Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Jason H. Cowley and Sarah E. Paul are in charge of the prosecution. Acting Assistant Attorney General Ciraolo and U.S. Attorney Bharara praised the outstanding investigative work of IRS-CI and thanked the U.S. Department of Homeland Security for its assistance with the case.
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Two Georgia Real Estate Investors Indicted for Bid Rigging and Bank Fraud at Public Home Foreclosure AuctionsRead the Press Release
A federal grand jury in Atlanta charged in separate indictments two real estate investors with bid rigging and bank fraud related to public real estate foreclosure auctions in Georgia, the Justice Department announced today.
Real estate investor Douglas L. Purdy has been charged with one count of bid rigging and five counts of bank fraud for participating in the alleged conspiracy and scheme at Forsyth County, Georgia, foreclosure auctions from 2008 to 2012. Clifford Wayne Hill was charged with one count of bid rigging and seven counts of bank fraud related to public foreclosure auctions in Gwinnett County, Georgia, from 2007 to 2012. The defendants and their co-conspirators allegedly rigged bids at public foreclosure auctions and defrauded banks that owned the mortgage notes. Among other methods, the conspirators allegedly held secret “second auctions” of properties they had obtained through rigged bids, dividing the auction proceeds that should have gone to pay off debts against the properties and, in some cases, to homeowners who had defaulted.
“These defendants corrupted public foreclosure auctions in Georgia to keep for themselves money that rightfully belonged to banks and homeowners,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “Those who illegally enrich themselves at the expense of financially distressed homeowners and their lenders should be held accountable for their crimes.”
“The FBI continues its work with the U.S. Department of Justice’s Antitrust Division in ridding corrupt activities within the public real estate foreclosure auction process in Georgia,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office. “The additional federal indictments of these two real estate investors illustrate not only the scope of the problem but also the federal efforts to address it. Anyone with information regarding such criminal activity as alleged here should contact their nearest FBI field office.”
An indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Including the indictments filed today in the Northern District of Georgia, 14 defendants have been charged in connection with the department’s ongoing investigation into bid rigging and fraudulent schemes involving real estate foreclosure auctions in the Atlanta area; 12 have pleaded guilty.
These charges have been filed as a result of the ongoing investigation being conducted by the Antitrust Division’s Washington Criminal II Section, the FBI’s Atlanta Division and the U.S. Attorney’s Office of the Northern District of Georgia, in connection with the president’s Financial Fraud Enforcement Task Force. The president established the task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information about the task force, please visit www.StopFraud.gov. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 888-647-3258, or visit http://www.justice.gov/atr/report-violations.
Purdy Indictment (211.42 KB)
Hill Indictment (274.93 KB)
Three Texas Tax Return Preparers Convicted of Filing False Tax Returns for ClientsRead the Press Release
Three El Paso, Texas, tax return preparers were convicted by a jury yesterday in the U.S. District Court for the Western District of Texas (El Paso Division) of conspiracy to defraud the United States for their involvement in a fraudulent tax return preparation scheme and numerous counts of aiding and assisting in the preparation and filing of materially false federal income tax returns, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U. S. Attorney Richard L. Durbin Jr. for the Western District of Texas announced.
According to evidence and witness testimony introduced at the trial, Belia Mendoza, 60, was the owner of Mendez Tax Services (MTS), a tax preparation business she operated out of her home in El Paso. Margarita Hernandez, 36, and Denise Duchene, 46, relatives of Mendoza’s, were employees of MTS hired and trained by Mendoza to prepare tax returns for clients for tax years 2008, 2009 and 2010. From February 2009 until June 2011, Mendoza, Hernandez and Duchene conspired to prepare and submit to the Internal Revenue Service (IRS) numerous false Forms 1040 (U.S. Individual Income Tax Returns).
To maximize their clients’ income tax refunds, Mendoza, Hernandez and Duchene placed materially false items on the clients’ tax returns, at times without the knowledge or consent of the clients, including false or inflated figures for unreimbursed employee business expenses, child and dependent care expenses and education credits. Income tax returns prepared by the defendants also included false filing statuses and improperly claimed Earned Income Tax Credits.
“These verdicts represent our continued commitment to identifying and prosecuting those individuals who willfully prepare and file false and fraudulent tax returns,” said Acting Assistant Attorney General Ciraolo. “The millions of U.S. taxpayers who will file returns during the 2016 filing season are entitled to the assistance of honest and competent professionals, and the Tax Division will hold those preparers who in engage in criminal conduct accountable.”
“It’s tax season and the guilty verdicts for Belia Mendoza and her relatives, Margarita Hernandez and Denise Duchene, are proof that taxpayers are fed up with tax fraud and abuse,” said Special Agent in Charge William Cotter of IRS-Criminal Investigation, San Antonio. “Dishonest return preparers use a variety of methods to cheat the government. Remember, it is your responsibility to know what is on your income tax return. You are ultimately responsible for what gets filed with the IRS. Taxpayers are encouraged to visit the IRS.gov website for tips on looking for a reputable return preparer.”
Mendoza, Hernandez and Duchene each face up to five years in federal prison on the conspiracy charge and up to three years in federal prison for each false tax return preparation charge.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Durbin commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorney Joseph M. Giannullo of the Tax Division and Assistant U.S. Attorneys Adrian Gallegos and Rifian Newaz, who prosecuted the case.
Texas Woman Sentenced to Prison in Prescription Drug Smuggling RingRead the Press Release
The Department of Justice announced today that an Athens, Texas, woman has been sentenced to more than one year in prison for her role in the smuggling of imitation, unapproved and misbranded prescription drugs from China.
Catherine Nix, 42, pleaded guilty in April 2015 to one count of conspiracy to smuggle the drugs into the United States. Nix was sentenced to 15 months in prison, followed by two years of supervised release. Two co-defendants, Tom Giddens, 59, and Wanda Hollis, 64, also of Athens, were each sentenced to 15 months in prison in October 2015.
“Consumers of prescription drugs need to know that what they are buying is legitimate, safe, and approved,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This illegal operation introduced more than 100,000 bogus pills into the stream of commerce, potentially posing a huge public health and safety risk. Consumers should know that the drugs they are buying are exactly what they appear to be, and not false versions of name-brand products that could ultimately do them more harm than good.”
In 2009, the defendants smuggled at least 43 known shipments, totaling approximately 106,000 pills, from China to Texas. The shipments contained unapproved, bogus versions of several FDA-approved drugs that, because of the health and safety risks associated with their use, require valid prescriptions to dispense. The prescription drugs seized included: Xanax®; Valium®; sibutramine; Cialis®; Viagra® and Stilnox®, marketed in the United States as Ambien®. None of the pills that were seized and tested were legitimate. Some were sub-potent, but most contained entirely different active ingredients from their legitimate, approved versions. The defendants attempted to hide their smuggling by using shipping labels that concealed the contents of their shipments and customs declarations falsely describing the contents as “gifts” or “toys.” They used multiple addresses in an effort to reduce the likelihood of seizures by U.S. Customs and Border Protection authorities.
“This office remains committed to stemming the increasing flood of illegitimate prescription drugs that come into East Texas,” said U.S. Attorney John M. Bales for the Eastern District of Texas. “This case puts the very real, inherent dangers of counterfeit prescription drugs on full display. These pills looked almost exactly like their legitimate counterparts, but lacked any of the safety or efficacy of the legitimate versions.”
“FDA’s laws are in place to ensure that consumers have access to safe and effective prescription drugs,” said Director George M. Karavetsos of the FDA’s Office of Criminal Investigations. “Those who evade those laws risk harming the public’s health. We will continue to work with our law enforcement partners to keep the U.S. marketplace free of illegitimate medical products.”
This case was investigated by the FDA’s Office of Criminal Investigations and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. The case was prosecuted by Assistant U.S. Attorney Allen Hurst for the U.S. Attorney’s Office for the Eastern District of Texas and by Trial Attorney John W.M. Claud of the Civil Division’s Consumer Protection Branch.
Justice Department Announces New Acting Pardon AttorneyRead the Press Release
The Justice Department announced today that Robert A. Zauzmer will become the new Acting Pardon Attorney effective immediately.
Zauzmer, the Chief of Appeals in the U.S. Attorney’s Office of the Eastern District of Pennsylvania, has been a key player in the department’s implementation of both the 2013 Smart on Crime initiative and the U.S. Sentencing Commission’s retroactive sentence reductions.
“Bob’s long-standing commitment to criminal justice reform and his knack for devising and implementing the department’s sentencing reduction policies made him a natural choice to serve as Pardon Attorney,” said Deputy Attorney General Sally Q. Yates. “Bob also shares my unwavering dedication to the president’s clemency initiative. Given his experience and dedication, I am confident that Bob will hit the ground running.”
“As someone who has been part of the criminal justice system for more than 25 years, I have long been troubled by the imposition of disproportionately lengthy sentences, even as long as life imprisonment, that were imposed on low-level drug offenders on the basis of laws and policies that have since been changed,” said Zauzmer. “I have dedicated much of the past decade to assisting in the efforts to right some of those unfairly long sentences, and it is my profound honor to aid the president in using his clemency power to continue to restore the sense of proportionality and fairness that is at the heart of our justice system.”
As part of his efforts on behalf of the department, Zauzmer has testified multiple times before the U.S. Sentencing Commission on sentencing guideline issues, including the retroactive application of reductions in drug sentences. He also trained federal prosecutors nationwide on how to apply retroactivity in a way that provides relief to all eligible inmates in the most efficient manner possible. From 2012 to 2014, Zauzmer served as a member of the Attorney General’s Advisory Committee (AGAC), working closely with Attorney General Loretta E. Lynch and Deputy Attorney General Yates at a time that they served as chair and vice-chair, respectively, of the AGAC.
The Office of the Pardon Attorney assists the president in the exercise of executive clemency. Under the Constitution, the president’s clemency power extends only to federal criminal offenses. All requests for executive clemency for federal offenses are directed to the Pardon Attorney for investigation and review. After review and recommendation by the Pardon Attorney, the Deputy Attorney General makes a recommendation to the president for final disposition of each application. Executive clemency may take several forms, including pardon, commutation of sentence, remission of fine or restitution, and reprieve.
In December 2013, President Obama directed the department to prioritize applications for clemency from inmates who were sentenced under outdated policies and would have received a lesser sentence under current policies and laws. Since the clemency initiative was announced in April 2014, the president has granted 187 commutations, more than the last five presidents combined.
Former U.S. Citizen Pleads Guilty to Tax Fraud Related to Swiss Financial AccountRead the Press Release
Used Hong Kong Entity and Foreign Accounts in Switzerland, Monaco and Singapore to Conceal Funds
A former U.S. citizen residing in Switzerland pleaded guilty today to one count of filing a false income tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia.
“U.S. taxpayers have been given ample opportunity to come forward, disclose their secret foreign accounts, and come into compliance,” said Acting Assistant Attorney General Ciraolo. “Those individuals and entities who rolled the dice in the hope of remaining anonymous are facing the consequences. The Tax Division remains committed to investigating and prosecuting individual taxpayers with undeclared foreign financial accounts, as well as the financial institutions, bankers, financial advisors and other professionals who facilitate the concealment of income and assets offshore. And as today’s guilty plea clearly indicates, the department’s reach is well beyond Switzerland.”
According to court documents, in 2006, Albert Cambata, 61, established Dragonflyer Ltd., a Hong Kong corporate entity, with the assistance of a Swiss banker and a Swiss attorney. Days later, he opened a financial account at Swiss Bank 1 in the name of Dragonflyer. Although he was not listed on the opening documents as a director or an authorized signatory, Cambata was identified on another bank document as the beneficial owner of the Dragonflyer account. That same year, Cambata received $12 million from Hummingbird Holdings Ltd., a Belizean company. The $12 million originated from a Panamanian aviation management company called Cambata Aviation S.A. and was deposited to the Dragonflyer bank account at Swiss Bank 1 in November 2006.
“IRS Criminal Investigation will continue to pursue those who do not pay the taxes they owe to the United States,” said Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office. “Today’s plea is a reminder that we are committed to following the money trail across the globe and will not be deterred by the use of sophisticated international financial transactions that hide the real ownership of income taxable by the United States.”
On his 2007 and 2008 federal income tax returns, Cambata failed to report interest income earned on his Swiss financial account in the amounts of $77,298 and $206,408, respectively. In April 2008, Cambata caused the Swiss attorney to request that Swiss Bank 1 send five million Euros from the Swiss financial account to an account Cambata controlled at the Monaco branch of Swiss Bank 3. In June 2008, Cambata closed his financial account with Swiss Bank 1 in the name of Dragonflyer and moved the funds to an account he controlled at the Singapore branch of Swiss Bank 2.
In 2012, Cambata, who has lived in Switzerland since 2007, went to the U.S. Embassy in Bratislava, Slovakia, to renounce his U.S. citizenship and informed the U.S. Department of State that he had acquired the nationality of St. Kitts and Nevis by virtue of naturalization.
U.S. District Judge Claude Hilton of the Eastern District of Virginia set sentencing for April 15. Cambata faces a statutory maximum sentence of three years in prison and a fine of up to $250,000. As part of his plea agreement, Cambata agreed to pay $84,849 in restitution to the Internal Revenue Service (IRS).
Acting Assistant Attorney General Ciraolo and U.S. Attorney Boente thanked special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief Todd Ellinwood of the Tax Division and Assistant U.S. Attorney Mark D. Lytle of the Eastern District of Virginia, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.