District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
Nation’s Largest Nursing Home Therapy Provider, Kindred/Rehabcare, to Pay $125 Million to Resolve False Claims Act AllegationsRead the Press Release
Four Nursing Homes Using Kindred/RehabCare to Pay an Additional $8.225 Million
Contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and their parent, Kindred Healthcare Inc., have agreed to pay $125 million to resolve a government lawsuit alleging that they violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred, the Department of Justice announced today.
RehabCare Group Inc. and RehabCare Group East Inc. were purchased by the Louisville, Kentucky-based Kindred Healthcare Inc. in 2011 and they now operate under the name RehabCare as a division of Kindred. RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in 44 states to provide rehabilitation therapy to their patients.
“Medicare beneficiaries are entitled to receive care that is dictated by their clinical needs rather than the fiscal interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “All providers, whether contractors or direct billers of taxpayer-funded federal healthcare programs, will be held accountable when their actions cause false claims for unnecessary services.”
The government’s complaint alleged that RehabCare’s policies and practices, including setting unrealistic financial goals and scheduling therapy to achieve the highest reimbursement level regardless of the clinical needs of its patients, resulted in Rehabcare providing unreasonable and unnecessary services to Medicare patients and led its SNF customers to submit artificially and improperly inflated bills to Medicare that included those services. Specifically, the government’s complaint alleged that RehabCare’s schemes included the following:
- Presumptively placing patients in the highest therapy reimbursement level, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
- During the period prior to Oct. 1, 2011, boosting the amount of reported therapy during “assessment reference periods,” thereby causing and enabling SNFs to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods, when the SNFs were not required to report to Medicare the amount of therapy RehabCare was providing to their patients (a practice known as “ramping”);
- Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy;
- Arbitrarily shifting the number of minutes of planned therapy among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
- Especially after Oct. 1, 2011 and continuing through Sept. 30, 2013, providing significantly higher amounts of therapy at the very end of a therapy measurement period not due to medical necessity but rather to reach the minimum time threshold for the highest therapy reimbursement level, to enable SNFs to bill for the care of their Medicare patients accordingly, even though the patients were receiving materially less therapy on preceding days;
- Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation time;
- Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care); and
- Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.
“This False Claim Act settlement addresses allegations that RehabCare and its nursing facility customers engaged in a systematic and broad-ranging scheme to increase profits by delivering, or purporting to deliver, therapy in a manner that was focused on increasing Medicare reimbursement rather than on the clinical needs of patients,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts. “The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs.”
“Health providers seeking to increase Medicare profits, rather than providing suitable, high-quality care, will be investigated and prosecuted,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services (HHS). “Under our robust compliance agreement, an outside review organization will scrutinize a random sample of medical records annually to assess the medical necessity and reasonableness of therapy services provided by RehabCare.”
In addition to RehabCare, the Department of Justice also announced settlements today with four SNFs for their role in submitting claims to Medicare that were false because they were based in part on therapy provided by RehabCare that was not reasonable, necessary and skilled, or that did not occur. These settlements include: A $3.9 million settlement with Wingate Healthcare Inc. and 16 of its facilities in Massachusetts and New York; A $2.2 million settlement with THI of Pennsylvania at Broomall LLC and THI of Texas at Fort Worth LLC; A $1.375 million settlement with Essex Group Management and two of its Massachusetts facilities, Brandon Woods of Dartmouth and Blaire House of Milford and a $750,000 settlement with Frederick County, Maryland, which formerly operated the Citizens Care skilled nursing facility. The department had previously reached settlements with a number of other SNFs for similar conduct. See http://www.justice.gov/opa/pr/two-companies-pay-375-million-allegedly-causing-submission-claims-unreasonable-or-unnecessary; http://www.justice.gov/opa/pr/episcopal-ministries-aging-inc-pay-13-million-allegedly-causing-submission-claims; http://www.justice.gov/usao-ma/pr/new-york-catholic-nursing-chain-pay-35-million-resolve-allegations-concerning-claims; http://www.justice.gov/usao-ma/pr/maine-nursing-home-pay-12-million-resolve-allegations-concerning-rehabilitation-therapy.
The settlement with RehabCare resolves allegations originally brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare. The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The government may intervene and file its own complaint in such a lawsuit, as it has done in this case. The whistleblowers will receive nearly $24 million as their share of the recovery from RehabCare.
The settlements announced today illustrate 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. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, including the conduct described in the United States’ complaint, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).
This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Massachusetts; HHS Office of Inspector General and the FBI.
The case is captioned United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS (D. Mass.).
The claims settled are allegations only, and there has been no determination of liability.
Michigan Residents Sentenced to Prison for Mortgage Fraud SchemeRead the Press Release
Recruited Straw Buyers to Purchase Homes and Submit Fraudulent Mortgage Applications
Five residents of the Detroit, Michigan, area were sentenced to prison this week for their roles in a multi-year mortgage fraud conspiracy, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced today.
Between January 2006 and December 2008, the perpetrators of the scheme purchased single-family homes in Detroit for approximately $5,000 to $40,000 each and re-sold the homes to third party individuals, referred to as “straw buyers,” that they recruited. The co-conspirators then caused fraudulent mortgage loan applications in the names of the straw buyers to be submitted to financial institutions.
On July 16, 2014, a grand jury returned a superseding indictment charging seven defendants with conspiracy to commit bank fraud, bank fraud, aiding and assisting in the filing of false tax returns and bankruptcy fraud. All of the defendants named in the superseding indictment pleaded guilty to conspiracy to commit bank fraud for their role in the scheme.
On Jan. 11 and 12, U.S. District Judge Bernard A. Friedman of the Eastern District of Michigan announced the following sentences:
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Jason Najor, 39, of West Bloomfield Township, Michigan, was sentenced to 16 months in prison, followed by four years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $705,900.
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Jeffrey Najor, 32, of Wixom, Michigan, was sentenced to 24 months in prison, followed by four years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $1,707,200.
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Suhail Hallak, 59, of Oak Park, Michigan, was sentenced to 15 months in prison, followed by three years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $759,804.
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Joey Murad, 37, of Old Shelby Township, Michigan, was sentenced to 33 months in prison, followed by four years of supervised release, and ordered to pay restitution to the affected financial institutions in the amount of $188,904.
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Al Karana, 46, of Old Sterling Heights, Michigan, was sentenced to one day in jail, followed by three years of supervised release to include one year of home confinement, and ordered to pay restitution to the affected financial institutions in the amount of $204,600.
Two of the defendants named in the superseding indictment were previously sentenced to prison. In January 2015, Wasseem Shamoun, 50, of Northville, Michigan, was sentenced to 15 months in prison and ordered to pay restitution to the in the amount of $394,000, following his plea of guilty to conspiracy to commit bank fraud. In September 2014, Peter Allen, 44, of Southfield, Michigan, was sentenced to 21 months in prison and ordered to pay restitution in the amount of $194,300, for his role in the bank fraud scheme.
In addition to the seven defendants named in the superseding indictment, two other individuals connected to the scheme have pleaded guilty and been sentenced to prison. In September 2015, Mary Ann Paschal, who served as a straw buyer for multiple properties and received substantial fees for her participation, was sentenced to one year and one day in prison and ordered to pay restitution in the amount of $523,750. Also in September 2015, Shawn Alexander Reed, a mortgage broker who assisted in the preparation of false mortgage loan applications, pleaded guilty and was sentenced to 15 months in prison.
Acting Assistant Attorney General Ciraolo thanked special agents of the FBI, Internal Revenue Service-Criminal Investigation and the Drug Enforcement Administration, who investigated the case and Senior Litigation Counsel Corey Smith and Trial Attorney Mark McDonald of the Tax Division, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division website.
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Un Hombre de Los Angeles Acusado Legalmente de Dirigir una Estafa Multimilloniaria en las Aperturas de Juicios de Rescates Hipotecarios en Visalia y SalinasRead the Press Release
FRESNO, Calif. – Un escrito de acusación se ha abierto hoy, acusando legalmente a un hombre de Los Ángeles de estar involucrado en una trama que estafaba a propietarios de viviendas que se encontraban en procesos de aperturas de juicios hipotecarios, anunció el Procurador de los Estados Unidos Benjamín B. Wagner.
El 31 de diciembre de 2015 un gran jurado federal dictó un escrito de acusación acusando legalmente a Martin Calzada, de 28 años de edad, y residente de Los Ángeles de conspirar a cometer fraude de correo y fraude de correo.
Según documentos del tribunal, entre agosto de 2010 y octubre de 2011, Calzada y otros empleados de la empresa Star Reliable Mortgage, que tenía oficinas en Bakersfield, Visalia y Salinas se dirigían a propietarios de viviendas afligidos con una estafa fraudulenta para “eliminar préstamos.” Star Reliable cobraba a sus clientes de entrada una cuota que oscilaba entre los $2,500 y los $4,500 dólares – como también cuotas mensuales, basándose en la promesa falsa de que los clientes podrían ver sus viviendas liberadas “de toda deuda” como resultado de los servicios prestados de Star Reliable. Para fomentar aún más la estafa, Calzada y otros empleados presentaban documentos fraudulentos en las oficinas de registros de propiedad del condado de parte de los propietarios-clientes en los que se pretendía reemplazar a los administradores legítimos de las propiedades con compañías fiduciarias ficticias asociadas con Calzada y Star Reliable; todo en un intento de “opacar el título” e impedir o atrasar el proceso judicial hipotecario. Además, Calzada y otros empleados que trabajaban bajo su dirección, dijeron a sus clientes que dejaran de pagar sus hipotecas. También expresaron falsamente que cada cliente tenía un millón de dólares en una cuenta del gobierno de los Estados Unidos que podía ser utilizada para terminar de pagar las hipotecas de cada uno de los propietarios.
En lugar de liberar “de toda deuda” sus viviendas, muchos de los clientes de Star Reliable perdieron sus viviendas en juicios hipotecarios. La estafa ocasionó que más de 100 propietarios-clientes pagaran aproximadamente $875, 000 dólares a Star Reliable y que las entidades de crédito perdieran más de $4 millones de dólares. Por lo menos unos $270,000 dólares del dinero pagado a Star Reliable por los propietarios-clientes fueron canalizados de vuelta a Calzada.
Este caso es el producto de una investigación llevada a cabo por la Oficina Federal de Investigaciones (FBI) y la Oficina del Fiscal del Distrito del Condado de Tulare. El Procurador Federal Auxiliar Patrick R. Delahunty está procesando el caso.
Si es declarado culpable, Calzada se enfrentaría a una pena máxima establecida por la ley de 30 años de prisión y una multa de $1 millón de dólares. Sin embargo, cualquier sentencia sería determinada a la discreción del tribunal después de considerar cualquier factor aplicable establecido por la ley y por las Normas para Sentenciar Federales. Los cargos son solo alegaciones; el demandado es presunto inocente hasta y a menos que sea comprobado culpable sin duda razonable.
Tribunal Federal Paraliza Permanentemente Las Operaciones De Preparador De Impuestos De ColoradoRead the Press Release
Un tribunal federal ha prohibido en forma permanente a un hombre de Colorado y su empresa preparar declaraciones de impuestos federales, anunció hoy el Departamento de Justicia. Los Estados Unidos entablaron una demanda civil contra Gerardo Herrera y su empresa, El Lobo Multiservicios Profesionales Inc., en la que alega que redujeron las obligaciones tributarias de sus clientes fraudulentamente al declarar dependientes adicionales y reclamar deducciones de impuestos falsas. Después de que los demandados dejaron de contestar la demanda, el 7 de enero de 2016 el Juez John L. Kane emitió una orden prohibiendo a Herrera preparar declaraciones de impuestos en forma permanente.
De acuerdo con la demanda civil entablada por el gobierno, Herrera y su personal declararon repetidamente a miembros de la familia extendida de sus clientes como dependientes de los mismos, a pesar de que no cumplían los requisitos para dependientes según la ley federal, y solicitaron indebidamente deducciones por gastos personales como teléfonos celulares y seguro de automóvil. Además, de acuerdo con la demanda, las auditorías realizadas indicaron que Herrera y sus empleados exageraron deducciones, solicitaron deducciones fraudulentas por contribuciones caritativas y declararon indebidamente estado de jefe de familia. La demanda alega que el Servicio de Impuestos Internos [Internal Revenue Service (IRS)] auditó más de 200 formularios de declaración de impuestos preparados por la empresa de Herrera y encontró declaraciones falsas en más del 99 por ciento de las mismas.
El fraude cometido por preparadores de declaraciones de impuestos es uno de los Doce principales ardides tributarios del IRS de 2015. El portal del IRS incluye algunos consejos para la elección de un preparador de declaraciones de impuestos. En la última década, la División de Impuestos ha obtenido interdictos contra cientos de preparadores de impuestos fraudulentos. Se puede encontrar información sobre estos casos en el portal del Departamento de Justicia. Se encuentra una lista alfabética de personas prohibidas de preparar declaraciones de impuestos y promover ardides tributarios en esta página. Si usted cree que una de las personas o empresas bajo prohibición puede estar violando un interdicto, por favor comuníquese con la División de Impuestos para proveer detalles.
Former Idaho Construction Company President Sentenced to Prison for Fraud SchemeRead the Press Release
The former president and majority stockholder of a construction company was sentenced to five years in prison today following her plea of guilty to filing a false tax return and her conviction by a jury of conspiracy to defraud the United States, wire fraud, mail fraud, false statements, interstate transportation of property taken by fraud, conspiracy to obstruct justice and obstruction of justice, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Wendy J. Olson for the District of Idaho.
Elaine Martin, 69, of Meridian, Idaho, was the president of MarCon Inc., a construction company based in Meridian. In September 2013, after a 26-day jury trial, Martin was convicted of tax and fraud charges and sentenced to 84 months in prison. In August 2015, the U.S. Court of Appeals for the Ninth Circuit vacated Martin’s sentence and her tax conviction and remanded for resentencing and further proceedings on the tax charge. Today, Martin pleaded guilty to filing a false tax return and U.S. District Judge B. Lynn Winmill of the District of Idaho sentenced her to 60 months in prison on both the tax and fraud charges. In addition to the prison term, Judge Winmill ordered Martin to pay restitution to the Internal Revenue Service (IRS) and Idaho Department of Transportation in the amount of $131,400.48, costs of prosecution in the amount of $22,859.60 and a forfeiture money judgment of $3,084,038.05, amounts Martin previously paid.
In the plea agreement, Martin admitted that she willfully signed false and fraudulent corporate income tax returns for Marcon Inc. for tax years 2005 and 2006. Martin also admitted that she caused these tax returns to be false and fraudulent by keeping the unreported income off of the books and that she falsely told an IRS revenue agent, who was conducting a civil audit of Marcon, that all of Marcon’s gross receipts were deposited into its Wells Fargo operating account, when in fact, Martin was diverting and depositing gross receipts into Marcon’s Bank of Cascades account. Martin withheld the records for Marcon’s Bank of Cascades from the individual who prepared her and Marcon’s tax returns for tax years 2005 and 2006. Martin admitted that the total tax loss was $73,678.
Martin also admitted to conspiring to defraud the SBA 8(a) Program and the U.S. Department of Transportation, Disadvantaged Business Enterprise (DBE) Program, by submitting fraudulent tax returns and making false statements concerning her finances that caused Marcon to qualify and/or remain eligible for these programs. Martin further admitted that her behavior affected the award of contracts pursuant to the 8(a) Program and DBE Programs. For example, Marcon’s status as an Idaho DBE affected how and what DBE goals were set for particular construction projects and helped Marcon maintain a virtual monopoly in its geographic region between 2000 and 2006. Marcon participated in the SBA 8(a) Program pursuant to direct negotiations with the awarding agency, rather than through fair and open competition. Martin admitted that during the relevant time period, she would not have been awarded the 33 contracts at issue in the case but for the fraud.
As part of the plea agreement that Martin entered into today, she waived her right to further appeal.
Assistant Attorney General Ciraolo and U.S. Attorney Olson thanked special agents of IRS-Criminal Investigation, the FBI, the Office of Inspector General for the U.S. Small Business Administration and the Office of Inspector General for the U.S. Department of Transportation, who investigated the case and Trial Attorney Gregory Bernstein and former Trial Attorney Katherine Wong of the Tax Division and Assistant U.S. Attorney Raymond Patrico of the District of Idaho, who prosecuted the case.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
Federal Court Permanently Shuts Down Colorado Tax Preparation BusinessRead the Press Release
A federal court has permanently barred a Colorado man and his tax preparation business from preparing federal tax returns, the Justice Department announced today. The United States filed a civil complaint against Gerardo Herrera and his business, El Lobo Multiservicios Professionales Inc., contending that they fraudulently reduced their customers’ tax liabilities by reporting extra dependents and claiming bogus deductions. After the defendants failed to respond to the complaint, on Jan. 7, 2016, Judge John L. Kane entered an order permanently banning Herrera from preparing returns.
According to the government’s civil complaint, Herrera and his staff repeatedly claimed their customers’ extended family members as dependents, even though they do not qualify for dependent status under federal law, and have improperly claimed deductions for personal expenses like cell phones and car insurance. In addition, according to the complaint, audits have shown that Herrera and his workers exaggerated deductions, reported fraudulent charitable contribution deductions and claimed improper head of household filing status. The complaint alleges that the Internal Revenue Service (IRS) audited more than 200 returns prepared by Herrera’s business and found misrepresentations on more than 99 percent of them.
Return-preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015. 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 fraudulent 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.
District Court Enters Permanent Injunction to Prevent Dallas Compounding Pharmacy and Three Individuals from Distributing Adulterated DrugsRead the Press Release
The U.S. District Court for the Northern District of Texas entered a consent decree for permanent injunction against Downing Labs LLC, Ashley Michelle Downing, Christopher Van Downing and Roger E. Mansfield to prevent them from distributing adulterated drugs in interstate commerce, the Department of Justice announced today.
The department filed a complaint in the U.S. District Court for the Northern District of Texas on Jan. 4, 2016, at the request of the U.S. Food and Drug Administration (FDA). According to the complaint, Downing Labs manufactures, packs, labels and distributes drugs in interstate commerce. As noted in the complaint, Downing Labs has been engaged in manufacturing drugs that, by virtue of their labeling and/or route of administration, purport to be or are intended to be sterile. The complaint alleges that Downing Labs has a long history of manufacturing drug products under conditions that fall short of the minimum requirements to ensure safety and quality.
“The permanent injunction requires Downing Labs and the individual defendants to bring their processes into compliance with the law, which is essential to ensuring that Downing Labs’ drug products are safe for the American public,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will remain vigilant in protecting consumers from pharmaceutical drugs that do not meet the safety protections provided under federal law.”
The federal Food, Drug, and Cosmetic Act defines adulterated drugs as those that are prepared or held under conditions where the drugs may become contaminated with filth or may become injurious to health. The Act also defines drugs as adulterated if the facilities or controls used for the drugs’ manufacture are not in conformity with current good manufacturing practices (CGMP).
The complaint alleges, among other things, that Downing Labs, its owners - Ashley and Christopher Downing - and pharmacist-in-charge, Roger E. Mansfield, violate the Act by introducing or delivering for introduction into interstate commerce sterile drugs that are adulterated in that they are prepared, packed, or held under insanitary conditions whereby they may have been contaminated with filth and/or rendered injurious to health. The complaint also alleges that defendants violate the Act by introducing or delivering for introduction into interstate commerce drugs that are adulterated in that the methods used in, or the facilities or controls used for, their preparation do not comply with CGMP requirements.
According to the complaint, the FDA conducted multiple inspections of Downing Labs and its predecessor, NuVision Pharmacy Inc. (NuVision), during the past three years. These inspections revealed numerous deficiencies, many of which had to do with the firm’s sterile drug production. The complaint alleges, for example, that test records obtained from the company pursuant to a September to October 2015 inspection showed excessively high levels of endotoxins in recently manufactured drug products. These products were not distributed. Endotoxins are substances found in certain bacteria that can cause a wide variety of serious reactions in humans, including high fever and shock.
FDA identified additional sterility problems during inspections in 2013 and 2014, according to the complaint. In 2014, Downing Labs’ records showed that 19 lots of supposedly sterile drugs had tested positive for various microorganisms, including the pathogens Staphylococcus haemolyticus, which can cause septicemia, peritonitis and urinary tract infections and Nocardia nova, which can cause pneumonia, sinusitis and skin infections. These products were not distributed. According to the complaint, however, FDA found that the company had failed to adequately investigate the cause of the sterility problems in the 19 lots.
According to the complaint, Downing Labs was formed in December 2013, purchased NuVision in January 2014 and obtained its pharmacy license from the state of Texas in June 2014. Defendant Ashley Michelle Downing serves as Downing Labs’ director and vice-president. She is responsible for all operations of the company. She previously held several positions at NuVision, including director, production manager, and quality manager. Defendant Christopher Van Downing, husband of Ashley Michelle Downing, is Downing Labs’ president, with responsibilities that include overall business management and compliance. Defendant Roger E. Mansfield became the pharmacist-in-charge at Downing Labs on Dec. 30, 2014, and is responsible for all pharmacy operations, including sterile drug production and oversight. He was a staff pharmacist at Downing Labs prior to becoming the pharmacist-in-charge.
The permanent injunction entered by U.S. District Judge Sam A. Lindsay for the Northern District of Texas enjoins the defendants from manufacturing, holding, or distributing drugs manufactured at or from their McEwen Road facility (located at 4001McEwen Road, Suite 110, Dallas, Texas) unless the defendants comply with the Act and associated drug manufacturing regulations. Under the injunction, Downing Labs will need to stop manufacturing, holding or distributing human drugs from its McEwen Road facility until it complies with the Act and regulations and the Decree. In addition, the permanent injunction authorizes the FDA to order Downing Labs to stop drug manufacturing should FDA determine that Downing Labs has violated the terms of the decree. The decree also authorizes the FDA to order Downing Labs to recall drugs that have been distributed by the firm or to destroy drugs that are in the process of being manufactured. Certain provisions of the injunction do not apply to drugs that defendants manufacture, hold, and/or distribute for animal use.
The government is represented by Trial Attorneys David A. Frank and Raquel Toledo of the Civil Division’s Consumer Protection Branch, with assistance of Associate Chief Counsel Michael D. Shane of the Department of Health and Human Services’ Office of General Counsel-Food and Drug Division and Assistant U.S. Attorney Mary M. (Marti) Cherry of the Northern District of Texas.
Department of Justice and Federal Trade Commission Support Reform of South Carolina Laws that Curb Competition, Limit Consumer Choice and Stifle Innovation for Health Care ServicesRead the Press Release
Agencies Submit Joint Statement Regarding Proposed Legislation Addressing the State’s Certificate-of-Need Laws
The Department of Justice’s Antitrust Division and the Federal Trade Commission (FTC) have recommended that South Carolina repeal its laws regulating the building of hospitals and other health care facilities and the provision of health care services.
In response to a request by South Carolina Governor Nikki R. Haley for views on South Carolina House Bill 3250, which would narrow the application of and ultimately repeal South Carolina’s certificate-of-need (CON) laws, the joint statement suggests the state consider whether its CON program best serves the needs of its citizens.
“South Carolina lawmakers have the opportunity to help health care consumers in the state,” said Assistant Attorney General Bill Baer of the Antitrust Division. “CON laws raise the cost of investment in new health care services and can shield incumbents from competition that would benefit consumers and lower costs. Repeal of South Carolina’s CON laws could invigorate competition in this important sector, to the benefit of patients, employers and other health care consumers.”
Although CON laws vary considerably by state, these laws, including South Carolina’s CON laws, typically require certain health care providers to obtain state approval before expanding, establishing new facilities or services or making certain large capital expenditures.
According to the joint statement, the Justice Department and FTC historically have urged states to consider repeal or reform of their CON laws because they can prevent the efficient functioning of health care markets and thereby harm consumers. CON laws can create barriers to entry and expansion, limit consumer choice, deny consumers the benefit of an effective remedy for antitrust violations, facilitate anticompetitive agreements, and stifle innovation.
SC CON Letter to Governor Haley (279.77 KB)
New Jersey Man Sentenced in Indiana to 20 Years for Biodiesel Fraud SchemeRead the Press Release
Joseph Furando, 50, of Montvale, New Jersey, was sentenced yesterday in Indianapolis, Indiana, to 20 years in prison, three years of supervised release and to pay more than $56 million in restitution for his role in an elaborate scheme to defraud biodiesel buyers and United States taxpayers by fraudulently selling biodiesel incentives, announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division and U.S. Attorney Josh J. Minkler for the Southern District of Indiana.
“Programs like the Renewable Fuel Standard and the Blender’s Tax Credit open the path toward energy independence and curbing the impact of climate change,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division. “When people approach these programs with bad faith and seek to exploit them, these purposes are blocked, American businesses are hurt and the treasury of the United States is depleted. This significant prison sentence sends the right message that such fraud will not be tolerated.”
“Joseph Furando used fraud to spin biodiesel programs into a million-dollar home, high-end cars, expensive jewelry and watches and any other luxury that pleased him,” said U.S. Attorney Minkler. “He did so through threats, bullying, and intimidation. With the court’s sentence, all of that unraveled. The agencies and prosecutors who unraveled his schemes have shown how foolish it is to try to prey on these programs.”
“Fraud in the renewable fuels program compromises our ability to fight climate change and reduce dependence on foreign oil,” said Assistant Administrator Cynthia Giles for Enforcement and Compliance Assurance at EPA. “Yesterday’s sentencing puts a check on illegal behavior and sends a clear message that EPA and its partners will prosecute serious offenders. We are committed to upholding program integrity and protecting responsible companies that play by the rules.”
“We are proud to work with our federal partners to identify and investigate groups that manipulate and utilize federal government programs to line their pockets by fraud,” said Special Agent in Charge W. Jay Abbott of the Indianapolis Office of the FBI. “In doing so, they deceive their customers, their shareholders and the American public. The FBI will continue the fight against this dishonest and fraudulent behavior which harms the American people and the American economy.”
“Federal government tax credits and incentives are put in place to assist the American people,” said Acting Special Agent in Charge David Talcott of the IRS-Criminal Investigation. “The harm is felt by all American taxpayers and our economy when individuals manipulate and take advantage of federal programs. Mr. Furando perpetrated this egregious fraud for his own personal gain. IRS-Criminal Investigation will continue to protect American taxpayers and our economy by vigorously pursuing individuals who prey upon the integrity of our great country.”
During yesterday’s sentencing hearing, Judge Sarah Evans Barker ordered Furando to pay more than $56 million in restitution, jointly and severally with other defendants. That amount reflects the losses Furando and his co-conspirators imposed on fraud victims and United States taxpayers.
Under the terms of a plea agreement, Furando is obligated to forfeit the fruits of his crime, which include a Ferrari, other cars, a million-dollar home, artwork, a piano and two biodiesel powered motorcycles.
Furando’s scheme may be summarized as follows: From 2007 through 2012, Indiana-based E‑biofuels owned a biodiesel manufacturing plant in Middletown, Indiana. Biodiesel is a fuel that can be used in diesel engines and that is made from renewable resources, including soybean oil and waste grease from restaurants. Under the Energy Independence and Security Act, properly manufactured biodiesel was eligible for a dollar per gallon tax credit as well as another valuable credit, called a Renewable Identification Number (RIN) that petroleum refiners and importers could use to demonstrate compliance with federal renewable fuel obligations. These incentives can be claimed once and only once for any given volume of biodiesel.
Furando admitted that sometime in late 2009, he and his companies, New Jersey-based defendants Caravan Trading Company and CIMA Green, began supplying E‑biofuels with biodiesel that was actually made by other companies and had already been used to claim tax credits and RINs. Because these incentives had already been claimed, Furando could purchase the biodiesel at much lower prices, sometimes for more than two dollars per gallon less than biodiesel that was still eligible for the credits. The conspiracy functioned as follows: Furando supplied the product to E‑biofuels and his co-conspirators would claim that E-biofuels made the fuel and then they would illegally re-certify the fuel and sell it at the much higher market price for incentivized biodiesel, known as B100 with RINs. Within the circle of those he trusted, Furando referred to this fraud scheme as “Alchemy.”
Furando, his New Jersey-based companies and his Indiana-based co-defendants realized huge per gallon profits through this scheme, sometimes in excess of $15,000 per truckload. Furando realized his profits through the prices he charged E‑biofuels. Over the course of approximately two years, the defendants fraudulently sold more than 35 million gallons of fuel for a total cost of over $145.5 million. The defendants realized more than $55 million in gross profits, at the expense of their customers and U.S. taxpayers.
In separate hearings yesterday, three corporations at the heart of the scheme were also sentenced for their joint liability in the scheme. Furando’s companies, CIMA Green LLC, and Caravan Trading LLC, were both sentenced to pay $56 million in restitution and million dollar fines. The companies, which are largely defunct, must serve two years’ probation to ensure that what assets remain are properly directed toward victims. Toward that end, the court imposed, but suspended, the fines. The third company, E‑biofuels LLC, operated by Furando’s co-defendants Craig Ducey, Chad Ducey and Chris Ducey, was also sentenced to pay the $56 million in restitution. E-biofuels is in bankruptcy and its few remaining assets are being distributed to creditors and victims through the bankruptcy process.
The case is being prosecuted by Senior Litigation Counsel Steven D. DeBrota of the U.S. Attorney’s Office, Assistant Chief Thomas T. Ballantine of the Environmental Crimes Section in the Department of Justice’s Environment and Natural Resources Division and Jake Schmidt, a Special Assistant U.S. Attorney of the U.S. Attorney’s Office and Senior Attorney for the Securities and Exchange Commission.
The collaborative investigation that brought this case to fruition is the result of work by EPA’s Criminal Investigation Division, IRS-Criminal Investigation, the FBI and the Securities and Exchange Commission, with assistance during the investigation by the U.S. Secret Service and the U.S. Department of Agriculture’s Office of Inspector General-Investigations.
All of the other defendants in this case have pled guilty and are awaiting sentencing. Another co-conspirator, Brian Carmichael, was charged in a separate case. Carmichael cooperated with the government before the criminal cases were filed. In December 2015, he received a sentence of five years of imprisonment.
Former Owner of Bostwick Laboratories Agrees to Pay up to $3.75 Million to Resolve Allegations of Unnecessary Testing and Illegal Remuneration to PhysiciansRead the Press Release
Dr. David G. Bostwick has agreed to pay the United States up to $3.75 million to resolve alleged violations of the False Claims Act for billing Medicare and Medicaid for medically unnecessary cancer detection tests and offering incentives to physicians to obtain Medicare and Medicaid business, the Department of Justice announced today. Dr. Bostwick was the founder, owner and chief executive officer of Bostwick Laboratories Inc. from 1999 to 2011. Bostwick Laboratories is a pathology laboratory headquartered in Glen Allen, Virginia.
“The Department of Justice is committed to ensuring that every laboratory test ordered is based on the medical needs of the patient and not just to increase physician and laboratory profits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This case shows that the Department will not hesitate to hold accountable both the companies and the individuals who order or perform excessive, non-patient specific tests and provide inducements to physicians that lead to unnecessary costs being imposed upon our nation’s health care programs.”
The settlement announced today resolves claims that, from 2006 to 2011, Dr. Bostwick allegedly directed Bostwick Laboratories to bill Medicare and Medicaid for expensive cancer detection tests known as Fluorescent In Situ Hybridization (FISH) tests, as well as other tests, that were not medically necessary and were performed without the treating physicians’ consent or order. FISH tests are used to detect bladder cancer. During the time period covered by the settlement, Medicare reimbursement for FISH tests ranged from $456 to $966 per test.
The settlement also resolves allegations that Dr. Bostwick, through Bostwick Laboratories, offered various discounts and billing arrangements to treating physicians to induce physicians to refer business to Bostwick Laboratories in violation of the federal Anti-Kickback Statute. The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federally funded programs. The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.
“We will continue to combat fraud against federal health care programs through actions against health care providers and by seeking accountability from responsible individuals,” said U.S. Attorney Carter M. Stewart for the Southern District of Ohio. “We are dedicated to holding accountable those who manipulate the health care system to collect money to which they are not entitled.”
Under the settlement announced today, Dr. Bostwick has agreed to pay over $2.6 million plus an additional $1.125 million if certain financial contingencies occur within the next five years - for a total potential payment of up to $3.75 million. On Aug. 28, 2014, Bostwick Laboratories previously agreed to pay over $6.5 million to resolve the allegations in this lawsuit.
The allegations resolved by these settlements were originally brought by whistleblower Michael Daugherty, who works in the industry, under the qui tam provisions of the False Claims Act. The act permits private citizens to sue on behalf of the government those who falsely claim federal funds. The act allows the whistleblower to receive a share of any funds recovered through the lawsuit. Daugherty will receive over $2.5 million from the government’s settlements with Dr. Bostwick and Bostwick Laboratories.
The government’s pursuit of the claims resolved by the settlements 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.
The settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Ohio, and the U.S. Department of Health and Human Services, Office of Inspector General.
The case is captioned, United States ex rel. Daugherty v. Bostwick Laboratories, Inc. and David Bostwick, Civil Action No. 1:08-cv-354 (S.D. Ohio). The claims resolved by the government are allegations only; there has been no determination of liability.
Countering Violent Extremism Task Force Fact SheetRead the Press Release
Since the White House Summit on Countering Violent Extremism (CVE) last February, the U.S. government has focused on strengthening our effort to prevent extremists from radicalizing and mobilizing recruits, especially here at home. Advancing this effort means working as effectively as possible across the U.S. government, which is why we are forming the CVE Task Force.
“The federal government’s top priority is protecting the American people from all forms of violent extremism,” said Attorney General Loretta E. Lynch. “By bringing together agencies from across the Executive Branch, this innovative task force will allow us to more efficiently and effectively support local efforts to counter violent extremism. The Department of Justice looks forward to joining the Department of Homeland Security in leading this new initiative, which represents an important step in our ongoing work to keep our communities safe and our country strong.”
“Countering violent extremism has become a homeland security imperative, and it is a mission to which I am personally committed,” said Secretary of Homeland Security Jeh Johnson. “At the Department of Homeland Security, our Office of Community Partnerships – which I established last year to take the Department’s CVE efforts to the next level – has been working to build relationships and promote trust with communities across the country, and to find innovative ways to support those who seek to discourage violent extremism and undercut terrorist narratives. The interagency CVE Task Force that we are announcing today, and which will be hosted by the Department of Homeland Security, will bring together the best resources and personnel from across the executive branch to ensure that we face the challenge of violent extremism in a unified and coordinated way.”
Since the Strategy to Empower Local Partners to Prevent Violent Extremism in the United States was issued in 2011, many federal, state, local and tribal governments have contributed meaningfully to the CVE effort. However, the efforts of ISIL and other groups to radicalize American citizens has required the U.S. government to update the efforts that began five years ago. Beginning in the summer of 2015, representatives from 11 departments and agencies reviewed our current structure, strategy and programs and made concrete recommendations for improvement. The review validated the objectives of the 2011 strategy but identified gaps in its implementation. The new task force will coordinate government efforts and partnerships to prevent violent extremism in the United States.
The review team identified four key needs:
- An infrastructure to coordinate and prioritize CVE activities;
- Clear responsibility, accountability and communication across government and with the public;
- Participation of relevant departments and agencies outside of national security lanes; and
- A process to assess, prioritize and allocate resources to maximize impact.
The CVE Task Force will be a permanent interagency task force hosted by the Department of Homeland Security (DHS) with overall leadership provided by DHS and the Department of Justice, with additional staffing provided by representatives from the FBI, National Counterterrorism Center and other supporting departments and agencies. The task force will be administratively housed at DHS. The CVE Task Force will address the gaps identified in the review by (1) synchronizing and integrating whole-of-government CVE programs and activities; (2) leveraging new CVE efforts, for example those of the DHS Office for Community Partnerships; (3) conducting ongoing strategic planning; and (4) assessing and evaluating CVE programs and activities.
The CVE Task Force will organize federal efforts into several areas, including:
- Research and Analysis. The Task Force will coordinate federal support for ongoing and future CVE research and establish feedback mechanisms for CVE findings, thus cultivating CVE programming that incorporates sound results.
- Engagements and Technical Assistance. The Task Force will synchronize Federal Government outreach to and engagement with CVE stakeholders and will coordinate technical assistance to CVE practitioners.
- Communications. The Task Force will manage CVE communications, including media inquiries, and leverage digital technologies to engage, empower and connect CVE stakeholders.
- Interventions. The Task Force will work with CVE stakeholders to develop multidisciplinary intervention programs.
Attorney General Loretta E. Lynch Statement on Capture of Joaquin ‘Chapo’ Guzman LoeraRead the Press Release
Today, Attorney General Loretta E. Lynch released the following statement on the capture of Joaquin ‘Chapo’ Guzman Loera:
“Today’s capture of Joaquin ‘Chapo’ Guzman Loera by Mexican authorities is a blow to the international drug-trafficking syndicate he is alleged to have led, a victory for the citizens of both Mexico and the United States, and a vindication of the rule of law in our countries. Guzman’s latest attempt to escape has failed, and he will now have to answer for his alleged crimes, which have resulted in significant violence, suffering and corruption on multiple continents. I commend the Government of Mexico for this arrest, and I salute the Mexican law enforcement and military personnel who have worked tirelessly in recent months to bring Guzman to justice. The U.S. Department of Justice is proud to maintain a close and effective relationship with our Mexican counterparts, and we look forward to continuing our work together to ensure the safety and security of all our people.”
Justice Department Settles Lawsuit with Niagara County, New York, Alleging Discrimination Against Pregnant Corrections OfficerRead the Press Release
The Department of Justice announced today that it has entered into a consent decree with Niagara County, New York, resolving allegations that the county discriminated against Corrections Officer Carisa Boddecker because of her sex and pregnancy.
The consent decree, entered today by the U.S. District Court for the Western District of New York, resolves the United States’ complaint filed on May 13, 2013, that the Niagara County Sheriff’s Office (NCSO) discriminated against Boddecker when it revoked her restricted duty assignment and forced her to take an extended leave of absence during her pregnancy, although she was able to work. The complaint alleged that NCSO violated Title VII by refusing to let Boddecker do the same sort of work while pregnant that it allowed for other non-pregnant employees with temporary medical conditions. Title VII is a federal statute that prohibits employment discrimination on the basis of sex, including pregnancy, as well as race, color, national origin and religion.
“It takes the strength and determination of women like Carisa Boddecker to stand up and speak out against sex-based discrimination,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “The Department of Justice remains firmly committed to ensuring that public employers do not discriminate against employees because of their pregnancies.”
Under the terms of the consent decree, NCSO must review its existing anti-discrimination policies and procedures and adopt and implement new policies to protect its employees from discrimination on the basis of sex, including pregnancy. The consent decree requires NCSO to conduct training of its employees to ensure that any future complaints of discrimination are handled properly. NCSO also has agreed to offer Boddecker $94,000 in back pay, compensatory damages and attorney’s fees, as well as restore the seniority and pension benefits that she lost as a result of her forced leave of absence.
The case was prosecuted by Trial Attorneys Elizabeth Banaszak and Kathleen Lawrence of the Civil Rights Division.
The continued enforcement of Title VII remains a priority of the Justice Department’s Civil Rights Division. More information about Title VII and other federal employment laws is available on the Civil Rights Division’s Employment Litigation Section (website).
Niagara County Consent Decree
Niagara County Order Approving Stipulated Consent Decree with Modification
Hawaii Businessman Sentenced to 46 Months in Prison for Tax FraudRead the Press Release
Diverted More than $2 Million from Company to Fund Lavish Lifestyle
A Honolulu County businessman was sentenced to prison yesterday for corruptly endeavoring to obstruct the Internal Revenue Service (IRS) and filing false tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Florence T. Nakakuni of the District of Hawaii.
Albert S.N. Hee, 61, of Kailua, Hawaii, was sentenced by Senior U.S. District Judge Susan Oki Mollway of the District of Hawaii to serve 46 months in prison, to be followed by one year of supervised release. Hee was also ordered to pay a fine of $10,000 and restitution to the IRS in the amount of $431,793. In July following an 11-day jury trial, Hee was convicted of one count of corruptly endeavoring to obstruct the IRS and six counts of filing false individual income tax returns for the years 2007 to 2012.
According to court documents and the evidence introduced at trial, Hee owned Waimana Enterprises Inc., a telecommunications holding company based in Honolulu. Between 2002 and 2012, Hee caused Waimana to pay more than $2 million of his personal expenses. Hee then falsely characterized these personal expenditures as business expenses on Waimana’s corporate income tax returns. Hee also filed false individual income tax returns for 2002 to 2012 on which he failed to report the expenditures as income. Hee’s lavish spending included more than $90,000 for personal massages, which he deducted on the corporate tax returns as “consulting fees,” full-time salaries and benefits for his wife and children even though they performed little to no work for the company and more than $736,900 in college tuition, housing and other expenses for his children.
In 2008, Hee purchased a $1.3 million home in Santa Clara, California, with corporate money and told his accountants that the property would be used by Waimana employees. Instead, from 2008 through 2012, Hee’s children lived in the home during and after they attended college in Santa Clara. At trial, Hee’s children testified that they indeed lived at the home and did not pay any rent to Waimana for their use of the property. Hee’s children also testified that the house was within walking and skateboarding distance of the college campus and that they rented out other rooms in the house to their college friends and collected rent from their roommates, which they kept rather than remit to Waimana.
Waimana financed Hee’s and his family’s trips to Disney World, Tahiti, France and Switzerland. Hee also used company funds to pay for a $17,000, five-day family vacation at the Mauna Lani resort on the Big Island of Hawaii, which Hee falsely characterized as a “stockholder’s meeting” even though he was the only shareholder of the company at that time.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Nakakuni commended the special agents of IRS-Criminal Investigation, who investigated the case, Assistant U.S. Attorney Larry Tong and Trial Attorney Quinn P. Harrington 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.
URS E & C Holdings, Inc. Agrees to Pay $9 Million to Resolve False Claims Act AllegationsRead the Press Release
URS E & C Holdings Inc., a successor in interest to the global design and construction company Washington Group International Inc. (WGI), has agreed to pay $9 million to settle allegations that WGI submitted false claims in connection with United States Agency for International Development (USAID) contracts, the Justice Department announced today.
“Contractors who misrepresent their eligibility for government contracts undermine the government procurement process,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Justice Department will take action to protect that process and to ensure that taxpayer funds are not misused.”
“Government contractors must be honest and forthright,” said U.S. Attorney Wendy J. Olson for the District of Idaho. “This settlement protects the integrity of the federal procurement process. Whether a situation involves procurement fraud, as in this case, or healthcare fraud or any other type of fraud and dishonesty, the U.S. Attorney’s Office for the District of Idaho seeks to hold those obtaining public funds accountable.”
The settlement concerns USAID-funded contracts for the construction of water and wastewater infrastructure projects in the Arab Republic of Egypt in the 1990s. The contracts were awarded to a joint venture partnership between WGI, Contrack International Inc. (Contrack) and Misr Sons Development S.A.E. (HAS), an Egyptian company. The United States filed suit under the False Claims Act and the Foreign Assistance Act, alleging that prior to the award of those contracts, the joint venture partners concealed from USAID that Contrack and HAS were partners in the venture, thus preventing USAID from evaluating their qualifications and eligibility, which was a precondition to contract award. As a result, WGI and its partners allegedly received USAID-funded contracts for which they were ineligible. The settlement resolves only WGI’s liability. The United States previously settled with Contrack and is continuing to pursue its claims against HAS.
This settlement was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Idaho; and the USAID Office of Inspector General.
The case is United States v. Washington Group International Inc. f/k/a/ Morrison Knudsen, Corporation, Contrack International, Inc.; and Misr Sons Development S.A.E. a/k/a Hassan Allam Sons, No. 04-555 (D. Idaho). The claims resolved by this settlement are allegations only and there has been no determination of liability.
Justice Department Announces Resolution under Swiss Bank Program with Union Bancaire Privée, UBP SARead the Press Release
The Department of Justice announced today that Union Bancaire Privée, UBP SA (UBP), reached a resolution under the department’s Swiss Bank Program. UBP will pay a penalty of more than $187 million.
“Today’s agreement marks the final resolution with UBP, which acknowledges its role in conspiring with U.S. taxpayers to evade U.S. tax through an array of sham entities, structured transactions, nominees and bank services designed to disguise the true ownership of foreign accounts and other assets,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Under the terms of the agreement, UBP pays a heavy price for its criminal conduct and must cooperate fully in all matters relating to the conduct described in the agreement until all civil or criminal examinations, investigations or proceedings are concluded.”
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:
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Make a complete disclosure of their cross-border activities;
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Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
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Cooperate in treaty requests for account information;
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Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
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Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
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Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreement signed today, UBP 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 UBP for tax-related criminal offenses.
UBP is a corporation organized under the laws of Switzerland with its headquarters in Geneva, Switzerland. It was originally founded in 1969 under the name Compagnie de Banque et d’Investissements CBI. In 1990, CBI merged with TBD-American Express Bank. The merged entity was re-named UBP. UBP operates a financial services business in Geneva, Zurich, Basel and Lugano, Switzerland. It primarily offers private banking and wealth management services for individual clients around the world, including U.S. citizens, legal permanent residents and resident aliens. However, UBP also provides investment management and hedge fund services with a focus on institutional clients.
Over the past two decades, UBP has made a number of acquisitions, including NordFinanz Bank (1995), Discount Bank and Trust (2002), ABN AMRO (Switzerland) AG (2011), a portion of the assets associated with Banco Santander (Switzerland) SA’s private banking business (2012), Nexar Capital Group (Luxembourg) (2012), the assets associated with Lloyds Banking Group’s international private banking business (2013) and the assets associated with Coutts’s Swiss private banking activities (2015).
For decades prior to and through 2013, UBP aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts. Over 200 private bankers were responsible for managing at least one U.S. client account during the period since Aug. 1, 2008. These private bankers, referred to as relationship managers, served as the points of contact for U.S. clients at UBP and were responsible for opening and servicing U.S. client accounts at UBP. Certain relationship managers assisted or otherwise facilitated some U.S. individual taxpayers in establishing and maintaining undeclared accounts in a manner that concealed the U.S. taxpayers’ ownership or beneficial interest in said accounts.
UBP assisted U.S. clients with undeclared accounts at UBP by placing and maintaining their assets in the names of non-U.S. structures, rather than the actual beneficial owner of the funds. During the period since Aug. 1, 2008, UBP held 502 U.S.-related accounts in the names of non-U.S. structures formed in jurisdictions such as the British Virgin Islands, the Cayman Islands, Liechtenstein and Panama. Because Swiss law requires UBP to identify the true beneficial owner of structures on a document called a Form A, it knew or should have known that these were U.S. clients. Nonetheless, UBP accepted and included in UBP’s account records Internal Revenue Service (IRS) Forms W-8BEN (or UBP’s substitute forms) provided by the directors of the offshore companies that falsely stated under penalty of perjury or implied that such companies were the beneficial owners of the assets in the UBP accounts for U.S. federal income tax purposes. This aided and assisted the U.S. clients in concealing these assets and income from the IRS.
Prior to UBP’s acquisition, former ABN AMRO employees advised U.S. clients to conceal their U.S. nexuses from bank documentation. For example, in September 2011, one relationship manager sent an email to a client with dual U.S. citizenship, while she was completing her account opening documents, recommending that the client provide her non-U.S. passport and not her U.S. passport. In another instance in September 2008, a relationship manager instructed a U.S. resident client to sign bank documents using a non-U.S. place and date and to provide a utility bill reflecting a non-U.S. residence.
Prior to 2001, UBP provided formation and administration services for offshore structures through a Geneva-based affiliate. However, in 2001, UBP formed an internal Wealth and Estate Planning unit (WEP Unit) and transferred the administration of these structures to the WEP Unit. The WEP Unit did not form structures but did administer them by liaising with entity agents such as foreign law firms, paying administrative fees and keeping corporate documents up-to-date. UBP coordinated with external trust companies and attorneys to form and administer offshore structures for U.S. clients, for example, with a Geneva-based consultant, a Geneva-based law firm and a Zurich-based individual company. These companies opened numerous accounts for U.S. clients at UBP in the names of offshore structures. For those potential and current U.S. clients interested in creating nominee offshore entities, UBP employees contacted and/or referred U.S. clients to these companies.
UBP maintained undeclared accounts at UBP for U.S. clients in the nominee names of non-U.S. insurance companies. Such accounts, known commonly as insurance wrappers, were titled in the names of insurance companies but were funded with assets that were transferred to the accounts for the beneficial owners of the insurance products. Insurance wrappers were marketed to Swiss Banks by third-party providers in the wake of the UBS investigation as a means of disguising the beneficial ownership of U.S. clients. For example, in November 2009, UBP worked with a third-party service provider to assist a U.S. beneficial owner in restructuring three existing accounts he held at UBP in the names of nominee Panamanian entities into three accounts owned by the insurance company.
UBP employees assisted numerous U.S. clients in concealing their undeclared account funds by making fictitious donations to other accounts at UBP controlled in whole or in part by the U.S. client but held by non-U.S. persons. Typically, the former U.S. customers either maintained signature authority over the donee’s account or had the funds returned to them in the future. For example, in December 2009, the U.S. beneficial owners of a UBP bank account informed UBP of their intent to donate their assets to the remaining non-U.S. beneficial owner of their account. UBP executed a new Form A reflecting sole ownership by the remaining non-U.S. person. However, when the non-U.S. person closed the account in 2012, UBP executed a $491,000 transfer to the personal bank account of the former U.S. beneficial owners at another bank.
UBP offered a variety of other traditional Swiss banking services, including hold mail and code name or numbered accounts, that it knew could assist, and did in fact assist U.S. clients in concealing assets and income from the IRS. UBP used or accepted the use of a variety of other means to assist U.S. clients in concealing their undeclared accounts, including by assisting U.S. clients to repatriate undeclared funds via fictitious donations, by making remote debit or credit card withdrawals, by converting the account funds into precious metals, through nominees, or by structuring transfers of funds from undeclared accounts to evade currency transaction reporting requirements.
Effective January 2001, UBP entered into a Qualified Intermediary (QI) Agreement with the IRS. The QI Agreement was designed to help ensure that, with respect to U.S. securities held in an account with UBP, non-U.S. persons were subject to the proper U.S. withholding tax rates and U.S. persons were properly paying U.S. tax. As a consequence of UBP entering into a QI Agreement with the IRS, UBP allowed U.S. clients to create and open accounts in the name of sham offshore entities and insurance wrappers. Certain UBP employees caused UBP to certify compliance with the QI Agreement event though the true beneficial owners were not reflected in the IRS Forms W-8BEN in the account files. UBP also divested U.S. securities from its undeclared U.S. accounts for the purpose of subverting its QI Agreement.
During the period since Aug. 1, 2008, UBP held and managed approximately 2,919 U.S.-related accounts, which included both declared and undeclared accounts, with aggregate peak of assets under management of $4.895 billion. However, 1,282 of the 2,919 U.S.-related Accounts were acquired through the acquisitions of other banks, including ABN AMRO, and bank assets. UBP will pay a penalty of $187.767 million.
In accordance with the terms of the Swiss Bank Program, UBP 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 these banks 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 UBP must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
“Today’s agreement is significant on several fronts,” said Chief Richard Weber of IRS-Criminal Investigation. “UBP, as one of the largest private banks in Switzerland, held nearly 3,000 U.S related accounts. This agreement will have far-reaching implications, expanding our understanding about the depth, breadth, tactics and techniques employed by the UBP private bankers and external asset managers who assisted U.S. taxpayers to conceal assets not only in Switzerland, but in other jurisdictions as well.”
“Today’s resolution with Union Bancaire Privée, UBP SA, reflects the effectiveness of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division. “Financial institutions are being held accountable for their past actions and are now cooperating by providing us information that will let us track and pursue those who have not complied with the law. U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes need to resolve this non-compliance or face the consequences.”
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 Kevin F. Sweeney, 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, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
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Wisconsin Architectural Firm to Plead Guilty and Pay $3 Million to Resolve Criminal and Civil ClaimsRead the Press Release
The Department of Justice announced today that Wisconsin-based Novum Structures LLC (Novum) has agreed to enter a guilty plea and pay $3 million to resolve its criminal and civil liability arising from its improper use of foreign materials on construction projects involving federal funds. This use was in violation of contractual provisions implementing various domestic preference statutes, often referred to colloquially as the “Buy America” requirements. Novum specializes in the design and construction of glass space frames often used in roofs and atrium enclosures.
The agreement announced today resolves a criminal Information alleging that Novum repackaged materials and falsified documents relating to some federally funded construction projects in order to hide that it was using noncompliant foreign materials. According to an agreement reached with the government, Novum will plead guilty to one count of concealing a material fact, in violation of 18 U.S.C. § 1001, and pay a $500,000 criminal fine.
“When taxpayer dollars are provided for construction projects, the government expects contractors to comply with all requirements, including ones that ensure the money remains in the U.S. economy,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This settlement shows that the Department of Justice is committed to pursuing claims against contractors that put financial gain ahead of complying with the law.”
“Domestic preference statutes are designed to promote American businesses and to protect U.S. economic interests,” said Acting U.S. Attorney Gregory J. Haanstad for the Eastern District of Wisconsin. “When companies subvert those interests by violating ‘Buy American’ provisions – and when they undertake efforts to conceal that they have done so – all in an effort to improperly advance their own private financial interests, the U.S. Attorney’s Office will pursue all appropriate criminal and civil sanctions.”
In addition to the criminal fine, Novum has agreed to pay $2.5 million to resolve civil allegations under the False Claims Act that its conduct caused the submission of false claims for payment. Specifically, the civil settlement resolves allegations that Novum caused false claims by knowingly – and in violation of its contractual obligations – using noncompliant foreign materials on several federally funded construction projects from Jan. 1, 2004 through July 11, 2013.
Construction projects funded by the U.S. government are generally subject to laws requiring the use of domestic materials, such as the Buy American Act; the Federal Transit Administration’s Buy America provision; and § 1605 of the American Recovery and Reinvestment Act. The contracts involved in this case covered both government buildings and transit projects partially paid for with federal funds.
As part of the settlement agreement, Novum has agreed not to contest debarment from federally funded projects.
Secretary of Transportation Anthony Foxx stated, “The U.S. Department of Transportation considers compliance with Buy America to be a fundamental requirement when a company is involved in federal projects. As we work to be good stewards of limited federal resources, the department applauds the Department of Justice and our own Office of Inspector General for the successful prosecution of this case.”
“Contractors must follow all federal contracting rules when doing business with the United States,” said General Services Administration Inspector General Carol Fortine Ochoa.
“The settlement agreement entered into by Novum Structures LLC is a positive step following the company’s disregard of its obligations to comply with the clear legal requirements of the Buy America Act designed to spur domestic economic investments and job opportunities in transportation infrastructure projects,” said Regional Special Agent in Charge Thomas Ullom Department of Transportation’s Office of Inspector General.
The allegations resolved by the civil settlement were originally brought by whistleblower Brenda King under the qui tam, or whistleblower, provisions of the False Claims Act. The act permits private parties to sue on behalf of the government those who falsely claim federal funds. The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit. King will receive approximately $400,000 as her share of the civil settlement.
The U.S. Attorney’s Office for the Eastern District of Wisconsin prosecuted the criminal case, and also jointly handled the civil lawsuit with the Civil Division’s Commercial Litigation Branch. Investigative assistance was provided by the Department of Transportation’s Office of Inspector General, the General Services Administration’s Office of Inspector General and the Defense Criminal Investigative Service, with additional support from other agencies.
The lawsuit is captioned United States ex rel. King v. Novum Structures, LLC, Case No. 12-cv-860 (E.D. Wis.). The claims resolved by the civil settlement are allegations only; there has been no determination of liability except to the extent admitted in Novum’s plea agreement.
Una Mujer de Rancho Cordova Acusada de Falsificar los Registros de la Seguridad Social RecordsRead the Press Release
SACRAMENTO, Calif. – Un gran jurado federal emitió una acusación formal el jueves, 17 de diciembre de 2015 contra Nelli Kesoyan, de 43 años y residente de Rancho Cordova, acusándola de hacer inscripciones e informes falsos, anunció el Procurador Federal Benjamín B. Wagner.
Según documentos del tribunal, Kesoyan fue empleada por la Administración de la Seguridad Social como asesora de reclamos. El 10 de octubre de 2014, ella hizo inscripciones falsas en los registros de la Administración de la Seguridad Social para engañar y despistar a los funcionarios de los Estados Unidos que estaban gestionando el proceso de ciudadanía para otro individuo.
La acusación formal se abrió el lunes y Kesoyan fue citada para comparecer el lunes por la tarde. Ella se declaró inocente. Se ha dispuesto una conferencia de estado para el 26 de enero de 2016, a las 09:15 AM en la Sala de Tribunal 6 ante el Juez Federal del Distrito John A. Méndez.
Este caso es el producto de una investigación de la Oficina del Inspector General de la Administración de la Seguridad Social, la Oficina Federal de Investigaciones (FBI) y las Investigaciones Criminales de Hacienda. Los Procuradores Federales Auxiliares Jeremy Kelley y Jared Dolan están procesando el caso.
Si es declarada culpable, Kesoyan se enfrentaría a una pena máxima establecida por la ley de 10 años de prisión y una multa de $250,000 dólares. No obstante, cualquier sentencia será determinada a la discreción del tribunal después de considerar cualquier factor aplicable establecido por la ley y las Normas para Sentenciar Federales que toman en cuenta una cantidad de variables. Los cargos son solo alegaciones; la demandada es presunta inocente hasta que y a menos que sea comprobada culpable sin duda razonable.
Presunto Asesino Extraditado a Michocan, MexicoRead the Press Release
FRESNO, Calif. – El martes, 15 de diciembre del 2015, Jesús Flores Buenrostro de 36 años de edad y residente de California, fue extraditado a México por orden judicial donde es requerido para ser llevado a juicio por el presunto asesinato en el 2007 de un hombre en Sahuayo de Morales, Michoacán, anunció el Procurador Federal Benjamín B. Wagner.
Según la petición para la extradición presentada por México, Jesús Flores Buenrostro es acusado de homicidio después de haber presuntamente disparado a un hombre el 30 de abril del 2007. Según las declaraciones de testigos presénciales, Jesús Flores Buenrostro y unos compañeros fueron a una plaza en el pueblo por la tarde donde horas antes se había desatado una pelea callejera. Cuando llegaron a la plaza, Jesús Flores Buenrostro y sus compañeros se encontraron con un grupo de hombres. Jesús Flores Buenrostro cargó un arma de fuego y disparó dos veces contra el grupo de hombres. La víctima fue alcanzada dos veces por los disparos y falleció a causa de las heridas. Jesús Flores Buenrostro, de ciudadanía Americana, huyó a los Estados Unidos.
El Servicio del Mariscal de los Estados Unidos arrestó a Jesús Flores Buenrostro en Kern County en julio del 2015. El 15 de diciembre del 2015, después de los trámites legales llevados a cabo por el tribunal federal de Fresno, el tribunal certificó su capacidad de ser extraditado a México.
“Al igual que nosotros pedimos la cooperación de México para la extradición de aquellos que violan nuestras leyes, ese país busca al nuestro para la extradición de aquellos que violan sus leyes,” declaró el Procurador Federal Wagner. “Tenemos el interés mutuo de asegurar que ninguno de los países sea un refugio seguro para aquellos que estén huyendo de la justicia hacia el otro.”
Este caso ha sido despachado por el Procurador Federal Auxiliar Daniel Griffin del Distrito Este de California, la Oficina de Asuntos Internacionales de la División Criminal del Departamento de Justicia y el Servicio del Mariscal de los Estados Unidos.
Maryland Man Pleads Guilty for Role in Massive Identity Theft and Tax Fraud SchemeRead the Press Release
Stole Identities from D.C. Government Agency for Use in Filing False Tax Returns
A resident of Bowie, Maryland, pleaded guilty today to federal charges for his involvement in a far-reaching identity theft and tax fraud scheme in which he assisted in the filing of fraudulent federal income tax returns seeking more than $4.4 million in refunds, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Channing D. Phillips for the District of Columbia, Special Agent in Charge Thomas Jankowski of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI), Inspector in Charge David G. Bowers of the U.S. Postal Inspection Service’s (USPIS) Washington, D.C., Division and Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury.
Marc A. Bell, 49, admitted taking part in a massive and sophisticated identity theft and false tax return scheme that involved an extensive network of more than 130 people, many of whom were receiving public assistance. According to court documents, the scheme involved the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $40 million from the U.S. Treasury. The false tax returns sought refunds for tax years 2005 through 2013 and were often filed 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. Bell is one of approximately 15 people who have pleaded guilty in the U.S. District Court for the District of Columbia for their role in this scheme.
“The prosecution of Stolen Identity Refund Fraud is one of the Tax Division’s top priorities,” said Acting Assistant Attorney General Ciraolo. “In addition to costing taxpayers millions of dollars in fraudulent refund claims each year, the perpetrators of these crimes often prey on our country’s most vulnerable citizens. This case is a prime example of the concerted and coordinated efforts of the department, the Internal Revenue Service, the Taxpayer Inspector General for Tax Administration, and our other federal and state law enforcement partners that are essential to combatting this epidemic of fraud.”
“This investigation has successfully targeted two serious crimes that cause great financial harm: identity theft and tax fraud,” said U.S. Attorney Phillips. “This defendant abused his position as a government employee to steal identifying information from young people who had no idea that their names were being used on fraudulent income tax returns. Like the many others prosecuted in this case, he was apprehended by law enforcement and brought to justice.”
“Mr. Bell was a public servant who was trusted to serve the taxpayers of the District of Columbia,” said Special Agent in Charge Jankowski. “He violated that trust by stealing the identities of at least 645 youth and then passing the information to his partners in crime who filed over 12,000 federal income tax returns claiming refunds of over $40 million. Aside from the terrible harm done to the Government by receiving over $4 million in refunds before the scam was stopped, Mr. Bell has caused immeasurable harm to the financial well-being of the youth whose identities he stole. IRS-Criminal Investigation will continue to relentlessly pursue those who prey on innocent taxpayers to satisfy their greed and cheat the honest taxpayers who comply with the tax laws of our nation.”
“Identity theft is an increasing problem,” said Inspector in Charge Bowers. “The U.S. Postal Inspection Service aggressively investigates this type of criminal conduct, especially when it involves the U.S. Mail, and it will not be ignored. This case serves as another example of the significant results of collaborating with our law enforcement partners to achieve justice.”
“This plea agreement reinforces the commitment of Treasury’s Office of Inspector General and its law enforcement partners to pursue criminal charges against individuals and groups that prey on the public by stealing identities and fraud committed against the U.S. taxpayer and Treasury Department in their criminal schemes,” said Assistant Inspector General Phillips.
According to documents filed with the court, from 2005 to 2013, Bell was employed as a program manager, program officer, or placement expeditor at the District of Columbia’s Department of Youth Rehabilitation Services (DYRS). The agency is responsible for the supervision, custody and care of young people charged with a delinquent act in the District of Columbia and either detained in a DYRS facility while awaiting adjudication or committed to DYRS by a District of Columbia Family Court judge following adjudication. In his various capacities at DYRS, Bell had access to the agency’s database system, which contained the personal identifying information of DYRS youth, including their names and social security numbers. Bell admitted that between approximately May 2010 and April 2013, he used his computer access to obtain the personal identifying information of at least 645 then-current and former DYRS youth. Bell admitted that he provided this information to other scheme participants, who used the names and Social Security numbers to file at least 1,160 fraudulent federal income tax returns that claimed refunds of approximately $4,441,194. The IRS issued approximately 700 U.S. Treasury checks, totaling approximately $2,422,211, in the names of the DYRS youth in whose names the tax returns were filed. Bell received financial compensation from co-conspirators for providing the stolen identities.
For his role in the scheme, Bell pleaded guilty to three charges: conspiracy to defraud the government with respect to claims; aiding and abetting in the filing of fictitious or false claims; and aiding and abetting fraud and related activity in connection with identification documents. U.S. District Judge Ellen S. Huvelle set sentencing for April 20. Bell faces a statutory maximum sentence of up to 10 years in prison for the conspiracy charge, up to five years in prison for the false claims charge and up to 15 years in prison for the charge of fraud related to identification documents. As part of his plea agreement, Bell has also agreed to pay restitution to the IRS in the amount of $1,972,710.
Acting Assistant Attorney General Ciraolo, U.S. Attorney Phillips, Special Agent in Charge Jankowski, Inspector in Charge Bowers 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 for the District of Columbia, including former Assistant U.S. Attorney Sherri L. Schornstein, Paralegal Specialists Donna Galindo, Corinne Kleinman and Julie Dailey and Legal Assistant Angela Lawrence. Finally, they thanked 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.
El Procurador Federal Wagner Anuncia que Sacramento ha sido Seleccionada para la Fase II del Equipo Coordinador Anti-Tráfico (ACTeam)Read the Press Release
Sacramento, Calif. – Hoy, el Procurador Federal Benjamín B. Wagner ha anunciado que la selección de Sacramento en el Distrito Este de California, como una de solo seis ubicaciones de todo los Estados Unidos, ha sido designada para formar parte de los nuevos destacamentos especiales federales de la Iniciativa del Equipo de Coordinación Anti-Tráfico o ACTeam, una iniciativa en la que participarán varias agencias que aplicarán la ley federal con el fin de optimizar la investigación y el procesamiento de los delitos federales del tráfico humano.
Las declaraciones del Procurador Federal Wagner siguen a las declaraciones conjuntas de hoy de la Procuradora General Loretta E. Lynch, el Secretario de Seguridad Nacional Jeh Johnson y el Secretario de Trabajo Thomas E. Pérez en las que se designa a las ciudades de: Cleveland, Ohio; Minneapolis, Minnesota; Newark, New Jersey; Portland, Maine; Portland, Oregón y Sacramento, California como los lugares para efectuar la Fase II del ACTeam. Sacramento fue seleccionada en base a su compromiso en la identificación, la investigación y el procesamiento en los casos de trabajo forzado, de tráfico de sexo internacional y de tráfico de sexo entre adultos; también por la prevalencia o la sospechada prevalencia de este tipo de tráfico en la área de Sacramento; y por los niveles de cooperación que existen entre las diversas agencias que aplican la ley y por la Oficina del Procurador Federal para combatir el tráfico humano.
El Procurador Federal Wagner dijo que, “De acuerdo con la dirección proporcionada por la Procuradora General, la investigación y el procesamiento de todo tipo de tráfico humano es una máxima prioridad para nuestra oficina. Estamos orgullosos de nuestra excelente trayectoria en el procesamiento de varios delitos sobre a la explotación infantil y estamos comprometidos en el continuar y mejorar nuestro trabajo crítico de identificar y procesar delitos relacionados al trabajo forzado, al tráfico internacional de sexo y al tráfico de sexo entre adultos. Me alegro de nuestra selección como ubicación para el ACTeam porque refleja el trabajo intenso que ya hemos realizado en esta área y porque esto nos asistirá en hacer incluso más.”
Los equipos ACTeam se proponen a desarrollar la investigación y el procesamiento del tráfico humano de alto impacto asociado al trabajo forzado, tráfico de sexo internacional y tráfico de sexo entre adultos por fuerza, fraude y por coerción y así complementando tanto el Proyecto para una Infancia Segura (Project Safe Childhood) como otros esfuerzos que van dirigidos a combatir la explotación sexual infantil e incluso el tráfico de sexo infantil. Los equipos ACTeam reúnen a procuradores y agentes federales de múltiples agencias investigadoras federales en estrecha coordinación para desarrollar e implementar métodos proactivos contra el tráfico para identificar, investigar y formar estrategias de procesamiento para los casos y cuentan con expertos nacionales en materia relacionada al tráfico. Se espera que en los próximos dos años los equipos desarrollen investigaciones y procesamientos federales de alto impacto, que desmantelen redes de tráfico humano, que vindiquen los derechos de las víctimas del tráfico humano y que traigan a los traficantes ante la justicia. El nuevo equipo EDCA consistirá de personal proveniente de la Oficina Federal de Investigaciones (FBI), del Cuerpo de Aduanas e Inmigración de los Estados Unidos (ICE), de Investigación para la Seguridad Nacional (HSI) y del Departamento de Trabajo de los Estados Unidos.
Durante la Fase I de la Iniciativa ACTeam, los Equipos Piloto de la Fase I fueron convocados en Atlanta, Georgia; El Paso, Texas; Kansas City, Missouri; Los Ángeles, California; Memphis, Tennessee y Miami, Florida. La Fase I obtuvo mucho éxito y en los distritos donde actuaba el ACTeam se incrementaron colectivamente los procesamientos en un 119 por ciento en comparación al 35 por ciento nacional dentro del mismo periodo en los dos años.
En base a los excelentes resultados de la Fase I, la Procuradora General Lynch, el Secretario de la Seguridad Nacional Johnson y el Secretario de Trabajo Pérez lanzaron la Fase II el 25 de junio de 2015 por medio de una petición conjunta a las Oficinas de los Procuradores Federales y a sus socios federales dedicados a la aplicación de la ley de todo el país.
Las ubicaciones para la Fase II fueron seleccionadas por consenso unánime del Grupo Laboral de Aplicación Federal (Federal Enforcement Working Group) después de un riguroso y competitivo proceso de selección a escala nacional. El grupo consta de expertos en la materia del Departamento de Justicia (incluyendo la Unidad de Procesamiento del Tráfico Humano de la División de los Derechos Civiles, la Oficina Ejecutiva de Procuradores Federales y la Unidad de Derechos Civiles de la Oficina Federal de Investigaciones (FBI), el Departamento de Seguridad Nacional (incluyendo el Cuerpo de Aduanas e Inmigración de los Estados Unidos (ICE) y la Unidad de Contrabando y Tráfico Humano de las Investigaciones de la Seguridad Nacional) y el Departamento de Trabajo (incluyendo la Oficina del Inspector General y la División de Salarios y Horarios).
En sus declaraciones la Procuradora General ha destacado que los esfuerzos para traer a los traficantes de humanos ante la justicia y el restaurar las vidas de los sobrevivientes del tráfico humano deben estar entre las máximas prioridades del Departamento de Justicia.
El Distrito Este de California tiene una lograda historia de procesamientos de casos relacionados al tráfico de sexo de menores. La evolución reciente de dichos casos incluyen los siguientes acontecimientos: El 14 de diciembre de 2015, Tyrell Richmond, de 33 años de edad y residente de Visalia, se declaró culpable de tráfico de sexo de un menor. El 10 de septiembre de 2015, un gran jurado federal en Sacramento acusó a Jeremy Ray Warren, de 22 años de edad y residente de Vallejo, y a Alyssa Tegan Brulez, de 22 años de edad y residente de Vacaville, de traficar con niños y se presentó una imputación por separado acusando a Jarrail Lamont Smith, de 23 años de edad y residente de Cleveland, Ohio, de transportar menores con el intento de inmiscuir en la prostitución. El 24 de agosto de 2015, Javier Solís, de 30 años de edad y residente de Fresno, fue sentenciado a 11 años y nueve meses de prisión por el tráfico de sexo de un menor. El 18 de agosto de 2015, Michael Anthony Andrade, de 35 años de edad y residente de Fresno, fue sentenciado a 12 años y siete meses de prisión por el tráfico de sexo de un menor.
United States Files Complaint Against Volkswagen, Audi and Porsche for Alleged Clean Air Act ViolationsRead the Press Release
The Department of Justice, on behalf of the Environmental Protection Agency (EPA), today filed a civil complaint in federal court in Detroit, Michigan, against Volkswagen AG, Audi AG, Volkswagen Group of America Inc., Volkswagen Group of America Chattanooga Operations LLC, Porsche AG and Porsche Cars North America Inc. (collectively referred to as Volkswagen). The complaint alleges that nearly 600,000 diesel engine vehicles had illegal defeat devices installed that impair their emission control systems and cause emissions to exceed EPA’s standards, resulting in harmful air pollution. The complaint further alleges that Volkswagen violated the Clean Air Act by selling, introducing into commerce, or importing into the United States motor vehicles that are designed differently from what Volkswagen had stated in applications for certification to EPA and the California Air Resources Board (CARB).
“Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division. “The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation’s clean air laws alleged in the complaint.”
“With today’s filing, we take an important step to protect public health by seeking to hold Volkswagen accountable for any unlawful air pollution, setting us on a path to resolution,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance. “So far, recall discussions with the company have not produced an acceptable way forward. These discussions will continue in parallel with the federal court action.”
“Today’s complaint is the first stage in bringing Volkswagen to justice for failing to disclose the defeat device while seeking certification for its diesel vehicles from EPA’s Office of Transportation and Air Quality in Ann Arbor, Michigan,” said U.S. Attorney Barbara L. McQuade for the Eastern District of Michigan. “The alleged misrepresentations allowed almost 600,000 diesel engines to emit excessive air pollution across the country, harming our health and cheating consumers.”
Consistent with EPA’s Notices of Violation, issued on Sept. 18, 2015, for 2.0 liter engines and Nov. 2, 2015 for certain 3.0 liter engines, the complaint alleges that the defeat devices cause emissions to exceed EPA’s standards during normal driving conditions. The Clean Air Act requires vehicle manufacturers to certify to EPA that their products will meet applicable federal emission standards to control air pollution. Motor vehicles equipped with illegal defeat devices cannot be certified.
The complaint alleges that Volkswagen equipped certain 2.0 liter vehicles with software that detects when the car is being tested for compliance with EPA emissions standards and turns on full emissions controls only during that testing process. During normal driving situations the effectiveness of the emissions control devices is greatly reduced. This results in cars that meet emissions standards in the laboratory and at the test site, but during normal on-road driving emit oxides of nitrogen (NOx) at levels up to 40 times the EPA compliance level. In total, the complaint covers approximately 499,000 2.0 liter diesel vehicles sold in the United States since the 2009 model year.
The complaint further alleges that Volkswagen also equipped certain 3.0 liter vehicles with software that senses when the vehicle is undergoing federal emissions testing. When the vehicle senses the test procedure, it operates in a “temperature conditioning” mode and meets emissions standards. At all other times, including during normal vehicle operation, the vehicles operate in a “normal mode” that permits NOx emissions of up to nine times the federal standard. In total, the complaint covers approximately 85,000 3.0 liter diesel vehicles sold in the United States since the 2009 model year.
NOx pollution contributes to harmful ground-level ozone and fine particulate matter. These pollutants are linked with asthma and other serious respiratory illnesses. Exposure to ozone and particulate matter is also associated with premature death due to respiratory-related or cardiovascular-related effects. Children, the elderly and people with pre-existing respiratory disease are particularly at risk of health effects from exposure to these pollutants. Recent studies indicate that the direct health effects of NOx are worse than previously understood, including respiratory problems, damage to lung tissue and premature death.
Today’s filing of a civil complaint under Sections 204 and 205 of the Clean Air Act seeks injunctive relief and the assessment of civil penalties. A civil complaint does not preclude the government from seeking other legal remedies. The United States will seek to transfer its case and fully participate in the pretrial proceedings now initiated in the related multi-district litigation in the Northern District of California. The United States’ investigation is ongoing, in close coordination with CARB. EPA and CARB have been in active discussion with Volkswagen about potential remedies and recalls to address the noncompliance, and those discussions are ongoing.
Affected 2.0 liter diesel models and model years include:
- Jetta (2009-2015)
- Jetta Sportwagen (2009-2014)
- Beetle (2013-2015)
- Beetle Convertible (2013-2015)
- Audi A3 (2010-2015)
- Golf (2010-2015)
- Golf Sportwagen (2015)
- Passat (2012-2015)
Affected 3.0 liter diesel models and model years include:
- Volkswagen Touareg (2009-2016)
- Porsche Cayenne (2013-2016)
- Audi A6 Quattro (2014-2016)
- Audi A7 Quattro (2014-2016)
- Audi A8 (2014 – 2016)
- Audi A8L (2014-2016)
- Audi Q5 (2014-2016)
- Audi Q7 (2009-2015)
Two Georgia Real Estate Investors Plead Guilty to Rigging Bids at Public Home Foreclosure AuctionsRead the Press Release
The 11th and 12th Defendants Charged in Ongoing Investigation
Two Georgia real estate investors pleaded guilty today for their roles in bid-rigging and mail fraud conspiracies at public real estate foreclosure auctions in Georgia. Paul Chen and Ira Eisenberg each admitted that they agreed not to bid against others at certain public real estate foreclosure auctions and that they conspired to defraud mortgage holders and homeowners using the mail system.
“These individuals unlawfully rigged home foreclosure auctions, and then used payoffs and private side auctions to divide among themselves money that should have gone to mortgage holders and homeowners,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “Together with our FBI colleagues, the division will bring to justice unscrupulous investors who scheme to rob unsuspecting mortgage holders and homeowners.”
“Incidents of bid rigging at public real estate auctions continue to be an issue in Georgia and elsewhere in the United States, and the FBI would like to remind the public that such matters are violations of federal law,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office. “The FBI will continue to work with the U.S. Department of Justice’s Antitrust Division in identifying, investigating and prosecuting those individuals engaged in such activities.”
Chen admitted to participating in the conspiracy in Fulton County, Georgia, from as early as February 2009 until at least March 2010, and Eisenberg admitted to participating from as early as August 2009 until at least February 2011. Additionally, Chen admitted to participating in the DeKalb County, Georgia, conspiracy from as early as November 2009 until at least September 2011. According to documents filed with the court, the purpose of the conspiracies was to suppress and restrain competition and divert money to the conspirators that otherwise would have gone to pay off the mortgage and other holders of debt secured by the properties and, in some cases, the defaulting homeowner.
These charges have been filed as a result of the ongoing investigation being conducted by the Antitrust Division’s Washington Criminal II Section, the FBI’s Atlanta Division, and the U.S. Attorney’s Office of the Northern District of Georgia, in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information about the task force, please visit www.StopFraud.gov. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Washington Criminal II Section of the Antitrust Division at 202-598-4000, call the Antitrust Division’s Citizen Complaint Center at 888-647-3258, or visit http://www.justice.gov/atr/report-violations.
Court Permanently Enjoins Baltimore-Area Importer of Stone from Accruing Payroll Tax LiabilitiesRead the Press Release
A federal court has ordered a Baltimore-area importer of marble and granite to pay its payroll taxes as they become due, the Justice Department announced today. Judge Ellen L. Hollander of the U.S. District Court for the District of Maryland entered a permanent injunction requiring Alexander Stone Inc. d/b/a MMG Marble & Granite and its owners, Soultana Efthimiadis and Kyriakos Efthimiadis, to pay their federal payroll tax liabilities as they became due and owing.
According to the United States’ complaint, Alexander Stone has repeatedly failed to make timely and adequate federal employment tax deposits since 2008 and has amassed substantial employment tax liabilities. The defendants agreed to entry of the injunction but did not admit or deny the substance of the allegations in the United States’ civil complaint.
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 requisite 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 and withholding liabilities are paid. The injunction is effective immediately and will ensure that Alexander Stone stays current on its federal employment tax obligations. Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division thanked IRS Field Collection and its revenue officer for investigating and preparing the civil case.
Canadian Man Sentenced to Prison for $10 Million Income Tax Refund Fraud SchemeRead the Press Release
Conspired With Other Canadian Citizens to File False Tax Returns Using Fraudulent Forms 1099-OID
A Ontario, Canada, man was sentenced to 135 months in prison today following his conviction for one count of conspiracy to defraud the United States and commit theft of government funds, one count of making a false claim against the United States and two counts of transferring stolen money in foreign commerce, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney William J. Hochul Jr. of the Western District of New York.
Kevin Cyster, 52, of Burlington, Ontario, was convicted in September by a federal jury after a six-day trial in Rochester, New York. According to court documents and testimony at trial, Cyster was part of a group of Canadian citizens that filed tax returns with the Internal Revenue Service (IRS) that contained fraudulent Forms 1099-OID. On these tax returns, Cyster and his co-conspirators falsely claimed that nearly $10 million in federal income taxes had been withheld on their behalf by various Canadian financial institutions and paid over to the IRS. The testimony at trial established that these false Forms 1099-OID were created and filed with the IRS by an individual in California named Ronald Brekke, 55, of Orange County, California, and not by the financial institutions. No federal income taxes were paid over to the IRS on behalf of Cyster and his co-conspirators and they were not entitled to the refunds claimed on their tax returns. The IRS paid out more than $3.5 million of the requested refunds before detecting the fraud. Renee Jarvis, 51, of Ontario one of Cyster’s co-conspirators, testified that co-conspirators held meetings at Cyster’s home at which Cyster promoted the 1099-OID scheme.
Jarvis pleaded guilty in June 2014 to conspiracy to defraud the United States and to commit theft of government funds. Her sentencing is set for Jan. 12, 2016. Brekke was sentenced in June 2012 to 12 years in prison after a jury convicted him of promoting a 1099-OID fraud scheme.
Chief U.S. District Judge Frank P. Geraci, Jr. of the Western District of New York, who also presided over Cyster’s trial, imposed the sentence. In addition to the prison term, Cyster was ordered to serve three years of supervised release and pay restitution to the IRS in the amount of $3,553,303.35.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Hochul commended the special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, who investigated the case and Assistant U.S. Attorney John J. Field of the Western District of New York and Trial Attorneys Jeffrey A. McLellan and Thomas F. Koelbl of the Tax Division, who prosecuted the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division website.
Attorney General Loretta E. Lynch Memorandum on Federal Efforts to Improve the Safety of Domestic Violence VictimsRead the Press Release
Earlier today the Attorney General sent the attached memorandum to U.S. Attorneys thanking them for their impressive work on ending the scourge of violence against women. The memorandum also outlines enforcement steps that have been taken and encourages them to continue building partnerships with state, local and tribal law enforcement and community groups to stop domestic violence.
Memorandum on Federal Efforts to Improve Safety of Domestic Violence Victims (791.24 KB)
Rochester Man Charged with Attempting to Provide Material Support to ISILRead the Press Release
Emanuel L. Lutchman, 25, was arrested and charged by criminal complaint with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization. The charge carries a maximum penalty of 20 years in prison and a $250,000 fine.
The announcement was made by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney William J. Hochul Jr. of the Western District of New York and Special Agent in Charge Adam S. Cohen of the Federal Investigation Bureau’s (FBI) Buffalo Division.
“According to the complaint, as part of Emanuel Lutchman’s attempt to provide material support to ISIL, he planned to kill innocent civilians on New Year’s Eve in the name of the terrorist organization.” said Assistant Attorney General Carlin. “Thankfully, law enforcement was able to intervene and thwart Lutchman's deadly plans.”
“This New Year’s Eve prosecution underscores the threat of ISIL even in upstate New York but demonstrates our determination to immediately stop any who would cause harm in its name,” said U.S. Attorney Hochul. “What began as an ISIL directive to harm the community ended with the arrest of this defendant and a message for any other individuals considering similar behavior - you will be caught, you will be prosecuted, and you will be punished. While law enforcement is well equipped for such investigations, the public is reminded to remain vigilant and report any suspicious activity. I assure members of the public that the excellent work of our law enforcement partners with the cooperation of the public is the best way to ensure the safety of our community.”
“The FBI thwarted Emanuel Lutchman’s intent to kill civilians on New Year's Eve,” said Special Agent in Charge Cohen. “The FBI remains concerned about people overseas who use the Internet to inspire people in the United States to commit acts of violence where they live.”
According to court records, the defendant, claiming to receive direction from an overseas ISIL member, planned to commit an armed attack against civilians at a restaurant/bar located in the Rochester, New York, area today, New Year’s Eve on behalf of ISIL and in furtherance of his plan to join ISIL overseas.
The defendant made an initial appearance this morning before U.S. Magistrate Judge Marian W. Payson of the U.S. Western District of New York.
The case is being investigated by the FBI’s Rochester Joint Terrorism Task Force (JTTF). The case is being prosecuted by Assistant U.S. Attorney Brett A. Harvey with the assistance of Trial Attorney Lawrence Schneider of the National Security Division’s Counterterrorism Section.
The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.
Justice Department Announces Two Banks Reach Resolutions under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Bank Lombard Odier & Co Ltd (Lombard Odier) and DZ Privatbank (Schweiz) AG (DZ Privatbank) reached resolutions under the department’s Swiss Bank Program. These banks collectively will pay penalties of more than $107 million.
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:
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Make a complete disclosure of their cross-border activities;
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Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
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Cooperate in treaty requests for account information;
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Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
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Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
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Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreements signed today, each bank 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 these banks for tax-related criminal offenses.
Lombard Odier is a partner-owned private bank that was founded in 1796 and is based in Geneva, Switzerland. It is organized under the laws of Switzerland and is part of the Lombard Odier Group, which consists of 23 operating entities owned by LO Holding S.A., a Swiss holding company. Lombard Odier provides private banking, asset management and technology and business infrastructure services to individuals and entities located inside and outside Switzerland.
Lombard Odier was aware that U.S. taxpayers had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on all of their income, including income earned in accounts that these U.S. taxpayers maintained at Lombard Odier. Lombard Odier nonetheless opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the Treasury Department, as required by U.S. law.
Lombard Odier offered traditional Swiss banking services, such as numbered accounts and holding clients’ mail, that assisted U.S. clients in the concealment of assets and income from the IRS. Lombard Odier also assisted U.S. clients in concealing their assets and income by opening and maintaining accounts in the names of non-U.S. corporations, foundations, trusts or other entities that it knew were beneficially owned by U.S. persons. Lombard Odier maintained at least 32 entity accounts that were operated without compliance with the requisite corporate formalities. The non-U.S. jurisdictions in which the entities were incorporated or formed included the British Virgin Islands, Liechtenstein and Panama. In some instances, Lombard Odier referred clients to its Swiss-based affiliate, Favona SA, which is also part of the Lombard Odier Group, to set up entity structures. In addition, Favona provided administrative services, including accounting services and supplying corporate directors.
A Zurich-based law firm (the Zurich firm) and a Zurich-based lawyer (the Zurich lawyer) referred U.S.-related accounts to Lombard Odier with aggregate assets under management of over $63 million. The Zurich lawyer was the accountholder and had signature authority and/or power of attorney over all of the U.S.-related accounts that he referred, and was also a director of the Panama corporation that was the accountholder of one of those accounts. In some instances, the Zurich firm and Zurich lawyer operated in cooperation with a U.S. lawyer in New York, New York. The Zurich firm and Zurich lawyer referred 13 accounts to Lombard Odier that the U.S. lawyer – or that person’s friends or family members – beneficially owned.
Effective in or about January 2001, Lombard Odier entered into a Qualified Intermediary (QI) Agreement with the IRS. The QI Agreement was designed to help ensure that non-U.S. persons were subject to the proper U.S. withholding tax rates and that U.S. persons were properly paying U.S. tax with respect to U.S. securities held in an account with Lombard Odier. As a consequence of Lombard Odier entering into a QI Agreement with the IRS, certain relationship managers and supervisory relationship managers opened accounts for U.S. clients in the names of sham offshore entities. In connection with these accounts, Lombard Odier employees knowingly accepted and included in its account records IRS Forms W-8BEN or Lombard Odier’s substitute forms provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners of the assets in the accounts for U.S. federal income tax purposes. Certain relationship managers, supervisory relationship managers and others caused Lombard Odier to certify compliance with the QI Agreement even though the true beneficial owners were not reflected in the Forms W-8BEN in the account files.
Since Aug. 1, 2008, Lombard Odier maintained accounts with an aggregate value of more than $24 million that were owned by insurance companies and which held assets relating to insurance products that were issued to U.S. taxpayer clients of the respective insurance companies. Such accounts, commonly known as “insurance wrappers,” were titled in the names of insurance companies, but were funded with assets that were transferred to the accounts for the beneficial owners of the insurance products.
Lombard Odier’s senior management decided, in June 2008, to prohibit new U.S. taxpayer clients coming from UBS and to refrain from hiring UBS relationship managers with U.S. taxpayer clients. Shortly thereafter, Lombard Odier implemented a Regularize or Leave Action Plan, the tenets of which were described in a written policy, dated Oct. 8, 2008, to be communicated verbally to the group heads of Lombard Odier’s private banking business unit. Pursuant to the plan, Lombard Odier’s management required that relationship managers instruct each of their U.S. clients to sign a Form W-9, voluntarily disclose their accounts to the IRS or close their accounts. According to the written policy, relationship managers were to propose that U.S. clients who wished to close their accounts do so via withdrawal of cash, checks or gold; transfers to another bank; or donations to non-U.S. relatives or charitable institutions. In connection with the plan, Lombard Odier closed 50 U.S.-related accounts with cash withdrawals exceeding $51 million. Lombard Odier also closed at least 12 U.S.-related accounts via fictitious donations, where the clients transferred the funds in their accounts to other accounts at Lombard Odier, or to external accounts that were controlled by the U.S. clients but held by their non-U.S. relatives or associates.
Since Aug. 1, 2008, Lombard Odier had 1,121 U.S.-related accounts, comprising maximum assets under management of approximately $4.45 billion, including assets of declared accounts. Lombard Odier will pay a penalty of $99.809 million.
DZ Privatbank was founded in 1975 as BEG Bank Europäischer Genossenschaftsbanken, a public limited liability company under Swiss law. In early 2006, following several internal reorganizations and name changes, its name was changed to DZ Privatbank (Schweiz) AG. DZ Privatbank’s sole office is in Zurich, Switzerland. DZ Privatbank’s ultimate owners are regionally-based German cooperative banks, whose customers are primarily individuals and small- to medium-sized companies. DZ Privatbank’s primary business focus has always been to provide private banking services in Switzerland for customers of the German cooperative banks, and it has always defined and marketed itself as the “Germany specialist in Switzerland.”
Through its managers, employees and/or others, DZ Privatbank knew or had reason to know that some U.S. taxpayers who had opened and maintained accounts at DZ Privatbank were not complying with their U.S. income tax and reporting obligations. During much of the time after Aug. 1, 2008, DZ Privatbank 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. DZ Privatbank offered a variety of traditional Swiss banking services that it knew could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the IRS. These services included numbered accounts, the ability for customers to have their mail held at DZ Privatbank and the use of a post office box held in the name of a DZ Privatbank employee.
In 2008, DZ Privatbank decided to expand its international business operations. DZ Privatbank’s international expansion plan focused on customers domiciled in various countries, including Great Britain, Hungary, Poland, Russia, Turkey and the United States. DZ Privatbank opened 222 new U.S.-related accounts with maximum aggregate assets under management of approximately $106 million between Jan. 1 and Oct. 31, 2009. Prior to that period, DZ Privatbank had approximately 110 U.S.-related accounts with maximum aggregate assets under management of $133 million.
In May 2009, DZ Privatbank began accepting customers from Credit Suisse who had either terminated their relationship with Credit Suisse or whom Credit Suisse had terminated. In addition to Credit Suisse, since Aug. 1, 2008, DZ Privatbank accepted the transfer of more than two dozen U.S.-related accounts from other Swiss banks under investigation by the department. DZ Privatbank knew or should have known that some clients who transferred assets from these banks during this period were undeclared to the IRS. By opening these U.S.-related accounts, DZ Privatbank aided and abetted those U.S. clients in concealing income and assets from the IRS.
DZ Privatbank employees corresponded and met with Credit Suisse personnel in connection with the transfer of accounts to DZ Privatbank. In an email dated Dec. 17, 2009, one Credit Suisse relationship manager notified a client that the account had to be closed before the end of December 2009, but indicated “DZ PRIVATBANK . . . will probably be an option for you.” This email was forwarded to DZ Privatbank’s general email address by Credit Suisse. In another email dated May 6, 2010, the head relationship manager for U.S. accounts at Credit Suisse contacted an employee of DZ Privatbank regarding the transfer of an account to DZ Privatbank: “I’m away during his stay. I have now ordered the gold so he can take it physically and can carry it ‘over the road.’ After I give him some cash, we will then close the relationship. [A third Credit Suisse relationship manager] has reviewed the documents and will supervise the case.”
Credit Suisse personnel also provided advice to DZ Privatbank personnel related to clients’ potential participation in the IRS’s offshore voluntary disclosure programs (OVDP) to DZ Privatbank personnel. For example, in or about April 2011, a DZ Privatbank relationship manager who had learned that some legal advisors were recommending a “quiet OVDP” filing sought the views of a Credit Suisse relationship manager on that topic and was informed it was “really dangerous,” tantamount to “giv[ing] [the customer] the rope (to hang themselves),” and should never be recommended.
As a result of the inflow of customers from Credit Suisse, a preliminary, interim protocol for U.S. customers was developed by several DZ Privatbank employees that, in part, incorporated the recommendations of the head relationship manager for U.S. accounts at Credit Suisse, mentioned above. This was effective beginning in or about November 2009 and remained effective until February 2010, when portions of it were incorporated in a Cross-Border Handbook, which noted: “The bank has the following aims” listing first, “The bank wants – in the meaning of a side-business (Nebensegment) – [to] start business relations with U.S.-Customers.” The handbook continued that “U.S. clients need to be treated due to several regulatory requirements with extreme caution and reluctance.”
In or about July 2010, DZ Privatbank accepted a U.S.-related account from Credit Suisse where the customer may have been concealing the existence of the account from U.S. authorities and was likely actively attempting to conceal his account from the IRS. This customer and a former DZ Privatbank relationship manager engaged in discussions related to various ways in which the customer could withdraw money from his account at DZ Privatbank, with the stated intention of not “attracting attention.” It was ultimately agreed that checks would be sent monthly to the customer in an amount set by him. The customer failed to provide forms required by DZ Privatbank when it began its program to implement the Foreign Account Tax Compliance Act (FATCA), and as a result, the account was blocked and ultimately closed for non-compliance. Nevertheless, DZ Privatbank unblocked the account several times through November 2012, against DZ Privatbank’s internal guidelines, so that the customer could continue to receive monthly checks.
Since Aug. 1, 2008, DZ Privatbank had a total of 691 U.S.-related accounts with aggregated assets under management of approximately $498 million. DZ Privatbank will pay a penalty of $7.452 million.
In accordance with the terms of the Swiss Bank Program, each bank 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 these banks 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 these non-prosecution agreements, noncompliant U.S. accountholders at these banks 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 Tracy L. Gostyla, Kimberly M. Shartar and Carl D. Wasserman, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
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Federal Grand Jury Indicts Riverside Man on Charges of Conspiring with Shooter in San Bernardino Terrorist Attack to Provide Material Support to TerroristsRead the Press Release
Defendant also Charged with Being ‘Straw Purchaser’ of Two Assault Rifles Later Used in San Bernardino Attack that Killed 14 People
Enrique Marquez Jr., 24, of Riverside, California, a longtime friend of Sayed Rizwan Farook, the male shooter in the San Bernardino, California, terrorist attack, was named today in a federal grand jury indictment that charges him with conspiring with Farook in 2011 and 2012 to provide material support to terrorists.
Marquez was also charged today with two counts of making a false statement in relation to the purchase of two assault rifles that were used in the deadly shooting at the Inland Regional Center (IRC) on Dec. 2, 2015.
The five-count indictment additionally charges Marquez with marriage fraud and making a false statement on immigration paperwork in relation to an alleged sham marriage with a member of Farook’s family.
Marquez is currently being held in federal custody without bond and is scheduled to be arraigned in U.S. District Court in Riverside on Jan. 6, 2016.
“Enrique Marquez Jr. has been indicted for his role in plotting terrorist attacks on American soil with Sayed Rizwan Farook in 2011 and 2012, attacks which were, fortunately, not carried out. He is also charged with firearms violations for making straw purchases of weapons for Farook – weapons that were eventually used to carry out the recent terrorist attack in San Bernardino,” said Assistant Attorney General for National Security John P. Carlin. “This indictment is the next step in holding Mr. Marquez accountable. I would like to extend my gratitude to all the members of law enforcement involved in this ongoing investigation.”
“This indictment demonstrates that we will hold accountable all individuals who collaborate with terrorists in executing their plans," said United States Attorney Eileen M. Decker. "Defendant Marquez's extensive plotting with Sayed Rizwan Farook in 2011 and 2012 and his purchase of explosive powder and two firearms provided the foundation for the murders that occurred this month. This indictment is the result of sustained and coordinated efforts by many federal and state prosecutors, agents and officers, and I thank them for their efforts."
"Mr. Marquez is charged for his role in a conspiracy several years ago to target innocent civilians in our own backyard with cold-blooded terror attacks, and with providing weapons to an individual whose endgame was murder," said David Bowdich, the Assistant Director in Charge of the FBI's Los Angeles Field Office. "The covert nature of the defendant's alleged actions is a stark reminder of the challenges we face in preventing attacks planned in the name of violent jihad, and underscores the critical need for those with knowledge about terror plots to come forward."
Today’s indictment charges Marquez with conspiring with Farook to provide material support and resources, including weapons, explosives and personnel, to terrorists, knowing and intending that such support was to be used in preparation for and in carrying out the use of fire or explosive to maliciously damage or destroy any institution or organization receiving federal financial assistance and property used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce.
In addition to the conspiracy count, Marquez is charged with two counts of making a false statement when purchasing two assault rifles for Farook – a Smith and Wesson, model M&P-15 Sport, 5.56-caliber rifle that was bought on Nov. 14, 2001, and a DPMS, model A-15, 5.56-caliber rifle that was bought on Feb. 22, 2012 – which, according to an affidavit previously filed in this case, were used in the Dec. 2 attack on the IRC that killed 14 people and wounded 22 others. Specifically, he is charged with stating on a Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) form that he was the actual buyer, a statement that was, and which defendant knew to be, false.
The final two counts in the indictment allege that Marquez entered into a sham marriage with a member of Farook’s family in November 2014 and that on July 17, 2015, he signed an immigration form, under penalty of perjury, that he was living with the purported spouse in Corona, California, when he was not actually living there.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty in court.
The charge of providing material support to terrorists carries a maximum sentence of 15 years in federal prison. The charges of making a false statement in connection with acquisition of firearms each carry a statutory maximum penalty of 10 years in federal prison. The marriage fraud count carries a statutory maximum sentence of 5 years in prison, and the charge of making a false statement on immigration paperwork carries a statutory maximum sentence of 10 years in prison.
Today’s indictment in the result of an ongoing investigation that is being conducted by several members of the Inland Empire Joint Terrorism Task Force, including agents and detectives from the FBI; the San Bernardino Police Department; the San Bernardino County Sheriff’s Department; ATF; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Riverside County Sheriff’s Department; the Ontario Police Department and the Riverside Police Department. Several agencies are providing considerable assistance to the investigation, including the San Bernardino County District Attorney’s Office and detectives with the Chino, California, Police Department; the Redlands, California, Police Department and the Corona Police Department. Additionally, investigators have collaborated with sister task forces in the region and throughout the country, as well as with the intelligence community, foreign law enforcement partners and various FBI Legal Attachés located overseas.
The case against Marquez is being prosecuted by the U.S. Attorney’s Office of the Central District of California and the Counterterrorism Section of the Department's National Security Division.
Puerto Rico’s Government to Make Major Upgrades to San Juan Water Infrastructure in Settlement with the Federal GovernmentRead the Press Release
Under two settlements with the Department of Justice and the U.S. Environmental Protection Agency (EPA), three Puerto Rico government agencies have agreed to upgrade portions of storm water systems they own within the Municipality of San Juan. These upgrades, which will be performed by the Department of Natural and Environmental Resources, the Department of Transportation and Public Works from the Commonwealth of Puerto Rico and the Puerto Rico Highways and Transportation Authority, are aimed at eliminating or minimizing future discharges of sewage and other pollutants into water bodies in and around San Juan, including the Condado Lagoon, the Martin Peña Channel and the Atlantic Ocean. The EPA estimates that over 6 million gallons of untreated sewage is being discharged into waterways in and around San Juan every day which amounts to more than 2.2 billion gallons discharged annually.
“These structural and operational improvements to the storm water infrastructure are critical and desperately needed for the public health and well-being of San Juan’s residents,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division. “This agreement will improve storm water collection systems that will reduce contamination from sewage that is presently escaping into water bodies around the city each day.”
“For far too long, harmful discharges of sewage and other contaminants have polluted water bodies in communities in Puerto Rico,” said Regional Administrator Judith A. Enck of the EPA. “These legal agreements will drive water quality improvements and protect the health of the people of Puerto Rico.”
The Puerto Rico agencies will invest an estimated $77 million in infrastructure upgrades and other actions over the life of the two legal agreements. The settlements are related to an agreement with the Municipality of San Juan that was announced on Oct. 26, 2015 in which San Juan agreed to take actions to upgrade its separate storm sewer system.
Stormwater runoff in San Juan is collected through municipal separate storm sewer systems and is discharged into local waterways. When rain falls on roofs, streets and parking lots, the water cannot soak into the ground and carries trash, bacteria, heavy metals and other pollutants into streams, threatening public health. In addition, property and infrastructure can be damaged by storm water runoff due to erosion. Additionally, sanitary sewer lines or industrial discharges can also be illegally connected to the storm sewer, leading to untreated sewage or other pollutants reaching water bodies.
Between 2005 and 2013, the EPA documented that the Puerto Rico agencies were discharging untreated sewage and other pollutants from their storm sewer systems into water bodies, in violation of the Clean Water Act. The waters receiving the untreated sewage include those that are classified for activities where people may come into contact with the water, such as fishing, boating, swimming, wading and/or other recreational and commercial activities. Untreated sewage can carry bacteria, viruses and other harmful pollutants that can cause a number of illnesses. Direct and indirect human exposure to or contact with untreated sewage and contaminated waters discharged on a daily basis presents an imminent and substantial endangerment to human health and welfare.
The EPA waived the collection of any monetary civil penalties due to financial challenges currently facing the Puerto Rico government; however, the agreements will include financial penalties if the agencies fail to complete the work and meet the deadlines.
In the complaint filed in 2014, the EPA alleges that the Puerto Rico Department of Natural and Environmental Resources was discharging pollutants without a permit from its Baldorioty de Castro, De Diego and Stop 18 stormwater pump stations. These three pump stations were designed to control flooding in the San Juan area by pumping large volumes of storm water into receiving waters. These three Department of Natural and Environmental Resources pump stations have been receiving flow from various sources which contain untreated sewage. The agreement with the Department of Natural and Environmental Resources requires it to invest an estimated $33 million to upgrade its system over the life of the settlement, including:
- Obtain a proper permit and implement a Storm Water Management Program.
- Install, inspect, maintain, monitor and replace warning signs at all pump station outfalls and replace booms at all pump stations.
- Upgrade the Baldorioty de Castro Pump Station and install electronic monitoring equipment and lighting fixtures at pump station wet wells.
- Routinely clean and maintain its pump stations and develop methods for sludge sampling, disposal and water level management.
- Develop a Spill Prevention Control and Countermeasures Plan.
- Pay $650,000 each year into a Court Registry Account to be used by the Municipality of San Juan, Department of Transportation and Public Works and the Highways and Transportation Authority to support the implementation of work plans for work in the collection systems that flow to DNER’s three pump stations.
The EPA also alleges that the Puerto Rico Department of Transportation and Public Works and the Puerto Rico Highway and Transportation Authority was discharging storm water containing untreated sewage through the storm water systems they own and operate to provide drainage for their roads and highways. Flow from these systems is conveyed to the Department of Natural and Environmental Resources’ pump stations. Under a legal agreement, the Puerto Rico Department of Transportation and Public Works and the Puerto Rico Highways and Transportation Authority will invest an estimated $44 million over the life of the agreement to:
- Comply with the permit and develop and implement a Storm Water Management Program.
- Eliminate all illegal connections and discharges to their storm water systems under an EPA-approved schedule.
- Address complaints from residents and government agencies by developing a registry of complaints of illegal discharges into their storm water systems and address those complaints.
- Install, inspect, maintain, monitor and/or replace warning signs at outfalls.
- Submit a vacuum truck sludge disposal plan and submit standard operating procedures for pump stations.
- HTA must investigate the Barrio Obrero Vacuum Sewer System and either enter into an agreement to transfer the system to PRASA, or repair the system.
- Develop a program, subject to EPA review, to inspect, clean and repair the storm water system.
- Develop plans to prevent and respond to spills.
- Sample water quality at all outfalls and maintain outfall information.
- Complete an inventory of all of outfalls in the city of San Juan.
- Actively identify ways to incorporate green infrastructure into plans to comply with the agreement.
The settlement, lodged today in the U.S. District Court for the District of Puerto Rico, 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.
DNER Consent Decree
DTPW HTA Consent Decree
Justice Department Announces Four Banks Reach Resolutions Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Bank J. Safra Sarasin AG (Safra Sarasin), Coutts & Co Ltd (Coutts), Gonet & Cie (Gonet) and Banque Cantonal du Valais (BC Valais) reached resolutions under the department’s Swiss Bank Program. These banks collectively will pay penalties of more than $178 million.
“With today’s resolutions under the Swiss Bank Program, the department has reached agreements with 75 Swiss banks, imposed penalties in excess of $1 billion, and secured voluminous and detailed information regarding the illegal conduct of financial institutions, professionals and accountholders around the world,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Building on the success of the Swiss Bank Program, the civil and criminal offshore enforcement efforts of the department and its partners in the IRS will be a top priority in 2016.”
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 the non-prosecution agreements signed today, each bank 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 these banks for tax-related criminal offenses.
Safra Sarasin is a Swiss bank with its head office in Basel. Safra Sarasin was formed in June of 2013 through the merger of two Swiss banks, Banque J. Safra (Suisse) SA (Safra) and Bank Sarasin & Cie AG (Sarasin). In Switzerland, Safra Sarasin has branches in Berne, Geneva, Lucerne, Lugano and Zurich. Safra Sarasin specializes in providing investment advice and asset management services to private and institutional clients, as well as to investment funds. It offers clients portfolio management, secured lending and financial analysis, among other services.
In 2001, Safra and Sarasin each entered into a Qualified Intermediary (QI) Agreement with the Internal Revenue Service (IRS). The QI regime provided a comprehensive framework for U.S. information reporting and tax withholding by a non-U.S. financial institution with respect to U.S. securities. After signing their respective QI Agreements, Safra and Sarasin continued to service certain U.S. customers without disclosing the customers’ identity to the IRS and without regard for the impact of U.S. criminal law on that decision.
Through at least 2014, Safra Sarasin knew that it was highly probable that some U.S. taxpayers who had opened and maintained accounts at Safra Sarasin were not complying with their U.S. income tax and reporting obligations. Safra and Sarasin took the position that they could service U.S. clients that they knew or had reason to believe were engaged in tax evasion so long as Safra and Sarasin prohibited their accountholders from trading in U.S.-based securities or required that the account be nominally structured in the name of a non-U.S.-based entity.
With respect to structured accounts, U.S. clients would create an entity, such as a Liechtenstein foundation, a Panama corporation or a British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open an account at Safra or Sarasin in the name of the entity or transfer a pre-existing Swiss bank account from another Swiss bank. In certain cases that involved a non-U.S.-based entity, Safra or Sarasin was aware that a U.S. taxpayer was the true beneficial owner of an account. Despite this, the respective bank would obtain from the entity’s directors an IRS Form W-8BEN or equivalent bank document in which the directors falsely declared that the beneficial owner was not a U.S. taxpayer. Although it was highly probable that in such cases the U.S. taxpayer was avoiding U.S. taxes, some of these accounts were permitted to trade in U.S. securities without the respective bank reporting account earnings or transmitting any withholding taxes to the IRS, as required by its QI Agreement.
In some instances, relationship managers at Safra and Sarasin met with or took directions or instructions from the U.S. taxpayer beneficial owner of an offshore structure account, instead of the directors or other authorized parties on the account. Some of these relationship managers interacted with corporate service providers, including Swiss lawyers, who assisted U.S. taxpayers in setting up nominee entities for their undeclared accounts. In some instances, relationship managers referred U.S. clients who were interested in creating nominee offshore entities to these corporate service providers. After these entities were created, relationship managers assisted these clients in opening and maintaining accounts at Safra Sarasin.
For example, a Geneva-based lawyer assisted U.S. clients in opening undeclared accounts in the names of Panama corporations. These accounts had high balances totaling approximately $250 million during the period since Aug. 1, 2008. The Geneva-based lawyer had signature authority and power of attorney over these accounts and was a director of some of these entities. With respect to one of these accounts, the lawyer signed an IRS Form W-8BEN falsely certifying that a Panama entity was the taxpayer, and not the U.S. client. In December 2010, in connection with the closing of one of these accounts, the lawyer assisted a U.S. client in transferring the funds to a bank in Hong Kong. During 2011, in connection with the closing of seven of these accounts, the lawyer assisted the U.S. clients in transferring the funds to a Swiss bank under investigation by the department.
Safra Sarasin assisted some U.S. clients in other ways, in concealing assets and income from the IRS upon the closure of their accounts. Approximately 20 percent of the funds in U.S.-related accounts closed by Safra Sarasin were transferred to banks in countries other than Switzerland and the United States, including Israel, Hong Kong and Liechtenstein. In one instance, Safra Sarasin assisted a U.S. client, whose account was held in the name of a Panama company, to withdraw $2.9 million in gold at the account closing. In another instance, Safra Sarasin processed five cash withdrawals of $190,000 each for a U.S. client, comprising a total aggregate amount of $950,000 in cash over a two-day period.
A number of U.S.-related accounts held at Sarasin were managed by external asset managers. From June through August 2008, one of these external asset managers used intermediary accounts at Sarasin to assist five U.S. clients in transferring $21.1 million from a large Swiss bank into undeclared bank accounts at Sarasin. These intermediary accounts were opened in the name of the external asset manager’s company and were used when a U.S. client wanted to deposit funds into his or her account or transfer funds to a third party. This added a layer of concealment when transferring the assets of a client or third party to or from the U.S. client’s bank account at Sarasin. In 2012, this same external asset manager was charged, in a U.S. federal court, with conspiring to impede and impair the IRS in the ascertainment, computation, assessment and collection of U.S. income taxes, in connection with the external asset manager’s activities at Swiss banks other than Safra Sarasin.
In the period since Aug. 1, 2008, Sarasin maintained six accounts, with an aggregate value of $24 million, that were owned by insurance companies and held assets relating to insurance products that were issued to U.S. taxpayer clients of the respective insurance companies. Such accounts, known commonly as “insurance wrappers,” were titled in the names of insurance companies but funded with assets that were transferred to the accounts for the beneficial owners of the insurance products. Two of the six insurance wrapper accounts were held in the name of a Cayman Islands corporation, and another account was held in the name of a Singapore company.
Since Aug. 1, 2008, Safra Sarasin had 1,275 U.S.-related accounts with an aggregate maximum value of approximately $2.2 billion. Safra Sarasin will pay a penalty of $85.809 million.
Coutts is a Swiss private bank headquartered in Zurich with branches in Geneva, Hong Kong, Monaco and Singapore. Coutts also has operating subsidiaries in Geneva and on the Isle of Man. During the period since Aug. 1, 2008, Coutts was part of the international Wealth Management Division of The Royal Bank of Scotland Group plc, which is majority-owned by the United Kingdom government, and had no offices, branches or subsidiaries in the United States. Coutts closed its New York branch in 1997, and the bank closed its representative office in Florida in 2005, shortly after Coutts had acquired the Florida office as part of its acquisition of Bank von Ernst & Cie AG in 2003.
Coutts was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on all of their income, including income earned in accounts that these U.S. taxpayers maintained at Coutts. Coutts nonetheless opened, serviced and profited from accounts for U.S. clients who Coutts knew or had reason to know were likely not complying with these obligations. Since August 2008, Coutts has accepted over $150 million in inflows from other Swiss banks that were being investigated by the department, and Coutts opened 465 accounts for U.S. clients, some of whom did not comply with their obligations regarding U.S. tax or Reports of Foreign Bank and Financial Accounts (FBARs).
Prior to December 2008, several relationship managers from the Coutts private banking desks traveled to the United States to maintain existing relationships with U.S. clients and recruit new clients. After 2008, Coutts relationship managers continued to travel to the United States to meet with clients, including three relationship managers employed by other group entities located outside of Switzerland who made 11 trips to the United States.
Coutts relationship managers in Switzerland aided and assisted certain U.S. clients with undeclared accounts at Coutts to evade their income taxes by placing their assets in the names of structures formed, maintained and managed by various subsidiary trust companies of Coutts. Coutts has operated its own trust companies in Liechtenstein and Switzerland. These companies provided structuring services to Coutts clients, including the creation of foundations, trusts and companies incorporated or based in offshore locations such as the Bahamas, British Virgin Islands, Channel Islands, Liechtenstein and Panama. By operation of Swiss bank secrecy laws, the U.S. client’s ownership of these structures would not be disclosed to U.S. authorities. In all, more than 500 of the 1,337 U.S. client accounts held at Coutts since August of 2008, with more than $1 billion in assets under management, had some type of structure with a U.S. beneficial owner.
In addition to the relationships they had with affiliated trust companies, Coutts relationship managers coordinated with external trust companies to create and administer offshore structures for its U.S. clients that were incorporated or based in offshore locations such as the British Virgin Islands, Liechtenstein and Panama. For example, one relationship manager had three U.S. clients with undeclared accounts held in the names of British Virgin Islands companies. These three accounts totaled approximately $130 million.
Because Swiss law requires Coutts 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 numerous such accounts, Coutts relationship managers and other employees knowingly accepted and included in Coutts’ account records IRS Forms W-8BEN or equivalent bank documents provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners, for U.S. income tax purposes, of the assets in the Coutts accounts. This aided and assisted the U.S. clients in concealing these assets and income from the IRS.
Coutts also assisted U.S. clients in concealing the assets and income in their undeclared accounts by processing requests from U.S. taxpayers to transfer assets from accounts being closed to non-U.S.-related Coutts accounts, or to Coutts accounts that were restructured to eliminate the U.S. connection. For example, in one instance in 2001, a joint account was opened by couple living in Singapore. The husband was a U.S. citizen, and the wife was a French citizen. After Coutts asked the accountholder to provide an IRS Form W-9, the husband instructed Coutts to close the joint account and internally transfer assets totaling $15.1 million to a Coutts account held jointly by his wife and children. The husband had signatory authority over the newly opened account based on a general power of attorney, and he continued to manage the assets and was the only contact person for Coutts with respect to this account. In another case, between July 2011 and April 2014, Coutts assisted a U.S. client in transferring $33 million from an undeclared account held in the name of a Belize corporation to 11 other accounts at Coutts held in the names of nominee entities.
Since Aug. 1, 2008, Coutts held and managed 1,337 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $2.1 billion. Coutts will pay a penalty of $78.484 million.
Gonet is a family-owned private bank headquartered in Geneva, Switzerland. Gonet operates a branch office in Lausanne, Switzerland, which was opened in 2011, and a representative office in Abu Dhabi, United Arab Emirates, which was opened in 2014. In 1982, Gonet opened a subsidiary in Nassau, Bahamas, which offers traditional private banking services. In 2008, Gonet acquired a minority interest in an entity in Monaco, and three years later Gonet established a subsidiary in Singapore. In 2014, Gonet sold the entities in Monaco and Singapore.
Gonet enabled some U.S. taxpayers to evade their U.S. tax and filing obligations, resulting in the filing of false income tax returns with the IRS and allowing U.S. taxpayers to hide offshore assets from the IRS. Gonet opened accounts for U.S. taxpayers who had left other Swiss banks that were known targets of investigations by the department, including UBS and Credit Suisse. With respect to the majority of these accounts, Gonet knew or should have known that the beneficial owners were attempting to evade U.S. taxes and foreign account reporting requirements. Gonet also opened and maintained a number of U.S.-related accounts held by non-U.S. entities with the knowledge that U.S. persons were the true beneficial owners of the assets maintained in the accounts. Two of the accounts held by non-U.S. entities were insurance wrapper accounts.
With respect to structured accounts, U.S. clients, with the assistance of their external advisors, would create an entity, such as a Liechtenstein foundation, Panamanian corporation or British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open a bank account at Gonet in the name of the non-U.S. entity or transfer funds from a pre-existing account from another bank. Gonet employees provided prospective U.S. clients with referrals to external advisors who could assist with the creation and management of such an entity. In certain cases, Gonet was aware that a U.S. client was the true beneficial owner of the account. Despite this, Gonet would sometimes obtain from the entity’s directors an IRS Form W-8BEN or equivalent bank document that falsely declared that the beneficial owner was not a U.S. taxpayer.
Since Aug. 1, 2008, Gonet held 150 U.S.-related accounts with an aggregate maximum balance of approximately $254.5 million. Gonet will pay a penalty of $11.454 million.
BC Valais, founded in 1917, is headquartered in the Canton of Valais, Switzerland. BC Valais was founded by the government of the Canton of Valais to provide banking services to assist in the development of the regional economy and to provide credit services to residents of the Canton of Valais. As a cantonal bank, the Canton of Valais is BC Valais’ majority shareholder, and pursuant to cantonal law, the Canton of Valais guarantees all of the bank’s liabilities.
In 2001, BC Valais entered into a QI Agreement with the IRS. If an accountholder wanted to trade in U.S. securities without being subjected to mandatory U.S. tax withholding, the agreement required BC Valais to obtain the consent of the accountholder to disclose the client’s identity to the IRS. In the years following the signing of its QI Agreement, BC Valais’ position was that it could service U.S. clients that it knew or had reason to believe were non-compliant with their U.S. tax obligations as long as the account did not trade or hold U.S. securities. For example, an internal memorandum written to BC Valais’ board of directors in October 2009 stated that BC Valais had 63 American clients whose accounts traded securities, but only seven of those 63 clients submitted Forms W-9 to BC Valais that authorized income generated from those securities to be reported to the IRS. The other 56 American clients had not authorized their names to be disclosed to the IRS and, because of the QI Agreement, “[t]he other clients [did] not hold any American securities.”
Prior to the time that BC Valais signed its QI Agreement in 2001, BC Valais requested that its accountholders sign an IRS Form W-9 if they wished to continue to trade in U.S. securities. One accountholder, who lived in New York and had an open BC Valais account for more than 25 years, signed a form declaring that “I am an American taxpayer … [and I] prohibit the Bank from divulging my name and authorize it to sell in the course of the year 2000 all of my American securities held by the Bank. I take note of the fact that the Bank will not invest in American securities for me anymore.”
Since Aug. 1, 2008, BC Valais maintained 185 U.S.-related accounts with a maximum aggregate value of approximately $72 million. BC Valais will pay a penalty of $2.311 million.
In accordance with the terms of the Swiss Bank Program, each bank 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 these banks 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 these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
“Today’s resolutions reflect the continued, strong progress of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division (LB&I). “Financial institutions that aided non-compliance and evasion are putting this conduct behind them and cooperating, leading us to those U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes.”
“The end of the year does not signal the end to our enforcement efforts to bring to justice those who would circumvent our nation’s tax laws by hiding their money overseas,” said Chief Richard Weber of IRS Criminal Investigation (CI). “In fact, with the wealth of information gathered from the Swiss Bank Program, we have already begun to track those individuals who think they are above the law and continue to hide their money offshore. The decision to evade taxes will certainly be one they regret when they face criminal sanctions.”
Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-CI and the IRS LB&I Division for their substantial assistance. Acting Assistant Attorney General Ciraolo also thanked the counsel on these matters, John E. Sullivan, Mark W. Kotila, Thomas G. Voracek and Thomas J. Sawyer, who serves as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program, as well as Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Justice Department Announces Banque Cantonale Vaudoise Reaches Resolution Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Banque Cantonale Vaudoise (BC Vaudoise) reached a resolution under the department’s Swiss Bank Program. BC Vaudoise will pay a penalty of more than $41 million.
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 the non-prosecution agreement signed today, BC Vaudoise 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 this bank for tax-related criminal offenses.
Founded in 1845 and headquartered in Lausanne, Switzerland, BC Vaudoise was established by an Act of the Vaud Cantonal Parliament as a corporation organized under public law. The Canton of Vaud must hold a majority share of BC Vaudoise, and the Canton currently holds more than two third of the shares of BC Vaudoise.
BC Vaudoise is a retail bank whose legal mission has always been to provide banking services to the local community. Because BC Vaudoise is a cantonal bank serving the residents of the Canton of Vaud, most of its business relates to three core areas: retail banking, including home mortgages and savings accounts; small and medium enterprises; and onshore private banking. BC Vaudoise also provides private banking services to clients residing outside of Switzerland through its International Private Banking Department.
BC Vaudoise was aware that U.S. persons had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on the basis of all their income, including income earned in accounts that the U.S. persons maintained at BC Vaudoise. BC Vaudoise knew or had reason to know that it was likely that some U.S. taxpayers who maintained accounts at BC Vaudoise were not complying with their U.S. reporting obligations.
In 2008, BC Vaudoise opened approximately 10,000 more new client accounts bank-wide than in the previous years. A large portion of these accounts were for ex-UBS clients who left UBS during the financial crisis. Out of this overall influx of clients, between August 2008 and February 2009, BC Vaudoise opened 265 new U.S. taxpayer accounts, comprising an aggregate of $171 million in new assets under management, without determining whether the relevant U.S. taxpayer clients were tax compliant in the United States.
BC Vaudoise had several relationships with independent asset managers who brought 93 U.S. taxpayer-clients to BC Vaudoise between August 2008 and February 2009. BC Vaudoise did not require evidence of tax compliance with respect to these accounts, which resulted in the opening of many undeclared accounts for U.S. taxpayer-clients. One of these asset managers received a finders’ fee of 300,000 Swiss francs for introducing accounts to BC Vaudoise.
BC Vaudoise offered a variety of traditional Swiss banking services – including hold mail service, numbered accounts and code named accounts – that it knew could assist, and that did assist, U.S. taxpayers in concealing assets and income from the IRS. BC Vaudoise permitted U.S. taxpayer-clients to close undeclared U.S.-related accounts by transferring account funds to non-U.S.-related accounts, while continuing to exercise control or retain entitlement to the funds. Close to or while closing accounts, BC Vaudoise also allowed U.S. taxpayer-clients to make large cash withdrawals totaling millions of dollars and to cash millions of dollars in checks drawn on the accounts.
BC Vaudoise opened and maintained potentially undeclared accounts beneficially owned by U.S. taxpayers and held in the name of structures, which were formed in the British Virgin Islands, Cayman Islands, Panama, Switzerland and the United Kingdom. U.S. taxpayers were beneficial owners of those nominee entities, which enabled U.S. taxpayer clients to conceal their identities from the IRS. In some instances, BC Vaudoise provided U.S. taxpayers with the names of outside service providers who could create these types of structures. BC Vaudoise also permitted relationship managers in some cases to have direct contact with and accept instructions from U.S. beneficial owners who did not have powers of attorney over the entity accounts, including accounts that were held by entities incorporated in the British Virgin Islands and Panama.
Since Aug. 1, 2008, BC Vaudoise held approximately 2,088 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $1.3 billion. BC Vaudoise will pay a penalty of $41.677 million.
In accordance with the terms of the Swiss Bank Program, BC Vaudoise 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 BC Vaudoise 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 BC Vaudoise must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
Acting Deputy Assistant Attorney General Larry J. Wszalek 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 Deputy Assistant Attorney General Wszalek also thanked W. Damon Dennis, 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, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
First Charges Brought in Investigation of Collusion Among Heir Location Services FirmsRead the Press Release
President and Company to Plead Guilty for Agreeing Not to Compete
The president and CEO of a California-based heir location services provider and his firm have agreed to plead guilty to allocating customers with another heir location firm, announced Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.
Bradley N. Davis, president of Brandenburger & Davis, and his firm will plead guilty to conspiring between 2003 and 2012 to eliminate competition in the heir location services industry. 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.
“The defendants conspired for nearly a decade to enrich themselves at the expense of beneficiaries,” said Assistant Attorney General Baer. “Heirs of relatives who died without a will deserve better. Working with the FBI and our other law enforcement partners, the Antitrust Division will continue to hold the leaders of companies that corrupt the competitive process accountable for their crimes.”
Brandenburger & Davis has agreed to pay an $890,000 criminal fine for its role in the conspiracy. In a separate plea agreement, Davis and the Antitrust Division have jointly agreed to allow the court to determine an appropriate criminal sentence. In addition, both the company and Davis have agreed to assist the government in its investigation. The charge was filed today in the U.S. District Court of the Northern District of Illinois. The terms of the plea agreements are subject to approval of the court.
Today’s charge is the first to result from an 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.
BD and Bradley Davis Information (596.08 KB)
Coloplast Corp. and Liberator Medical Agree to Pay over $3.6 Million to Resolve False Claims Act AllegationsRead the Press Release
The Justice Department announced today that Coloplast Corp., a manufacturer of ostomy and continence care products, and Liberator Medical Supply, Inc., a supplier of medical products, have agreed to pay $3.16 million and $500,000, respectively, to resolve allegations that Coloplast paid kickbacks to several medical suppliers, including Liberator, to induce them to conduct promotional campaigns designed to refer individual users to Coloplast products.
The settlement with Coloplast resolves allegations that it paid kickbacks to Byram Healthcare Centers, Inc.; CCS Medical, Inc.; Liberator; Liberty Medical, Inc. and Handi Medical, Inc., in return for marketing promotions and conversion campaigns. In the case of Byram, Liberty and Handi, Coloplast’s promotional campaigns allegedly included kickbacks in the form of funding for cash incentives – sometimes known as “spiffs” – paid to the suppliers’ sales personnel to induce them to refer patients to Coloplast products. In other instances, Coloplast allegedly gave rebates or price concessions as inducements for the promotional campaigns. The settlement with Liberator resolves Liberator’s alleged receipt of kickbacks from Coloplast in the form of price concessions, in return for Liberator’s agreement to conduct two campaigns promoting Coloplast ostomy products to Liberator’s customers.
“This settlement displays the commitment of the Justice Department to protect vulnerable patients in federal health care programs from corporate marketing practices that are not in those patients’ best interests,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
“The payment of kickbacks to induce purchases of medical supplies undermines our federal health care programs, ultimately distorting consumer purchasing decisions, and increasing health care costs,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts.
“Both of these companies acted with their own self-interests in mind, putting profits over patient care,” said Special Agent in Charge Harold H. Shaw of the FBI Boston Field Office. “The decision on which medical products to refer should be based on what is best for the patient, not on cash incentives or rebates.”
The False Claims Act settlements resolve allegations brought in a whistleblower lawsuit filed by two former employees of Coloplast under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery. Under the False Claims Act, a whistleblower is entitled to receive a share of the federal recovery. The whistleblowers’ share of the Coloplast and Liberator settlements has not been determined. Claims against other defendants in the case remain outstanding.
The investigation was conducted by the FBI and the Department of Health and Human Services Office of Inspector General. The case is being handled by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the District of Massachusetts.
The case is captioned United States ex rel. Herman, et al. v. Coloplast Corp., et al. Case No. 11-cv-12131-RWZ (D. Mass.). The claims resolved by the settlements are allegations only, and there has been no determination of liability.
Gray Television Required to Divest Television Stations in South Bend, Indiana, and Wichita, Kansas, as Part of Schurz Communication AcquisitionRead the Press Release
Proposed Settlement Preserves Competition for Broadcast Television Advertisers
The Department of Justice’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court of the District of Columbia challenging Gray Television, Inc.’s proposed acquisition of Schurz Communication, Inc., and simultaneously filed a proposed settlement that would resolve the competitive harm alleged in the lawsuit.
The division alleged that the proposed transaction would have eliminated head-to-head competition between Gray’s and Schurz’s television stations for the business of local and national advertisers on television stations in South Bend, Indiana, and Wichita, Kansas. The division determined that elimination of this competition would have resulted in higher prices and lower quality services to broadcast television spot advertisers in these markets. The proposed settlement – which must be approved by the court – requires Gray to divest two television stations – the CBS-affiliated WSBT-TV in South Bend and the ABC-affiliated KAKE-TV in Wichita – to department-approved buyers.
“We remain vigilant in protecting competition in local television markets,” said Assistant Attorney Bill Baer of the Justice Department’s Antitrust Division. “Combining these stations under common ownership would have made it more costly for advertisers to communicate with consumers. The antitrust laws render those transactions unlawful.”
Gray is incorporated in the state of Georgia, with its headquarters in Atlanta. Schurz is a privately owned company, with its headquarters in Mishawaka, Indiana. Both Gray and Schurz operate broadcast television stations in various metropolitan areas throughout the United States.
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 David Kully, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Fourth Floor, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.
Gray Schurz PFJ (49.77 KB)
Gray Schurz CIS (56.14 KB)
Gray Schurz Explanation (23.31 KB)
Gray Schurz HSSO (1.32 MB)
Gray Schurz Complaint (145.69 KB)
Federal Jury Finds State of Hawaii Condoned Sexual HarassmentRead the Press Release
Yesterday, a federal jury in Honolulu found that the state of Hawaii and the Hawaii Department of Transportation’s Airports Division (HDOT) discriminated against former employee Sherry Valmoja by subjecting her to sexual harassment. The verdict was returned in a case that the Justice Department filed last year, alleging that the defendants violated Title VII of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, national origin, sex and religion.
The evidence presented at trial showed that during her employment as an explosives detection canine handler at the Honolulu International Airport, Valmoja was subjected to sexual harassment in the form of lewd and unwelcome comments and physical intimidation by a co-worker. The unwelcome conduct and intimidation began as early as November 2008, when both Valmoja and her co-worker were employed by a private company that contracted with the defendants. After both Valmoja and the co-worker became employed by the State of Hawaii, the harassment and intimidation continued.
The jury found that despite timely complaints by Valmoja about her co-worker’s conduct, the defendants failed to take prompt and effective action to remedy the harassment, which continued until March 2011 and created an abusive and hostile working environment. The jury awarded Valmoja $38,000 to compensate her for the pain and suffering she endured because of the harassment. Decisions about additional injunctive relief are still pending; the department has asked for a permanent injunction prohibiting the state of Hawaii from discriminating against its employees, review and revision of defendants’ sexual harassment policies and complaint procedures and training for its employees on discrimination.
“The Justice Department vigorously enforces Title VII to ensure that people can work free from sexual harassment and retaliation,” said Principal Deputy Assistant Attorney Vanita Gupta, head of the Civil Rights Division. “This jury’s verdict sends a loud message and a clear reminder that we will continue to effectively combat sex-based discrimination whenever it occurs in a public sector workplace.”
Valmoja originally filed her sexual harassment charge against HDOT with the Honolulu Field Office of the Equal Employment Opportunity Commission (EEOC), which investigated and determined that there was reasonable cause to believe that discrimination had occurred and referred the matters to the Department of Justice. This lawsuit was brought by the Department of Justice as a result of a project designed to ensure vigorous enforcement of Title VII against state and local governmental employers by enhancing cooperation between EEOC and the Civil Rights Division.
“Sexual harassment remains a significant problem for our nation’s workforce,” said EEOC Chair Jenny R. Yang. “EEOC takes very seriously its obligation to obtain redress for employees who are victims of these egregious practices. This verdict serves as a reminder to employers that they must remain vigilant in preventing and remedying harassment in their workplace.”
More information about Title VII and other federal employment laws is available at the division’s Employment Litigation Section website. The continued enforcement of Title VII is a priority of the Civil Rights Division. Additional information about the Civil Rights Division of the Department of Justice is available on the division website.
EEOC enforces federal laws prohibiting employment discrimination. Further information about EEOC is available on its website.
Texas-Based Importers Agree to Pay $15 Million to Settle False Claims Act Suit for Alleged Evasion of Customs DutiesRead the Press Release
The Department of Justice announced today that University Furnishings LP and its general partner, Freedom Furniture Group Inc. (collectively University Furnishings) agreed to pay $15 million to resolve a lawsuit brought under the False Claims Act alleging that the companies made or conspired with others to make false statements to avoid paying duties on wooden bedroom furniture imported from the People’s Republic of China. Texas-based University Furnishings sells furniture for student housing.
“Those who introduce goods into the United States must comply with the law, including the payment of customs duties meant to protect domestic companies and American workers from unfair competition abroad,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will zealously pursue those who seek an unfair advantage in U.S. markets by evading the duties owed on goods imported into this country.”
The government alleged that between 2009 and mid-2012, University Furnishings knowingly misclassified or conspired with others to misclassify wooden bedroom furniture on documents presented to U.S. Customs and Border Protection (CBP) to avoid paying antidumping duties on imports of wooden bedroom furniture manufactured in the People’s Republic of China. Specifically, University Furnishings allegedly classified the furniture as office and other types of furniture not subject to duties while selling the furniture in the student housing market for use in dormitory bedrooms. The Department of Commerce assesses and CBP collects antidumping duties to protect U.S. businesses by offsetting unfair foreign pricing and foreign government subsidies.
“Companies that cheat, by fraudulently mislabeling their imports, undermine U.S. manufacturers and others that obey the rules, and hurt consumers and taxpayers,” said U.S. Attorney Richard L. Durbin Jr. of the Western District of Texas. “We are hopeful that today’s settlement will help deter others from this type of scheme.”
The allegations resolved by the settlement were originally brought by University Loft Company under the qui tam or whistleblower provisions of the False Claims Act. The act permits private parties to sue on behalf of the United States those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct. The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit. University Loft Company will receive $2.25 million as its share of the settlement.
The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Texas, CBP’s Office of Field Operations, Office of Regulatory Audit and Office of Chief Counsel; and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.
The lawsuit is captioned United States ex rel. University Loft Company v. University Furnishings, LP, et al., No. A13-CV-678 (W.D. Tex.). The claims resolved by this settlement are allegations only; there has been no determination of liability.
Southwest Airlines Agrees to Pay $2.8 Million to Settle Action Alleging Federal Aviation Administration Safety ViolationsRead the Press Release
Southwest Airlines Co. (Southwest) and the United States settled a lawsuit involving allegations that Southwest violated Federal Aviation Administration (FAA) safety regulations in its maintenance of its Boeing 737s, as well as other pending administrative matters, announced the Department of Justice. The settlement requires operational changes by Southwest designed to enhance its oversight of and control over third parties that perform maintenance on Southwest aircraft. Southwest also agreed to pay a $2.8 million civil penalty and up to $5.5 million in deferred civil penalties if it does not implement the operational changes set forth in the settlement agreement.
“The Justice Department believes the settlement agreement with Southwest Airlines Co. will provide meaningful improvements in safety and compliance and further ensure the integrity of FAA air safety regulations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
“Safety depends on compliance with our regulations,” said FAA Administrator Michael Huerta. “This agreement provides strong incentives for Southwest to take specific steps to address the compliance problems that the FAA investigations uncovered.”
This case was handled by the Civil Division’s Federal Programs Branch, with the assistance of the U.S. Attorney’s Office of the Western District of Washington, the FAA’s Office of General Counsel and the FAA’s Northwest Mountain Region.
The lawsuit is captioned United States v. Southwest Airlines Co., 14-cv-1693-JCC (W.D. Wa.). The claims resolved by the settlement are allegations only; there has been no determination of liability.
FBI New York Art Crime Team Has Record Number of Art and Cultural Items Returned in Second Half of 2015, Seeks Public Assistance Locating Other Stolen ItemsRead the Press Release
A Chilean tapestry, the Bark Washington painting, and the Ames Stradivarius violin were returned to their rightful owners following the investigative work and partnerships of the FBI’s New York Art Crime Team. The team is composed of Special Agents Meridith Savona and Christopher McKeogh, whose primary investigative work includes recovering art and cultural property and bringing those responsible for the theft, fraud, looting and trafficking to justice.
The Chilean tapestry known as The Ambassadors of Rome Offering the Throne to Numa Pompilio was returned in September 2015 to the owner’s attorney. The tapestry had been stolen from the owner’s residence in Santiago, Chile, in November 2006, and the theft was reported to INTERPOL Washington. The tapestry was recovered when it was placed for auction in New York in 2014. INTERPOL Washington requested the assistance of the FBI’s New York Art Crime Team on behalf of the Santiago Police to take custody of the tapestry. The case remains open with the Santiago Police. There were no charges filed against the parties attempting to auction the tapestry.
The Bark Washington painting was returned to the Oysterponds Historical Society in Orient, New York, by the FBI’s New York Art Crime Team in September. The painting, along with the Jennie French Potter painting and two whale busks, were stolen in March 2001. The return of the Bark Washington painting was made possible by an individual who bought the painting at an antique shop in East Marion, New York in 2001 for a few hundred dollars. The individual researched the painting on the FBI’s Stolen Art Database and discovered it was stolen. He then contacted the FBI, generously agreeing to return it to the rightful owner. The thief was never, and the case remains open.
A 1734 Stradivarius violin, the Ames Stradivarius, was returned in August to the heirs of deceased violinist Roman Totenberg. The violin was stolen from Mr. Totenberg in 1980, along with two antique bows, following a concert in the Longy School of Music in Cambridge, Massachusetts. It was recovered by the FBI’s New York Art Crime Team in June 2015. The bows are still missing, and the FBI case remains open.
The FBI reminds the public to come forward with any information they may have about the missing items. Tips may be submitted to the FBI’s Art Crime Team at (212) 384-1000 or on our webpage (https://tips.fbi.gov/). Tipsters may remain anonymous. Art and cultural item buyers are recommended to review the FBI’s Stolen Art Database prior to a purchase to avoid civil forfeiture of stolen items.
Department of Justice Announces Leaders of U.S. Marshals Service and Bureau of Alcohol, Tobacco, Firearms and Explosives Will Continue Serving for Duration of AdministrationRead the Press Release
The Department of Justice today announced that both Acting Director David Harlow of the U.S. Marshals Service (USMS) and Deputy Director Thomas E. Brandon of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) will continue to serve as the heads of their respective agencies for the duration of this administration.
“Over the course of their decades in law enforcement, David Harlow and Thomas Brandon have demonstrated themselves to be outstanding public servants and extraordinary partners in the work of building a stronger, safer nation,” said Attorney General Loretta E. Lynch. “As head of the U.S. Marshals Service, David Harlow has led on a range of important issues, from helping to expand the ability of USMS to assist in cases involving missing children, to promoting an understanding of implicit bias, to apprehending violent fugitives. As the leader of ATF, Thomas Brandon has forged broad-based partnerships, advanced intelligence-driven policing and helped shape ATF’s impact as a guardian of public safety. In all of their efforts, they have worked to fulfill America’s highest priorities and most deeply-held values. I am pleased that the American people will continue to receive the benefit of their professionalism, integrity and devotion to duty.”
Harlow became Acting Director of the U.S. Marshals on July 26, 2015. Pursuant to the Vacancies Reform Act, the title of acting director will expire on Feb. 20, 2016, at which time Harlow will continue leading the Marshals as Deputy Director for the duration of this administration.
Brandon became Acting Director of ATF on April 1, 2015. Pursuant to the Vacancies Reform Act, his title of acting director expired on Oct. 27, 2015, and he will continue leading ATF in his role as Deputy Director for the duration of this administration.
Biography of Acting Director David Harlow
David Harlow became the Acting Director of the U.S. Marshals on July 26, 2015, following more than 30 years of dedicated service in the agency. He leads the nation’s oldest and most versatile federal law enforcement agency, responsible for federal judicial security, fugitive apprehension, witness security, asset forfeiture and prisoner operations.
Acting Director Harlow was named the agency’s Deputy Director in February 2014. Since that time, he has focused on ensuring accountability and excellence, and bringing about successful organizational change.
From 2012 to 2014, Acting Director Harlow was the Associate Director for Operations, managing the USMS Operational Directorate, which includes Investigative Operations, Judicial Security, Witness Security, Tactical Operations, Prisoner Operations and the Justice Prisoner and Alien Transportation System.
In May 2012, Acting Director Harlow was promoted to the Senior Executive Service when he was selected as the Assistant Director of the Investigative Operations Division (IOD), overseeing the agency’s extensive fugitive investigations mission. Prior to assuming the position, he was the Acting Deputy Assistant Director of IOD for approximately one year.
Acting Director Harlow served as Chief of the Sex Offender Investigations Branch from 2008 to 2011, overseeing the development and deployment of the agency’s newest investigative program, the Sex Offender Apprehension Program. He also oversaw the interagency National Sex Offender Targeting Center and developed the USMS Behavioral Analysis Unit to assist with prioritizing and targeting non-compliant and fugitive sex offenders.
Before arriving at USMS Headquarters, Acting Director Harlow was the Chief Deputy U.S. Marshal (CDUSM) for the Eastern District of Virginia from 2007 to 2008. Prior to that, he was CDUSM for the Northern District of Ohio, where he served from the time he joined the USMS as a Deputy U.S. Marshal in 1983 until 2007. He made numerous contributions to Northern Ohio over the years, including serving as Commander of Operation FALCON 2007, serving as Deputy Commander of Operation FALCON III, developing the first cooperative fugitive apprehension team consisting of multiple law enforcement agencies in the Toledo area and overseeing the development of the Northern Ohio Violent Fugitive Task Force.
Throughout his career, Acting Director Harlow has received numerous awards, including Attorney General’s Awards, Director’s Awards and several other special act and performance awards. He is also an active member of the Federal Law Enforcement Officers Association.
Acting Director Harlow holds a bachelor’s degree in Law Enforcement Administration from Western Illinois University. He and his wife, Lisa, have two sons, Sean and Brian.
Biography of Deputy Director Thomas E. Brandon
Thomas E. Brandon serves as the Deputy Director and head of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). He was appointed ATF's Deputy Director in October 2011. On April 1, 2015, he was named Acting Director of the agency, and served in that position until October 27th, 2015, when pursuant to the Vacancies Act the title expired. As Deputy Director and head of ATF, Mr. Brandon is responsible for the unique law enforcement agency within the U.S. Department of Justice charged with enforcing firearms and explosives laws and regulations that protect communities from violent criminals and criminal organizations.
At the time of his appointment as Deputy Director in 2011, Mr. Brandon was serving as the Special Agent in Charge of the Phoenix Field Division, directing field operations for ATF in Arizona and New Mexico.
A member of the Senior Executive Service and a seasoned law enforcement professional, Mr. Brandon began his ATF career as a Special Agent in 1989, with Detroit as his first office assignment. Rising through the ranks at ATF, he has served in many management positions including Special Agent in Charge of the Phoenix Field Division and Special Agent in Charge of the Detroit Field Division; Supervisory Special Agent of the Detroit Arson and Explosives Enforcement Group; Special Agent with the Office of Inspection in Washington, D.C.; Supervisory Special Agent of the Achilles Enforcement Group in Los Angeles, California; and as the Division Intelligence Officer with the Phoenix, Arizona, Field Division. Mr. Brandon also held the position of Chief, ATF National Academy, in Glynco, Georgia.
Mr. Brandon is a member of several professional organizations including the International Association of Chiefs of Police (IACP). He earned his Bachelor of Science degree in Business Administration from Oakland University in Rochester, Michigan, in 1987.
Mr. Brandon proudly served in the United States Marine Corps from 1978 to 1982, where his assignments included Embassy duty in Rome, Italy, and Dhahran, Saudi Arabia. Mr. Brandon is a native of New Jersey.
Statement by Deputy Attorney General Sally Quillian Yates on the President's Clemency DecisionsRead the Press Release
Deputy Attorney General Sally Quillian Yates released the following statement after the clemency announcement made today by President Obama:
“The president’s decision today to commute the prison terms of 95 individuals is another sign of this administration’s strong commitment to ensuring fairness in the criminal justice system. The Justice Department has pursued that goal by changing charging policies through our Smart on Crime initiative, working cooperatively with the U.S. Sentencing Commission to reduce guidelines for certain drug offenders, urging Congress to enact meaningful and comprehensive sentencing reform legislation and identifying appropriate candidates for executive clemency. While the clemency initiative is just one prong in the larger effort to reform sentencing practices, it is one to which we are strongly committed.”
Splint Supplier and Its President to Pay over $10 Million to Resolve False Claims Act AllegationsRead the Press Release
Maryland-based splint supplier Dynasplint Systems Inc., and its founder and president, George Hepburn, have agreed to pay approximately $10.3 million to resolve allegations that they violated the False Claims Act by improperly billing Medicare for splints provided to patients in skilled nursing facilities, the Department of Justice announced today.
“Health care companies and their principals who flout Medicare rules will be held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates our continuing vigilance to ensure that companies and individuals do not plunder taxpayer funded programs for their own enrichment.”
“The civil False Claims Act is a valuable weapon in our office’s arsenal to combat abuse of federal healthcare funds here in the Eastern District of Louisiana and nationwide,” said U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana. “The favorable resolution and settlement of the claims in this case serve as a reminder to all in the industry to stay vigilant for signs of waste and abuse by providers in our healthcare markets.”
The government alleged that Hepburn and Dynasplint knowingly mischarged Medicare for splints used by patients in Medicare-certified skilled nursing facilities. Patients staying in skilled nursing facilities, or their insurers such as Medicare, pay a bundled payment to these facilities that cover all of a patient’s needs, including such items as splints, and thus no separate Medicare reimbursement for such devices is permitted. To circumvent Medicare rules, defendants allegedly mispresented that patients were in their homes or other places that were not skilled nursing facilities.
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 $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against federal health care programs.
The settlement resolves allegations originally brought in a lawsuit filed by Meredith Deane, a former sales executive for Dynasplint, under the whistleblower, or qui tam, provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery. The United States may intervene in such an action as it did here. Ms. Deane will receive at least $1.98 million for the settlement.
In August 2013, the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) suspended payments to Dynasplint based upon credible allegations of fraud. As part of the settlement, defendants are agreeing to forfeit all funds held by this payment suspension, approximately $8.5 million.
“CMS’ highest priority is protecting people with Medicare benefits and taxpayers and the agency will continue to hold health care providers and suppliers accountable for following Medicare rules,” said Acting Administrator Andy Slavitt of HHS CMS. “We are pleased to partner with the Department of Justice and law enforcement to safeguard patients, taxpayer funding and the integrity of our programs.”
The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Louisiana and HHS’ Office of Inspector General.
The lawsuit is captioned U.S. ex rel. Deane v. Dynasplint Health Systems, Inc. and George Hepburn, Case No. 10-cv-2085 (E.D. La.). The claims resolved by this settlement are allegations only and there has been no determination of liability.
President Obama Grants Commutations and PardonsRead the Press Release
Today, President Barack Obama granted commutations of sentence to 95 individuals and pardons to two individuals.
The President granted commutations of sentence to the following 95 individuals:
- Donald Allen – Lynn Haven, FL
Offense: Conspiracy to possess with intent to distribute cocaine base; possession with intent to distribute cocaine base; possession of a firearm during a felony drug offense (Northern District of Florida)
Sentence: Life plus five years’ imprisonment; 10 years’ supervised release (Aug. 17, 1998)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Royal Deandre Allen – Houston, TX
Offense: Conspiracy to possess with intent to distribute cocaine base; possession with intent to distribute cocaine base (Southern District of Texas)
Sentence: Life imprisonment; 10 years’ supervised release; $17,500 fine (May 13, 1996)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted.
- Sandra Avery – Sarasota, FL
Offense: Conspiracy to possess with the intent to distribute 50 grams or more of cocaine base; possession with intent to distribute a quantity of cocaine base; possess with the intent to distribute 50 grams or more of cocaine base (three counts); possess with the intent to distribute a quantity of cocaine; possess with the intent to distribute a quantity of cocaine base (Middle District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Jan. 3, 2007)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Jose Aviles – Chicago, IL
Offense: Conspiracy to possess with intent to distribute more than five kilograms of cocaine (Middle District of Florida)
Sentence: Life imprisonment (Apr. 23, 1993)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- George Andre Axam – Atlanta, GA
Offense: Possession of a firearm by a convicted felon (Northern District of Georgia)
Sentence: 180 months’ imprisonment; four years’ supervised release (Jun. 12, 2007)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Ray Bennett – Hazlehurst, GA
Offense: Knowingly conspiring to distribute cocaine base (commonly known as “crack”); knowingly possessing with intent to distribute and causing to be possessed with intent to distribute a quantity of cocaine base (commonly known as “crack”) (Middle District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Nov. 22, 1991)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Wendell Edward Betancourt – Washington, D.C.
Offense: Conspiracy to possess with intent to distribute and to distribute “crack” cocaine (Northern District of West Virginia)
Sentence: 220 months’ imprisonment; five years’ supervised release (Jun. 11, 2002)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Edward B. Betts – Carbondale, IL
Offense: Conspiracy to distribute in excess of 100 kilograms of marijuana (Southern District of Illinois)
Sentence: 360 months’ imprisonment; eight years’ supervised release (Jul. 27, 1992)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and eight-year term of supervised release commuted to two years of supervised release.
- Anthony Bosley – Spokane, WA
Offense: Possession with intent to distribute 50 grams or more of cocaine base (Eastern District of Washington)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Jun. 13, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Ramona Brant – Freeport, NY
Offense: Conspiracy to possess with intent to distribute and distribute a quantity of cocaine and cocaine base (Western District of North Carolina)
Sentence: Life imprisonment; five years’ supervised release (Feb. 2, 1995)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Ivory Charles Brinson – Wabasso, FL
Offense: Possession with intent to distribute five grams or more of cocaine base (Southern District of Florida)
Sentence: 360 months’ imprisonment; eight years’ supervised release (Nov. 15, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Carolyn Yvonne Butler – San Antonio, TX
Offense: Armed bank robbery (three counts); using a firearm during a crime of violence (three counts) (Western District of Texas
Sentence: 48 years’ imprisonment; three years’ supervised release; $1,200 fine; $3,339 restitution (Jul. 30, 1992)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Arnold Charles Cabarris – Victoria, VA
Offense: Distribution of cocaine base; conspiracy to distribute cocaine base (Eastern District of Virginia)
Sentence: 262 months’ imprisonment; five years’ supervised release (Feb. 19, 1999)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Jimmy Lee Carter – Okeechobee, FL
Offense: Possession with intent to distribute cocaine base (Southern District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Jul. 21, 1993)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Sherman Dionne Chester – St. Petersburg, FL
Offense: Conspiracy to possess with intent to distribute cocaine; conspiracy to possess and distribute heroin; distribution of cocaine (six counts); distribution of heroin (five counts); possession with intent to distribute cocaine (Middle District of Florida)
Sentence: Life imprisonment (Feb. 11, 1994)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Herbert Lee Christopher, Jr. – Cordele, GA
Offense: Conspiracy to possess with intent to distribute 50 grams or more of cocaine base (Middle District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Oct. 4, 1991)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Jawariel Coffie – Hollywood, FL
Offense: Conspiracy to possess with intent to distribute cocaine base (Northern District of Florida)
Sentence: Life imprisonment; five years’ supervised release (Oct. 5, 1993)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Michael Reese Coffman – Milton, FL
Offense: Conspiracy to distribute and possession with intent to distribute 500 grams or more of a mixture and substance containing methamphetamine (Northern District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Jul. 21, 2005)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Oscar Cole, Jr. – Bessemer, AL
Offense: Possession with intent to distribute fifty (50) grams or more of a mixture and substance containing cocaine base and cocaine hydrochloride (Northern District of Alabama)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Sep. 21, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Alex Contreras – Anchorage, AK
Offense: Drug conspiracy; distribution of a controlled substance (four counts); possession with intent to distribute a controlled substance (four counts); using, carrying, possessing firearm during drug trafficking crime (three counts) (District of Alaska)
Sentence: 481 months’ imprisonment; five years’ supervised release (Jul. 11, 2002); prison sentence amended to 480 months’ imprisonment (May 27, 2008)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Eddie Lee Cooks – Monroe, LA
Offense: Conspiracy to distribute cocaine base; distribution of cocaine base (three counts) (Western District of Louisiana)
Sentence: Life imprisonment (May 24, 1994)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Lelus Crawford – St. Louis, MO
Offense: Distribution of cocaine base (“crack”) (two counts); possession with intent to distribute cocaine base (“crack”) (Eastern District of Missouri)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Jun. 15, 2007)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Dewayne Crompton – Bakersfield, CA
Offense: Possession with intent to distribute cocaine base (Western District of Wisconsin)
Sentence: Life imprisonment (May 28, 1993)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Charles Frederick Cundiff – Altoona, FL
Offense: Conspiracy to possess with intent to distribute 1,000 kilograms or more of marijuana; attempt to possess with intent to distribute 1,000 kilograms or more of marijuana (Northern District of Florida)
Sentence: Life imprisonment (Jan. 8, 1992)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Thomas Daniels – Philadelphia, PA
Offense: Distribution of cocaine; distribution of cocaine base ("crack cocaine") (Eastern District of Pennsylvania)
Sentence: Life imprisonment (Jun. 26, 1996)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Joe Nathan Darby – Salters, SC
Offense: Possession with intent to distribute and distribution of five grams or more of crack cocaine (two counts); possession with intent to distribute and distribution of 50 grams or more of crack cocaine (District of South Carolina)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (May 25, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Alphonso Davis – Ridgeway, SC
Offense: Conspiracy to violate narcotic laws (crack) (Western District of North Carolina)
Sentence: Life imprisonment; 10 years’ supervised release (Feb. 12, 1996)
Commutation Grant: Prison sentence to expire on April 16, 2016.
- William Ervin Dekle – Lake City, FL
Offense: Conspiracy to import 1,000 kilograms or more of marijuana; conspiracy to possess with intent to distribute 1,000 kilograms or more of marijuana; importation of 100 kilograms of marijuana (four counts); possession with intent to distribute 100 kilograms of marijuana (four counts) (Northern District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release; four years’ special parole (Jun. 7, 1991)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Dianne Demar -- St. Petersburg, FL
Offense: Conspiracy to distribute in excess of 100 grams of methamphetamine; possession with intent to distribute methamphetamine (two counts); unlawful manufacturing of methamphetamine (two counts); possession of a firearm during a drug trafficking crime (Northern District of Georgia)
Sentence: Life plus five years’ imprisonment; 10 years’ supervised release (Dec. 13, 1991)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Eric T. Downs – Mansfield, OH
Offense: Possession with intent to distribute cocaine base (Northern District of Ohio)
Sentence: Life imprisonment (July 18, 1996)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Ernest R. Eads – Seneca, MO
Offense: 1. Conspiracy to distribute methamphetamine (Western District of Missouri
2. Felon in possession of firearms (Western District of Missouri)
Sentence: 1. Life imprisonment; 10 years’ supervised release (Mar. 7, 1997)
2. 12 months’ imprisonment (consecutive) (Mar. 7, 1997)
Commutation Grant: Prison sentences commuted to expire on April 16, 2016.
- Reginald Gerard Ennis – Mobile, AL
Offense: Conspiracy to possess with intent to distribute crack cocaine (Southern District of Alabama)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Apr. 22, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Jimmy Lee Fields – Dundee, FL
Offense: Conspiracy to possess with intent to distribute cocaine and cocaine base (Middle District of Florida)
Sentence: Life imprisonment (Jan. 16, 1996)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Pedro Figueroa – Philadelphia, PA
Offense: Conspiracy to distribute controlled substance; distribution of controlled substance, aiding and abetting (three counts); possession of controlled substance with intent to distribute, aiding and abetting (Eastern District of Pennsylvania)
Sentence: 240 months’ imprisonment; five years’ supervised release; $1,000 fine (Jul. 15, 2003)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Donald Lee Gill – Cincinnati, OH
Offense: Conspiracy to possess with intent to distribute crack cocaine; possession with intent to distribute crack cocaine and aiding and abetting; carrying firearm during a drug trafficking crime (Eastern District of Kentucky)
Sentence: Life imprisonment (Aug. 20, 1997)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Calvin C. Gillings – Chicago, IL
Offense: Possession with intent to distribute cocaine base, “crack”; possession with intent to distribute cocaine (Southern District of Iowa)
Sentence: 360 months’ imprisonment; eight years’ supervised release (Jul. 18, 1997)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Glenn D. Gold – Clarksville, TN
Offense: Conspiracy to possess with intent to distribute cocaine and cocaine base; possession with intent to distribute cocaine and cocaine base; use of a firearm during and in relation to a drug trafficking crime; felon in possession of a firearm (Middle District of Tennessee)
Sentence: Life plus 60 months’ imprisonment; five years’ supervised release (Apr. 23, 1997)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Alberto Gonzalez – Philadelphia, PA
Offense: Conspiracy to distribute more than 500 grams of cocaine; distribution of 1,003 grams of cocaine (Eastern District of Pennsylvania)
Sentence: 262 months’ imprisonment; eight years’ supervised release (May 19, 2003)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Willie James Griffin, Jr. – Pensacola, FL
Offense: Conspiracy to possess with intent to distribute cocaine and cocaine base; possession with intent to distribute cocaine (Northern District of Florida)
Sentence: 252 months’ imprisonment; 10 years’ supervised release; $1,000 fine (Dec. 2, 1999); prison sentence amended to 240 months’ imprisonment (Apr. 14, 2008)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016 and balance of the fine remitted.
- Doyle Grimes, Jr. – Miami, FL
Offense: Conspiracy to possess with intent to distribute 50 grams or more of cocaine base; possession with intent to distribute a detectable amount of cocaine base; possession with intent to distribute five grams or more of cocaine base (Middle District of Florida)
Sentence: 292 months’ imprisonment; 10 years’ supervised release (Apr. 8, 2003); prison sentence amended to 240 months’ imprisonment (Dec. 5, 2014)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Kenneth Hamlin, Jr. – Pittsburgh, PA
Offense: Conspiracy to possess with intent to distribute and distribution of in excess of 50 grams of cocaine base, in excess of 100 grams of heroin, and a quantity of marijuana; possession with intent to distribute and distribution of in excess of 100 grams of heroin
(Western District of Pennsylvania)
Sentence: 360 months’ imprisonment; 10 years’ supervised release (Mar. 4, 1999)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Glenn A. Harris – Elizabeth City, NC
Offense: Distribution of more than five grams of cocaine base (crack) (Eastern District North Carolina)
Sentence: 188 months’ imprisonment; five years’ supervised release; $2,100 restitution (Aug. 8, 2005)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and balance of the restitution obligation remitted.
- Lisa Harris – Arcadia, FL
Offense: Possession with intent to distribute fifty grams or more of cocaine base, crack cocaine; conspiracy to possess with intent to distribute five grams or more of cocaine base, crack cocaine (Middle District of Florida)
Sentence: 235 months’ imprisonment; five years’ supervised release (Nov. 30, 2005)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Antorrian Adrionne Hawkins – Lilburn, GA
Offense: Felon in possession of a firearm; possession with intent to distribute cocaine; possession with intent to distribute cocaine base; possession of a firearm during a drug trafficking crime (Eastern District of Michigan)
Sentence: 300 months’ imprisonment; 10 years’ supervised release (Apr. 12, 2005)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Eugene L. Haywood – Peoria, IL
Offense: Conspiracy to distribute cocaine base (crack); possession of cocaine base (crack) (Central District of Illinois)
Sentence: Life imprisonment; 10 years’ supervised release (Jul. 12, 2002)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Jerome A. Jackson – Washington, DC
Offense: Conspiracy to distribute 50 grams or more of cocaine base: unlawful distribution of cocaine base (two counts) (District of Columbia)
Sentence: Life imprisonment; 10 years’ supervised release (Feb. 18, 1994)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Gloria Louise James – Fort Madison, IA
Offense: Conspiracy to distribute methamphetamine (Southern District of Iowa)
Sentence: 188 months’ imprisonment; five years’ supervised release (Feb. 9, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Angie Jenkins – Klamath Falls, OR
Offense: Conspiracy to manufacture methamphetamine; manufacture of methamphetamine; possession with intent to distribute methamphetamine (District of Oregon)
Sentence: 360 months’ imprisonment; five years’ supervised release (Sep. 22, 1998); prison sentence amended to 324 months’ imprisonment (Jan. 29, 2015)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Allen Johnson – Live Oak, FL
Offense: Distribution of five grams or more of cocaine base (Middle District of Florida)
Sentence: 188 months’ imprisonment; five years’ supervised release (Oct. 3, 2003)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Javon Tyrone Johnson – Saginaw, MI
Offense: Distribution of 50 grams or more of cocaine base (Eastern District of Michigan)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Sep. 30, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Mario Alonzo Johnson – Stockton, CA
Offense: Possession with intent to distribute crack cocaine (Eastern District of California)
Sentence: 288 months’ imprisonment; five years’ supervised release (Jan. 20, 1999)
Commutation Grant: Prison sentence to expire on April 16, 2016.
- Tommy Lynn Johnson – Athens, TX
Offense: Conspiracy to manufacture, distribute and possess with intent to manufacture and distribute methamphetamine; conspiracy to possess a listed chemical knowing it will be used to manufacture a controlled substance; possession of a listed chemical with intent to manufacture a controlled substance (two counts); possession and distribution of a listed chemical with intent to manufacture a controlled substance (two counts); use, carrying and possession of a firearm in furtherance of a drug trafficking crime (two counts); possession of an unregistered firearm (Eastern District of Texas)
Sentence: 511 months’ imprisonment; five years’ supervised release (Jul. 21, 2003); prison sentence amended to 481 months’ imprisonment (Oct. 6, 2015)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Sharanda Purlette Jones – Terrell, TX
Offense: Conspiracy to distribute cocaine base (Northern District of Texas)
Sentence: Life imprisonment; five years’ supervised release (Nov. 10, 1999)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Ryan O’Neil Lansdowne – Haymarket, VA
Offense: Conspiracy to distribute 50 grams or more of cocaine base (Eastern District of Virginia)
Sentence: 292 months’ imprisonment; 10 years’ supervised release (Oct. 20, 2000); prison sentence amended to 262 months’ imprisonment (Apr. 28, 2009)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Chad Robert Latham – Tacoma, WA
Offense: Conspiracy to manufacture marijuana; manufacturing marijuana (Western District of Washington)
Sentence: 180 months’ imprisonment; five years’ supervised release (Jan. 18, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Jimmy Ewell Lee – Bonifay, FL
Offense: Conspiracy to distribute and possess with intent to distribute more than 50 grams of methamphetamine (actual) and more than 500 grams of a mixture and substance containing methamphetamine (Northern District of Florida)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (May 4, 2005)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Carlos Lopez – Lawrence, MA
Offense: Conspiracy to distribute cocaine base; distribution of cocaine base (four counts); possess and carry a firearm during a drug crime; possession of firearm by a prohibited person; possession of firearm with an obliterated serial number (District of New Hampshire)
Sentence: 300 months’ imprisonment; 10 years’ supervised release (May 14, 2003)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Kevin McDonald – Lawrenceville, NJ
Offense: Conspiracy to distribute cocaine base “crack” (Eastern District of Virginia)
Sentence: Life imprisonment (Oct. 17, 2005)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Terry Dennard McNeair – Lexington, NC
Offense: Possess with intent to distribute cocaine base (crack) (Middle District of North Carolina)
Sentence: 360 months’ imprisonment; five years’ supervised release (Nov. 18, 1996)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Michael McRae – Wadesboro, NC
Offense: Conspiracy to possess with intent to distribute cocaine base (Western District of North Carolina)
Sentence: Life imprisonment; 10 years’ supervised release (May 22, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Juan Fernando Mendoza-Cardenas – Houston, TX
Offense: Conspiracy to possess with intent to distribute marijuana (Northern District of Georgia)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Jan. 28, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Billy R. Mercer, Jr. – Slapout, AL
Offense: Possession with intent to distribute methamphetamine; use/carry firearm during and in relation to a drug trafficking crime (Middle District of Alabama)
Sentence: 292 months’ imprisonment; 72 months’ supervised release (May 24, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Alton D. Mills – Chicago, IL
Offense: Conspiracy to possess with intent to distribute and distribution of cocaine base and cocaine and conspiracy to use communication facilities in the commission of drug trafficking offenses; use of communication facility to possess with intent to distribute cocaine base (two counts); possession with intent to distribute cocaine base (Northern District of Illinois)
Sentence: Life imprisonment; (July 14, 1994)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Alphonso Ravon Morrison – Lincolnton, NC
Offense: Conspiracy to possess with intent to distribute and distribute, a quantity of cocaine and cocaine base (Western District of North Carolina)
Sentence: Life imprisonment; 10 years’ supervised release (May 7, 2001)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Matthew Murphy, III – Moreno Valley, CA
Offense: Conspiracy to distribute and possess with intent to distribute in excess of five kilograms of cocaine (Western District of Pennsylvania)
Sentence: 360 months’ imprisonment; 10 years’ supervised release (Nov. 13, 1997)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Darnell Jamar Nash – Ardmore, OK
Offense: Drug conspiracy (Eastern District of Oklahoma)
Sentence: 264 months’ imprisonment; 10 years’ supervised release (Mar. 18, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and 10-year term of supervised release commuted to three years of supervised release.
- Eric L. Orington – Danville, IL
Offense: Possession with intent to distribute more than 50 grams of (crack) cocaine (Central District of Illinois)
Sentence: Life imprisonment; 10 years’ supervised release; $2,000 fine (Sep. 1, 1995)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Lynette Owens – Lehigh Acres, FL
Offense: Possession with intent to distribute five or more grams of cocaine base, “crack cocaine” (Middle District of Florida)
Sentence: 188 months’ imprisonment; four years’ supervised release (Jan. 22, 2007)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- David Padilla – Philadelphia, PA
Offense: Conspiracy; possession with intent to distribute cocaine; carrying a firearm during a drug trafficking crime (Eastern District of Pennsylvania)
Sentence: Life imprisonment plus 60 months’ imprisonment; 10 years’ supervised release (Nov. 18, 1997)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- LaShawn D. Patton – Cahokia, IL
Offense: Conspiracy to distribute cocaine and cocaine base; possession with intent to distribute cocaine; felon in possession of firearm; possession of a firearm in relation to a drug trafficking crime (Southern District of Illinois)
Sentence: 180 months’ imprisonment; eight years’ supervised release (Feb. 24, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and eight-year term of supervised release commuted to four years of supervised release.
- Donald Lamont Postell – Miami, FL
Offense: Conspiracy to possess with intent to distribute five kilograms of cocaine (Western District of North Carolina)
Sentence: 600 months’ imprisonment; 10 years’ supervised release; $20,000 fine (Feb. 1, 1989)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted.
- Lalanda Price – Wellington, FL
Offense: Conspiracy to distribute and to possess with intent to distribute more than 50 grams of cocaine base; possession with intent to distribute more than 50 grams of cocaine base (Northern District of Florida)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Nov. 29, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Lamar Roberson – Savannah, GA
Offense: Conspiracy; distribution of cocaine (two counts) (Southern District of Georgia)
Sentence: Life imprisonment; five years’ supervised release (Dec. 6, 1991)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Kenneth Cordell Robinson – Houston, TX
Offense: Distribution of cocaine base (Southern District of Texas)
Sentence: 262 months’ imprisonment; five years’ supervised release; $5,000 fine (Apr. 21, 2000)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Amador Rodriguez – Chicago, IL
Offense: Conspiracy to distribute cocaine (Northern District of Illinois)
Sentence: Life imprisonment; $25,000 fine (Apr. 24, 1991)
Commutation Grant: Prison sentence commuted to expire on December 18, 2016.
- Felix Roman, Jr. – Reading, PA
Offense: Possession of five grams or more of cocaine base “crack” with the intent to distribute; possession of marijuana with intent to distribute (Eastern District of Pennsylvania)
Sentence: 262 months’ imprisonment; 10 years’ supervised release (Apr. 15, 2003)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Angel Sanchez – Atlantic Beach, FL
Offense: Possession with intent to deliver five or more grams of cocaine (crack); possession of a firearm during or in relation to a drug trafficking crime; felon in possession of a firearm (Eastern District of Pennsylvania)
Sentence: 240 months’ imprisonment; eight years’ supervised release; $1,000 fine (Mar. 13, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted.
- Timothy Bernard Sanchious – Richmond, VA
Offense: Possession with intent to distribute cocaine base, to wit: “crack” (Eastern District of Virginia)
Sentence: 204 months’ imprisonment; five years’ supervised release (Dec. 16, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Michael Santoyo – Saginaw, MI
Offense: Conspiracy to possess with intent to distribute cocaine; possession with intent to distribute cocaine (three counts) (Eastern District of Michigan)
Sentence: Life imprisonment; 20 years’ supervised release; $80,000 fine (May 24, 1993)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Wilbert L. Shoemaker – Tallulah, LA
Offense: Conspiracy to possess with intent to distribute cocaine base and marijuana (Western District of Louisiana)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Feb. 2, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Marcus Stovall – Etowah, TN
Offense: Possession of cocaine base with intent to distribute (Eastern District of Tennessee)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Oct. 21, 2002)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Daron Benjamin Swygert – Gaston, SC
Offense: Possessing with intent to distribute cocaine base (District of South Carolina)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Apr. 13, 2001)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Billie Marie Taylor – Houston, TX
Offense: Did knowingly and willfully conspire, combine, confederate and agree together, with each other, and with other persons, to manufacture methamphetamine; did knowingly and intentionally possess a listed chemical, namely ephedrine, with intent to manufacture methamphetamine; did knowingly use and carry a firearm, namely, a 12 gauge Harrington and Richardson, Inc. shotgun, serial number AX492667, during and in relation to a drug trafficking crime for which the defendant may be prosecuted in a court of the United States, namely, conspiracy to manufacture methamphetamine; did knowingly possess a firearm, namely, a 12 gauge Harrington and Richardson, Inc. shotgun, serial number AX492667, with a barrel length of less than 18 inches and a weapon made from a shotgun with an overall length of less than 26 inches, and such firearm was not registered to the defendant in the National Firearms Registration and Transfer Record (Eastern District of Texas)
Sentence: 412 months’ imprisonment; five years’ supervised release (Feb. 28, 1992); prison sentence amended to 355 months’ imprisonment (Jul. 15, 2015)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Eric Desmond Thomas – Houston, TX
Offense: Conspiracy to possess with intent to distribute cocaine; possession with intent to distribute cocaine base (Southern District of Texas)
Sentence: Life imprisonment; 10 years’ supervised release; $20,000 fine (Sep. 26, 1996)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted.
- Raymond Allen Thomas – Fairbanks, AK
Offense: Possession of controlled substance with intent to distribute (District of Alaska)
Sentence: 265 months’ imprisonment; eight years’ supervised release (Feb. 7, 2005); prison sentence amended to 216 months’ imprisonment (Mar. 4, 2015)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Bruce Lamar Thompson – Dalton, GA
Offense: Conspiracy to possess with the intent to distribute in excess of 500 grams of methamphetamine after sustaining a prior felony drug conviction (Northern District of Georgia)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Jul. 30, 2004)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Keith Demond Thompson – Eastpointe, MI
Offense: Distribution of five grams of more of cocaine base (two counts) (Eastern District of Michigan)
Sentence: 188 months’ imprisonment; eight years’ supervised release (May 24, 2006)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Otis Lee Thompson, Jr. – Houston, TX
Offense: Possession with intent to distribute five grams or more of cocaine base; possession of a firearm in furtherance of a drug trafficking crime; possession of a firearm by a convicted felon; possession with intent to distribute codeine (Southern District of Texas)
Sentence: 195 months’ imprisonment; eight years’ supervised release (Dec. 6, 2005); prison sentence amended to 180 months’ imprisonment (May 20, 2008)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Charles Lee Torian – South Boston, VA
Offense: Conspiracy to possess with intent to distribute more than 50 grams of cocaine base; possess with intent to distribute more than five grams of cocaine base (two counts); possess with intent to distribute more than 50 grams of cocaine base (Western District of Virginia)
Sentence: 300 months’ imprisonment; five years’ supervised release (Apr. 19, 2002)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Maurice Junior Turpin – Lynchburg, VA
Offense: Conspiracy to distribute 50 grams or more of cocaine base (Western District of Virginia)
Sentence: 240 months’ imprisonment; 10 years’ supervised release; $500.00 fine (Jul. 19, 2007)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Tommie Sand Tyree – Birmingham, AL
Offense: Distribution of 50 grams or more of “crack” cocaine (Northern District of Alabama)
Sentence: Life imprisonment; 96 months’ supervised release (Feb. 7, 2007)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Alfonzo Samuel Wallace – Lake Worth, FL
Offense: Conspiracy to distribute cocaine base; possession of cocaine base with intent to distribute, distribution and manufacturing of cocaine base (three counts); possession of cocaine (Southern District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Oct. 23, 1997)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- John Thomas Watters – Midlothian, TX
Offense: Conspiracy to possess with intent to distribute controlled substance (two counts); maintaining drug involved premises; felon in possession of firearms (Northern District of Oklahoma)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (May 26, 2006) Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Monica Ann White – Rock Island, IL
Offense: Conspiracy to distribute cocaine base (“crack”); possess with intent to distribute cocaine base (“crack”); distribute cocaine base (“crack”) (Southern District of Iowa)
Sentence: Life imprisonment; 10 years’ supervised release (Nov. 17, 1998)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
- Shelton L. Williams – Galveston, TX
Offense: Conspiracy to possess with intent to distribute 50 grams or more of crack cocaine; possession with intent to distribute 50 grams or more of crack cocaine (Southern District of Texas)
Sentence: Life imprisonment; 10 years’ supervised release (May 1, 1997)
Commutation Grant: Prison sentence commuted to expire on April 16, 2016.
The President granted pardons to the following two individuals:
- Jon Dylan Girard – Centerville, OH
Offense: Making counterfeit obligations (Southern District of Ohio)
Sentence: Three years' probation, with the special condition of six months' home confinement (Nov. 7, 2002).
- Melody Eileen Homa, fka Melody Eileen Childress – New Kent, VA
Offense: Aiding and abetting bank fraud (Eastern District of Virginia)
Sentence: Thirty days’ home detention; three years’ supervised release conditioned on performance of 200 hours of community service (Dec. 16, 1991).
Peruvian Man Sentenced for Threatening and Defrauding Spanish-Speaking Consumers Through Fraudulent Call CentersRead the Press Release
A resident of Lima, Peru, charged with operating call centers that lied to and threatened Spanish-speaking victims in the United States, convincing them to pay fraudulent settlements, was sentenced today to more than four years in prison in federal district court in Miami, Florida, the Department of Justice and the U.S. Postal Inspection Service (USPIS) announced.
Cesar Luis Kou Reyna, 40, was sentenced to serve 58 months in federal prison to be followed by three years of supervised release for operating telemarketing call centers in Peru that threatened Spanish-speaking victims across the United States with phony debts and other consequences of failure to pay the alleged debts that they did not owe. On Oct. 14, Reyna pleaded guilty to conspiracy to commit mail and wire fraud.
“The threats made by the defendant’s call centers frightened and intimidated Spanish-speaking victims across the United States,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “As this case and other recent ones show, we will track down those responsible for defrauding and threatening American consumers, no matter where the fraudsters reside, what language they speak or which populations they target.”
“The U.S. Postal Inspection Service has a long tradition of protecting postal customers from these types of fraud and bringing those responsible to justice,” said Acting Inspector in Charge Delany De Leon-Colon of the USPIS’s Miami Division. “Every day we protect our postal customers and the general public from falling victim to these scams.”
Kou Reyna owned and controlled a corporation called Fonomundo FC, which operated call centers in Peru and payment and fulfilment operations in Miami. Fonomundo FC and its affiliated call centers used Internet-based telephone calling services to place cold calls to Spanish-speaking residents in the United States. The callers falsely claimed to be attorneys and said that victims had failed to pay for or receive a delivery of products, although the victims had not ordered these products.
The callers claimed that victims would be sued and that the companies would obtain large monetary judgements against them. Some victims were also threatened with negative marks on their credit reports, imprisonment or deportation. The callers said these threatened consequences could be avoided if the victims immediately paid “settlement fees.” Many victims made monetary payments based on these threats.
Kou Reyna was originally charged by criminal complaint and was arrested by USPIS on July 30. He has remained incarcerated since his arrest and was later indicted on Aug. 27.
Principal Deputy Assistant Attorney General Mizer commended USPIS for its investigative efforts and thanked the U.S. Attorney’s Office of the Southern District of Florida for its contributions to the case. The case is being prosecuted by Trial Attorneys Phil Toomajian and Stephen T. Descano of the Civil Division’s Consumer Protection Branch.
Justice Department Announces Joint Resolution with Two Banks Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Edmond de Rothschild (Suisse) SA and Edmond de Rothschild (Lugano) SA (collectively EdR Switzerland) reached a joint resolution under the department’s Swiss Bank Program. EdR Switzerland will pay a penalty of more than $45 million.
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 the joint non-prosecution agreement signed today, EdR Switzerland 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 EdR Switzerland for tax-related criminal offenses.
Edmond de Rothschild (Suisse) SA is a corporation organized under the laws of Switzerland with its headquarters in Geneva, Switzerland, and it operates a subsidiary called Edmond de Rothschild (Lugano) SA (collectively EdR Switzerland). EdR Switzerland, one of the largest private banks in Switzerland, also operates a financial services business in Geneva, Lausanne, Fribourg and Lugano, Switzerland. It offers private banking and wealth management services for individual clients around the world, including U.S. citizens, legal permanent residents and resident aliens.
EdR Switzerland is affiliated with the Edmond de Rothschild Group, an independent, family-controlled financial group focused on high-net-worth individual clients. The Edmond de Rothschild Group was founded in 1953 and currently operates in 19 countries worldwide. In 2012, EdR Switzerland agreed to acquire the Lugano-based Sella Bank AG, which became part of Edmond de Rothschild (Lugano) SA in 2013.
For decades prior to and through 2013, EdR Switzerland aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts. EdR used a variety of means to assist U.S. clients in concealing their undeclared accounts, including by:
- Providing traditional Swiss banking products such as hold mail, code name and numbered account services;
- Assisting clients in using sham entities, such as structures as nominee beneficial owners of the undeclared accounts;
- Providing offshore credit cards, cash cards and debit cards to repatriate funds from the undeclared accounts;
- Structuring transfers of funds from undeclared accounts to evade currency transaction reporting requirements;
- Facilitating the covert repatriation of undeclared accounts via cash withdrawals, the purchase of luxury goods and transfers to the foreign bank accounts of non-U.S. friends, family and business associates;
- Accepting and suggesting the use of Internal Revenue Service (IRS) forms that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts; and
- Divesting U.S. securities from its undeclared U.S. accounts for the purpose of subverting its Qualified Intermediary (QI) Agreement with the IRS.
EdR Switzerland relationship managers assisted numerous U.S. clients in covertly repatriating undeclared account funds by structuring transfers in amounts under $10,000 to avoid detection by U.S. authorities. For example, after numerous discussions with one U.S. client regarding his intent to covertly repatriate his undeclared account funds, an EdR Switzerland relationship manager issued a series of checks in the amount of $8,500 made out to the U.S. client drawn on EdR Switzerland’s bank account at UBS in Switzerland. The same relationship manager also assisted this U.S. client in withdrawing $11,000 in cash before re-depositing $2,000 based on “customs limitations.” In another instance, an EdR Switzerland relationship manager assisted a U.S. client in transferring 145,000 Swiss francs to the Swiss UBS account of a luxury watch maker.
Several EdR Switzerland employees notated the advice they provided regarding the repatriation of undeclared U.S. client funds. One relationship manager noted the following about his discussion with a U.S. client: “Telephonic contact with the account holder. Explained to him the situation with respect to U.S. citizen account holders. Asked what to do. Suggested to him to make a donation to his wife.” An assistant to a different relationship manager made this note in an account file: “Explained to [the niece] our need to close the account (client residing in USA) and only possible solution transfer of account to a person not resident in the USA.”
Certain relationship managers assisted or otherwise facilitated some U.S. individual taxpayers in establishing and maintaining undeclared accounts in a manner that concealed the U.S. taxpayers’ ownership or beneficial interest in said accounts. At least one EdR Switzerland relationship manager coordinated with an external trust company to create and administer an offshore structure incorporated in Singapore. EdR Switzerland relationship managers also knew or had reason to know that U.S. clients used external trust companies and attorneys to create and administer structures incorporated or based in offshore locations such as the British Virgin Islands, Panama and Liechtenstein. For certain U.S. client accounts, EdR Switzerland relationship managers and other employees knowingly accepted and included in EdR Switzerland’s account records IRS Forms W-8BEN (or EdR Switzerland’s substitute forms) provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners.
At least one relationship manager assisted two U.S. clients in closing their undeclared accounts at EdR Switzerland by briefly opening up new individual accounts at EdR Switzerland, into which EdR Switzerland transferred the funds from the undeclared accounts, and then transferred the funds from the new accounts to insurance wrapper accounts in Liechtenstein. Insurance wrappers were marketed to U.S. clients by third-party providers in the wake of the UBS investigation as a means of disguising the beneficial ownership of U.S. clients.
Throughout its participation in the Swiss Bank Program, EdR Switzerland has made comprehensive disclosures regarding its U.S.-related accounts. Among other things, EdR Switzerland provided actionable information concerning numerous U.S. client accounts held at EdR Switzerland since August of 2008 permitting the department to make treaty requests to the Swiss competent authority for U.S. client account records. EdR Switzerland also described in detail its U.S. cross-border business, including the policies or lack of policies that contributed to misconduct committed by relationship managers, supervisory relationship managers and EdR Switzerland management; the supervisory chain overseeing relationship managers; and the names of senior management and legal and compliance officials.
Since Aug. 1, 2008, EdR Switzerland held and managed approximately 950 U.S. client accounts, which included both declared and undeclared accounts, with aggregate peak of assets under management of $2.16 billion. EdR Switzerland will pay a penalty of $45.245 million.
In accordance with the terms of the Swiss Bank Program, EdR Switzerland 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 EdR Switzerland 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 EdR Switzerland 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 Kevin F. Sweeney, 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, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
32 Hospitals to Pay U.S. More Than $28 Million to Resolve False Claims Act Allegations Related to Kyphoplasty BillingRead the Press Release
Thirty-two hospitals located throughout 15 states have agreed to pay the United States a total of more than $28 million to settle allegations that the health care facilities submitted false claims to Medicare for minimally-invasive kyphoplasty procedures, the Justice Department announced today. The Justice Department has now reached settlements with more than 130 hospitals totaling approximately $105 million to resolve allegations that they mischarged Medicare for kyphoplasty procedures.
Kyphoplasty is a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis. In many cases, the procedure can be performed safely and effectively as an outpatient procedure without any need for a more costly inpatient hospital admission. The settlements announced today resolve allegations that the 32 settling hospitals frequently billed Medicare for kyphoplasty procedures on a more costly inpatient basis, rather than an outpatient basis, in order to increase their Medicare billings.
“Charging the government for higher cost inpatient services that patients do not need wastes the country’s vital health care dollars,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that Medicare funds are expended appropriately, based on the medical needs of patients rather than the desire to maximize hospital profits.”
The settling facilities and the amounts they have agreed to pay, include the following:
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The Cleveland Clinic in Cleveland, Ohio, has agreed to pay $1.74 million.
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Citrus Memorial Health System in Inverness, Florida, has agreed to pay $2.6 million.
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Cullman Regional Medical Center in Cullman, Alabama, has agreed to pay $350,000.
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Martin Memorial Medical Center in Stuart, Florida, has agreed to pay $2 million.
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MultiCare Tacoma General Hospital in Tacoma, Washington, has agreed to pay $983,000.
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Norwalk Hospital in Norwalk, Connecticut, has agreed to pay $920,000.
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Princeton Community Hospital Association in Princeton, West Virginia, has agreed to pay $1,513,500.
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Sacred Heart Medical Center in Spokane, Washington, has agreed to pay $906,000.
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Sarasota Memorial Hospital in Sarasota, Florida, has agreed to pay $972,000.
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Spartanburg Regional Health Services District Inc. in Spartanburg, South Carolina, has agreed to pay $1.725 million.
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St. Cloud Hospital in St. Cloud, Minnesota, has agreed to pay $500,000.
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Tampa General Hospital in Tampa, Florida, has agreed to pay $2 million.
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Five hospitals affiliated with Community Health Systems Inc., in Franklin, Tennessee, have agreed to pay a total of $3.5 million.These include:Crestwood Medical Center in Huntsville, Alabama; St. Joseph’s Hospital in Fort Wayne, Indiana; Carolinas Hospital System in Florence, South Carolina; Mary Black Health System in Spartanburg, South Carolina; and Trinity Medical Center in Birmingham, Alabama.
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Five hospitals affiliated with Tenet Health Care Corporation in Dallas, Texas, have agreed to pay a total of $2.2 million. These include:East Cooper Medical Center in Mt. Pleasant, South Carolina; North Fulton Hospital in Roswell, Georgia; Providence Memorial Hospital in El Paso, Texas; St. Francis Hospital in Memphis, Tennessee; and Sierra Medical Center in El Paso.
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Five hospitals formerly owned and operated by Health Management Associates Inc., in Naples, Florida, have agreed to pay a total of $2 million.These include:Biloxi Regional Medical Center in Biloxi, Mississippi; Davis Regional Medical Center in Statesville, North Carolina; Lancaster Regional Medical Center in Lancaster, Pennsylvania; Physicians Regional Medical Center in Naples, Florida; and Riley Hospital in Meridian, Mississippi.
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Three hospitals affiliated with BayCare Health System in Clearwater, Florida, have agreed to pay a total of $1.5 million.These include:Winter Haven Hospital in Winter Haven, Florida; St. Joseph’s Hospital in Tampa, Florida; and St. Anthony’s Hospital in St. Petersburg, Florida.
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Two hospitals affiliated with Banner Health in Phoenix, Arizona, have agreed to pay a total of $2.685 million.These include Banner Boswell Medical Center in Sun City, Arizona, and Banner Thunderbird Medical Center in Glendale, Arizona.
“As has been shown throughout this successful investigation, we will never allow hospitals to put profits ahead of patients,” said U.S. Attorney William J. Hochul Jr. of the Western District of New York. “Decisions regarding potential procedures should be made using sound medical judgment only, not with an eye toward increasing Medicare reimbursements. The public should be assured that any hospital involved in improper kyphoplasty billing will be held accountable for its actions.”
In addition to settlements with over 130 hospitals, the government previously settled with Medtronic Spine LLC, the corporate successor to Kyphon Inc., for $75 million to settle allegations that the company caused false claims to be submitted to Medicare by counseling hospital providers to perform kyphoplasty procedures as inpatient rather than outpatient procedures.
All but three of the settling facilities announced today were named as defendants in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant. The lawsuit was filed in federal district court in Buffalo, New York, by Craig Patrick and Charles Bates. Patrick is a former reimbursement manager for Kyphon, and Bates was formerly a regional sales manager for Kyphon in Birmingham. The whistleblowers will receive a total of approximately $4.75 million from the settlements announced today.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against federal health care programs.
The settlements were the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of New York, the Civil Division’s Commercial Litigation Branch and the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General.
The claims resolved by these settlements are allegations only, and there have been no determinations of liability.
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21st Century Oncology to Pay $19.75 Million to Settle Alleged False Claims for Unnecessary Laboratory TestsRead the Press Release
21st Century Oncology LLC, has agreed to pay $19.75 million to the government to resolve allegations that it violated the False Claims Act by billing federal health care programs for laboratory tests that were not medically necessary, the Justice Department announced today. 21st Century is a nationwide provider of integrated cancer care services that is headquartered in Fort Myers, Florida.
“Today’s settlement demonstrates our unwavering commitment to protect the Medicare trust fund against unscrupulous providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Providers who waste taxpayer dollars by billing for unnecessary services will face serious consequences.”
The settlement announced today resolves allegations that 21st Century submitted claims to Medicare and Tricare for fluorescence in situ hybridization, or “FISH,” tests that were not medically necessary. FISH tests are laboratory tests performed on urine that can detect genetic abnormalities associated with bladder cancer. The government alleged that 21st Century submitted claims for unnecessary FISH tests that were ordered by four of its urologists, Dr. Meir Daller, Dr. Steven Paletsky, Dr. David Spellberg and Dr. Robert Scappa, all of whom practiced in the Fort Myers area. The government also alleged that 21st Century encouraged these physicians to order unnecessary FISH tests by offering bonuses that were based in part on the number of tests referred to 21st Century’s laboratory. Today’s settlement resolves the civil liability of 21st Century only.
“Charging the government for clearly unnecessary medical services squanders taxpayer dollars,” said U.S. Attorney A. Lee Bentley, III of the Middle District of Florida. “Our office will continue to pursue health care providers who defraud the United States, thereby threatening the viability of government health care programs, such as Medicare.”
“These tests were ordered to increase profits, not improve the healthcare of patients,” said Special Agent in Charge Shimon Richmond of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “This kind of unvarnished fraud is an attack on Medicare by unscrupulous providers and the OIG and its federal partners will take whatever steps are necessary to stop them.”
“This settlement demonstrates the commitment of the Defense Criminal Investigative Service (DCIS) and its law enforcement partners to protect the integrity of the U.S. military health care program (TRICARE) against fraudulent claims for medical services, said Special Agent in Charge John F. Khin of DCIS’s Southeast Field Office.”
The settlement resolves allegations originally brought in a lawsuit filed by a whistleblower under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery. The whistleblower, a former 21st Century Oncology LLC medical assistant, will receive $3.2 million as her share of the recovery in this case.
The investigation was handled by the Civil Division’s Commercial Litigation Branch and the Fort Myers Division of the U.S. Attorney’s Office of the Middle District of Florida with assistance from HHS-OIG, DCIS and the FBI.
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 $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against federal health care programs.
The lawsuit is captioned United States, State of Florida, ex rel. Mariela Barnes v. Dr. David Spellberg, 21st Century Oncology and Naples Urology Associates, Civil Action No. 2:13-cv-228-FtM-38DNF (M.D. Fla.). The claims resolved by the settlement are allegations only, and there has been no determination of liability.
The Departments of Justice and Labor Announce Expansion of Worker Endangerment Initiative to Address Environmental and Worker Safety ViolationsRead the Press Release
Justice Department’s Environment and Natural Resources Division Will Work with the Department of Labor and U.S. Attorneys for Broader Look at Environmental and Workplace Safety Crimes
In an effort to prevent and deter crimes that put the lives and the health of workers at risk, the Departments of Justice and Labor announced today a plan to more effectively prosecute such crimes. Under the new plan, the Justice Department’s Environment and Natural Resources Division and the U.S. Attorneys’ Offices will work with the Department of Labor’s Occupational Safety and Health Administration (OSHA), Mine Safety and Health Administration (MSHA) and Wage and Hour Division (WHD) to investigate and prosecute worker endangerment violations.
“On an average day in America, 13 workers die on the job, thousands are injured and 150 succumb to diseases they obtained from exposure to carcinogens and other toxic and hazardous substances while they worked,” said Deputy Attorney General Sally Quillian Yates. “Given the troubling statistics on workplace deaths and injuries, the Department of Justice is redoubling its efforts to hold accountable those who unlawfully jeopardize workers’ health and safety.”
“Safety and security in the workplace are a shared commitment. Workplace injuries and illnesses cause an enormous amount of physical, financial and emotional hardship for workers and their families and underscore the urgent need for employers to provide a safe workplace for their employees,” said Department of Labor Deputy Secretary Chris Lu. “Today’s announcement demonstrates a renewed commitment by both the Department of Labor and the Department of Justice to utilize criminal prosecution as an enforcement tool to protect the health and safety of workers.”
Starting last year, the Departments of Justice and Labor began meetings to explore a joint effort to increase the frequency and effectiveness of criminal prosecutions of worker endangerment violations. This culminated in a decision to consolidate the authorities to pursue worker safety statutes within the Department of Justice’s Environment and Natural Resource Division’s Environmental Crimes Section. In a memo sent today to all 93 U.S. Attorneys across the country, Deputy Attorney General Yates urged federal prosecutors to work with the Environmental Crimes Section in pursuing worker endangerment violations. The worker safety statutes generally provide for only misdemeanor penalties. However, prosecutors have now been encouraged to consider utilizing Title 18 and environmental offenses, which often occur in conjunction with worker safety crimes, to enhance penalties and increase deterrence. Statutes included in this plan are the Occupational Safety and Health Act (OSH Act), the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) and the Mine Safety and Health Act (MINE Act).
“We have seen that employers who are willing to cut corners on worker safety laws to maximize production and profit, will also turn a blind eye to environmental laws,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division. “Working with our partners in the Department of Labor and law enforcement, we will remove the profit from these crimes by vigorously prosecuting employers who break safety and environmental laws at the expense of American workers.”
“Every worker has the right to come home safely. While most employers try to do the right thing, we know that strong sanctions are the best tool to ensure that low road employers comply with the law and protect workers lives,” said Assistant Secretary for Occupational Safety and Health Dr. David Michaels. “More frequent and effective prosecution of these crimes will send a strong message to those employers who fail to provide a safe workplace for their employees. We look forward to working with the Environment and Natural Resources Division to enforce these life-saving rules when employers violate workplace safety, workers’ health and environmental regulations.”
In addition to prosecuting environmental crimes, the Environment and Natural Resources Division has also been strengthening its efforts to pursue civil cases that involve worker safety violations under statutes such as the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act and the Toxic Substances Control Act. Violations of a number of provisions under these statutes can have a direct impact on workers tasked with handling dangerous chemicals and other materials, cleaning up spills and responding to hazardous releases.
For more information, visit: www.justice.gov/enrd/worker-endangerment/
Oregon Woman Indicted in Tax Refund Fraud SchemeRead the Press Release
A Portland, Oregon, resident was indicted by a federal grand jury yesterday for one count of conspiracy to defraud the United States, 12 counts of wire fraud, 12 counts of filing false claims for tax refunds, four counts of theft of government funds and one count of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, Acting U.S. Attorney Billy J. Williams for the District of Oregon and Special Agent in Charge Teri L. Alexander for the Internal Revenue Service (IRS) Criminal Investigation.
Danyelle Calcagno is alleged to have conspired with others to file fraudulent income tax returns with the IRS between January 2008 and April 2011. Calcagno is alleged to have checked into Portland-area hotel rooms to use the hotels’ Internet connections to file at least 32 fraudulent federal income tax returns using the personal identifying information of third parties seeking refunds of at least $167,932. According to the indictment, Calcagno received more than $25,000 in fraudulently procured refunds into her own bank account. Additionally, Calcagno allegedly directed the IRS to deposit refunds onto stored-value debit cards issued in other people’s names.
If convicted, Calcagno faces a statutory maximum sentence of 10 years in prison for the conspiracy charge, five years in prison for each count of filing false claims, 10 years in prison for each count of theft of government funds and 20 years in prison for each count of wire fraud. Calcagno is subject to a mandatory two year sentence on the aggravated identity theft charge, which will run consecutive to any other term of imprisonment she receives. If convicted, Calcagno could be subject to fines, monetary penalties and mandatory restitution.
Acting Assistant Attorney General Ciraolo, Acting U.S. Attorney Williams and Special Agent in Charge Alexander thanked special agents of the IRS-Criminal Investigation’s Stolen Identity Refund Fraud Task Force, who investigated the case and Trial Attorney Leslie A. Goemaat of the Tax Division, who is 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.
New York Tax Return Preparer Pleads Guilty to Preparing False Tax ReturnsRead the Press Release
A Brooklyn, New York tax return preparer pleaded guilty today in the U.S. District Court for the Eastern District of New York to one count of aiding and assisting in the preparation of false tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Phillip Baynes, 51, was charged in a 31-count indictment with preparing false tax returns for tax years 2008, 2009 and 2010 for 12 clients of his tax return preparation business, Small Mans Accounting and Tax Service, located in Brooklyn. The indictment filed last March alleged that Baynes included false and fraudulent expenses on the clients’ tax returns, including false itemized deductions for charitable contributions and unreimbursed employee expenses.
U.S. District Judge Kiyo A. Matsumoto set sentencing for May 31, 2016. Baynes faces a statutory maximum sentence of three years in prison and a $250,000 fine.
Acting Assistant Attorney General Ciraolo thanked agents of Internal Revenue Service– Criminal Investigation, who investigated the case and Trial Attorneys Mark Kotila and Brittney N. Campbell 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.