District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
BBA Aviation to Divest Facilities at Six Airports in Landmark Aviation AcquisitionRead the Press Release
Divestitures Avoid Creating Monopolies or Duopolies for Critical Fueling and Support Services
The Department of Justice announced today that it will require BBA Aviation plc, the parent company of Signature Flight Support, to divest fixed‑base operator assets (FBOs) at six U.S. airports in order to proceed with its $2.065 billion acquisition of Landmark Aviation.
The department’s Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed acquisition, and simultaneously filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit. The department said that without the required divestitures, the transaction would have created a monopoly for FBO services at three airports and reduced the number of full-service FBO providers from three to two at three others, resulting in higher prices and lower quality of FBO services for consumers.
“The merger would have subjected general aviation customers at six airports to a monopoly or duopoly for critical fueling and support services,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “Higher prices and lower quality services were the likely result. Today’s proposed settlement will ensure that customers at these airports will continue to receive the benefits of vigorous competition.”
FBOs provide fuel and related support services to general aviation customers, which include charter, private and corporate aircraft operators. Signature and Landmark own or operate full-service FBOs at airports throughout the United States. Signature and Landmark are the only two full-service FBOs at Washington Dulles International Airport (IAD) in Dulles, Virginia; Scottsdale Municipal Airport (SDL) in Scottsdale, Arizona; and Fresno Yosemite International Airport (FAT) in Fresno, California. Signature and Landmark are two of only three full-service FBOs at Jacqueline Cochran Regional Airport (TRM) in Thermal, California; Westchester County Airport (HPN) in White Plains, New York; and Ted Stevens Anchorage International Airport (ANC) in Anchorage, Alaska. At each of these three airports, the third FBO is much smaller than Signature and Landmark.
Under the terms of the proposed settlement, BBA Aviation must divest Landmark’s FBO assets at each of the six impacted airports to a buyer approved by the Antitrust Division.
BBA Aviation plc is a United Kingdom public limited company headquartered in London. Its subsidiary, Signature Flight Support, a Delaware corporation headquartered in Orlando, Florida, has the world’s largest FBO network and operates approximately 70 FBO facilities in the United States. BBA had worldwide revenues of approximately $2.3 billion in 2014, of which over $900 million were derived from Signature’s U.S. FBO business.
Landmark U.S. Corp LLC and LM U.S. Member LLC (collectively doing business as Landmark Aviation), are Delaware limited liability companies headquartered in Houston and are owned by investment funds managed by the Carlyle Group. Landmark operates approximately 60 FBO facilities in the United States. Landmark had worldwide revenues of over $700 million in 2014, of which over $500 million were derived from its U.S. FBO business.
As required by the Tunney Act, the proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to James J. Tierney, Chief, Networks & Technology Enforcement Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, N.W., Suite 7100, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed final judgment upon finding that it serves the public interest.
BBA_Landmark CIS (86.52 KB)
BBA_Landmark PFJ (84.97 KB)
BBA_Landmark Hold Separate (105.15 KB)
BBA_Landmark Explanation (26.9 KB)
BBA_Landmark Complaint (115.75 KB)
South Florida Government Contractor Sentenced to Prison for Tax FraudRead the Press Release
A government contractor based in Fort Lauderdale, Florida, was sentenced to 12 months and one day in prison for filing a false income tax return, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced today.
According to court documents, Maxim Silinsky, 44, owned an aircraft-leasing and parts-supply company called Simplex Corporation. Simplex contracted with the federal government to lease Russian aircraft to the U.S. Air Force for training purposes and to supply parts and equipment to U.S. military forces deployed to Afghanistan.
Silinsky used a complex web of domestic and foreign corporate entities and financial accounts to facilitate his underpayment of both corporate and individual income tax for the years 2007 through 2010. Silinsky filed false corporate tax returns for these years that overstated Simplex’s expenses. For the years 2008 through 2010, Silinsky also filed false individual income tax returns on which he understated the amount of income he received from the business. To conceal his fraud from the Internal Revenue Service (IRS), Silinsky transferred approximately $1.7 million from Simplex to nominee bank accounts that he controlled and disguised the transfers as costs of goods sold, which led to overstated costs-of-goods-sold expenses on Simplex’s corporate returns. In 2012, during an audit of Simplex’s 2008 corporate return, Silinsky made false statements to the IRS about these expenses. Silinsky also purchased real estate using funds he diverted from the business and titled the property in nominee names to hide his involvement. Additionally, a family member served as a nominee shareholder of a shell corporation that Silinsky established to receive income from Simplex on his behalf, which allowed Silinsky to pay taxes on this money at a lower rate. In the plea documents, Silinsky also admitted that he was involved in making illicit payments to a government contractor and U.S. military personnel.
“All taxpayers are required to provide truthful information to the Internal Revenue Service, whether it be on a tax return, during an audit, or with respect to collections” said Acting Assistant Attorney General Ciraolo. “The Tax Division is committed to pursuing those taxpayers who seek to obstruct or evade the assessment and collection of federal income taxes by lying to the government about their income, expenses or assets.”
Silinsky cooperated with federal authorities in the prosecution of a federal government contractor, Victor Villalobos, and a retired senior non-commissioned Air Force officer, Trevor Smith, who have both pleaded guilty in separate cases to government contracting and tax fraud. Smith was sentenced last month to 18 months in prison and Villalobos is set to be sentenced on Feb. 17.
In addition to the prison term, Silinsky was also ordered to pay a $6,000 fine. Silinsky paid restitution to the IRS prior to his sentencing.
Acting Assistant Attorney General Ciraolo commended special agents of IRS Criminal Investigation, the U.S. Air Force’s Office of Special Investigations and the U.S. Department of Defense’s Defense Criminal Investigative Service, who investigated this case, and Trial Attorneys Charles M. Edgar Jr. and Jason H. Poole of the Tax Division, who prosecuted this case. 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.
New Jersey Pipe Supply Company Owner Sentenced to 32 Months in Prison for Role in Fraud and Bribery Conspiracy in Power Generation IndustryRead the Press Release
Company Sentenced to Pay a Total of Over $1.7 Million in Fines and Restitution
A New Jersey industrial pipe supply company and its owner were sentenced today for conspiring to commit fraud and pay bribes to a purchasing manager at Consolidated Edison of New York in return for the manager’s efforts to steer contracts to the company, the Department of Justice announced.
Andrew Martingano, of Staten Island, New York, was sentenced by U.S. District Judge Deborah A. Batts of the Southern District of New York to 32 months and a day in prison. American Pipe Bending and Fabrication Co. Inc. of Edison, New Jersey, was sentenced to pay a $150,000 criminal fine. Martingano and American Pipe were also sentenced to pay over $1.6 million in restitution, jointly and severally with their co-conspirators, to the victim, Con Ed. The company and its owner pleaded guilty to committing wire fraud and conspiring to defraud Con Ed on Aug. 15, 2012.
According to court documents, Martingano and others agreed to pay approximately $510,000 in cash bribes to James M. Woodason, a department manager of the purchasing department at Con Ed. In exchange for the bribes, Woodason steered Con Ed industrial pipe supply contracts to American Pipe by secretly providing Martingano with confidential competitor bid information, thereby causing Con Ed to pay higher, non-competitive prices for materials. At the time of Woodason’s arrest in August 2010, Woodason had already received approximately $45,000 in cash bribes from Martingano and American Pipe.
The department said the conspiracy took place from approximately January 2009 to August 2010. In addition, Martingano and American Pipe defrauded Con Ed by requesting a 14 percent price increase and basing that request on a fake email purporting to document a “Steel Mill” price increase that American Pipe was passing on to Con Ed. These false and fraudulent price increase requests caused actual losses to Con Ed in the amount of approximately $1.4 million and intended losses of approximately $9.4 million.
Con Ed is a regulated utility headquartered in Manhattan. It provides electric service to approximately 3.2 million customers, and gas service to approximately 1.1 million customers in New York City and Westchester County, New York. Con Ed received more than $10,000 in federal funding each year between 2003 through 2010, and cooperated with the department’s investigation.
Including Martingano and American Pipe, a total of five individuals and two companies have been charged as part of this investigation and have been ordered to serve a total of more than 16 years in prison and to pay criminal fines and restitution of more than $3 million.
The charges arose from an ongoing federal antitrust investigation of bid rigging, bribery, fraud and tax-related offenses in the power generation industry. The investigation is being conducted by the Antitrust Division’s New York Office, with assistance from the FBI and the Internal Revenue Service-Criminal Investigation. Anyone with information concerning bid rigging, bribery, tax offenses or fraud in the power generation industry should contact the FBI’s New York Division at 212-384-3720 or the Antitrust Division’s New York Office at 212-335-8000, or visit www.justice.gov/atr/contact/newcase.htm.
MCC Construction Company Agrees to Pay Nearly $1.8 Million for Conspiring to Illegally Obtain Federal Contracts Meant for Small, Disadvantaged BusinessesRead the Press Release
The Justice Department announced today that MCC Construction Company (MCC) has agreed to pay $1,769,294 in criminal penalties and forfeiture for conspiring to commit fraud on the United States by illegally obtaining government contracts that were intended for small, disadvantaged businesses.
The court agreement was announced today by Assistant Attorney General William J. Baer of the Justice Department’s Antitrust Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Assistant Director in Charge Paul M. Abbate of the FBI’s Washington Field Office, Inspector General Peggy E. Gustafson of the Small Business Administration (SBA), Inspector General Carol Fortine Ochoa of the U.S. General Services Administration (GSA), Special Agent in Charge Brian J. Reihms of the Defense Criminal Investigative Service’s (DCIS) Central Field Office and Director Frank Robey of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU).
“This conspiracy defrauded the government and denied small, disadvantaged businesses the opportunity to compete to do business with the United States,” said Assistant Attorney General Baer. “We will continue to work with U.S. Attorney Phillips and his talented colleagues to protect the integrity of the government contracting process.”
“This prosecution shows that there will be consequences for companies that violate federal contracting rules meant to assist small, disadvantaged businesses,” said U.S. Attorney Phillips. “MCC Construction Company secured millions of dollars in contracts by hiding behind two small businesses that did not perform labor on the projects. Its conduct took away opportunities that could have gone to companies that truly are socially and economically disadvantaged and deserving of the work.”
“An uneven marketplace is created when businesses engage in illegal backroom deals to fraudulently obtain government contracts, placing competitors at an unfair disadvantage,” said Assistant Director in Charge Abbate. “In this case, the FBI and our partners moved to protect the American taxpayer and ensure the integrity of the process. Together, we will continue to work to protect federal contract opportunities for socially and economically disadvantaged businesses within our communities from unlawful conduct.”
“Fraudulently passing work through eligible small businesses to a large business does not provide taxpayers the best value and certainly does not support the role of small businesses as engines of economic development and job creation,” said Inspector General Gustafson. “In fact, it subverts the purpose of SBA’s preferential contracting programs and harms the small businesses the programs are designed to assist. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their leadership and dedication to serving justice.”
“We will continue our work on behalf of taxpayers and legitimate small business owners to expose and punish nationwide small business fraud schemes such as this,” said Inspector General Ochoa.
“The Defense Criminal Investigative Service is committed to working with our partner agencies to combat fraud impacting the Department of Defense’s vital programs and operations and maintain the integrity of the procurement system,” said Special Agent in Charge Reihms.“This settlement is a testament to our steadfast and continued commitment to working closely with our law enforcement partners in rooting out this type of activity,” said Director Robey.
MCC was a construction management company and general contractor headquartered in Colorado.
A criminal information was filed last month in the U.S. District Court for the District of Columbia charging MCC with one count of knowingly and willfully conspiring to commit major fraud on the United States. MCC waived the requirement of being charged by way of federal indictment, agreed to the filing of the information and accepted responsibility for its criminal conduct and that of its employees. U.S. District Judge Ketanji B. Jackson accepted the company’s guilty plea today. The plea agreement is subject to the court’s approval at a sentencing hearing scheduled for March 15, 2016.
According to court documents, MCC conspired with two companies that were eligible to receive federal government contracts set aside for small, disadvantaged businesses with the understanding that MCC would, illegally, perform all of the work. In so doing, MCC was able to win 27 government contracts worth over $70 million from 2008 to 2011. The scope and duration of the scheme resulted in a significant number of opportunities lost to legitimate small and disadvantaged businesses.
Under the illegal agreement, the companies awarded these government contracts were allowed to keep 3 percent of the value of the contracts for allowing MCC to use the companies small business status to win the contracts.
Court documents state that MCC violated the provisions of the SBA 8(a) program. The SBA 8(a) development program is designed to award contracts to businesses that are owned by “one or more socially and economically disadvantaged individuals.” To qualify for the 8(a) program, a business must be at least 51 percent owned and controlled by a U.S. citizen (or citizens) of good character who meet the SBA’s definition of socially and economically disadvantaged. The firm must also be a small business (as defined by the SBA) and show a reasonable potential for success. Participants in the 8(a) program are subject to regulatory and contractual limits. Also, under the program, the disadvantaged business is required to perform a certain percentage of the work. For the types of contracts under investigation here, the SBA 8(a)-certified companies were required to perform 15 percent or more of the work with its own employees.
MCC, along with the two 8(a) companies used to illegally obtain the contracts, engaged in and executed a scheme to defraud the SBA by, among other things:
- Allowing the two 8(a) companies to retain a guaranteed percentage of each contract for simply obtaining the contracts for MCC;
- Allowing the two 8(a) companies to perform no labor on these projects;
- Performing the accounting and government reporting for the two 8(a) companies on certain projects;
- Falsely representing to the government that MCC employees were in fact employees of the 8(a) companies;
- Obtaining certain contracts on behalf of the 8(a) companies without first informing those 8(a) companies prior to bidding; and
- Conspiring with the 8(a) companies to hire straw employees for the 8(a) companies whose labor and salaries were paid for by MCC.
For the contracts obtained through this scheme on which MCC made a profit, MCC’s profit was at least $1,269,294. The criminal penalty in this case includes a $500,000 fine and a forfeiture money judgment of $1,269,294.
The investigation is being conducted by the FBI’s Washington Field Office, the Inspector General for the SBA, the Inspector General of the U.S. GSA, the DCIS’ Central Field Office, and the MPFU.
Department of Justice, EPA and the State of Utah Reach Agreement with Salt Lake County to Reduce Polluted Runoff and Protect Water QualityRead the Press Release
The Department of Justice, the U.S. Environmental Protection Agency (EPA) and the State of Utah have reached an agreement with Salt Lake County to resolve alleged Clean Water Act violations associated with the County’s stormwater management program. This agreement, lodged as a consent decree in the U.S. District Court for the District of Utah today, requires the county to take specific measures to reduce illegal stormwater and non-stormwater discharges to Jordan River Valley surface waters by thoroughly implementing the requirements of its municipal separate storm sewer system (MS4) permit. The county will also pay a civil penalty of $280,000.
“This agreement is good news for water quality in Salt Lake County and the people and wildlife that depend on it,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division. “The settlement today is the result of a joint enforcement action by the State of Utah and the United States that will protect the area’s precious water resources from contaminated runoff for many years to come.”
“Protecting the water quality in Salt Lake County is a priority for all of us,” said U.S. Attorney John W. Huber for the District of Utah. “Salt Lake County, working together with the State of Utah, the EPA, and the Department of Justice, has agreed to take several measures that will help protect the Jordan River watershed going forward.”
“Preventing and managing polluted runoff in urban areas is essential to protecting water quality,” said Director Suzanne Bohan for EPA’s Enforcement Program in Denver, Colorado. “The rivers and streams in the Jordan River watershed support growing populations and provide significant economic and recreational benefits in Salt Lake County’s communities. EPA will continue to take steps to ensure that municipalities have viable stormwater programs in place to reduce polluted runoff and protect water resources.”
Under the terms of the agreement, Salt Lake County will secure adequate resources to fully maintain and implement its stormwater program, including training and maintaining full-time staff. The county will also take measures to remedy several identified deficiencies, including procedures to review construction site stormwater control plans, inspect sites with active construction or industrial activity and enforce sediment and erosion control requirements. In addition, the county will ensure structural controls are properly installed and maintained and will improve efforts to identify and eliminate illegal discharges to stormwater infrastructure.
The volume of annual runoff in the Jordan River Valley is estimated at 190 million cubic meters per year, a figure that underscores the importance of local efforts to manage stormwater so it does not become contaminated before reaching surface waters. The Jordan River watershed supports fish, migratory bird species and wildlife and provides water for recreation, irrigation and public supply.
Stormwater runoff from rain and snowmelt events can pick up pollutants like trash, chemicals, oils and sediment as it flows over land and impervious surfaces, such as industrial storage areas, paved streets and parking lots. These pollutants can damage the health of a watershed and cause changes in the water quality, resulting in impaired drinking water sources, habitat modification and loss, increased flooding, decreased aquatic biological diversity and increased sedimentation and erosion. Stormwater controls—also known as best management practices—filter out pollutants and prevent pollution by controlling it at its source.
The Clean Water Act uses a permitting process to manage stormwater discharges from three types of sources: municipal separate storm sewer systems (MS4s), construction activities, and industrial activities. These permits are designed to prevent runoff from rain and snowmelt events from washing harmful pollutants into local surface waters. MS4s are systems of conveyances for storm water that include infrastructure such as storm drains, pipes, ditches and roads. MS4 permits are designed to reduce the release of contaminated runoff into MS4s and the waters into which they discharge. EPA and the Utah Department of Environmental Quality inspected the County’s MS4 in 2012 and identified numerous violations of the County’s MS4 permit.
The consent decree agreement requires the county to pay a one-time civil penalty of $280,000, including $140,000 to the United States and $140,000 to the State of Utah, with an opportunity to offset a portion of the state amount through the completion of supplemental environmental projects.
The settlement, lodged today is subject to a 30-day public comment period and approval by the federal court. The settlement will be available for viewing at www.justice.gov/enrd/Consent_Decrees.html
For more information on EPA’s NPDES stormwater program visit: http://www.epa.gov/npdes/npdes-stormwater-program
U.S. Attorney Dana J. Boente Appointed to Attorney General’s Advisory CommitteeRead the Press Release
Attorney General Loretta E. Lynch announced today the appointment of U.S. Attorney Dana J. Boente of the Eastern District of Virginia to the Attorney General’s Advisory Committee (AGAC), effective Feb. 1, 2016.
“Dana Boente embodies the vision and leadership we need to empower our communities and strengthen our nation, and I am pleased to welcome him to the Attorney General’s Advisory Committee,” said Attorney General Lynch. “Throughout his career – as a Trial Attorney in the Department of Justice’s Tax Division, as a federal prosecutor dedicated to rooting out fraud, and as a U.S. Attorney in Louisiana and Virginia – he has demonstrated his perseverance, his dedication and his wisdom. I have no doubt that he will be an outstanding addition to the Committee, and I look forward to receiving the benefit of his experience as we continue to work towards a safer, more just future for all Americans.”
Boente will fill the seat vacated by former U.S. Attorney Booth Goodwin of the Southern District of West Virginia, who resigned on Dec. 31, 2015.
Boente was appointed by President Barack Obama and confirmed by the Senate on Dec. 15, 2015 as the U.S. Attorney of the Eastern District of Virginia (EDVA). Boente is a 31-year veteran of the Department of Justice, joining the department in 1984 at the conclusion of a clerkship with a U.S. District Court Judge. From 1984 to 1999, Boente was a Trial Attorney with the department’s Tax Division. In January 2000, Boente became an Assistant U.S. Attorney in the Fraud Unit in EDVA. In August 2005, Boente was detailed back to the Tax Division to serve as the Principal Deputy Assistant Attorney General. He returned to EDVA in May 2007, when he was selected as the First Assistant U.S. Attorney. In December 2012, Boente went to serve as the U.S. Attorney of the Eastern District of Louisiana. He returned to the U.S. Attorney’s Office in EDVA in September 2013.
The AGAC was created in 1973 to serve as the voice of the U.S. Attorneys and to advise the Attorney General on policy, management and operational issues impacting the U.S. Attorneys’ Offices.
Two Men Plead Guilty to Federal Charges for Role in Fargo Liquor Store RobberiesRead the Press Release
FARGO - U. S. Attorney Christopher C. Myers announced that on Jan. 29, 2016, Andrew Jerome Ford, and Carlos Henry Bethel, both 28, pled guilty before U. S. District Judge Ralph R. Erickson to Interference with the Commerce by Threats and Violence-Hobbs Act Robbery and Possession of a Firearm in Furtherance of a Crime of Violence.
On September 28, 2015, Bottle Barn Wine and Liquor, 2515 South University Dr., and The Spirit Shop Liquor Store, 1404 33rd St. S., were robbed within an hour of each other. Bethel pled guilty to robbing Bottle Barn while brandishing a firearm and threatening the cashier to hand over money. Ford has agreed to plead guilty to robbing The Spirit Shop through violence or threat of violence and did knowingly possess a firearm in furtherance of the crime of violence.
As part of the plea agreement Ford and Bethel also agreed that they participated or aided and abetted the following crimes:
(a) A home invasion on June 24, 2015, in Hillsboro, North Dakota, where currency was stolen;
(b) A burglary resulting in a stolen firearm in Hillsboro in or about July through September 2015;
(c) A burglary of a vehicle in Fargo, North Dakota, in which monetary instruments were stolen on or about August 24, 2015, and on or about September 24, 2015;
(d) A burglary of a residence in Fargo, resulting in the theft of five firearms on or about September 24, 2015;
(e) Setting fire to four dumpsters in Fargo in an effort to determine law enforcement response time on or about September 28, 2015, as well as robbery of The Spirit Shop Liquor Store in Fargo;
(f) The pistol whipping assault of a victim resulting in serious bodily injury including unconsciousness on or about September 19, 2015 in Fargo; and,
(g) Conspiracy to distribute marijuana in North Dakota.
Judge Erickson has set sentencing for Ford to be held on April 19, 2016, and Bethel’s sentencing is scheduled for April 25, 2016, in the U. S. District Court, Fargo, ND.
This case is being investigated by the Fargo Police Department and Alcohol, Tobacco, Firearms, and Explosives (ATFE).
U. S. Attorney Christopher C. Myers is prosecuting the case
Lumber Liquidators Inc. Sentenced for Illegal Importation of Hardwood and Related Environmental CrimesRead the Press Release
Virginia-based hardwood flooring retailer Lumber Liquidators Inc. was sentenced today in federal court in Norfolk, Virginia, and will pay more than $13 million in criminal fines, community service and forfeited assets related to its illegal importation of hardwood flooring, much of which was manufactured in China from timber that had been illegally logged in far eastern Russia, in the habitat of the last remaining Siberian tigers and Amur leopards in the world, announced the Department of Justice.
In total, the company will pay $13.15 million, including $7.8 million in criminal fines, $969,175 in criminal forfeiture and more than $1.23 million in community service payments. Lumber Liquidators has also agreed to a five-year term of organizational probation and mandatory implementation of a government-approved environmental compliance plan and independent audits. In addition, the company will pay more than $3.15 million in cash through a related civil forfeiture. The more than $13.15 million dollar penalty is the largest financial penalty for timber trafficking under the Lacey Act and one of the largest Lacey Act penalties ever.
Lumber Liquidators pleaded guilty and was charged in October 2015 in the Eastern District of Virginia with one felony count of importing goods through false statements and four misdemeanor violations of the Lacey Act, which makes it a crime to import timber that was taken in violation of the laws of a foreign country and to transport falsely-labeled timber across international borders into the United States. The charges describe Lumber Liquidators’ use of timber that was illegally logged in Far East Russia, as well as false statements on Lacey Act declarations which obfuscated the true species and source of the timber. This is the first felony conviction related to the import or use of illegal timber and the largest criminal fine ever under the Lacey Act.
“The case against Lumber Liquidators shows the true cost of turning a blind eye to the environmental laws that protect endangered wildlife,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division. “This company left a trail of corrupt transactions and habitat destruction. Now they will pay a price for this callous and careless pursuit of profit.”
“This prosecution has been the result of hard work of federal agents and prosecutors who have been dedicated to protecting our natural habitats in the United States and around the world,” said U.S. Attorney Dana Boente of the Eastern District of Virginia.
“Today’s sentence – which includes the largest financial penalty ever under the Lacey Act – demonstrates the consequences companies will face if they knowingly accept illegally sourced materials and violate U.S. customs laws,” said Special Agent in Charge Clark E. Settles of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) in Washington, D.C.
“By knowingly and illegally sourcing timber from vulnerable forests in Asia and other parts of the world, Lumber Liquidators made American consumers unwittingly complicit in the ongoing destruction of some of the world's last remaining intact forests,” said Director Dan Ashe of the U.S. Fish and Wildlife Service. “Along with hastening the extinction of the highly endangered Siberian tiger and many other native species, illegal logging driven by the company's greed threatens the many people who depend on sustainable use of these forests for food, clean water, shelter and legitimate jobs. These unprecedented sanctions show how seriously we take illegal trade, and I am grateful to the Service special agents and wildlife inspectors, Homeland Security agents, and Justice Department attorneys who halted Lumber Liquidators' criminal acts and held the company accountable under the law.”
According to a joint statement of facts filed with the court, from 2010 to 2013, Lumber Liquidators repeatedly failed to follow its own internal procedures and failed to take action on self-identified “red flags.” Those red flags included imports from high risk countries, imports of high risk species, imports from suppliers who were unable to provide documentation of legal harvest and imports from suppliers who provided false information about their products. Despite internal warnings of risk and non-compliance, very little changed at Lumber Liquidators.
For example, Lumber Liquidators employees were aware that timber from the Russian Far East was considered, within the flooring industry and within Lumber Liquidators, to carry a high risk of being illegally sourced due to corruption and illegal harvesting in that remote region. Despite the risk of illegality, Lumber Liquidators increased its purchases from Chinese manufacturers using timber sourced in the Russian Far East. In 2013, the defendant imported Russian timber logged under a concession permit that had been utilized so many times that the defendants’ imports alone exceeded the legal harvest allowance of Mongolian oak, Quercus mongolica, by more than 800 percent. The investigation revealed a prevalent practice in timber smuggling enterprises, where a company uses a seemingly legitimate government permit to log trees. Corruption and criminal activity along the supply chain results in the same permit being used multiple times and in areas outside of the designated logging area, sometimes vastly exceeding its legal limits.
On other occasions, Lumber Liquidators falsely reported the species or harvest country of timber when it was imported into the United States. In 2013, Lumber Liquidators imported Mongolian oak from Far East Russia which it declared to be Welsh oak and imported merpauh from Myanmar which it declared to be mahogany from Indonesia.
The illegal cutting of Mongolian oak in far eastern Russia is of particular concern because those forests are home to the last 450 wild Siberian tigers, Panthera tigris altaica. Illegal logging is considered the primary risk to the tigers’ survival, because they are dependent on intact forests for hunting and because Mongolian oak acorns are a chief food source for the tigers’ prey species. Mongolian oak forests are also home to the highly endangered Amur leopard, Panthera pardus orientalis, of which fewer than 50 remain in the wild. In June 2014, in response to illegal logging and the decline in tiger populations, Mongolian oak was added to the Convention on the International Trade in Endangered Species (CITES) Appendix III.
The $1,230,825 in community service payments is being provided to two Congressionally-chartered recipients, the National Fish and Wildlife Foundation (NWFW) and the USFWS Rhinoceros and Tiger Conservation Fund. One project that will be funded is the development of a wood identification device that if successful, could fill a critical gap in enforcement when it comes to identifying the species of timber at a border or in an enforcement scenario. The device would be able to identify timber species that are listed on the CITES Appendices, including the species that were at issue in this case. If U.S. border officials would have had access to such a device in 2011, then perhaps Lumber Liquidators could have been flagged for violation years ago, thus averting the flow of money back to China and Far East Russia in support of illegal logging. Other projects would involve protecting, researching and preserving the Siberian tiger, Amur leopard and their habitat.
The case was jointly investigated by agents of the USFWS and HSI as part of Operation Oakenshield. The case is being prosecuted by Patrick M. Duggan and Christopher L. Hale of the Justice Department’s Environmental Crimes Section of the Environment and Natural Resources Division, and Stephen Haynie and Kevin P. Hudson of the U.S. Attorney’s Office in Norfolk.
Executive Office for Immigration Review Swears in Nine Immigration JudgesRead the Press Release
FALLS CHURCH, VA – The Executive Office for Immigration Review (EOIR) today announced the investiture of nine immigration judges. Acting Chief Immigration Judge Print Maggard presided over the investiture during a ceremony held Jan. 29, 2016, at the U.S. Court of Appeals for the Armed Forces in Washington D.C.
After a thorough application process, Attorney General Loretta E. Lynch appointed Xiomara Davis-Gumbs, Jennifer M. Gorland, Denise C. Hochul, Mark J. Jebson, Margaret M. Kolbe, Ramin Rastegar, Shifra Rubin, Meredith B. Tyrakoski, and Daniel H. Weiss to their new positions.
“Our agency continues to work hard to hire highly qualified immigration judges who will help to decrease our pending caseload,” said Maggard. “With these nine new immigration judges, our immigration judge corps now totals 254, and we will continue adding to this number throughout this year to further enhance EOIR’s capacity to meet the tremendous challenges we face.”
Xiomara Davis-Gumbs, Immigration Judge, Dallas Immigration Court
Attorney General Loretta E. Lynch appointed Judge Davis-Gumbs to begin hearing cases in January 2016. Judge Davis-Gumbs earned a Bachelor of Science degree in 1983 from John Jay College of Criminal Justice, City University of New York and a Juris Doctor in 1992 from Touro College, Jacob D. Fuchsberg Law Center. From 2008 through 2015, Judge Davis-Gumbs served in the Office of the Chief Counsel, U.S. Citizenship and Immigration Services (USCIS), U.S. Department of Homeland Security (DHS), in Dallas, in various capacities including deputy chief counsel, and previously as associate counsel, Central Law Division, and as associate counsel, Training and Knowledge Management Division. From 2002 through 2008, Judge Davis-Gumbs served as assistant chief counsel in the Office of Principal Legal Advisor, U.S. Immigration and Customs Enforcement, DHS, in Newark, N.J. From 1997 through 2002, Judge Davis-Gumbs served as an asylum officer in the Office of International Affairs, in the former Immigration and Naturalization Service, U.S. Department of Justice (DOJ), in Rosedale, N.Y. From 1994 through 1997, Judge Davis-Gumbs served as special assistant/litigation coordinator for the Federal Bureau of Prisons, DOJ, in New York, N.Y. From 1993 through 1994, Judge Davis-Gumbs served as a law clerk, and from 1988 through 1993, as an inmate grievance counselor in the Trial Unit, New York City Department of Corrections. Judge Davis-Gumbs is a member of the New York Bar.
Jennifer M. Gorland, Immigration Judge, Detroit Immigration Court
Attorney General Loretta E. Lynch appointed Judge Gorland to begin hearing cases in January 2016. Judge Gorland received a Bachelor of Arts degree in 1982 from the University of Michigan and a Juris Doctor in 1985 from Wayne State University School of Law. From 1989 through 2015, Judge Gorland served in the U.S. Attorney’s Office for the Eastern District of Michigan, in Detroit, as an assistant U.S. attorney in various capacities, including: first assistant U.S. attorney; chief, General Crimes Unit; deputy chief, and previously as assistant U.S. attorney, General Crimes Unit; assistant U.S. attorney, Economic Crimes Unit; and, as assistant U.S. attorney, Civil Division. From 1985 through 1989, Judge Gorland served as an associate for Pepper, Hamilton and Scheetz, in Detroit. Judge Gorland is a member of the State Bar of Michigan.
Denise C. Hochul, Immigration Judge, Buffalo Immigration Court
Attorney General Loretta E. Lynch appointed Judge Hochul to begin hearing cases in January 2016. Judge Hochul received a Bachelor of Arts degree in 1980 from the State University of New York at Buffalo and a Juris Doctor in 1985 from the Ohio Northern University, Claude W. Pettit College of Law. From 1996 through 2015, Judge Hochul served in the Office of the Chief Counsel, U.S. Immigration and Customs Enforcement (ICE), Department of Homeland Security, in Buffalo, in various capacities, including: senior attorney; assistant chief counsel; designated human rights law special interest attorney; designated national security special interest attorney; member of the Trial Advocacy Training Team; and as a special assistant U.S. attorney in the U.S. Attorney’s Office for the Western District of New York. From 1987 through 1996, she served as an assistant district attorney in the Erie County District Attorney’s Office in Buffalo. Judge Hochul is a member of the New York Bar.
Mark J. Jebson, Immigration Judge, Detroit Immigration Court
Attorney General Loretta E. Lynch appointed Judge Jebson to begin hearing cases in January 2016. Judge Jebson received a Bachelor of Arts degree in 1990 from the University of California, Los Angeles, a Juris Doctor in 1994 from the John Marshall Law School, and a Master of Laws degree in 1995 from the New York University School of Law. From 2003 through 2015, Judge Jebson served in the Office of Chief Counsel, U.S. Immigration and Customs Enforcement (ICE), Department of Homeland Security, in Detroit, in various capacities, including: senior attorney, deputy chief counsel, assistant chief counsel, and as a special assistant U.S. attorney in the U.S. Attorney’s Office for the Eastern District of Michigan. From 2002 through 2003, Judge Jebson served as an assistant U.S. attorney in the U.S. Attorney’s Office for the Northern District of Texas, in Dallas. From 1997 through 2002, Judge Jebson served as an assistant district counsel in the former Immigration and Naturalization Service, U.S. Department of Justice, in Detroit. From 1996 through 1997, he served as a judicial law clerk for the Michigan Supreme Court, and from 1995 through 1996, as a prehearing attorney for the Michigan Court of Appeals, in Detroit. Judge Jebson is a member of the Illinois State Bar and the State Bar of Michigan.
Margaret M. Kolbe, Immigration Judge, New York Immigration Court
Attorney General Loretta E. Lynch appointed Judge Kolbe to begin hearing cases in January 2016. Judge Kolbe received a Bachelor of Arts degree in 1987 from the University of Cincinnati, a Master of Arts degree in 1989 from the University of Cincinnati, and a Juris Doctor in 1996 from the Notre Dame Law School. From 2002 through 2015, Judge Kolbe served as assistant U.S. attorney in the U.S. Attorney’s Office for the Eastern District of New York, in Brooklyn, N.Y. From 1996 through 2002, Judge Kolbe served as an attorney advisor for the Board of Immigration Appeals, Executive Office for Immigration Review, U.S. Department of Justice, in Falls Church, Va., and from 1991 through 1993, as a Peace Corps volunteer in Gabon, Africa. Judge Kolbe is a member of the Ohio Bar.
Ramin Rastegar, Immigration Judge, Newark Immigration Court
Attorney General Loretta E. Lynch appointed Judge Rastegar to begin hearing cases in January 2016. Judge Rastegar received a Bachelor of Science in 1991 from George Mason University and a Juris Doctor in 1995 from New York Law School. From 2000 through 2015, Judge Rastegar served as assistant chief counsel in the Office of the Chief Counsel, U.S. Immigration and Customs Enforcement, Department of Homeland Security, in New York, N.Y. From 1997 through 2000, Judge Rastegar served as an associate at Barst and Mukamal LLP, in New York, N.Y., and from 1996 through 1997, as an associate in the Law Offices of Ronald Salomon, in New York, N.Y. Judge Rastegar is a member of the Connecticut and New York Bars.
Shifra Rubin, Immigration Judge, Newark Immigration Court
Attorney General Loretta E. Lynch appointed Judge Rubin to begin hearing cases in January 2016. Judge Rubin received a Bachelor of Arts degree in 1992 from Rutgers University and a Juris Doctor in 2002 from Rutgers School of Law. From 2003 through 2015, Judge Rubin served in various capacities for the Immigration Representation Project, Legal Services of New Jersey, in Edison, N.J., including serving as a senior attorney, supervising attorney, and staff attorney. Judge Rubin is a member of the New Jersey Bar.
Meredith B. Tyrakoski, Immigration Judge, San Antonio Immigration Court
Attorney General Loretta E. Lynch appointed Judge Tyrakoski to begin hearing cases in January 2016. Judge Tyrakoski received a Bachelor of Arts degree in 1996 from Northwestern University and a Juris Doctor in 2003 from the William and Mary School of Law. From 2006 through 2015, Judge Tyrakoski served as an assistant U.S. attorney in a number of U.S. Attorney’s Offices throughout the country, including the U.S. Attorney’s Office for the District of Nebraska in Omaha, the U.S. Attorney’s Office for the Western District of Texas in El Paso, Texas, and as special assistant attorney in the U.S. Attorney’s Office for the Central District of California in Los Angeles, Calif. From 1997 through 2008, Judge Tyrakoski served in the U.S. Marine Corps in various capacities, including: staff judge advocate, legal assistance attorney, defense counsel, student judge advocate, operations officer, public affairs officer, and supply officer. Judge Tyrakoski is a member of the State Bar of Texas and the Virginia Bar.
Daniel H. Weiss, Immigration Judge, Dallas Immigration Court
Attorney General Loretta E. Lynch appointed Judge Weiss to begin hearing cases in January 2016. Judge Weiss received a Bachelor of Arts degree in 1986 from the University of Pennsylvania and a Juris Doctor in 1990 from the University of Maryland School of Law. From 2010 through 2015, Judge Weiss served as senior trial attorney in the Human Trafficking Prosecution Unit, Criminal Section, Civil Rights Division, U.S. Department of Justice (DOJ), in Washington, D.C. From 2005 through 2010, Judge Weiss served as deputy chief, and, previously as a trial attorney, in the Special Litigation Section, Civil Rights Division, DOJ. From 1992 through 2000, Judge Weiss served as an assistant public defender II in the Appellate Trials Division, State of Maryland Office of the Public Defender, in Baltimore. From 1991 through 1992 Judge Weiss served as an attorney at the Fidelity & Deposit Companies of Maryland, in Baltimore, and from 1990 through 1991, as law clerk to the Honorable Ellen Hollander, Circuit Court for Baltimore City. Judge Weiss is a member of the District of Columbia and Maryland Bars.
- EOIR -
The Executive Office for Immigration Review (EOIR) is an agency within the Department of Justice. Under delegated authority from the Attorney General, immigration judges and the Board of Immigration Appeals interpret and adjudicate immigration cases according to United States immigration laws. EOIR's immigration judges conduct administrative court proceedings in immigration courts located throughout the nation. They determine whether foreign-born individuals—whom the Department of Homeland Security charges with violating immigration law—should be ordered removed from the United States or should be granted relief from removal and be permitted to remain in this country. The Board of Immigration Appeals primarily reviews appeals of decisions by immigration judges. EOIR's Office of the Chief Administrative Hearing Officer adjudicates immigration-related employment cases. EOIR is committed to ensuring fairness in all of the cases it adjudicates.
Department of Justice Launches Comprehensive Review of the San Francisco Police DepartmentRead the Press Release
The Department of Justice today announced the launch of an independent and comprehensive review of the San Francisco Police Department. This review will be conducted by the Office of Community Oriented Policing Services (COPS Office) through its Collaborative Reform Initiative.
The review is in response to requests made by city officials and community members asking that the Justice Department conduct an in-depth look into the use of force policies and practices of the San Francisco Police Department.
“The Department of Justice is dedicated to upholding the highest standards of law enforcement throughout the United States, and this Collaborative Reform Initiative is a vital component of that effort,” said Attorney General Loretta E. Lynch. “In the days and months ahead, we will examine the San Francisco Police Department’s current operational policies, training practices and accountability systems, and help identify key areas for improvement going forward. I am confident that together we can make certain that our officers have the tools and training they need to do their jobs, and that every member of the San Francisco community has the protection and service they deserve.”
Director Ronald Davis of the COPS Office, the Justice Department agency responsible for collaborative review, and Acting U.S. Attorney Brian J. Stretch of the Northern District of California, were joined by San Francisco city and law enforcement leaders to announce the launch of the collaborative reform process.
“As part of the collaborative reform process, the Justice Department will conduct a thorough, independent and objective assessment of the San Francisco Police Department’s policies, practices and accountability systems,” said Director Davis. “The findings will allow the police department to implement best practices in law enforcement and empower the community to hold the department to those standards.”
“San Francisco Mayor Ed Lee and San Francisco Police Department Chief Greg Suhr have jointly requested this collaborative review and have publicly committed to providing the resources necessary for its successful completion,” said Acting U.S. Attorney Stretch. “The Department of Justice will engage the police department, the Mayor's office, and the communities they serve in a constructive assessment. We are also committed to monitoring and assisting with the implementation of any reforms recommended by the COPS Office.”
– MORE –
The Collaborative Reform Initiative for Technical Assistance is an independent and objective way to transform a law enforcement agency through an analysis of policies, practices, training, tactics and accountability methods around key issues facing law enforcement today. The initiative is designed to provide technical assistance to agencies facing significant law enforcement-related issues. Using subject matter experts, interviews and direct observations, as well as conducting extensive research and analysis, the COPS Office assists law enforcement agencies in enhancing and improving their policies and procedures, operating systems and professional culture.
Following the assessment, the Justice Department will issue a public report detailing the findings of the assessment, along with specific recommendations for improvement. The COPS Office will assess progress made in implementing those recommendations over an 18-month period following the initial assessment. Two progress reports will be released tracking implementation of those recommendations.
The COPS Office is currently providing collaborative reform in Spokane, Washington; Philadelphia; St. Louis County, Missouri; Salinas, California; Fayetteville, North Carolina; Calexico, California; and Milwaukee, Wisconsin, and has completed the process in Las Vegas.
The COPS Office, headed by Director Ronald Davis, is a federal agency responsible for advancing community policing nationwide. Since 1995, the COPS Office has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local and tribal law enforcement agencies to fund the hiring and redeployment of more than 127,000 officers and provide a variety of knowledge resource products including publications, training and technical assistance. For additional information about the COPS Office, please visit www.cops.usdoj.gov.
California Man Operating Phone Room in Debt Relief Scam Pleads Guilty to Defrauding ConsumersRead the Press Release
An Orange County, California, man pleaded guilty today for his role in operating fraudulent debt relief firms that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service announced.
Jeremy Nelson, 30, pleaded guilty to one count of an indictment alleging conspiracy to commit mail fraud and wire fraud in connection with companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter). According to the indictment, Nelson and his employees portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors. Clients made monthly payments expecting the money to go toward settlements. Nelson and his co-conspirators instead took at least 15 percent of the total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees.
“Debt relief scams prey on vulnerable consumers trying to climb out of tough financial situations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Justice Department will continue to investigate those who take advantage of consumers facing hard times, and prosecute unlawful schemes that bleed desperate consumers of their remaining resources.”
“This scheme victimized people already in financial distress,” said U.S. Attorney Eileen M. Decker of the Central District of California. “As today’s guilty plea shows, the Justice Department is committed to protecting consumers, particularly those who are vulnerable to fraud schemes designed to prey upon people already in perilous economic condition.”
“Protecting our customers from fraud is one of our agency’s biggest priorities,” said Acting Inspector in Charge Daniel Brubaker of the U.S. Postal Inspection Service. “The U.S. Postal Inspection Service will continue to vigorously pursue those who use our nation’s mail system to commit fraud or other illegal activity.”
Jeremy Nelson’s scheme ran from February 2010 to September 2012. Nelson admitted he changed the name of his company from Nelson Gamble to Jackson Hunter in 2011. Nelson and his co-conspirators told victims that Nelson Gamble had gone bankrupt and that Jackson Hunter was an unrelated company that had taken over some of the accounts. Nelson and his co-conspirators blamed past problems on Nelson Gamble and denied requests for refunds of money paid to Nelson Gamble. Some victims who previously demanded refunds accepted the explanation that Nelson Gamble was bankrupt and did not pursue complaints against Jackson Hunter.
Nelson faces a statutory maximum penalty of 20 years in prison. The court has not yet scheduled a sentencing date before U.S. District Judge Dale S. Fischer of the Central District of California in Los Angeles.
One of Nelson’s co-defendants, Elias Ponce, previously pleaded guilty in October 2015. Two other defendants, Athena Maldonado and Christopher Harati, pleaded guilty in June 2015 in a related case. Trial against the remaining defendant charged in the scheme, John Vartanian, is set for Sept. 13 in Los Angeles.
In September 2012, the Federal Trade Commission brought a civil case against Nelson and his companies, alleging that the defendants misrepresented debt relief services offered to consumers. (See https://www.ftc.gov/enforcement/cases-proceedings/122-3030-x120048/nelson-gamble-associates-llc-et-al). The case was settled by entry of a consent decree in August 2013.
Principal Deputy Assistant Attorney General Mizer commended the U.S. Postal Inspection Service team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts and thanked the U.S. Attorney’s Office of the Central District of California for their contributions to the case. The case is being prosecuted by trial attorneys Alan Phelps and James Harlow of the Consumer Protection Branch.
Former Kentucky Private Investigator and Legal Consultant Sentenced to Prison for Tax FraudRead the Press Release
Failed to File Tax Returns for Four Years and Lied to the IRS about His Financial Condition
A former Russell Springs, Kentucky investigator and legal consultant, was sentenced to three years in prison and three years of supervised release, following his June 2015 conviction for tax fraud, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kerry B. Harvey for the Eastern District of Kentucky announced today.
James S. Faller II, 54, was convicted after a two-week jury trial of one count of corruptly endeavoring to obstruct the Internal Revenue Service (IRS), four counts of evading federal individual income taxes, one count of falsifying a document submitted to the IRS under penalties of perjury and four counts of failing to timely file his federal individual income tax returns. In addition to his prison sentence, the court ordered restitution to be determined at a later date.
According to the evidence admitted at trial, from 2006 through 2009, Faller received annual income of approximately $126,000 to $289,000 per year from his work as a private investigator and legal consultant. However, Faller did not timely file any individual income tax returns for that period. Instead, Faller took steps to conceal his income from the IRS in several ways, including arranging for his income to be made payable to a nominee and using nominee bank accounts. Faller owes additional federal income taxes of $112,065 for the 2006 through 2009 tax years.
“When individuals submit false information in an effort to obstruct the IRS and evade the payment of tax due and in doing so, steal from the American public, the Tax Division stands ready to prosecute,” said Acting Assistant Attorney General Ciraolo. “Today’s sentence sends a message that this conduct will not be tolerated, and those lying to the IRS and hiding their income to avoid paying their tax liabilities will pay a heavy price.”
In March 2010, Faller signed and submitted a false Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, to an IRS revenue officer as part of the IRS’s efforts to collect his unpaid taxes. A Form 433-A is used by the IRS to obtain financial information from a taxpayer to determine his ability to pay an outstanding tax liability. On this form, which the taxpayer signs under penalties of perjury, the taxpayer must disclose information about his income and expenses. On the Form 433-A that Faller submitted to the IRS revenue officer, Faller falsely reported that he had no income even though he had earned $23,000 in the preceding month alone.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Harvey thanked special agents of the IRS Criminal Investigation, who investigated the case, and Trial Attorney Thomas Voracek of the Tax Division and Assistant U.S Attorney Thomas Lee Gentry of the Eastern District of Kentucky, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Federal Court Preliminarily Orders Florida Man to Close Tax Preparation Business and Bars Him from Preparing Federal Tax Returns for OthersRead the Press Release
Court Orders Nation Tax Services to Shut Down Immediately Based on a “Pattern of False Tax Returns”
A federal court in Orlando, Florida has preliminarily barred Jason Stinson from preparing federal tax returns for others and from operating a tax return preparation business, the Justice Department announced today. The civil order, signed by Judge Anne C. Conway of the U.S. District Court for the Middle District of Florida, requires Stinson to “immediately close all tax return preparation stores that he currently owns.”
According to the court’s order, Stinson owns a company that operates return preparer storefronts under the name “Nation Tax Services.” According to the United States’ complaint, Stinson’s stores are in Alabama, Florida, Georgia and North Carolina.
The United States filed its civil injunction complaint against Stinson in September 2014. The complaint alleged that return preparers in Stinson’s businesses targeted primarily low-income customers with deceptive and misleading advertisements, prepared and filed fraudulent tax returns to fraudulently increase their customers’ refunds and profited through unconscionable, exorbitant and often undisclosed fees—all at the expense of their customers and the United States Treasury.
Trial in this case is scheduled for October. To prevent the alleged fraud from continuing this tax filing season, the United States filed a motion for preliminary injunction to bar Stinson from operating his stores pending resolution of this case after trial. Following a hearing on the motion, the court today found that the United States “presented enough evidence to show a pattern of false tax returns sufficient to prove it is likely to succeed on the merits” at trial. The pattern of false returns alleged by the United States includes:
- Falsely claiming the Earned Income Tax Credit;
- Fabricating businesses and related business income and expenses;
- Fabricating Schedule A deductions for unreimbursed employee expenses, charitable deductions and medical and dental expenses; and
- Claiming false education credits.
The court found that the “falsely reported numbers are not merely oversight, or a computational error, because the errors are repeated and the amounts are significant.” The court added that it was “most troubled that Stinson’s conduct has continued even after the commencement of this lawsuit in 2014.”
The court also held that the “Government and Stinson’s customers will suffer irreparable harm if an injunction is not granted.” The court emphasized “the harm that Stinson’s business causes his customers”:
Stinson’s customers are relying on his business to properly handle their taxes. In return, Stinson’s business exposes these primarily low-income customers to individual tax liability. Both the Government and Stinson’s customers will suffer irreparable harm if an injunction is not granted. Moreover, it is in the public’s best interest to protect vulnerable customers from the inaccurate preparation of their taxes, not to deplete Government resources, and to maintain the public trust in the tax system.
Return preparer fraud is one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams. 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.
Al-Shabaab Member Sentenced to Nine Years for Conspiring to Provide Material Support to the Terrorist OrganizationRead the Press Release
Defendant Traveled to Somalia to Join Foreign Fighter Corps
Mahdi Hashi, 26, a Somali national, was sentenced to nine years in prison by U.S. District Judge John Gleeson of the Eastern District of New York for conspiring to provide material support to al-Shabaab, a designated foreign terrorist organization. The defendant traveled from the United Kingdom to Somalia to join the terrorist group. While in Somalia, the defendant was affiliated with the American jihadist Omar Hamami and his band of American fighters, as well as individuals associated with al-Shabaab’s suicide bomber program.
The sentence was announced by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Robert L. Capers of the Eastern District of New York and Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office.
As stated in court today and according to court documents, between approximately December 2009 and August 2012, the defendant served as a member of al-Shabaab in Somalia where he conspired to support al-Shabaab and its violent extremist agenda. In August 2012, the defendant was apprehended with others by local authorities in East Africa after he left Somalia, and then lawfully deported to the Eastern District of New York for prosecution in November 2012.
On Nov. 14, 2012, the FBI took custody of the defendant and brought him to the Eastern District of New York for prosecution. He, along with two codefendants, pleaded guilty on May 12, 2015.
“Hashi travelled to Somalia to join and fight on behalf of al-Shabaab in their foreign terrorist fighter ranks,” said Assistant Attorney General Carlin. “The National Security Division remains committed to detecting, thwarting and bringing to justice those who seek to provide material support to and fight on behalf of designated foreign terrorist organizations.”
“This defendant left his family and his adopted home in the United Kingdom behind so he could offer himself in support of al-Shabaab, a violent terrorist organization that has demonstrated its capabilities and motives in numerous terrorist attacks and that has publicly called for attacks against the United States,” said U.S. Attorney Capers. “Today’s sentence should serve as a warning to others who offer support to terrorist groups that pose a threat to the United States and our allies around the world.”
“Mahdi Hashi joined a foreign terrorist organization to be part of a group utilizing violence to fulfill their agenda,” said Assistant Director in Charge Rodriguez. “He now finds himself isolated behind bars due to the criminality of his activities. Through today’s sentence, we hope he can no longer be in a position to inflict, or support those who inflict, harm on others. The FBI, in cooperation with our JTTF partners, will continue to work to identify and interrupt those engaged in terrorist activities globally, and bring them to justice in the U.S.”
During the time of the charged conspiracy and thereafter, al-Shabaab successfully recruited individuals from around the world, including Hashi, to come to Somalia and join the organization. These individuals, known within al-Shabaab as “foreign fighters,” lived, trained and often fought alongside native Somali fighters. Al-Shabaab frequently made Western foreign fighters the face of its fundraising and propaganda efforts as part of a broader strategy emphasizing that the conflict in Somalia was part of a global jihad aimed at creating an Islamic caliphate. In addition, al-Shabaab assesses that Westerners have the potential to more easily cross certain international borders. Because al-Shabaab frequently employs suicide bombings, as it did in the Kampala, Uganda, attacks in 2010 resulting in 74 deaths, freedom of travel was and is particularly crucial to al-Shabaab’s external terror operations.
Assistant Attorney General Carlin joined U.S. Attorney Capers in thanking the federal, state and local law enforcement agencies who participate in the FBI’s Joint Terrorism Task Force in New York.
The government’s case is being handled by Assistant U.S. Attorneys Shreve Ariail, Seth D. DuCharme and Richard M. Tucker of the Eastern District of New York, along with Trial Attorney Annamartine Salick of the National Security Division’s Counterterrorism Section. The Department of Justice’s Office of International Affairs also provided invaluable assistance.
Retired Air Force Master Sergeant Sentenced to Prison for Disclosing Confidential Bid Information for Government Contracts and Tax FraudRead the Press Release
A retired U.S. Air Force Master Sergeant was sentenced today in the U.S. District Court for the Southern District of Florida to 18 months in prison following his guilty plea to unlawfully disclosing confidential procurement information and filing a false tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
According to court documents, Trevor Smith retired from the U.S. Air Force in December 2012 at the rank of Master Sergeant. From February 2009 through February 2010, Smith was deployed to Afghanistan, where he served as Supply Non-Commissioned Officer-In-Charge for the Operation Enduring Freedom/Combined Security Transition Command-Afghanistan NATO Training Mission. In that capacity, Smith met a Fort Lauderdale-based government contractor. As part of his plea, Smith admitted that he agreed to disclose confidential bid information on government contracts to the contractor in exchange for bribe payments. Smith and the contractor agreed that Smith would receive two percent of all revenues on contracts that the contractor received as a result of Smith’s assistance.
In January 2010, the contractor wired $42,853.29 to Smith. The two agreed to wait until Smith returned to the United States for more payments. After returning to the United States, Smith set up a shell corporation called T Star Air Inc. to receive 23 additional payments totaling $220,600. Smith also created and submitted phony invoices to conceal the scheme. For tax years 2010 through 2012, Smith filed corporate tax returns for T Star Air that falsely claimed inflated expenses and deductions.
In addition to the prison term, U.S. District Judge Beth Bloom for the Southern District of Florida ordered Smith to pay restitution to the Internal Revenue Service (IRS) in the amount of $6,501.
Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, the U.S. Air Force’s Office of Special Investigations and the U.S. Department of Defense’s Office of the Inspector General, who investigated this case and Trial Attorneys Charles M. Edgar Jr. and Jason H. Poole of the Tax Division, who are prosecuting 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.
Justice Department Asks Federal Court to Shut Down Detroit-Area Liberty Tax Service FranchiseeRead the Press Release
The United States filed a complaint asking a federal court in Detroit to permanently bar a Liberty Tax Service franchise owner and his company from preparing federal tax returns for others, the Justice Department announced today. The civil complaint against Craig M. Comer of Royal Oak, Michigan, and his business, Comer Inc., alleges that Comer operates five Liberty Tax Service franchise locations in the Detroit area.
According to the complaint, the defendants prepare income tax returns for customers that fraudulently overstate refunds and claim refundable credits by, among other things, claiming false or inflated Schedule C income and expenses, bogus dependents, false filing statuses, improper education credits and false itemized deductions. Based on audit adjustments the IRS has made to tax returns prepared and filed by the defendants for 2008 to 2013, the defendants’ conduct has cost the U.S. Treasury approximately $4.5 million for those years alone, according to the suit.
The complaint also alleges that in order to increase their fees, the defendants have altered completed tax returns already signed by the customers and forged customers’ signatures on returns. Furthermore, the defendants have added false information to internal Liberty Tax Service documents to give the illusion that the franchises are properly verifying customer information when preparing customers’ tax returns, according to the complaint.
Return preparer fraud is one of the Internal Revenue Service’s (IRS)’s Dirty Dozen Tax Scams. The IRS has some tips on their website for choosing a tax preparer. 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.
Federal Criminal Charges Filed Against Two Pharmacists for Adulteration of Drugs in Connection with Alabama-Based Compounding PharmacyRead the Press Release
A criminal Information was filed today in the U.S. District Court for the Northern District of Alabama against David Allen, former pharmacist-in-charge of the now-defunct compounding pharmacy Advanced Specialty Pharmacy doing business as “Meds IV,” and William Timothy Rogers, a pharmacist and the former president of Meds IV, the Department of Justice announced today. Allen and Rogers were charged in connection with the distribution of adulterated drugs, which were compounded at the Meds IV facility and distributed to Birmingham, Alabama-area hospitals in 2011.
“The compounding of sterile drug products requires significant care, and the distribution of contaminated drug products can cause serious harm to patients,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This criminal case demonstrates the Justice Department’s commitment to protecting consumers and patients, and making sure pharmaceutical drugs are safe and effective.”
Allen, 60, of McCalla, Alabama, and Rogers, 48, of Hoover, Alabama, have signed plea agreements, in which both individuals have agreed to plead guilty to two misdemeanor violations of the federal Food, Drug and Cosmetic Act (FDCA) as charged in the Information. Following today’s filing of the criminal charges; the U.S. District Court will schedule an arraignment, where the defendants will be formally advised of the charges against them. Another hearing will then be set in which the defendants can enter their guilty pleas to the Court.
As alleged in the Information, Meds IV compounded various drugs for human use, including an intravenous drug known as Total Parenteral Nutrition (TPN). TPN is liquid nutrition administered intravenously to patients who cannot or should not receive their nutrition through eating. The information alleges that beginning in or around February 2011, Meds IV compounded its own amino acid solution, which it then mixed with other ingredients to form TPN.
As charged in the information, amino acid used in compounding the TPN was adulterated in the following ways: it consisted in whole or in part of a filthy, putrid, or decomposed substance, namely Serratia marcescens (S. marcescens) and it was prepared, packed, or held under insanitary conditions whereby it may have been contaminated with filth or rendered injurious to health. S. marcescens is gram-negative bacteria that can cause bloodstream infections if introduced into the bloodstream through contaminated medications. These infections can cause serious medical complications, including death, because S. marcescens is resistant to many antibiotics.
“Meds IV was in the business of compounding drugs and IV nutrition that was supposed to help patients heal,” said U.S. Attorney Joyce White Vance for the Northern District of Alabama. “Instead, because of unsanitary procedures in the mixing of liquid nutrition, contaminated IV fluid was sent to Birmingham area hospitals and a number of patients developed serious bloodstream infections. I thank the FDA and its Office of Criminal Investigations for their diligence in helping us prosecute those responsible for the failings at Meds IV which contributed to significant harm.”
According to the charging document, the amino acid was prepared by Meds IV outside a laminar airflow workbench and was kept unrefrigerated, in a room that was not sterile, in a large pot sitting on the floor, sometimes overnight, before it was sterilized and used.
As alleged in the information, between March 5 and 15, 2011, nine patients at various Birmingham-area hospitals who developed bloodstream infections caused by S. marcescens died, and several other hospital patients developed S. marcescens bloodstream infections but survived. According to the charges, all of these patients had been given TPN that was compounded and distributed by Meds IV. As alleged in the information, while a number of the patients who died had underlying conditions which may have contributed to their deaths, medical records of some patients suggest that the S. marcescens bloodstream infections were also a significant factor.
According to the information, Meds IV was notified on March 14, 2011, by a hospital in the Birmingham area, that four patients receiving TPN had tested positive for S. marcescens. The information alleges that the TPN was compounded and distributed by Meds IV and that this notification was the first time Meds IV was informed of a link between its TPN and patients testing positive for S. marcescens. The information alleges that on or around March 16, 2011, Meds IV began notifying some customers that compounding of TPN was suspended until further notice.
As noted in the information, during an inspection at Meds IV starting on March 22, 2011, investigators from the U.S. Centers for Disease Control and Prevention (CDC) found S. marcescens that was indistinguishable to the outbreak strain on a tap-water faucet, in an open container of amino acid powder and on the surface of mixing equipment that had been used to make TPN. According to the charging document, the U.S. Food and Drug Administration (FDA) and CDC investigators linked the S. marcescens to TPN that had been compounded by Meds IV.
“Americans expect and deserve drugs that are safe, effective, and that meet appropriate standards for quality, yet Meds IV contaminated and distributed drug products that resulted in serious harm to patients,” said Acting FDA Commissioner Stephen Ostroff, MD. “Such conduct cannot be tolerated, and the FDA will continue to work with the Department of Justice to pursue aggressive enforcement actions against those who place American patients at risk.”
As alleged in the Information, Allen supervised all compounding at Meds IV, was specifically responsible for reviewing and approving TPN formulations, and was also responsible for filling the individual prescriptions Meds IV received for patient-specific TPN products. The information alleges that Rogers was ultimately responsible for overseeing all of the day-to-day operations of Meds IV. Both defendants have agreed to plead guilty to two misdemeanor counts, representing the two lots of amino acid which were determined to be adulterated in violation of the FDCA. For each count, the defendants face a statutory maximum sentence of up to one year in prison, a fine of up to $250,000, or both, and a term of supervised release after any imprisonment for up to one year.
The case is being prosecuted by Trial Attorney Heide L. Herrmann of the Justice Department’s Consumer Protection Branch and Assistant U.S. Attorney Henry Cornelius of the Northern District of Alabama. They were assisted by Associate Chief Counsel Shannon M. Singleton of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services. The case was investigated by the FDA’s Office of Criminal Investigations.
A criminal Information is merely an allegation and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Alabama Woman Sentenced to Prison for Involvement in Stolen Identity Tax Refund Fraud RingRead the Press Release
Filed 326 Fraudulent Tax Returns Seeking More than $450,000 in Tax Refunds
A Phenix City, Alabama resident was sentenced to serve 51 months in prison, followed by three years of supervised release and ordered to pay $116,636 in restitution for her role in a stolen identity refund fraud (SIRF) scheme, 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 today.
“Prosecuting stolen identity refund fraud remains a top priority of the department,” said Assistant Attorney General Ciraolo. “Individuals engaged in this criminal conduct not only cause millions of dollars in financial losses to the IRS, but inflict long-term economic and personal consequences on those US taxpayers whose private information is stolen. The Tax Division will continue to work with its federal, state and local law enforcement partners to combat this serious fraud on the American public, and seek lengthy terms of incarceration for those responsible.”
“My office will continue to work with the IRS to vigorously prosecute those people who steal an innocent person’s identity, just to file a false tax return and steal the tax refunds,” said U.S. Attorney Beck. “These criminals need to be punished for the harm they cause to the person whose identity is stolen and the harm they cause to the U.S. taxpayer.”
According to court documents, during 2013, Benita E. Short, conspired with others to defraud the United States by filing false federal income tax returns using stolen identities. Short obtained personal identifiable information, including names, social security numbers, addresses and dates of birth, without the individuals’ authorization. A co-conspirator obtained the stolen personal identifiable information from an individual who had access to Alabama state databases and obtained Electronic Filing Identification Numbers (EFINs) in the names of several tax preparation businesses, and provided this information to Short. Short then used the stolen identities and EFINs to electronically file 326 fraudulent tax returns with the Internal Revenue Service (IRS), causing a tax loss of $456,853. Short also caused income tax refund checks that were issued as a result of the fraudulent tax returns to be cashed at several businesses in Alabama and Georgia. For her role in the conspiracy, Short pleaded guilty in October 2015 to conspiracy to defraud the United States and aggravated identity theft.
In March 2015, one of Short’s co-conspirators, Keshia Lanier, the ringleader of a $24 million SIRF conspiracy, also pleaded guilty to one count of wire fraud and one count of aggravated identity theft. On Sept. 25, 2015, Lanier was sentenced to serve 15 years in prison to be followed by three years of supervised release and ordered to forfeit $5,811,406.
In addition to the prison term, U.S. District Judge Myron H. Thompson of the Middle District of Alabama ordered Short to serve three years of supervised release and pay $116,636 in restitution to the IRS. Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of IRS Criminal Investigation, who investigated the case and Trial Attorneys Michael C. Boteler and Michael P. Hatzimichalis of the Tax Division and Assistant U.S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Subway Franchisee and Gas Station Owner Pleads Guilty to Multi-Million Dollar Conspiracy to Defraud the Internal Revenue ServiceRead the Press Release
Defendant Failed to Report More Than $6 Million in Gross Receipts
A Subway franchisee and resident of Alexandria, Virginia pleaded guilty today to conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente for the Eastern District of Virginia.
According to court documents, Obayedul Hoque, 49, owned and operated a gas station in Alexandria called Skyhill Shell and multiple Subway restaurant franchises in Alexandria, Arlington, Virginia and Washington, D.C. Hoque admitted that between 2008 and 2014, he and his co-conspirators, who were managers of some of the Subway franchises and the gas station, conspired to defraud the United States for the purpose of obstructing the Internal Revenue Service (IRS) in the ascertainment and collection of individual and corporate income taxes. Hoque and his co-conspirators did not deposit all of the gas station or the Subway franchises’ gross receipts into the corporate or partnership bank accounts. Instead, Hoque and the managers retained a portion of the gross receipts for their personal benefit and failed to report those funds to the IRS. For the Subway franchises that had no co-conspirator managers, Hoque retained all of the unreported gross receipts for himself.
For the period of 2008 through 2013, point of sales records for the Subway franchises reflected total sales of $20,805,667. However, Hoque and his co-conspirators provided false monthly sales figures to the accounting firm to prepare the Subway entities’ tax returns. As a result, Hoque and his co-conspirators caused false corporate and partnership tax returns to be filed for the Subway franchises, which reported sales of only $14,377,696. Hoque and a co-conspirator also caused false corporate tax returns to be filed on behalf of Skyhill Shell. For some years, some of the entities did not file tax returns with the IRS. Hoque also filed false individual income tax returns with the IRS. Hoque admitted that his conduct caused a tax loss to the IRS of between $1.5 million and $3.5 million.
“As we start the 2016 filing season, this case serves as a reminder that the Justice Department, working with its partners at the IRS, remains committed to identifying, investigating and prosecuting businesses and individual taxpayers who willfully fail to file accurate tax returns and pay the taxes due,” said Acting Assistant Attorney General Ciraolo. “Every taxpayer owes a duty to their fellow citizens to pay their fair share and those who choose not to do so will face the consequences.”
“Today’s plea of Obayedul Hoque for conspiracy to defraud the United States sends a clear message to would-be tax cheats,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “Whether you fail to file and pay your corporate taxes or your personal income taxes, IRS-CI special agents work diligently to uncover all kinds of fraud and hold everyone accountable. U.S. citizens expect and deserve a level playing field when it comes to paying taxes and there are no better financial investigators in the world when it comes to following the money.”
U.S. District Judge Liam O’Grady set sentencing for May 13 at 9:00 a.m. EST. Hoque faces a statutory maximum prison term of five years and a fine of up to $250,000. As part of his plea agreement, Hoque agreed to pay restitution to the IRS for tax liabilities for the years 2008 through 2013.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Boente thanked special agents of IRS-CI, who investigated the case and Assistant U.S. Attorney Uzo Asonye and Assistant Chief Caryn Finley and Trial Attorney Kimberly Shartar of the Tax Division, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Readout of Attorney General Lynch’s Visit to New OrleansRead the Press Release
Attorney General Loretta E. Lynch spent the day in New Orleans participating in a roundtable on human trafficking with U.S. Attorney for the Eastern District of Louisiana Kenneth A. Polite; attending a roll call meeting with the New Orleans Police Department; and meeting with the family of Jefferson Parish, Louisiana Sheriff's Deputy Steven Arnold, who is being treated for injuries sustained in yesterday’s shooting.
The roundtable discussion on human trafficking was held at Covenant House in New Orleans and included representatives from Covenant House, Eden House, the Department of Homeland Security's Homeland Security Investigations, the Jefferson Parish Sheriff's Office as well as two human trafficking survivors.
Covenant House and the Jefferson Parish Sheriff's Office were the recipients of one of the Enhanced Collaborative Model (ECM) grants that are jointly administered by the Department of Justice's Bureau of Justice Assistance and the Office for Victims of Crime. The ECM grants use a holistic approach to respond to human trafficking by supporting law enforcement entities that partner with victim service providers in order to improve services to human trafficking survivors and bring traffickers to justice through effective partnerships.
The discussion focused on the importance of a victim-focused, trauma-informed response to human trafficking and the importance of partnerships between law enforcement and victim service providers to ensure that survivors are able to effectively build new lives.
Today’s roundtable is one part of the department’s work to raise awareness during National Slavery and Human Trafficking Prevention Month. Earlier this month, the Office for Victims of Crime released a video series and resource guide, The Faces of Human Trafficking, to raise awareness about the many forms of human trafficking in the United States.
Following the roundtable, Attorney General Lynch also attended a roll call meeting at the New Orleans Police Department’s 1st District Police Station with rank and file officers, Police Superintendent Michael Harrison and 1st District Commander Hans Ganthier. The Attorney General expressed her continued support for the department, as well as her appreciation for their hard work in implementing the terms of the NOPD's consent decree agreement with the Justice Department, which she noted will lead to more effective policing in New Orleans.
Attorney General Lynch also met with the family of Jefferson Parish Sheriff's Deputy Steven Arnold at the LSU Medical Center. During the meeting, she shared her best wishes for his swift recovery and her commitment to justice for his shooting.
Justice Department Announces Final Swiss Bank Program Category 2 Resolution with HSZH Verwaltungs AGRead the Press Release
Department’s Swiss Bank Program Imposed More Than $1.3 Billion in Penalties on 80 Banks, Which Continue to Cooperate with the Department
The Department of Justice announced today that it reached its final non-prosecution agreement under Category 2 of the Swiss Bank Program, with HSZH Verwaltungs AG (HSZH). The department has executed agreements with 80 banks since March 30, 2015, when it announced the first Swiss Bank Program non-prosecution agreement with BSI SA. The department has imposed a total of more than $1.36 billion in Swiss Bank penalties, including more than $49 million in penalties from HSZH. Every bank in the program, including HSZH, is required to cooperate in any related criminal or civil proceedings, and that cooperation continues through 2016 and beyond.
“The Department of Justice is committed to aggressively pursuing tax evasion, and the Swiss Bank Program has been a central component of that effort,” said Attorney General Loretta E. Lynch. “Through this initiative, we have uncovered those who help facilitate evasion schemes and those who hide funds in secret offshore accounts. We have improved our ability to return tax dollars to the United States. And we have pursued investigations into banks and individuals. I would like to thank the Swiss government for their cooperation in this effort, and I look forward to continuing our work together to root out fraud and corruption wherever it is found.”
“The department’s Swiss Bank Program has been a successful, innovative effort to get the financial institutions that facilitated fraud on the American tax system to come forward with information about their wrongdoing – and to ensure that they are held responsible for it,” said Acting Associate Attorney General Stuart F. Delery. “As we have seen over the last year, Swiss banks are paying an appropriate penalty for their misconduct, and the information and continuing cooperation we have required the banks to provide in order to participate in the program is allowing us to systematically attack offshore tax avoidance schemes.”
“The completion of the agreements under Category 2 of the Swiss Bank Program represents a substantial milestone in the department’s ongoing efforts to combat offshore tax evasion, and we remain committed to holding financial institutions, professionals and individual taxpayers accountable for their respective roles in concealing foreign accounts and assets, and evading U.S. tax obligations,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Using the flood of information flowing from various sources, the department is investigating this criminal conduct, referring appropriate matters to the Internal Revenue Service for civil enforcement and pursuing leads in jurisdictions well beyond Switzerland. Individuals and entities engaged in offshore tax evasion are well advised to come forward now, because the window to get to us before we get to you is rapidly closing.”
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
-
Make a complete disclosure of their cross-border activities;
-
Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
-
Cooperate in treaty requests for account information;
-
Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
-
Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
-
Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
HSZH, the final bank to reach a non-prosecution agreement under Category 2 of the Swiss Bank Program, was previously known as Hyposwiss Privatbank AG. HSZH was founded in 1889 in Solothurn, Switzerland. In 1988, Schweizerische Bankgesellschaft AG, which was later merged into UBS AG, acquired the bank and renamed it Hyposwiss Privatbank AG. Hyposwiss Privatbank AG increasingly focused on private banking activities, servicing both domestic and international clients, and at all times, HSZH solely operated on Swiss territory. In 2002, the bank was acquired from UBS by St. Galler Kantonalbank (SGKB), the state-owned cantonal bank of St. Gallen. In 2014, HSZH unwound its residual banking operations under the supervision of FINMA, the Swiss banking regulator. On Jan. 6, 2014, and in connection with the wind-down, the bank changed its name to HSZH Verwaltungs AG. HSZH returned its banking license, and FINMA released HSZH from its supervision on Nov. 27, 2014.
Until 2013, HSZH conducted a U.S. cross-border banking business that aided and assisted certain of its U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the U.S. government. Through its managers, employees and/or others, HSZH knew or had reason to know that some U.S. taxpayers who opened and maintained accounts at HSZH were not complying with their U.S. income tax and reporting obligations.
HSZH and other banks operating in Switzerland have closely monitored the criminal investigations of UBS and other Swiss banks. In 2008, UBS publicly announced that it was the target of a criminal investigation by the Internal Revenue Service (IRS) and the department and that it would be exiting and no longer accepting certain U.S. clients. In February 2009, the department and UBS filed a deferred prosecution agreement, in which UBS admitted that its cross-border banking business used Swiss privacy law to aid and assist U.S. clients in opening and maintaining undeclared assets and income from the IRS. Since UBS, several other Swiss banks have publicly announced that they were or are the targets of similar criminal investigations and that they would be exiting and not accepting certain U.S. clients.
The senior management of HSZH viewed the exit of U.S. clients by the targeted Swiss banks as a business opportunity to be seized immediately rather than a warning to be heeded. In addition to 83 accounts opened through two pipelines of U.S. clients transferred from UBS, HSZH opened at least 275 accounts for U.S. clients after August 2008. Internal bank notes indicate that in September and October 2008, certain external asset managers with whom HSZH entered into agreements were expected to have “many former UBS clients” and would introduce U.S. clients to HSZH.
The first pipeline of undeclared U.S. clients transferred from UBS was solicited by the CEO of HSZH (CEO #1) from a UBS private banker who was a former colleague of CEO #1. On Aug. 15, 2008, the general counsel of HSZH sent CEO #1 an email containing his views on a new internal bank IRS Form W-9 policy for CEO #1’s review and discussion before sending to SGKB: “In my opinion this policy should be a clarification of the already existing practice in connection with U.S. persons. The actual situation in the US (UBS, Birkenfeld, etc.) has nothing to do with [HSZH] [redacted] or SGKB. . . . Why should we freely throw away a good business opportunity?” Between Sept. 19, 2008, and Jan. 26, 2009, HSZH knowingly opened six undeclared accounts for U.S. clients with an aggregate total of approximately $9.2 million in peak assets under management; all six undeclared U.S. clients had previously been with UBS.
The second pipeline of undeclared U.S. clients predominantly from UBS were all introduced and managed by an external asset management firm in Zurich whose head of private banking was formerly in charge of UBS’s North America International business (EAM #1). In June 2008, the head of HSZH’s EAM Desk provided EAM #1 with HSZH marketing materials, and the Executive Board of HSZH unanimously approved a new business relationship with EAM #1 on Sept. 24, 2008. On Aug. 18, 2009, HSZH opened the last EAM #1 pipeline account. On Aug. 20, 2009, the head of private banking for EAM #1 was indicted by the U.S. Attorney’s Office of the Southern District of Florida.
Meetings between HSZH private bankers and U.S. clients took place in multiple locations within the United States, including in Florida, New York, Pennsylvania, Virginia and Washington, D.C. Some U.S. clients asked for cash on a regular basis, so at times, the HSZH private banker for such clients would personally deliver cash to the clients in the United States in amounts below $10,000 to avoid the reporting requirements.
HSZH private bankers also met with U.S. clients outside of the United States to provide banking services and investment advice related to their accounts, which included undeclared accounts. For example, one U.S. client resided in the United States and had assets of more than $90 million in an account at HSZH held by a Liechtenstein foundation. An HSZH private banker regularly met with this U.S. client in a Swiss hotel, at HSZH or in London. When meeting in London, the HSZH private banker usually delivered cash amounts of 10,000 to 50,000 Swiss francs or U.S. dollars to the U.S. client, who had a preference to receive used U.S. dollar banknotes. The funds were wired to the custodian bank for HSZH in London, where the HSZH private banker would withdraw the cash and personally deliver it to the U.S. client in a London hotel.
HSZH processed significant cash and precious metals withdrawals for U.S.-related accounts at or around the time the clients’ accounts were closed, even though HSZH knew, or had reason to know, that some of the accounts contained undeclared assets. For example, a U.S. couple that owned more than $24 million in assets in an account nominally held by a Liechtenstein foundation, and known by HSZH to be undeclared, regularly withdrew cash amounts between $10,000 and $30,000 – they requested used bank notes – and repeatedly withdrew gold bars. Five instances in 2010 involved 15 kilograms of gold bars. When this U.S. couple closed their HSZH account in 2012, they withdrew large cash amounts totaling more than 19 million Swiss francs, as well as 55 kilograms in gold bars during five visits to HSZH.
HSZH serviced approximately 103 U.S. clients who structured their accounts so that they appeared as if they were held by a non-U.S. legal structure, such as an offshore corporation or trust, which aided and abetted the clients’ ability to conceal their accounts from the IRS. While HSZH did not provide direct structuring services to U.S. clients, HSZH private bankers and members of HSZH’s management suggested the use of structures in some instances for U.S. clients and provided referrals to third-party service providers. In addition, at least two HSZH private bankers served as board members for structures with U.S. beneficial owners maintained at HSZH. Despite the decision in 2009 by HSZH to stop this practice due to the risk of conflicts of interest, one HSZH private banker remained a member of an offshore foundation’s board until 2011. External trust companies created and administered offshore structures incorporated or based in offshore locations such as the British Virgin Islands, Liechtenstein and Panama.
HSZH assisted at least two U.S. taxpayers in further concealing their undeclared funds from the IRS by transferring those funds from UBS in August 2010 through an HSZH account held by a Swiss attorney to an HSZH account held by a sham entity domiciled in Panama that was beneficially owned by the two U.S. taxpayers. In connection with this transfer, HSZH received a revised Form A from the Swiss attorney listing the two U.S. taxpayers as beneficial owners for one transaction only along with instructions from the Swiss attorney to HSZH that his clients’ funds should be transferred from UBS to HSZH through his account, due to the “understandable interests of his clients, that the target account would not be visible.” HSZH’s anti-money laundering documentation dated one day after this August 2010 transfer states: “Since this [sic] are U.S. clients, the transfer was made over the account holder’s account due to understandable reasons. Sender and recipient are identical.”
During the period since Aug. 1, 2008, HSZH held a total of 605 U.S.-related accounts, both declared and undeclared, with an aggregate peak of approximately $1.12 billion in assets under management. HSZH will pay a penalty of $49.757 million.
In accordance with the terms of the Swiss Bank Program, HSZH mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. While U.S. accountholders at HSZH who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.
Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at HSZH must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
“Today’s resolution with HSZH Verwaltungs AG brings to a close this phase of DOJ’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division. “The comprehensive success of this program sends a powerful message to those who might think they can evade their tax obligations by going offshore. A whole sector of financial institutions, 80 banks in all, has been held accountable for aiding the use of secret accounts and circumventing U.S. law. In addition to the more than $1.3 billion in penalties from these resolutions, more than 54,000 taxpayers have come forward to the IRS to pay more than $8 billion in taxes, interest and penalties.”
“The bank agreement with HSZH announced today may bring an end to one phase of the Swiss Bank Program, but more importantly it brings us closer to our overall goal of compliance and accountability for financial institutions and U.S. taxpayers,” said Chief Richard Weber of IRS-Criminal Investigation. “The data received from each agreement on the accounts, schemes and linkages is extremely valuable in combating international tax evasion. I could not be more proud of the effort of our special agents who worked tirelessly to make this program a success in coordination with the Department of Justice.”
Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance. Acting Assistant Attorney General Ciraolo also thanked Kimberle E. Dodd, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
-
Iowa Businessmen Indicted for Failing to Pay Employment TaxesRead the Press Release
A grand jury sitting in Cedar Rapids, Iowa returned an indictment on Jan. 21, unsealed yesterday after their initial court appearances, charging two Iowa businessmen with federal employment tax violations, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kevin W. Techau of the Northern District of Iowa announced today.
Randy Less, 48, of Hopkinton, Iowa, and Darrell Smith, 59, of Forest City, Iowa, are each charged with multiple counts of willfully failing to truthfully account for, and pay over federal income, social security and Medicare taxes that were withheld from the wages of the employees of Permeate Refining Inc., which was in the business of ethanol production.
According to the allegations in the indictment, Less was the majority owner, a general partner and the general manager of Permeate Refining Inc. in Hopkinton. In those roles, Less had the responsibility to collect, truthfully account for and pay over to the Internal Revenue Service (IRS) federal income, social security and Medicare taxes withheld from the wages of his employees. From approximately the fourth quarter of 2009 and continuing through the fourth quarter of 2010, Less is alleged to have willfully failed to pay over to the IRS more than $116,000 in withheld taxes.
The indictment further alleges that a company called Algae Energae purchased an ownership interest in Permeate in September 2009. After that purchase, it is alleged that Smith, a corporate officer and manager of Algae Energae, also had the responsibility to collect, truthfully account for and pay over to the IRS taxes withheld from the wages of Permeate’s employees. From approximately the first quarter of 2011 and continuing through the third quarter of 2012, both Less and Smith are alleged to have willfully failed to pay over to the IRS more than $307,000 in withheld taxes.
If convicted, the defendants face a statutory maximum sentence of five years in prison and a $250,000 fine for each count.
An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent until proven guilty beyond a reasonable doubt.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Techau thanked special agents of IRS Criminal Investigation, the FBI, the U.S. Postal Inspection Service and the U.S. Environmental Protection Agency, who investigated the case and Assistant U.S. Attorney Tim Vavricek of the Northern District of Iowa and Trial Attorney Matthew Hoffman 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 Permanently Enjoins California Business from Accruing Payroll Tax LiabilitiesRead the Press Release
A federal court has ordered a San Diego, California provider of collection services to pay its payroll taxes as they become due, the Justice Department announced today. Judge Larry Alan Burns of the U.S. District Court for the Southern District of California entered a permanent injunction requiring Prolien Services LLC and its owner, Albert F. Quintrall, to pay Prolien’s federal payroll tax liabilities as they become due and owing.
The defendants agreed to entry of the injunction and admitted the allegations in the government’s complaint. Prolien has repeatedly failed to make sufficient federal employment tax deposits since 2009 and has amassed substantial employment tax liabilities.
Under the terms of the injunction, the business must deposit its payroll taxes and file its employment tax returns on a timely basis. The defendants are also required to notify the Internal Revenue Service (IRS) that the required tax deposits have been made and tell the IRS if they begin operating any new business. The defendants are precluded from assigning property or making any payments to other creditors until the employment tax liabilities are paid. The injunction is effective immediately.
Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division thanked the revenue officer of IRS Field Collection for investigating and preparing the civil case and the attorneys who handled the litigation.
Additional information about the Tax Division and its enforcement efforts may be found on the Division’s website.
Justice Department Announces New Chief Executive Officer of Federal Prison IndustriesRead the Press Release
Attorney General Loretta E. Lynch announced today the hiring of Gary Simpson to serve as the new CEO of Federal Prison Industries (FPI).
“Today, Federal Prison Industries remains the Bureau of Prisons’ largest and most successful reentry program, helping men and women find a new sense of purpose and develop concrete skills that they can bring back to their communities,” said Attorney General Loretta Lynch. “I am pleased to welcome its new CEO, Gary Simpson – an expert in manufacturing operations with 28 years of experience. Over the next few years, Gary will spearhead a business transformation plan to expand FPI’s activities – using a business model that results in no costs to the taxpayers – to ensure that more incarcerated individuals can take advantage of this vital program.”
Gary Simpson comes to FPI with over 28 years of experience in manufacturing operations at Procter and Gamble. Simpson is an expert in the areas of cost effective product launches, operational turnarounds and sourcing optimization. He will use these skills to lead FPI’s business transformation plan.
“I’m honored for the opportunity to lead Federal Prisons Industries through this transformative period,” Simpson said. “For more than 80 years, FPI has provided job skills training to federal inmates and helped prepare them to return to their respective communities. This program has been and will continue to be, a vital part of the Department of Justice’s reentry initiatives.”
FPI is a voluntary industrial work program that operates as a wholly owned government corporation. It is the largest reentry program within the Bureau of Prisons (BOP), providing job skills training to almost 12,000 federal inmates. FPI operates without any appropriations from Congress and instead primarily relies on proceeds generated from the sale of inmate-produced goods to federal agencies, with the Department of Defense being the chief source of business.
FPI benefits not only those within the federal prison system, but society as a whole. Research has shown that participants in the program are 24 percent less likely to reoffend and are 14 percent more likely to obtain employment upon release from custody. In Fiscal Year 2014, $1 million of earnings from FPI helped inmates contribute to financial obligations including court-ordered fines, restitution and familial support.
The hiring of Simpson is one of the steps the department is taking to ensure that FPI remains a viable program in which federal offenders become productive, law-abiding citizens.
Georgia Man Sentenced to Prison for Operating an Unlicensed Money Transmitting BusinessRead the Press Release
A Columbus, Georgia resident was sentenced to serve 21 months in prison, followed by three years of supervised release and ordered to forfeit $1,357,476.18 for operating an unlicensed money transmitting business, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney G.F. “Pete” Peterman III for the Middle District of Georgia announced today.
According to court documents, between February 2013 and March 2014, Sawan Shah aka Sunny, owned, operated and managed several money transmitting companies in the Columbus area. Shah offered check cashing services to the public, including cashing of checks that exceeded $1,000. Shah knew that he and his companies were required to be registered with Financial Crimes Enforcement Network (FinCEN) and with the State of Georgia. Neither Shah nor any of the businesses he controlled were registered with FinCEN or the State of Georgia as a money transmitting business or as a check cashier.
As part of his plea, the defendant admitted that several individuals approached him about cashing tax refund checks that were issued in the names of other individuals. Shah agreed to do so and did not require proof of identification for the individuals listed on the checks. Shah charged fees of between 10 and 30 percent of the value of the check, due to his knowledge that the checks were involved in tax fraud. In 2013 and 2014, Shah cashed approximately 567 federal tax refund checks that totaled $1,357,476.18. Shah admitted in plea documents that those checks were the result of fraudulent claims for income tax refunds submitted in the names of stolen identities.
Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Peterman III commended special agents of Internal Revenue Service (IRS)-Criminal Investigation and the U.S. Secret Service, who investigated the case and Trial Attorney Michael C. Boteler of the Tax Division and Assistant U.S. Attorney Crawford L. Seals of the Middle District of Georgia, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Florida Residents Sentenced to Prison for Involvement in Stolen Identity Tax Refund Fraud SchemeRead the Press Release
Filed More than 860 False Tax Returns Seeking Over $1 Million in Tax Refunds
Two Miami, Florida residents were sentenced to prison for their role in a stolen identity tax refund fraud scheme, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida and Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service (IRS) Criminal Investigation announced today.
Roland Alexis, 34, was sentenced today to 42 months in prison followed by three years of supervised release. Alexis’s co-conspirator, Jim Joseph, 31, was previously sentenced to 42 months in prison followed by three years of supervised release on Jan. 20.
“Identity theft and filing false tax returns are serious crimes that inflict tremendous damage on innocent victims,” said Acting Assistant Attorney General Ciraolo. “We will continue to work with our federal and state law enforcement partners to aggressively investigate and prosecute these crimes and, where appropriate, seek the maximum sentence available to punish the perpetrators, deter others from engaging in such behavior, and seek justice for the victims.”
According to the indictment and information disclosed in court proceedings, Joseph and Alexis conspired to file more than 860 false income tax returns claiming more than $1 million in refunds from the IRS. Alexis’s conduct resulted in a tax loss of $1.8 million; Joseph’s conduct resulted in a tax loss of $1.2 million. Joseph and Alexis each pleaded guilty in November 2015 to one count of a multi-object conspiracy to defraud the IRS, commit wire fraud and commit aggravated identity theft, as well as one count of aggravated identity theft.
Between 2007 and July 2014, Joseph, Alexis and others filed false federal income tax returns using stolen identities. Joseph and Alexis obtained the personal identification information including names, social security numbers, addresses and dates of birth, without the individuals’ authorization. Much of the stolen personal identification information belonged to prisoners and deceased individuals. Joseph, Alexis and others recruited knowing co-conspirators and unknowing victims to obtain Electronic Filing Identification Numbers (EFINs) in their names through which fraudulent income tax returns would be filed. In late 2009, Alexis and Joseph, along with a co-conspirator, formed Worldwide Income Tax Multi-Services LLC and North Miami Income Tax Services. The companies were created with the intended purpose of filing fraudulent tax returns using stolen identities. Worldwide Income Tax Multi-Services was located in Miramar, Florida and listed Alexis as President and Joseph as Vice-President. North Miami Income Tax Services was set up in Miami and listed Alexis as Registered Agent. Joseph, Alexis and others then used the stolen identities and EFINs to electronically file fraudulent tax returns.
In addition to the prison term, U.S. District Judge William Zloch for the Southern District of Florida ordered Joseph to pay $1,225,686.12 in restitution to the IRS. Alexis was also ordered to pay $1,805,332.71 in restitution, forfeit two single family owned properties in Miami and $369,776.18 in proceeds held in a bank account.
Acting Assistant Attorney General Ciraolo, U.S. Attorney Ferrer and Special Agent in Charge Jackson commended special agents of IRS Criminal Investigation and Homeland Security Investigations, who investigated the case and Assistant Chief Gregory E. Tortella of the Tax Division and Assistant U.S. Attorney Neil Karadbil of the Southern District of Florida, who prosecuted the case.
Justice Department Announces Leodan Privatbank AG Reaches Resolution Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Leodan Privatbank AG (Leodan), reached a resolution under the department’s Swiss Bank Program.
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
-
Make a complete disclosure of their cross-border activities;
-
Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
-
Cooperate in treaty requests for account information;
-
Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
-
Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
- Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of Leodan’s non-prosecution agreement, Leodan agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute Leodan for tax-related criminal offenses.
Leodan, which is organized as a corporation owned by private shareholders, is a small private bank that commenced doing business in September 2009. Leodan previously was known as PHZ Privat- und Handelsbank Zürich AG until it changed its name in August 2015 as part of a new business strategy. Leodan focuses on asset management, which encompasses advisory, brokerage and custodial services, for private and institutional clients. Leodan’s sole office is in Zurich, Switzerland. On Jan. 11, 2016, a meeting of Leodan’s shareholders was convened, and the shareholders voted to voluntarily wind-down Leodan’s banking operations.
Until June 2013, Leodan conducted a U.S. cross-border banking business that aided and assisted certain of its U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the U.S. government. Six private bankers at Leodan, including the Chief Executive Officer, serviced the 44 U.S.-related accounts at the bank. Leodan offered a variety of traditional Swiss banking services, including hold mail and code-name or numbered account services, that it knew could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS). Leodan opened and maintained accounts belonging to U.S. taxpayers who had left other banks being investigated by the department without ensuring that each such account was compliant with U.S. tax law. Leodan accepted instructions in connection with U.S.-related accounts not to invest in U.S. securities and not to disclose the names of U.S. clients to U.S. tax authorities, including the IRS. Leodan also processed significant securities or precious metals electronic transfers in relation to U.S.-related accounts at or around the time the clients’ accounts were closed, even though Leodan knew, or had reason to know, that some of the accounts contained undeclared assets.
Leodan opened and maintained undeclared accounts in the names of sham structures that were beneficially owned by U.S. taxpayers, while knowing, or having reason to know, that these structures were used by U.S. clients to help conceal their identities from the IRS. These structured accounts were non-U.S. domiciled entities, such as an offshore corporation or trust, which aided and abetted the clients’ ability to conceal their undeclared accounts from the IRS. These non-U.S. domiciled entities were established in the British Virgin Islands, Cyprus, Germany, Hong Kong, Liechtenstein and Panama. Because Swiss law requires Leodan to identify the true beneficial owner of structures on a document called a Form A, it knew that these were U.S. client accounts. Nonetheless, for certain U.S. client accounts, Leodan private bankers and other employees aided and assisted some of these U.S. clients in concealing these assets and income from the IRS.
On Dec. 22, 2010, the Chief Executive Officer and the Chief Operating Officer of Leodan met in the bank’s offices with an external asset manager (EAM #1) and two private bankers, who were not satisfied with their positions at UBS. EAM #1 presented his company and proposed a business relationship. During this meeting, EAM #1 informed Leodan’s management that he was under investigation in the United States. Later that same month and viewing a potential relationship with EAM #1 as a business opportunity, Leodan made a decision to hire the two private bankers commencing May 2011 and to enter into a business relationship with EAM #1.
Leodan opened 19 U.S.-related accounts for 13 clients of EAM #1. Of these 19 accounts, 16 were structured accounts held by non-U.S. domiciled entities. EAM #1 served as a director of his 16 structured accounts at Leodan, and EAM #1 had a power of attorney for the non-U.S. domiciled entity that held the account in its name. The relationship with EAM #1 brought more than 40 percent of the U.S.-related accounts to Leodan. EAM #1 was later indicted in the United States for conspiring with U.S. taxpayers to help them evade their U.S. tax obligations.
Between May 2011 and October 2012, Leodan made no efforts to ascertain the status of the criminal investigation against EAM #1. On Oct. 16, 2012, representatives of Leodan’s Board of Directors and Management Board met with representatives of FINMA. After discussing with FINMA the indictment of EAM #1, which had taken place more than 15 months earlier in July 2011, Leodan made the decision to terminate its relationship with EAM #1 and exit his clients. Between November 2012 and January 2013, Leodan transferred the 19 U.S.-related accounts of EAM #1 to other banks. The majority of the assets in these accounts were transferred per the clients’ instructions to one specific Swiss bank and two banks in Liechtenstein, and these transfers continued to aid some of those clients in evading their U.S. taxes.
During the period since Aug. 1, 2008, Leodan held a total of 44 U.S.-related accounts, which included both declared and undeclared accounts, with an aggregate peak of approximately $59.42 million in assets under management. Leodan will pay a penalty of $500,000.
In accordance with the terms of the Swiss Bank Program, Leodan mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. While U.S. accountholders at Leodan who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.
Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at Leodan must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance. Acting Assistant Attorney General Ciraolo also thanked Kimberle E. Dodd, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
-
Georgia Tax Return Preparer Charged in Refund Fraud SchemeRead the Press Release
An Atlanta, Georgia tax return preparer self-surrendered earlier today after being indicted by a federal grand jury on Dec. 1, 2015 for 10 counts of wire fraud, 10 counts of aggravated identity theft and 10 counts of filing false claims against the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney John A. Horn for the Northern District of Georgia.
Cheryl Singleton, 28, owned and operated Advanced Tax Services, a tax return preparation business with multiple offices in the Atlanta area, according to the indictment and other information presented in court. Singleton’s initial court appearance was earlier today in U.S. District Court for the Northern District of Georgia. Beginning in 2012, Singleton is alleged to have participated in a scheme with others to obtain tax refunds by filing false federal income tax returns. The indictment states that as part of this scheme, Singleton falsely advised individuals that they could apply for a government stimulus payment by providing their personal identification information to Advanced Tax Services. Singleton and the other participants in the scheme are also accused of using this personal identification information to electronically file false income tax returns in those individuals’ names, without their knowledge or consent. These tax returns each claimed fraudulent tax refunds of at least $1,000.
If convicted, Singleton faces a statutory maximum sentence of 20 years in prison for each wire fraud count, five years in prison for each false claims count and a mandatory minimum sentence of two years in prison for the aggravated identity theft counts, which will run consecutively to any other prison term she receives. Singleton also faces substantial monetary penalties and restitution.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Horn commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorney Melanie A. Smith of the Tax Division and Assistant U.S. Attorney Thomas J. Krepp of the Northern District of Georgia, who are prosecuting the case.
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.
Federal Court Bars Florida Man from Owning Tax Preparation Business and from Preparing Federal Tax Returns for OthersRead the Press Release
A Former Franchisee of “LBS Tax Services” and Owner of “AWA Tax Services” Allegedly Operated Fraudulent Tax Preparation Businesses
A federal court in Miami, Florida, has permanently barred Wilfrid Antoine of Lake Worth, Florida, from preparing federal tax returns for others and from owning or operating a tax return preparation business, the Justice Department announced today.
The civil injunction order, to which Antoine agreed, was signed by Judge Donald M. Middlebrooks of the U.S. District Court for the Southern District of Florida.
The United States filed its civil injunction and disgorgement complaint against Antoine in September 2014. The complaint alleged that return preparers in Antoine’s businesses targeted primarily low-income customers with deceptive and misleading advertisements, prepared and filed fraudulent tax returns to fraudulently increase their customers’ refunds, and profited through unconscionable, exorbitant and often undisclosed fees—all at the expense of their customers and the U.S. Treasury.
According to the complaint, Antoine owned and operated AWA Tax Inc., a corporation that operated seven tax return preparation stores in Florida. Those stores allegedly operated as “LBS Tax Services” in 2013 and began operating as “AWA Tax Services” in 2014. The complaint alleged that Antoine’s preparers engaged in fraudulent activity, including:
- Falsely claiming the Earned Income Tax Credit;
- Claiming improper filing status (i.e. head of household for married individuals);
- Fabricating businesses and related business income and expenses;
- Fabricating Schedule A deductions, such as unreimbursed employee business expenses;
- Falsely claiming the fuel tax credit; and
- Charging deceptive and unconscionable fees;
According to the complaint, Antoine was a franchisee of LBS Tax Services. Since September 2014, the United States has filed nine similar lawsuits in Florida against the former LBS Tax Services franchisor Walner Gachette and 12 former LBS franchisees and managers, many of whom rebranded and have continued to operate tax preparation businesses. The franchisees and managers include Douglas Mesadieu, Jean Demesmin, Kerny Pierre-Louis, Demetrius Scott, Jason Stinson, Tonya Chambers, Jehoakim Victor, Lauri Rodriguez, Milot Odne, Alexander Baraz and Christopher Lawrence. The United States has also sued Kenneth Aikens, who worked for Lawrence as a tax preparer and manager before Aikens assumed ownership of several tax return preparation stores. In the complaint against Lawrence and Aikens, the government alleges that both men have taken steps to mask their ownership of the businesses.
To date, Jean Demesmin, Odne, Chambers, Scott, Pierre-Louis, Victor and Lauri Rodriguez have agreed to preliminary injunctions barring them from tax return preparation. The U.S. District Court for the Central District of Florida, following a motion by the United States, entered a preliminary injunction barring Mesadieu from tax return preparation. A preliminary injunction motion to bar Stinson from tax return preparation is pending.
Return preparer fraud was one of the Internal Revenue Service’s (IRS) Dirty Dozen Tax Scams for 2015. 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’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.
Tribunal de Nueva Jersey Prohíbe Permanentemente a un Hombre de Florida Preparar Declaraciones De Impuestos Para TercerosRead the Press Release
Un tribunal federal de Nueva Jersey ha prohibido en forma permanente a una preparador de declaraciones de impuestos del Sur de Florida preparar declaraciones de impuestos a la renta federales para terceros, anunció hoy el Departamento de Justicia.
La orden judicial civil también prohíbe a Felix Taveras Santos, individualmente y a través de su empresa Latino Tax LLC, realizar actividades de preparación de declaraciones de impuestos en el futuro. Santos, quien actualmente vive en Doral, Florida, aceptó la presentación del mandamiento judicial; sin embargo, no admitió los alegatos de la demanda civil entablada en su contra.
De acuerdo con la demanda, Santos y su empresa ubicada en Atlantic City, Nueva Jersey, prepararon declaraciones de impuestos falsas e improcedentes durante los períodos de presentación de declaraciones de 2010 a 2014. El Servicio de Impuestos Internos [Internal Revenue Service (IRS)] auditó 43 declaraciones de impuestos federales preparadas por Santos o uno de sus empleados, y las auditorías resultaron en un ajuste del 80 por ciento de dichas declaraciones y un déficit total de impuesto a la renta de alrededor de $100.000, de acuerdo con la demanda. La demanda alegó que Santos y sus empleados infravaloraron las obligaciones tributarias de sus clientes o exageraron sus reembolsos indebidamente al:
-
reclamar créditos tributarios para hijos, incluyendo hijos que vivían fuera de los Estados Unidos;
-
declarar exenciones por dependientes, por ejemplo, para clientes sin manera de comprobar que mantenían a sus hijos; y
- utilizar categorías incorrectas de declaración del contribuyente, tales como soltero o cabeza de familia para clientes casados.
El mandamiento judicial exige que Santos le entregue a los Estados Unidos una lista de sus clientes desde 2010 y envíe una copia del mandamiento judicial a todos los clientes para los que él y Latino Tax LLC prepararon declaraciones de impuestos a partir de 2010.
El fraude de preparación de declaraciones de impuestos es uno de los Doce ardides tributarios sucios de 2015 del IRS. En su portal en Internet, el IRS incluye algunos consejos para elegir un preparador de declaraciones de impuestos. En la última década, la División de Impuestos ha obtenido mandamientos judiciales contra cientos de preparadores de declaraciones de impuestos inescrupulosos y promotores de ardides tributarios. Hay información disponible sobre estos casos en el portal del Departamento de Justicia. Se puede encontrar aquí una lista de personas prohibidas de preparar declaraciones de impuestos y personas que promovieron ardides tributarios. Si usted cree que alguna de las personas o empresas prohibidas podrían estar violando un mandamiento judicial, por favor comuníquese con la División de Impuestos para brindar información.
-
New Jersey Court Permanently Bars South Florida Man from Preparing Tax Returns for OthersRead the Press Release
A federal court in New Jersey has permanently barred a South Florida man from preparing federal income tax returns for others, the Justice Department announced today.
Felix Taveras Santos, of Doral, Florida, is prohibited individually and doing business as Latino Tax LLC, from operating a tax return preparation business in the future, pursuant to the civil injunction order. Santos agreed to the entry of the injunction but did not admit to the allegations in the civil complaint against him.
According to the complaint, Santos and his business, which was located in Atlantic City, New Jersey, prepared false and improper returns during the 2010 through 2014 filing seasons. The Internal Revenue Service (IRS) audited 43 federal tax returns that Santos or one of his employees prepared, and the audits resulted in adjustment of 80 percent of those returns and a total income tax deficiency of approximately $100,000, according to the complaint. The complaint alleged that Santos and his employees understated their customers’ tax liabilities or inflated their refunds by improperly:
-
claiming child tax credits, including for children who lived outside of the United States;
-
declaring dependency exemptions, for instance, for customers who had no proof that they supported the children; and
-
using incorrect filing statuses, such as single or head-of-household for customers who were married.
The injunction order requires Santos to provide the United States with a list of his customers since 2010 and to send a copy of the court’s injunction order to all customers for whom he and Latino Tax LLC prepared returns starting in 2010.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2015. 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 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. A list of persons enjoined from preparing returns and promoting tax schemes can be found here. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.
-
Delaware Cheese Company Agrees to Plead Guilty to Food Adulteration Charge, Signs Consent DecreeRead the Press Release
A criminal information was filed today in the U.S. District Court for the District of Delaware against Roos Foods Inc., charging the company with the distribution of adulterated cheese in interstate commerce, the Department of Justice announced today. The company has signed a plea agreement in which it has agreed to plead guilty to a misdemeanor violation of the federal Food, Drug and Cosmetic Act (FDCA). In addition to the company’s agreement to plead guilty, Roos, and its principals, Ana A. Roos and Virginia Mejia, have agreed to a proposed consent decree of permanent injunction.
Roos Foods distributed several varieties of ready-to-eat cheese, including ricotta, queso fresco and fresh cheese curd and sold and distributed its products to wholesale customers in Maryland, New Jersey, Virginia and Washington D.C., according to the information. A civil complaint along with the proposed consent decree was also filed in the U.S. District Court for the District of Delaware. The criminal charge and civil complaint allege that Roos distributed cheese in interstate commerce connected to an outbreak of Listeria monocytogenes (L. mono) in early 2014.
“We must work to ensure that the food we buy is free from dangerous bacteria and is safe to eat,” 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 to combat and deter conduct leading to the distribution of adulterated food to consumers.”
“It is cases like this that demonstrate the need for government regulations concerning food safety, ” said U.S. Attorney Charles M. Oberly III for the District of Delaware. “Fortunately, there were no serious or permanent injuries as a result of the marketing of contaminated cheese. Manufacturers of our nation’s food supplies must comply with the law and when violators are found they should expect to be prosecuted and, if necessary, put out of business.”
The criminal information alleges that on Feb. 21, 2014, the Centers for Disease Control and Prevention (CDC) reported that a total of eight people (five adults and three newborns) in Maryland and California were infected with L. mono and according to the CDC, several of the Maryland patients reported having eaten soft or semi-soft cheeses in the month before becoming ill.
L. mono is the bacterium that causes the disease listeriosis. Listeriosis is most commonly contracted by eating food contaminated with L. mono. Listeriosis can be serious, even fatal, for high-risk groups such as unborn babies, newborns and those with impaired immune systems.
Unlike many other foodborne microbes, L. mono bacteria are capable of adapting and growing even at refrigerator temperatures. Thus, the presence of L. mono in ready-to-eat foods is a particularly significant public health risk.
As alleged in the information, following a report that L. mono had been isolated from cheese manufactured by Roos Foods, the U.S. Food and Drug Administration (FDA) inspected the firm’s Kenton, Delaware, facility and established that ready-to-eat cheese products were adulterated in that they had been prepared, packed or held under insanitary conditions whereby they may have become contaminated with filth or rendered injurious to health. As alleged, FDA found numerous failures to implement effective monitoring and sanitation controls in accordance with current Good Manufacturing Practices.
The information alleges that the FDA inspection revealed significant sanitation deficiencies, such as widespread roof leaks in the manufacturing area, including over open manufacturing equipment; rust flakes on the manufacturing equipment from corroded roof trusses and metal roofing; un-cleanable surfaces on walls, floors and ceilings and product residue on equipment that had purportedly been cleaned. In addition, as alleged in the information, FDA collected environmental samples and found L. mono on 12 surfaces in the facility.
On March 11, 2014, FDA suspended the food facility registration of Roos Foods after determining there was a reasonable probability that food manufactured, processed, packed, or held by Roos Foods would cause serious adverse health consequences or death to humans. A company without a food facility registration cannot distribute any food products. Roos Foods has not reopened.
“The FDA will not tolerate food companies that fail to provide adequate safeguards and place the public health at risk by producing and shipping contaminated products,” said FDA’s Deputy Commissioner for Global Regulatory Operations and Policy Howard Sklamberg, J.D. “We will continue to work with the Department of Justice to use the full force of our justice system against those that place profits over the health and safety of American consumers.”
The civil complaint alleges that Roos Foods and two individual defendants violated the FDCA by, among other things, introducing or delivering for introduction into interstate commerce articles of food that were adulterated in that the food was prepared, packed or held under insanitary conditions whereby it may have become contaminated with filth or rendered injurious to health. The proposed consent decree of permanent injunction requires the defendants to cease receiving, preparing, processing, packing, holding and distributing all food products unless and until the defendants bring their operations into compliance with the FDCA and its implementing regulations.
The criminal case is being prosecuted by Trial Attorney Heide L. Herrmann of the Justice Department’s Consumer Protection Branch and Assistant U.S. Attorneys Jennifer Welsh and Edmond Falgowski of the District of Delaware. They were assisted by Associate Chief Counsel Laura Pawloski of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services. The case was investigated by the FDA’s Office of Criminal Investigations.
The government is represented in the civil case by Trial Attorney Megan Englehart of the Justice Department’s Consumer Protection Branch and Assistant U.S. Attorney Patricia Hannigan of the District of Delaware, with the assistance of Associate Chief Counsel Shannon M. Singleton of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.
A criminal information is merely an allegation and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.
A civil complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.
Big Brothers Big Sisters of America to Pay $1.6 Million to Resolve Allegations of False Claims for Federal GrantsRead the Press Release
Big Brothers Big Sisters of America Corporation (Big Brothers) has agreed to pay the United States $1.6 million to resolve allegations of false claims for funds under Department of Justice grants awarded to help children at risk, the Justice Department announced today. Big Brothers is a not-for-profit organization that provides mentoring services to boys and girls throughout the United States. The organization, originally based in Philadelphia, Pennsylvania, is now headquartered in Tampa, Florida.
“Organizations such as Big Brothers do great work, but in carrying out their mission they also have an obligation to the populations they serve and to the taxpayer to ensure that government grant funds are used responsibly according to the rules,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The settlement announced today exemplifies the Department’s commitment to hold those who mishandle such funds accountable.”
“The U.S. Attorney’s office is committed to protecting federal grants and ensuring that the funds are appropriately spent,” said U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania. “Federal grant recipients must administer these grants with transparency and diligence, and the compliance measures implemented pursuant to this settlement agreement will help to achieve those goals.”
Big Brothers is a national organization that acts through approximately 300 independent affiliate agencies across the United States. Since 2004, Big Brothers has received millions of dollars in grants from the Justice Department to support initiatives on behalf of children at risk. As a condition of those grants, Big Brothers was required to maintain sound accounting and financial management systems in accordance with federal regulations and guidelines designed to ensure that grant funds would be properly accounted for and used only for appropriate purposes.
The United States alleges that Big Brothers violated these regulations and guidelines with respect to three grants awarded by the Justice Department from 2009 to 2011, by commingling the grant funds with general operating funds, failing to segregate expenditures to ensure that the funds were used as intended and failing to maintain internal financial controls to safeguard the proper use of those funds. These allegations were the focus of a 2013 audit of the three grants performed by the Department of Justice Office of the Inspector General. Since 2013, Big Brothers has replaced its management team and begun implementing policies governing the use of federal grant funds.
“We appreciate the support of the U.S. Attorney for the Eastern District of Pennsylvania and the Civil Division in working with us on these kinds of cases,” said Department of Justice Inspector General Michael E. Horowitz. “The OIG’s auditors and investigators will continue to work with each other closely to uncover misuses of grant funds, and with our law enforcement partners to ensure that justice is served.”
In addition to paying the United States $1.6 million, and as part of the settlement, Big Brothers has agreed to institute a strict compliance program that requires the organization to engage in regular audits, both internally and by independent auditors; establish a compliance team, an employee code of conduct, whistleblower policies and a disciplinary policy for employees who engage in or fail to disclose abuses of federal grant funds; provide regular employee training on these policies; and employ risk assessment tools to detect abuses that might otherwise go undetected.
The settlement was the result of a coordinated effort between the U.S. Attorney’s Office for the Eastern District of Pennsylvania and the Civil Division’s Commercial Litigation Branch. The Department of Justice Office of the Inspector General conducted the investigation.
The claims resolved by this settlement are allegations only; there has been no determination of liability.
Two Maryland Men Plead Guilty to Federal Charges for Roles in Massive Identity Theft and Tax Fraud SchemeRead the Press Release
Worked with Others to Seek More Than $700,000 in Fraudulent Refunds
Two Maryland residents pleaded guilty today for their involvement in a far-reaching stolen identity refund fraud scheme in which they worked with others to seek over $700,000 in income tax refunds through the filing of fraudulent federal income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge Maria L. Kelokates of the U.S. Postal Inspection Service, Washington Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.
Michael Whittaker, 31, of Cumberland, Maryland, and Wayne Gardner, 49, of Capitol Heights, Maryland, are among approximately 18 participants in this scheme who have pleaded guilty to charges in the U.S. District Court for the District of Columbia. According to court documents, the overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $42 million. The two men pleaded guilty to one count of conspiracy to commit theft of public money and one count of theft of public money.
The charges carry statutory maximum prison terms of five years and 10 years, respectively, as well as potential financial penalties. As part of the plea agreements, Whittaker and Gardner agreed to pay restitution to the IRS in the amounts of $397,090 and $158.160, respectively, which represent that value of the U.S. Treasury checks that were negotiated as a result of their conduct. U.S. District Judge Ellen S. Huvelle set sentencing for May 18.
According to the government’s evidence, Whittaker and Gardner participated in a massive and sophisticated stolen identity refund fraud scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance. The refunds were sought for tax years 2005 through 2012, often in the names of people, whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners. Returns were also filed in the names of, and refunds were issued to, people who were willing participants in the scheme. The refunds listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia.
According to documents filed with the court, Whittaker and Gardner obtained the means of identification of third parties, including names and social security numbers and provided them to a co-conspirator for use in the preparation of fraudulent income tax returns. Whittaker admitted to providing 21 means of identification from August 2010 to May 2012. He also permitted various residential addresses that he controlled to be used as purported taxpayer addresses for the delivery of tax refund checks and deposited U.S. Treasury checks that were received as part of this scheme into his bank accounts. Gardner admitted to providing 65 means of identification to a co-conspirator between August and December 2010. Whittaker admitted that he was involved in the filing of 135 fraudulent tax returns that sought refunds of approximately $494,902. Gardner admitted that he was involved in the filing of 116 fraudulent tax returns that sought refunds of approximately $299,984.
The fraudulent tax returns that were filed as part of the scheme included Schedules C or C-EZ that falsely claimed that each “taxpayer” operated a business, such as “barber” or “childcare,” as a sole proprietorship. The returns falsely stated that the “taxpayer” had gross receipts and two or more dependent children, when, in fact, the “taxpayer” was either a victim of identity theft, was misled into providing his or her identifying information, or was a willing participant in the scheme.
In announcing the pleas, Acting Assistant Attorney General Ciraolo, U.S. Attorney Phillips, Special Agent in Charge Jankowski, Inspector in Charge Kelokates and Assistant Inspector General Phillips commended those who investigated the case. They also acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office of the District of Columbia, including former Assistant U.S. Attorney Sherri L. Schornstein and Paralegal Specialists Donna Galindo and Julie Dailey. Finally, they expressed appreciation for the work of Assistant U.S. Attorney Ellen Chubin Epstein of the District of Columbia’s Fraud and Public Corruption Section and Trial Attorneys Jeffrey B. Bender and Thomas F. Koelbl and former Trial Attorney Jessica Moran of the Tax Division, who prosecuted the case.
Texas Man Indicted for Federal Tax CrimesRead the Press Release
An Austin, Texas, businessman was indicted by a federal grand jury for five counts of filing false tax returns and one count of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
According to the allegations in the superseding indictment, Victor Antolik owned and operated a commercial janitorial business in Austin, San Antonio and Houston, Texas, for which he used a variety of business names, including Diversified Building Services Inc., DBS Services Inc., Partners in Cleaning, PIC Building Services and BSI Industries. Antolik also earned income as a real estate agent, real estate broker and property manager. Antolik earned a portion of his real estate income through his companies SGN Realty Inc. and Signature Realty Services. For the tax years 2004, 2007 and 2008, Antolik submitted to the Internal Revenue Service (IRS) a total of four false individual income tax returns on which he underreported his income. In addition, between 1998 and 2014, Antolik attempted to obstruct the IRS by, among other things, attaching altered Forms W-2 and 1099 to his tax returns, providing false information to his accountants that was used to prepare both corporate and individual income tax returns on his behalf, and using nominees to conceal income and assets.
If convicted, for each count, Antolik faces a statutory maximum sentence of three years in prison, a maximum fine of $250,000 and restitution to the IRS.
An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent until proven guiltly beyond a reasonable doubt.
Acting Assistant Attorney General Ciraolo thanked agents of the IRS-Criminal Investigation, who are investigating the case and Tax Division Trial Attorneys Robert A. Kemins and David Zisserson, who are prosecuting the case. Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office for the Western District of Texas for their substantial assistance.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Judge Orders York County Trucking Company to End Repeated Violations of Employment Tax LawsRead the Press Release
Yesterday, a federal court in Rock Hill, South Carolina, ordered Tony McMillan and his trucking company, which he operated under the names T-N-T of York County Inc. and TM Trucking of the Carolinas LLC, to stop violating their employment tax reporting, deposit and payment obligations. The Judgment and Permanent Injunction by Consent requires McMillan and the business to timely file all employment tax returns, to make all required deposits of employment and unemployment taxes and to certify to the Internal Revenue Service (IRS) that they have made these deposits. The injunction also prohibits the defendants from making other disbursements if the business’s current employment taxes are not paid. The injunction also requires McMillan to notify the IRS of any new company he owns, manages, or works for over the next five years.
The government’s complaint alleged that McMillan operated the trucking company since at least 2008 and was routinely late in filing its employment tax returns and paying its employment taxes, when he did so at all. According to the complaint, McMillan also failed to pay over the taxes withheld from his employees’ paychecks. By the time the complaint was filed in June 2015, T-N-T of York County and TM Trucking of the Carolinas together owed more than $2.7 million in federal employment and unemployment taxes for various periods from 2009 through 2014, the complaint stated. The complaint alleged that this pyramiding of taxes had continued in spite of repeated efforts by the IRS to collect the tax and to help McMillan and the business cure the violations.
Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked IRS Field Collection and its revenue officer 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.
Two Brothers Admit Filing Fraudulent Tax Returns Seeking Refunds of over $218 MillionRead the Press Release
Criminals Received $16 Million in Refunds After Filing Bogus Tax Returns
Two brothers pleaded guilty today in the District of Maryland in a scheme in which they filed approximately 37 fraudulent tax returns seeking refunds of over $218 million. The guilty plea was announced by Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Rod J. Rosenstein for the District of Maryland and Special Agent in Charge Thomas Jankowski of the Internal Revenue Service - Criminal Investigation (IRS-CI)., Washington, D.C. Field Office.
Sean Aude Gallman, 39, of Upper Marlboro, Maryland, and his brother Eric Maurice Gallman, 42, of Huntersville, North Carolina, pleaded guilty today to a conspiracy to commit mail and wire fraud, mail fraud and conspiracy to commit money laundering. Sean Gallman also pleaded guilty to aggravated identity theft and money laundering charges.
“With the 2016 tax filing season officially underway today, taxpayers can take comfort that the Department of Justice and IRS are aggressively pursuing those who seek to defraud the government through the filing of false tax returns,” said Acting Assistant Attorney General Ciraolo.
“These two criminals filed bogus tax returns claiming ‘refunds’ that were not owed, and stole over $16 million from the IRS,” said U.S. Attorney Rosenstein. “Federal agents and prosecutors have a duty to pursue perpetrators of such fraud schemes and try to recover money stolen from the U.S. Treasury.”
According to evidence the government would have used at trial to prove the criminal conduct, Sean and Eric Gallman established trusts and business entities and used mailboxes at numerous private commercial postal carrier stores in Maryland and North Carolina as the addresses for the trusts and business entities. The defendants, acting as trustees and agents, mailed fraudulent tax returns to the IRS in the names of the trusts and businesses requesting refunds.
For example, in January 2013, Sean Gallman mailed to the IRS a fraudulent 2012 tax return in the name of the Gallman Charitable Trust, requesting a refund of $8,218,930. Also around this time, the defendants mailed to the IRS a fraudulent 2012 tax return in the name of LEA Group Holdings Trust, requesting a refund of $8,293,562. The defendants knew that the trusts were not entitled to the tax refunds. After receiving refund checks in these amounts, on Feb. 15 and March 11, 2013, the defendants deposited the two refunds in bank accounts they controlled. To hide their receipt of these refunds, the defendants used cashier’s checks and other financial instruments to transfer a portion of the money to third parties and other bank accounts.
Altogether, the Gallman brothers filed a total of approximately 37 fraudulent tax returns seeking refunds totaling $218,094,765, for which the IRS paid two refunds totaling $16,512,492.
The government seeks the forfeiture of the two refunds paid by the IRS, including $11,529,954 seized from numerous bank accounts; foreign currency and gold and silver coins, seized from a residence in Upper Marlboro; nine residential properties located in Upper Marlboro and Laurel, Maryland; North Carolina and South Carolina; and two Mercedes-Benz vehicles and a Hyundai vehicle.
The defendants face a statutory maximum sentence of 20 years in prison for conspiring to commit mail and wire fraud, conspiring to commit money laundering and mail fraud. Sean Gallman also faces a statutory maximum sentence of 20 years in prison for an additional count for mail fraud and for money laundering; and a mandatory two years in prison consecutive to any other sentence imposed for aggravated identity theft. U.S. District Judge Paul W. Grimm has scheduled sentencing for May 17, 2016 at 10:00 a.m.
Acting Assistant Attorney General Ciraolo, U.S. Attorney Rosenstein and Special Agent in Charge Jankowski thanked special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Thomas P. Windom of the District of Maryland and Trial Attorney Erin Pulice of the Tax Division, who are prosecuting the case.
Justice Department Releases Human Trafficking Resources to Raise Awareness and Serve VictimsRead the Press Release
Attorney General Loretta E. Lynch announced today the release of a video series and resource guide to raise awareness about the many forms of human trafficking in the United States and to provide information on how to identify and serve its victims. She also spoke with a group 20 survivors of human trafficking at a forum hosted by the Justice Department’s Office for Victims of Crime (OVC) to seek survivors’ input about how federal agencies can most effectively address the crime of human trafficking.
“In an effort to bring human trafficking survivors’ voices to as many people as we can, we are proud to announce today the release of The Faces of Human Trafficking, a new video series sponsored by OVC,” said Attorney General Lynch. “I applaud OVC and the producers for their work to present the strength and resilience of the survivors who were interviewed for the film, which will serve as an informative training, outreach and awareness tool for years to come.”
Created by OVC, the Faces of Human Trafficking multidisciplinary resource includes:
• Nine videos with Spanish subtitled versions;
• Public Service Announcements (PSAs) offered in Spanish, Thai, Hindi and Tagalog;
• Discussion guide;
• Four fact sheets; and
• Four posters
“Through heightened awareness, victim-centered services, and effective investigations and prosecutions, we can work together to fight the horrific crime of human trafficking and support survivors,” said Director Joye Frost of OVC. “A crucial first step is to help everyone recognize the reality of trafficking in the United States, and we hope our new resource will do just that.”
The resource features voices of survivors of trafficking and is intended to educate service providers, law enforcement, prosecutors and others in the community about multidisciplinary approaches to serving victims of human trafficking, effective victim services and victims' legal needs. It addresses the special considerations and needs of youth victims and describes promising practices for building effective collaborations among federal agencies to address human trafficking. The posters are available for download and can be customized with information about training opportunities or local service providers.
For more information about OVC’s anti-human trafficking programs, please visit http://www.ovc.gov/trafficking.
Attorney General Loretta E. Lynch Statement on Recent Police Officer ShootingsRead the Press Release
Attorney General Loretta E. Lynch released the following statement on recent police officer shootings:
“I am appalled and deeply saddened by the recent shooting attacks against law enforcement officers in Danville, Ohio, and Holladay, Utah, in addition to an earlier ambush in Philadelphia, which left an officer injured. These heinous assaults are reminders of the difficult jobs that our brave law enforcement officers perform every day and of the dangers that they willingly face in the service of their communities. The Department of Justice is dedicated to supporting the courageous men and women who wear the badge and determined to do all that we can to keep them safe. We stand ready to offer any and all appropriate resources to help hold accountable those who threaten our communities, attack our neighbors and seek to harm the peacekeepers within our nation.”
List of Individuals Receiving Pardons/CommutationsRead the Press Release
Below is a list of the seven defendants who either received pardons or commutations.
- Khosrow Afghahi – Southern District of Texas (Pardon)
Offenses: One count of conspiracy to violate the Iranian embargo and the Export Administration Regulations (EAR), one count of violating the Iranian embargo, one count of conspiracy to commit money laundering and one count of money laundering.
- Tooraj Faridi – Southern District of Texas (Pardon)
Offenses: One count of conspiracy to violate the Iranian embargo and the EAR, two counts of violating the Iranian embargo and one count of conspiracy to commit money laundering.
- Bahram Mechanic – Southern District of Texas (Pardon)
Offenses: One count of conspiracy to violate the Iranian embargo and the EAR, six counts of violating the Iranian embargo and the EAR, five counts of violating the Iranian embargo, one count of conspiracy to commit money laundering, eight counts money laundering and one count of failure to file Reports of Foreign Bank and Financial Accounts (FBARs).
- Nima Golestaneh – District of Vermont (Pardon)
Offenses: Four counts of wire fraud, one count each of conspiracy to access a computer without authorization and accessing a computer without authorization.
- Nader Modanlo, aka Modanlu and Modanlou – District of Maryland (Commutation)
Offenses: One count of conspiracy to violate the Iranian embargo, two counts of violating the Iranian embargo, one count each of money laundering and obstruction of bankruptcy proceedings.
- Arash Ghahreman – Southern District of California (Commutation)
Offenses: One count of conspiracy to violate the Iranian embargo, one count of conspiracy to smuggle goods from the United States, one count of attempting to violate the Iranian embargo, one count of smuggling, one count of conspiracy to money launder and two counts of money laundering.
- Ali Saboonchi – District of Maryland (Commutation)
Offenses: One count of conspiracy to violate the Iranian embargo and seven counts of violating the Iranian embargo.
District of Columbia Man Sentenced to 18 Months in Prison for Role in Massive Identity Theft and Tax Fraud SchemeRead the Press Release
Worked With Others to Obtain More Than $315,000 in Fraudulent Refunds
A resident of the District of Columbia was sentenced today to 18 months in prison for his involvement in a far-reaching stolen identity refund fraud scheme in which he worked with others to obtain over $315,000 in income tax refunds through the filing of fraudulent federal income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips of the District of Columbia, Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge Maria L. Kelokates of the U.S. Postal Inspection Service, Washington Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.
Ezekiel Raspberry, 39, is among approximately 16 participants in this scheme who have pleaded guilty to charges in the U.S. District Court for the District of Columbia. According to court documents, the overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $42 million. Raspberry pleaded guilty on Nov. 10, 2015, to conspiracy to defraud the United States with respect to claims. Following his prison term, Raspberry will be placed on three years of supervised release. During that time, he must perform 100 hours of community service. In addition, U.S. District Judge Ellen S. Huvelle of the District of Columbia ordered Raspberry to pay $315,076 in restitution to the IRS.
According to the government’s evidence, Raspberry participated in a massive and sophisticated stolen identity refund fraud scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance. The refunds were sought for tax years 2005 through 2012, often in the names of people, whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners. In other cases, the refunds were sent to people who were willing participants in the scheme. The refunds listed more than 400 “taxpayer” addresses located in the District of Columbia, Maryland and Virginia.
According to documents filed with the court, from September 2008 through November 2010, Raspberry and others conspired to defraud the IRS of approximately $315,076 through the filing of 145 fraudulent federal income tax returns. Raspberry received refund checks from a co-conspirator and deposited them into his bank account. He would then withdraw the funds and provide them to the co-conspirator, keeping a portion of the proceeds for himself.
The refund checks were generated by filing false federal income tax returns that included Schedules C or C-EZ that falsely claimed that each “taxpayer” operated a business, such as “barber” or “childcare,” as a sole proprietorship. The returns falsely stated that the “taxpayer” had gross receipts and two or more dependent children, when, in fact, the “taxpayer” was either a victim of identity theft, was misled into providing his or her identifying information, or was a willing participant in the scheme. The businesses listed on the Schedules C and C-EZ were entirely fictitious.
In a related case this week, Rashida King, 41, of Savannah, Georgia, pleaded guilty on Jan. 14 to conspiracy to defraud the United States with respect to claims. According to court documents, King deposited at least 33 fraudulently obtained U.S. Treasury checks into her back account. A sentencing date has not yet been set.
In announcing the sentence, Acting Assistant Attorney General Ciraolo, U.S. Attorney Phillips, Special Agent in Charge Jankowski, Inspector in Charge Kelokates and Assistant Inspector General Phillips commended those who investigated the case. They also acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office of the District of Columbia, including former Assistant U.S. Attorney Sherri L. Schornstein and Paralegal Specialists Donna Galindo and Julie Dailey. Finally, they expressed appreciation for the work of Assistant U.S. Attorney Ellen Chubin Epstein of the District of Columbia’s Fraud and Public Corruption Section and Trial Attorneys Jeffrey B. Bender and Thomas F. Koelbl and former Trial Attorney Jessica Moran of the Tax Division, who prosecuted the case.
California Hospital to Pay More Than $3.2 Million to Settle Allegations That It Violated the Physician Self-Referral LawRead the Press Release
Tri-City Medical Center, a hospital located in Oceanside, California, has agreed to pay $3,278,464 to resolve allegations that it violated the Stark Law and the False Claims Act by maintaining financial arrangements with community-based physicians and physician groups that violated the Medicare program’s prohibition on financial relationships between hospitals and referring physicians, the Justice Department announced today.
The Stark Law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within an enumerated exception. The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals and are commercially reasonable. In addition, arrangements with physicians who are not hospital employees must be set out in writing and satisfy a number of other requirements.
“The settlement of this matter reflects not only our commitment to protect the integrity of the healthcare system through enforcement of the Stark Law, but also our willingness to work with providers who disclose their own misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
The settlement announced today resolves allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups that did not comply with the Stark Law. The hospital identified five arrangements with its former chief of staff from 2008 until 2011 that, in the aggregate, appeared not to be commercially reasonable or for fair market value. The hospital also identified 92 financial arrangements with community-based physicians and practice groups that did not satisfy an exception to the Stark Law from 2009 until 2010 because, among other things, the written agreements were expired, missing signatures or could not be located.
“Patient referrals should be based on a physician’s medical judgment and a patient’s medical needs, not on a physician’s financial interests or a hospital’s business goals,” said U. S. Attorney Laura E. Duffy of the Southern District of California. “This settlement reinforces that hospitals will face consequences when they enter into financial arrangements with physicians that do not comply with the law. We will continue to hold health care providers accountable when they shirk their legal responsibilities to the detriment of tax payer-funded health care programs.”
“Together with our law enforcement partners, our agency’s investigators and attorneys will continue to work with health care providers who use the self-disclosure protocol to resolve their billing misconduct,” said Special Agent in Charge Chris Schrank of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Los Angeles region.”
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 $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.
This matter was handled by the U.S. Attorney’s Office of the Southern District of California, the Civil Division’s Commercial Litigation Branch and HHS-OIG. The claims settled by this agreement are allegations only, and there has been no determination of liability.
Turkish Ship Management Company and Two Employees Plead Guilty in Maryland to Environmental CrimesRead the Press Release
Ciner Gemi Acente Isletni Sanayi Ve Ticaret S.A., a ship management company in Turkey, pleaded guilty and was sentenced in federal court in Baltimore, Maryland, for violating the Act to Prevent Pollution from Ships (APPS), announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division and U.S. Attorney Ron J. Rosenstein for the District of Maryland.
Ciner operated the M/V Artvin, a 44,635 ton bulk carrier ship that transported cargo to and from ports around the world, including the Port of Baltimore. According to the plea agreement, from March 2014 until November 2014, oily waste water was routinely discharged from the vessel into the sea without the use of required pollution prevention equipment. During that time, the crew intentionally covered up the illegal discharges of oil waste by falsifying the vessel’s oil record book.
In previous proceedings, the chief engineer of the vessel, John C. Malaki, 56, of the Philippines, pleaded guilty to failing to maintain an accurate oil record book. For his role, Malaki was sentenced to six months supervised probation and a $50,000 fine. The vessel’s second engineer, Ulyses A. Atabay, 46, also of the Philippines, pleaded guilty to aiding and abetting Malaki’s failure to maintain an accurate oil record book and received a sentence of one year of unsupervised probation. According to their plea agreements, Atabay directed members of the crew to discharge oily water from the waste oil tank into the sea without first using the vessel’s oil water separator, as required by law. Malaki did not stop the discharges and did not record them in the vessel’s oil record book, as he was required to do.
The court accepted the terms of the company’s plea agreement, and sentenced Ciner to pay an overall criminal penalty of $1.05 million, $150,000 of which will be in the form of an organizational community service payment to the National Marine Sanctuary Foundation and used to fund projects aimed at the restoration of marine and aquatic resources in the District of Maryland. Ciner will also be required to implement an environmental compliance plan, which will ensure that any ship operated by Ciner complies with all maritime environmental requirements established under applicable international, flag state and port state laws. The plan ensures that Ciner’s employees and the crew of any vessel operated by Ciner are properly trained in preventing maritime pollution. An independent monitor will report to the court about Ciner’s compliance with its obligations during the period of probation.
This case was investigated by the U.S. Coast Guard Investigative Service. The case was prosecuted by Michael Cunningham from the U.S. Attorney’s Office of the District of Maryland and by Thomas Franzinger of the Environmental Crimes Section of the Environment and Natural Resources Division of the Department of Justice.
President of Heir Location Services Provider to Plead Guilty for Agreement Not to CompeteRead the Press Release
Second Individual to Agree to Plead Guilty in Ongoing Investigation
The owner and President of a Massachusetts-based heir location services provider has agreed to plead guilty to allocating customers with another heir location services firm, the Department of Justice announced today.
Richard A. Blake Jr. will plead guilty to conspiring to eliminate competition in the heir location services industry between 1999 and 2014. Heir location services firms identify people who may be entitled to an inheritance from the estate of a relative who died without a will. The heir location services firms then help heirs secure their inheritances in exchange for a contingency fee paid out of the inheritances they are due to receive.
“Here the death of a relative was used by heir location service firms to line their pockets at the expense of their clients,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “This announcement is another step in bringing to justice those who conspired to cheat heirs of those who died without a will.”
Under the plea agreement, Blake and the department have jointly agreed to allow the court to determine an appropriate criminal sentence. In addition, Blake has agreed to assist the government in its ongoing investigation. The charge was filed today in the U.S. District Court for the Northern District of Illinois. The terms of the plea agreement are subject to approval of the court.
The charge against Blake is the result of the division’s ongoing federal antitrust investigation into customer allocation, price fixing, bid rigging and other anticompetitive conduct in the heir location services industry being conducted by the Antitrust Division’s Chicago Office and the FBI’s Salt Lake City Division, with assistance from the U.S. Attorney’s Office of the Northern District of Illinois.
Anyone with information concerning the focus of this investigation should contact the Antitrust Division’s Chicago Office at 312-984-7200, visit www.justice.gov/atr/contact/newcase.html, or call the FBI’s Salt Lake City office at 801-579-1400.
Richard A. Blake Jr. Information (718.67 KB)
Two U.S. Bureau of Prisons Corrections Officers Plead Guilty to Assaulting a Prison Inmate and Falsifying ReportsRead the Press Release
The Justice Department announced today that U.S. Bureau of Prisons (BOP) Correction Officers (CO) William Houghton, 32, and Eddie Rodas-Castro, 32, have pleaded guilty in connection with the beating of a federal inmate and the subsequent submission of false reports.
Houghton pleaded guilty to violating the civil rights of an inmate inside the Coleman Correctional Facility in Coleman, Florida, by striking the inmate repeatedly in the head and face on March 22, 2014. Houghton also pleaded guilty to submitting two false reports in connection with the incident, falsely stating the inmate had attempted to assault him and omitting the fact that Houghton had repeatedly punched the inmate.
Rodas-Castro pleaded guilty to one count of falsifying official reports, for his role in submitting a false report in an effort to cover up Houghton’s abuse.
“Conduct by corrections officers who abuse their power to violate the civil rights of those in their custody and lie about their actions undermines our criminal justice system,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “The Justice Department is committed to holding officers who engage in such criminal acts accountable.”
The defendants were both indicted on June 17, 2015. Sentencing for both defendants will be scheduled at a later date. Houghton faces a maximum sentence of three years in federal prison. Rodas-Castro faces a maximum sentence of one year in federal prison.
This case is being investigated by the FBI and the Department of Justice Office of the Inspector General, and prosecuted by Trial Attorneys Jared Fishman and Maura White of the Civil Right Division’s Criminal Section.
Houghton Plea Agreement
Rodas-Castro Plea Agreement
Irish National Sentenced to 12 Months in Prison for Trafficking in Endangered Rhinoceros HornsRead the Press Release
Patrick Sheridan, an Irish national, was sentenced in federal court in Waco, Texas, today to 12 months in prison for conspiracy to violate the Lacey Act in relation to illegal rhinoceros horn trafficking, announced Assistant Attorney General John C. Cruden for the Environment and Natural Resources Division of the Department of Justice and U.S. Attorney Richard L. Durbin Jr. for the Western District of Texas and Director Dan Ashe of the U.S. Fish and Wildlife Service.
Sheridan was arrested by United Kingdom law enforcement on Jan. 9, 2015, at Holyhead Sea Port in the United Kingdom as he disembarked a ferry from Dublin, Ireland. The arrest was made pursuant to a request for his provisional arrest by the United States and in September 2015 Sheridan was extradited to the United States . Sheridan’s arrest and subsequent extradition were part of “Operation Crash,” a nation-wide crackdown in the illegal trafficking in rhinoceros horns. Sheridan was sentenced by U.S. District Court Judge Walter S. Smith Jr.
In May 2014, a federal grand jury sitting in Waco, Texas, returned an indictment charging Sheridan and a co-defendant with conspiring to traffic in horns from black rhinoceros. In addition to conspiracy, the indictment charges substantive violations of the Lacey Act for wildlife trafficking and making a false wildlife document. According to the indictment, Sheridan, along with John Slattery aka John Flynn and Michael Slattery Jr., used a “straw buyer” to purchase two black rhinoceros horns from a taxidermist in Texas, which the group then transported to New York, where they sold the horns along with two additional horns that the group also illegally purchased in Texas. In January 2014, Michael Slattery Jr. pleaded guilty in federal court in Brooklyn and was sentenced to 14-months in prison for his role in the conspiracy. In addition to the trafficking, the indictment also charged Sheridan and his co-defendant with making a fictitious and fraudulent Bill of Sale in connection with the rhinoceros horns, in an attempt to make their illegal purchase of the horns appear legal.
“We will hold wildlife traffickers fully accountable for these crimes, which are – transaction by transaction – robbing from our children and grandchildren the great diversity of life on our planet,” said Assistant Attorney Cruden. “This case shows the global reach and demand of a trade that is literally driving the black rhino closer to becoming a relic of the past, but it also shows the tireless work of investigators and prosecutors to give it a fighting chance at survival.”
“The slaughter of incredible animals like the rhino driven by poaching and illegal wildlife trafficking is a global scourge, requiring global enforcement,” said Director Ashe. “Working with law enforcement in countries across the world, we’re tracking, apprehending and extraditing criminals like Patrick Sheridan and his co-conspirators, no matter where they operate. Today’s sentencing demonstrates that criminals who contribute to the slaughter of rhinos and other protected wildlife have nowhere to hide, and will inexorably face justice in the United States."
According to the information, plea agreement and statements made during court proceedings:
In China and Vietnam, rhinoceros horns are highly prized because they are believed to have medicinal value. The escalating value of the horns has resulted in an increased demand that has helped fuel a thriving black market.
In pleading guilty, Sheridan admitted to participating in a conspiracy to travel to and within the United States to purchase rhinoceros horns, which he, along with others, then resold to private individuals or consigned to auction houses in the United States, knowing that the interstate purchase and sale of the horns was illegal. Due to their dwindling populations, all rhinoceros species are protected under international trade agreements.Rhinoceros are an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under United States and international law. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 170 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets.
Operation Crash is a continuing investigation being conducted by the Department of the Interior’s Fish and Wildlife Service (FWS), in coordination with other federal and local law enforcement agencies including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.
The investigation by was handled by the U.S. Fish & Wildlife Service, with assistance from Ireland's An Garda Síochána (Irish National Police Service) and the Durham Constabulary Police Force in the United Kingdom. The prosecution was handled by the U.S. Attorney’s Office for the Western District of Texas and the Justice Department’s Environmental Crimes Section, with assistance from the Justice Department’s Office of International Affairs. Assistant U.S. Attorney Greg Gloff and Trial Attorney Gary N. Donner of the Justice Department’s Environmental Crimes Section are in charge of the prosecution.FACT SHEET: State of the Union: Cabinet in Your Community -- Department of JusticeRead the Press Release
In the days immediately following the State of the Union, Cabinet officials are embarking on the “State of the Union: Cabinet In Your Community” road tour to engage Americans in small towns, big cities and Indian country about the advancements the Administration has made on the most important issues facing the American people, as well as the opportunities and challenges that lie ahead. The President will make clear in his State of the Union address that the true test is not the challenges we face, but how we approach those challenges. That’s why he and his Cabinet will keep their feet on the gas in this final stretch to continue driving toward solutions that will move this country forward for generations to come, while highlighting the progress that has been made over the past seven years.
***
The Department of Justice has taken major steps during the Obama Administration to make our criminal justice system more just, fair, and effective at reducing recidivism and promoting successful reintegration into society. Our ultimate aim has been to break the cycle of poverty, criminality, and incarceration that grips too many of our communities, and to ensure that each component of our justice system is more closely aligned with our fundamental belief in opportunity and justice for all. A vital part of that task involves examining what happens to our fellow Americans when they exit prison and return to our communities, and addressing the obstacles to successful reentry is a top priority for the Justice Department and the Obama Administration.
More than 600,000 individuals are released from federal and state prisons each year, and 11.4 million cycle through local jails annually. In addition, a broader population – some one in four Americans – has an arrest record, mostly for relatively minor, non-violent offenses, sometimes from decades in the past. The long-term-- sometimes lifelong-- impact of a criminal record keeps many people from obtaining employment and accessing housing, higher education, loans, and credit – even if they have paid their debt to society, turned their lives around, are qualified, and are unlikely to reoffend. At the same time, research shows that people who stay out of trouble for just a few years are largely indistinguishable from the general population in terms of their odds of another arrest.
The Justice Department is committed to breaking the cycle of incarceration and improving reentry outcomes by reducing barriers to education, employment, housing and civic engagement, and by instituting various reforms at the federal Bureau of Prisons that are designed to improve the reentry success of those returning from incarceration in federal prisons.
Today, following President Obama’s 2016 State of the Union, Attorney General Lynch traveled to Boston, Massachusetts to speak with incarcerated and formerly incarcerated individuals, corrections and law enforcement partners, and service providers. She is visiting the Boston Reentry Initiative – a program proven to reduce recidivism – and other innovative programs that prepare people for their return to the community. The Justice Department’s first-ever Second Chance Fellow, Daryl Atkinson, is accompanying the Attorney General and participating in a roundtable at the South Bay House of Correction in Suffolk County, MA. The visit highlights the Department’s committed actions on this issue, including the following recent and ongoing efforts:
-
The Federal Interagency Reentry Council, chaired by Attorney General Lynch, brings together the efforts of more than 20 federal agencies to reduce recidivism and improve employment, education, housing, health, and child welfare outcomes.Recent policy actions championed by the Reentry Council include “banning the box” in federal employment to delay inquiries into criminal history until later in the hiring process. The Department of Housing and Urban Development (HUD) issued guidance to reduce barriers to HUD-assisted housing, and the Department of Education launched a Second Chance Pell initiative, providing a limited waiver of the statutory ban to help pay for postsecondary education and training programs. And the Departments of Labor and Justice are establishing a National Clean Slate Clearinghouse that will provide local jurisdictions technical assistance to help with record-cleaning and expungement.
-
The Federal Bureau of Prisons embraces a corrections philosophy that “reentry begins on day one.”Accordingly, the Bureau has made significant strides to better prepare inmates for successful reentry while they are still incarcerated.Under the Obama Administration, the Bureau created the Reentry Services Division, which has expanded mental health and substance abuse treatment programs, improved work and educational opportunities inside prison, and better equipped inmates with the tools necessary for success outside the prison walls.Recognizing that education reduces the risk of recidivism, the Bureau has also launched a comprehensive assessment of its education program and identified opportunities for improvement across its 122 correctional institutions. This focused evaluation will increase the Bureau’s capacity to provide high quality education services to inmates with special learning and literacy needs. To date, these ongoing efforts have enabled the Bureau to more effectively identify and serve inmates between the ages of 18 and 21 who require learning accommodations to successfully engage in education programming, and to pilot a specialized curriculum using education technology for individuals requiring instruction at grade levels Pre-K through 5.
-
The Justice Department is encouraged by, and strongly supportive of, the bipartisan efforts in Congress
These efforts build on achievements by the Justice Department under the leadership of President Obama:
-
Since 2009, the Justice Department’s Office of Justice Programs has made close to 750 Second Chance Act grants totaling more than $400 million.These grants are being used for the full range of reentry assistance, focusing on populations at moderate and high risk of recidivism.The programs offer a range of resources and support, including substance abuse and mental health treatment; job training; expansion of services to children of incarcerated parents; and help to secure driver’s licenses, modify child support orders, and expunge criminal and juvenile records.They also support states designing recidivism reduction strategies as well as new interagency reentry grants to expand access to education for juveniles, permanent supportive housing for those at risk of homelessness, and records expungement for youth in public housing.In addition, Second Chance funds support the National Reentry Resource Center, a one-stop resource for reentry-related research, best practices, and technical assistance managed by the Council of State Governments Justice Center.
-
The Department is committed to strengthening and supporting Federal Prison Industries (FPI or trade name UNICOR).Founded in 1934, FPI is a voluntary industrial work program that provides federal inmates with work experience, job training, and life skills, thereby increasing the likelihood they will find meaningful employment upon release and become productive citizens.FPI is the Bureau’s largest and most effective reentry program, employing over 12,000 inmates nationwide.Research has shown that participating inmates are 24 percent less likely to be rearrested or returned to custody.As a result of new authorities granted to FPI in 2012, FPI launched approximately 45 new repatriation projects and employed more than 1,000 inmates who manufacture items that would otherwise be made outside of the United States.In 2016, FPI will welcome a new Chief Executive Officer who will oversee further expansion of this critical recidivism-reducing program.
For more information, please visit https://www.whitehouse.gov/sotu.
-
United States to Accept Concurrent Jurisdiction over Mille Lacs Band of Ojibwe Reservation in MinnesotaRead the Press Release
Second Assumption of Federal Jurisdiction under Historic Tribal Law and Order Act
The Department of Justice has granted a request by the Mille Lacs Band of Ojibwe for the United States to assume concurrent criminal jurisdiction on the tribe’s reservation in central Minnesota, Deputy Attorney General Sally Quillian Yates announced today.
The decision was the second assumption of jurisdiction granted by the Department of Justice under the landmark Tribal Law and Order Act of 2010 (TLOA), which gave the department discretion to accept concurrent federal jurisdiction to prosecute violations of the General Crimes Act and the Major Crimes Act within areas of Indian country that are also subject to state criminal jurisdiction under Public Law 280. Public Law 280 is the 1953 law that mandated the transfer of federal law enforcement jurisdiction for certain tribes to six states, including Minnesota. The first assumption of federal jurisdiction took place on Minnesota’s White Earth Reservation in March 2013.
The decision will take effect on Jan. 1, 2017. Tribal, state and county prosecutors and law enforcement agencies will also continue to have criminal jurisdiction on the reservation.
“We believe this decision – made after a careful review of the tribe’s application and the facts on the ground – will strengthen public safety and the criminal justice system serving the Mille Lacs Band of Ojibwe,” said Deputy Attorney General Yates. “This is another step forward in the Justice Department’s commitment to serve and protect American Indian and Alaska Native communities, to deal with them on a government-to-government basis and to fulfill the historic promise of the Tribal Law and Order Act. Strong law enforcement partnerships with the Tribe, as well as state and local counterparts, will be essential to the success of this effort.”
“We want to make certain that the outcome of this decision will benefit the residents of the Mille Lacs Band and improve the safety of the community,” said U.S. Attorney Andrew M. Luger of the District of Minnesota. “As we work towards full implementation, we will work to strengthen the bonds between our tribal and local partners in pursuit of our common goal of providing a safe environment where this community can thrive.”
The Department of Justice already has jurisdiction to prosecute certain crimes, such as drug trafficking, wherever they occur in the United States – including on the Mille Lacs Reservation. The change announced today will expand this existing jurisdiction to allow federal prosecution of major crimes such as murder, rape, felony assault and felony child abuse.
The decision followed careful consideration of the request and information provided by the Mille Lacs Band Tribal government, as well as by the Justice Department’s Office of Tribal Justice, the Executive Office for U.S. Attorneys, the U.S. Attorney's Office for the District of Minnesota, the Federal Bureau of Investigation, the U.S. District Court, state and local law enforcement partners and other sources.
Three Georgia Residents Indicted for Laundering Proceeds from a Stolen Identity Refund Fraud SchemeRead the Press Release
A federal grand jury sitting in Atlanta, Georgia, returned an indictment, which was unsealed today, against three residents of an Atlanta suburb for conspiracy to commit money laundering, money laundering, access device fraud, aggravated identity theft and structuring, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney John A. Horn of the Northern District of Georgia.
Anthony Alika, his wife, Sonia Alika and Rapheal Atebefia, residents of Austell, Georgia, conspired together to launder the proceeds from a stolen identity refund fraud scheme, according to allegations in the indictment. It is alleged that the defendants and others obtained means of identification of actual individuals, including their names and social security numbers and used this information to access the Internal Revenue Service’s (IRS) “Get Transcript” database. Anthony Alika, Atebefia and others are also alleged to have obtained prepaid debit cards from stores located in multiple states, registered the cards in the names of the stolen identities and then filed false income tax returns using the stolen identities and directed the IRS to deposit the tax refunds onto these cards. To conceal their fraud, Anthony Alika, Atebefia and others allegedly used the prepaid debit cards to purchase money orders, which Anthony Alika, Sonia Alika and Atebefia deposited into bank accounts and then structured cash withdrawals of the proceeds in order to prevent the bank from filing Currency Transaction Reports.
If convicted, the defendants face a statutory maximum sentence of 20 years in prison for each count of money laundering, 10 years in prison for each count of access device fraud, 10 years in prison for structuring more than $100,000 or five years in prison for structuring less than $100,000 and a mandatory sentence of two years in prison for aggravated identity theft, which will run consecutive to any other prison term they receive. They also face substantial monetary penalties, restitution and forfeiture.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Horn commended special agents of IRS-Criminal Investigation and the U.S. Postal Inspection Service, who investigated the case and Trial Attorneys Michael C. Boteler and Charles M. Edgar Jr. of the Tax Division and Assistant U.S. Attorney Shanya Dingle, who are prosecuting this case.
An indictment merely alleges that crimes have been committed. 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.
Readout of Attorney General Lynch's Meeting with State of the Union GuestsRead the Press Release
Earlier today, Attorney General Loretta Lynch hosted Sue Ellen Allen, Mayor of Shelby County, Tennessee, Mark Luttrell, and Seattle Police Chief Kathy O’Toole for a conversation about criminal justice reform. They were joined by Deputy Attorney General Sally Yates. Ms. Allen, Mayor Luttrell and Chief O’Toole will be seated in the box with First Lady Michelle Obama, Dr. Jill Biden and Valerie Jarrett during the State of the Union Address tonight. Their conversation focused on the importance of investing in rehabilitation and reentry programs that can reduce the likelihood of recidivism, supporting vulnerable communities to prevent them from being caught up in the criminal justice system and the collaborative work that can be done on criminal justice reform when officials from the federal, state, and local level work with community leaders.
Sue Ellen Allen
Sue Ellen Allen knows the difficulties that formerly incarcerated individuals face after prison – both as the co-founder of a nonprofit helping inmates reenter society and as a former inmate starting over after her release in 2009. Her organization, Gina’s Team, supports women in Arizona prisons and upon release, gives them the resources they need and teaches them how give back to the community. Named for her cellmate in prison who died in incarceration, Sue Ellen started Gina’s Team with Gina’s parents in an effort to provide women a path out of prison, back into the community and out of additional trouble with the law. She wrote the President to thank him for the launch of a new pilot program that enables incarcerated Americans to receive Pell Grants and to encourage a national dialog that includes women in prison reform. Sue Ellen is proud to be accompanied to Washington by Gina’s mother, Diane, whose daughter gave her a renewed purpose in life.
Mayor Mark Luttrell
Throughout his career in public service, Republican Mayor Mark Luttrell has built partnerships with local, state and federal agencies, and his unique background has focused him on criminal justice reform. As mayor of Shelby County, Tennessee, he helped create specialty courts for drug, mental health, and veterans’ cases to provide resources for effective rehabilitation instead of ineffectual incarceration. The county also put in place measures to reduce recidivism by streamlining and pooling resources to better provide formerly incarcerated individuals with the tools they need to re-enter society. Afterward, he was appointed as Director of Corrections for Shelby County, Tennessee and served there until he was elected Sheriff in 2002 and subsequently as Mayor in 2010. Mayor Lutrell and his wife, Pat, have three children and six grandchildren.
Chief Kathleen O’Toole
Since 2014, Chief Kathleen O’Toole has led the Seattle Police Department in developing its approach to community policing, and her focus on improving officer morale, implementing new policies and optimizing department resources has received national attention. Under her leadership, the department tested a six-month pilot program for body-worn police cameras focused on public transparency, and the Department of Justice awarded the department a $600,000 grant to expand the program. Last year, the Seattle Police Department presented its policies at the White House Police Data Initiative as part of its renewed emphasis on accountability and transparency. Prior to Kathleen’s role as Chief, she served as Chief Inspector of the Gardia Síochána Inspectorate in Ireland, responsible for developing best practices of the Irish police service and rose the ranks of Massachusetts law enforcement, finishing as the first female Boston police commissioner in 2004. Chief O’Toole is married to a retired police detective, Dan O’Toole, and they have a daughter, Meghan.