District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
Justice Department Announces Three Banks Reach Resolutions Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Bordier & Cie Switzerland (Bordier), PBZ Verwaltungs AG (PBZ) and PostFinance AG reached resolutions under the department’s Swiss Bank Program. These banks collectively will pay penalties of more than $15 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 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.
Bordier was founded in 1844 in Geneva, Switzerland, where it maintains its headquarters. Five generations of the Bordier family have run the bank over the subsequent 170 years. Bordier has three additional Swiss offices in Zurich, Bern and Nyon, and outside of Switzerland, Bordier has two asset management companies – one in London and one in Paris. Additionally, Bordier is affiliated with two independent entities with local banking licenses: Bordier Bank (TCI) Ltd., established in 1986 under the laws of the Turks and Caicos, and Bordier & Cie (Singapore) Ltd., established in 2011 under the laws of Singapore. Structurally, Bordier is led by its “Comité de Direction,” which is composed of the partners, the chief financial/administrative officer, the General Counsel, the communications director and two senior wealth managers.
Bordier was aware that some of its U.S. clients were using their accounts at Bordier to evade U.S. taxes and reporting requirements. In certain account files, Bordier had notes stating, “Declared: No.” In other instances, the U.S. taxpayer-client informed Bordier that he or she did not plan to declare his or her account in the United States. For one account, a U.S. taxpayer-client refused to provide a copy of his passport, despite repeated requests from Bordier, and in 1998, this client signed bank forms with a fake signature to avoid potential recognition. This accountholder eventually told Bordier that he did not want to declare the account in the United States because he was a lawyer and would be disbarred. In 2000, one U.S. taxpayer-client informed Bordier, “I am glad to know that there are no U.S. securities subject to U.S. withholding tax. I do not intend to declare this account to the U.S. authorities.” For one account where the ultimate beneficial owner was a U.S. person, Bordier noted in the files, “Client will introduce a South African friend domiciled in Monaco who will invest in USA and transfer funds to the client.”
In a limited number of instances, Bordier actively facilitated the evasion of U.S. taxes and reporting requirements for some of its U.S. accountholders. For example, Bordier made repeated transfers of undeclared assets under $10,000 to the Montreal bank account of a U.S. taxpayer-client in Canada in order to help the client avoid U.S. tax and reporting obligations and keep the undeclared assets hidden. For one such transfer, the U.S. taxpayer-client requested his “usual order of chocolate” from Bordier in order to institute these transfers. Bordier was aware that the U.S. taxpayer-client withdrew the amounts in cash: “Telephone [call from U.S. taxpayer-client]. Please transfer US$8,000 to Montreal as usual. He will pick up the cash. . . .” In 2002, according to file notes made by the former relationship manager, Bordier transmitted undeclared assets to a U.S. taxpayer-client in a hidden manner (“sous forme cache” in French). Bordier’s conduct allowed the bank to increase the undeclared U.S. taxpayer assets that it managed, thereby increasing the fees it generated.
Another U.S. taxpayer-client refused to sign Bordier’s Declaration of Non-U.S. Status form, which would have indicated that she was a U.S. person, despite it being required as part of Bordier’s account opening procedures. When the U.S. taxpayer-client asked Bordier about the impact of the UBS investigation, Bordier told the U.S. taxpayer-client that she “cannot call, that her capital is protected and that she multiplies her risks by calling the bank often. She should only call once a year when she is in Europe.”
From 2008 to the present, Bordier maintained approximately 292 U.S.-related accounts with a total of $440.8 million in assets under management. Bordier will pay a penalty of $7.827 million.
PBZ was a private bank operating in Zurich. From 2001 to November 2013, PBZ Verwaltungs AG operated as AKB Privatbank Zürich AG and was a subsidiary of Aargauische Kantonalbank. Prior to 2001, PBZ operated as BFZ Bankfinanz AG, a bank founded in 1988 and headquartered in Zurich. In November 2013, Aargauische Kantonalbank sold AKB Privatbank to Privatbank IHAG Zürich AG, and since July 2014 it has operated as PBZ Verwaltungs AG. PBZ Verwaltungs AG has ceased its banking activities and had its banking license revoked by Aug. 29, 2014.
As early as 2008, PBZ knew that some U.S.-related accounts held untaxed funds, which were described within PBZ in one instance as “Schwarzgeld” or “black money.” PBZ knew that U.S. persons had a duty under U.S. law to report their income to the Internal Revenue Service (IRS) and to pay taxes on that income, including all income earned in accounts maintained by PBZ in Switzerland. Despite this knowledge, PBZ 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 U.S. Department of the Treasury, as U.S. law required. As of Feb. 19, 2010, PBZ formally renounced its previous practice of accepting “manifestly untaxed assets from foreign clients.”
In 2001, PBZ entered into a Qualified Intermediary (QI) agreement with the IRS. As a QI, PBZ agreed to supply the IRS with information and to withhold tax in connection with trades in U.S. securities. The agreement’s purpose was to ensure that, with respect to U.S. securities held in an account at PBZ, non-U.S. accountholders would be subject to the proper U.S. tax rates on withholding and that U.S. accountholders would properly pay U.S. taxes. As a practical matter, PBZ reported income pursuant to the QI agreement on only one of its U.S.-related accounts. For each U.S. client who did not provide a W-9, PBZ blocked any trading in U.S. securities, which, in PBZ’s view, obviated any payment or reporting obligation under the QI agreement.
PBZ opened accounts for foundations and other entities set up in Panama, Liechtenstein and any of several island countries – the Bahamas, the British Virgin Islands, the Cayman Islands, the Marshall Islands, St. Kitts and Nevis and the Turks and Caicos Islands – that PBZ knew were beneficially owned by U.S. persons. For instance, accounts were opened for three British Virgin Islands corporations that really belonged to a single U.S. person as the beneficial owner. In another instance, a U.S. resident beneficial owner of a Marshall Islands corporation gave instructions on an account nominally held by a domiciliary entity that resulted in the transfer of the account to the beneficial owner’s brother, who lived abroad.
PBZ also offered a variety of traditional Swiss banking services – including hold mail and numbered accounts – that it knew could assist, and did assist, U.S. taxpayers in concealing their identity from the IRS by minimizing the paper trail associated with their undeclared assets and income. From time to time, PBZ assisted its U.S. clients in sending money to themselves, relatives, business partners or other businesses in the United States by issuing checks drawn on PBZ’s own bank account. Issuing such checks is a service routinely provided by banks to clients and is similar to cashier’s checks in the United States. But under the circumstances present with respect to the U.S. clients, because these checks listed only PBZ as the accountholder, they did not reveal that the funds were ultimately paid out of the U.S. clients’ Swiss bank account. One such check issued was in the amount of $301,000. U.S. clients were thus able to utilize this technique to conceal their ownership of a Swiss bank account.
From at least 2008 through 2014, PBZ maintained and serviced 171 U.S.-related accounts having a maximum aggregate value of more than $101 million. PBZ will pay a penalty of $5.57 million.
PostFinance, headquartered in Bern, is a wholly-owned subsidiary of Swiss Post, the Swiss state-owned enterprise responsible for Swiss postal and other essential public infrastructure services. The Swiss parliament established PostFinance’s predecessor in 1906 to provide payment services to retail customers. PostFinance operated as a division of Swiss Post until June 26, 2013, when it became a bank under Swiss law.
For decades, PostFinance has provided the predominant means of payment in Switzerland. Customers pay bills and receive payments, electronically or in person, at post offices in Switzerland through PostFinance accounts. PostFinance has 45 branch offices, all in Switzerland, and roughly 40 percent of Swiss residents have an account with PostFinance. Until 2008, the names of PostFinance’s customers were publicly available. PostFinance was not subject to Swiss bank secrecy laws until June 26, 2013, when it received its license to operate as a bank under Swiss law.
Before and since Aug. 1, 2008, PostFinance was required by Swiss law and government mandate to provide accounts to persons living in Switzerland, regardless of nationality, and to Swiss nationals living outside of Switzerland. Consequently, PostFinance provided accounts to U.S. taxpayers living in Switzerland, as well as to Swiss nationals living in the United States, including U.S.-related accountholders who transferred assets to PostFinance from UBS or other banks under investigation by the department.
PostFinance has never offered private banking or wealth management services to any of its customers. Instead, PostFinance engaged in basic consumer retail banking and payment services. U.S. taxpayers resident in Switzerland, as well as U.S.-Swiss dual nationals, may obtain “current” accounts, which are comparable to checking accounts in the United States. Savings accounts, fixed income retirement accounts and credit cards may be obtained only by Swiss residents.
PostFinance was aware that citizens and resident aliens of the United States had a legal duty to report their assets and income to the IRS and to pay taxes on the basis of all their income, including income earned from accounts that PostFinance maintained on their behalf. Largely due to its obligations under Swiss law, however, PostFinance nevertheless opened and maintained undeclared accounts belonging to customers who were subject to U.S. tax and were not complying with their U.S. tax obligations.
Since Aug. 1, 2008, PostFinance maintained a total of 2,731 U.S.-related accounts having a maximum aggregate value of approximately $290 million. PostFinance will pay a penalty of $2 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 Kaycee M. Sullivan, Brian D. Bailey and Paul G. Galindo, 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.
-
Former Tax Return Preparer Pleads Guilty to Theft of Public Money and Aggravated Identity TheftRead the Press Release
A former tax return preparer and resident of New Orleans, Louisiana, pleaded guilty today to one count of theft of public funds and one count of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U. S. Attorney Kenneth A. Polite, Jr. for the Eastern District of Louisiana.
Donald Stewart, 59, prepared tax returns under the business names Stewart’s Tax Service and Stewart LTD from approximately 2001 through 2008, before the Internal Revenue Service (IRS) suspended his Electronic Filing Information Number, according to court documents. Stewart admitted that he used the means of identification of individuals, including their names and social security numbers, without lawful authority, to electronically file false federal income tax returns with the IRS that claimed income refunds. From January 2011 through February 2012, Stewart caused approximately $37,809 in federal and state tax refunds in the names of others to be electronically deposited into bank accounts under his control. Stewart also admitted to cashing or depositing U.S. Treasury checks totaling approximately $539,393 and payable to other individuals at a bank in the New Orleans area.
U.S. District Judge Eldon E. Fallon set sentencing for March 17, 2006. Stewart faces a statutory maximum sentence of 10 years in prison for the theft of public money charge and a mandatory term of two years in prison for the aggravated identity theft charge, which must run consecutive to any other prison term he receives. As to each count, Stewart also faces a fine of $250,000, or twice the gross gain or loss caused by the offense and terms of supervised release.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Polite thanked special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Hayden Brockett and Trial Attorney Lauren M. Castaldi 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.
Departments of Justice, Homeland Security and Labor Announce Selection of Phase II Anti-Trafficking Coordination TeamsRead the Press Release
The U.S. Departments of Justice, Homeland Security and Labor announced today the selection of six new Anti-Trafficking Coordination Teams. These teams will lead Phase II of the ACTeam Initiative, an interagency effort to streamline federal criminal investigations and prosecutions of human trafficking offenses.
The six new ACTeams will be based in Cleveland; Minneapolis; Newark, New Jersey; Portland, Maine; Portland, Oregon; and Sacramento, California. Each team will serve under the leadership of the local U.S. Attorney and the highest-ranking federal investigative agents in the regional field offices of the FBI, U.S. Immigration and Customs Enforcement (ICE) and Department of Labor.
“Human trafficking robs victims of their liberty, exploits them for labor and for sex, and infringes not only on their rights, but on their essential humanity,” said Attorney General Loretta E. Lynch. “Through the ACTeam Initiative, we are harnessing resources across the federal government to ensure that our multi-agency fight against human trafficking is as comprehensive and effective as possible. In the days and months ahead, the Department of Justice will continue to work alongside our federal partners to prosecute wrongdoing, support survivors, and bring this devastating crime to an end.”
“The Anti-Trafficking Coordination Team (ACTeam) Initiative is an important tool in our collective ability to combat sex trafficking, forced labor and domestic servitude here in the United States,” said Secretary Jeh C. Johnson of Homeland Security. “It highlights our commitment to increase capacity to rescue victims and bring perpetrators of these terrible crimes to justice. Our collective efforts are amplified when we work together in furtherance of shared missions like this. And, through DHS’s Blue Campaign, we will remain focused on ending human trafficking in the United States.”
“A trafficking victim shouldn’t have to spend time trying to determine whether they have a Department of Labor issue or a Department of Justice issue,” said Secretary Thomas Perez of the Department of Labor. “Their basic rights are being violated, and we can accomplish so much more to redress those crimes when we work together. The Anti-Trafficking Coordination Team Initiative, by bringing our respective departments’ collective resources and expertise to bear, is helping us build a whole even greater than the sum of our individual parts.”
“Human trafficking is a modern day form of slavery that destroys lives and exploits the most vulnerable in our society,” said Director James B. Comey of the FBI. “These Anti-Trafficking Coordination Teams are the most effective way to investigate human trafficking by allowing us to work in a collaborative, victim-oriented manner.”
The new teams were selected by unanimous consensus of the Federal Enforcement Working Group after a rigorous, competitive and nationwide selection process. The group includes subject matter experts from the Department of Justice (including the Civil Rights Division’s Human Trafficking Prosecution Unit, the Executive Office of U.S. Attorneys and the FBI’s Civil Rights Unit); the Department of Homeland Security (including ICE and Homeland Security Investigations’ Human Smuggling and Trafficking Unit); and the Department of Labor (including the Office of the Inspector General and the Wage and Hour Division).
The new ACTeams will collaborate with the human-trafficking subject matter experts in the Federal Enforcement Working Group to implement a strategic action plan in their respective districts. Over the next two years, teams are expected to develop high-impact federal investigations and prosecutions, dismantle human-trafficking networks, vindicate the rights of human-trafficking victims and bring traffickers to justice.
Launched in 2011 by the Attorney General and Secretaries of Labor and Homeland Security, the ACTeam Initiative established six Phase I ACTeams in Atlanta; El Paso, Texas; Kansas City, Missouri; Los Angeles; Memphis, Tennessee; and Miami. In these ACTeam districts, prosecutions of forced labor, international sex trafficking and adult sex trafficking rose even more markedly than they did nationally. For instance, the number of defendants convicted rose 86 percent in ACTeam districts, compared to 14 percent in non-ACTeam districts, and 26 percent nationwide. Based on this demonstrated record of success, Attorney General Lynch, Labor Secretary Perez and Homeland Security Secretary Johnson launched Phase II of the ACTeam Initiative earlier this year. The fight against human trafficking remains a top priority for the three officials and they have committed to collaborating with other governmental and non-governmental partners to continue to enhance their anti-trafficking efforts.
North Carolina Man Charged in Fraudulent U.S. Treasury Check SchemeRead the Press Release
A federal grand jury sitting in Raleigh, North Carolina, returned an indictment, which was unsealed today against a Raleigh man, charging him with one count of conspiracy to commit theft of public money and 22 counts of theft of public money, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Thomas G. Walker for the Eastern District of North Carolina.
According to the indictment, in 2011 and 2012, Wilfredo Acosta Hidalgo conspired with two check cashers to cash U.S. Treasury checks issued as a result of fraudulent tax returns filed in the names of third-parties. Hidalgo provided U.S. Treasury checks ranging in value from $4,000 to $8,000 to the check cashers. These checks were issued to third parties in whose names the fraudulent tax returns were filed. The third-party payees purportedly lived in Florida, North Carolina, Virginia, Maryland, Delaware, Pennsylvania and New Jersey. The check cashers deposited the U.S. Treasury checks into their business bank accounts and then provided Hidalgo with cash equal to the value of the check minus a check cashing fee. The third-party payees were not present when the checks were cashed.
If convicted, Hidalgo faces a statutory maximum sentence of five years in prison for the conspiracy charge and 10 years in prison for each count of theft of public funds. He also faces substantial monetary penalties, supervised release and restitution.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Walker commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Nathan P. Brooks and Lauren M. Castaldi of the Tax Division, who are prosecuting this case. Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office for the Eastern District of North Carolina for its assistance.
An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Justice Department Settles Sex Discrimination Lawsuit Against the Chicago Board of EducationRead the Press Release
The Department of Justice announced today that it has reached a settlement with the Chicago Board of Education, which oversees the third largest school district in the United States, to resolve allegations that the board discriminated against pregnant teachers in violation of federal law.
The civil lawsuit, filed on Dec. 23, 2014, in federal district court in Chicago, alleged that the board engaged in a pattern or practice of discrimination against pregnant teachers employed at Scammon Elementary School by subjecting them to terminations because of their pregnancies. The board’s actions violated Title VII of the Civil Rights Act of 1964, according to the department’s complaint. Title VII is a federal statute that prohibits employment discrimination on the basis of sex, race, color, national origin and religion. Federal law explicitly prohibits employers from discriminating against female employees due to pregnancy, childbirth or related medical conditions.
“Today, the Chicago Board of Education takes an important step toward ensuring that no woman loses her job, faces discipline or endures threats because of her pregnancy,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “Our settlement establishes critical measures to provide a workplace environment free from sex-based discrimination.”
Under the terms of the settlement agreement, which must be approved by the district court, the board must change its personnel policies to guard employees against discrimination on the basis of sex and pregnancy; establish training requirements for supervisors and staff that reinforce its commitment to providing a workplace environment free of sex-based discrimination; and pay $280,000 in back pay and compensatory damages to eight women harmed by the practices challenged by the department.
The department brought this lawsuit as a result of a joint effort to enhance collaboration between the Equal Employment Opportunity Commission (EEOC) and the Department’s Civil Rights Division for vigorous enforcement of Title VII. “Stronger policies and training to prevent pregnancy discrimination are critical to the economic security of women and their families,” said Chair Jenny R. Yang of EEOC. “Firing a woman because she is pregnant is simply against the law and EEOC remains committed to vigorous enforcement of the law.”
The Chicago District Office of EEOC investigated charges of discrimination made by Scammon teachers. After finding reasonable cause that discrimination occurred, EEOC attempted to resolve the charges before referring them to the Department of Justice for litigation.
“That a public school engaged in a pattern of firing teachers because of their pregnancies is dismaying to say the least,” said Director Julianne Bowman of EEOC’s Chicago District. “This settlement puts in place meaningful measures to eradicate the kind of antiquated thinking that resulted in the loss of these dedicated female educators from Scammon Elementary School.”
The continued enforcement of Title VII has been a priority of the Justice Department’s Civil Rights Division. Additional information on the Civil Rights Division’s work is available on its website at www.justice.gov/crt/. EEOC has made addressing pregnancy discrimination a strategic enforcement priority, and last year issued updated guidance available at www.eeoc.gov/laws/types/pregnancy_guidance.cfm.
Chicago Board of Education Settlement Agreement
Department of Justice Appoints Veterans Law Enforcement Executive to Lead New Policing Practices and Accountability InitiativeRead the Press Release
Department of Justice, Office of Community Oriented Policing Services (COPS) Director Ronald Davis today announced the appointment of Noble Wray, retired Madison, Wisconsin, police chief, to lead its newly created Policing Practices and Accountability Initiative.
The creation of the new initiative follows a recommendation of the President’s Task Force on 21st Century Policing. The report also calls on the COPS Office to assist the field in implementing task force recommendations. Specifically, recommendation 7.3 charges the COPS Office with “assisting the law enforcement field in addressing current and future challenges” and to “create a National Policing Practices and Accountability Division.” Wray will serve as chief of this new initiative.
The new COPS Office initiative will also oversee the collaborative reform and critical response technical assistance programs and assist the law enforcement field in developing strategies to implement task force recommendations, work closely with law enforcement and elected officials to provide technical assistance, identify industry best practices and provide crisis response services.
“The recommendations from the President's Task Force on 21st Century Policing serve as a blueprint for reducing crime while building trust and legitimacy,” said Director Davis. “Chief Wray's background and extensive experience make him the ideal candidate to lead this effort.”
Wray comes to the Department of Justice’s COPS Office after serving close to 30 years at the Madison Police Department, with nine as chief of police. Wray is a widely respected law enforcement leader recognized for his community policing efforts and work to build trust between the police and the communities they serve. He has worked with the Department of Justice to provide training to more than 200 law enforcement agencies on fair and impartial policing. He has also consulted with law enforcement on topics such as “Blue Courage,” which emphasizes improving police culture and leadership; police legitimacy and procedural justice; and the “nobility of policing,” which focuses on the purpose of policing in a democratic society.
Wray has also served on a number of non-profit boards in the Madison area, including serving as interim CEO for the Urban League of Greater Madison, Wisconsin, and board president for the United Way of Dane County.
He has a Bachelor of Science in Criminal Justice from the University of Wisconsin, Milwaukee.
The COPS Office, headed by Director Ronald Davis, is a federal agency responsible for advancing community policing nationwide. Since 1995, the COPS Office has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local and tribal law enforcement agencies to fund the hiring and redeployment of more than 127,000 officers and provide a variety of knowledge resource products including publications, training and technical assistance. For additional information about the COPS Office, please visit www.cops.usdoj.gov.
California Man Sentenced to One Year in Prison for Illegal Sale of Black Rhinoceros HornsRead the Press Release
Lumsden W. Quan, 47, an art dealer from San Francisco, California, was sentenced today in federal court in Las Vegas, Nevada, to one year and two days in prison for conspiracy to violate the Lacey and Endangered Species Acts and to a violation of the Lacey Act for knowingly selling black rhinoceros horns to an undercover agent from the United States Fish and Wildlife Service (USFWS). Quan was also sentenced to three years of supervised release to follow his prison sentence, pay a $10,000 fine and a three year ban on work in the art and antique business.
Quan, was arrested in March 2014 as part of “Operation Crash,” a nation-wide crackdown in the illegal trafficking of rhinoceros horns, for his role in a conspiracy to knowingly sell black rhinoceros horns across state lines. In pleading guilty, Quan admitted to working with his co-defendant, Edward N. Levine, to transport two horns from California to Nevada, where they sold them to an undercover agent from Colorado for a sum of $55,000. Levine, also charged in the indictment, remains scheduled for trial on March 7, 2016, in Las Vegas. The charges in an indictment are merely allegations and the defendant is presumed innocent unless and until proven guilty.
“Wildlife trafficking has become an extremely profitable type of transnational organized crime and illicit transactions like this are fueling a global market and leading us closer to a day when rhinoceroses, elephants and countless other species are extinguished from the earth,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division. “The Justice Department is committed to working through our law enforcement and international partners to reverse this disturbing trend.”
“Prosecuting individuals who profit from the destruction of an ancient endangered species is critical to stopping the illegal ivory trade’” said U.S. Attorney Dan Bogden. “There are no excuses for this type of crime. Considering the devastating impact on an endangered species, the offenders should be dealt with appropriately and punished in the criminal justice system.”
“Illegal trafficking in rhino horn threatens to reverse decades of rhino conservation work in Africa and Asia, driving rhinos to the brink of extinction in the wild,” said Director Dan Ashe of the U.S. Fish and Wildlife Service. “Today’s sentencing demonstrates that the United States takes wildlife trafficking very seriously and we will do everything possible to identify and disrupt smuggling operations and hold perpetrators responsible. I’m very proud of the work of the Office of Law Enforcement for their continued diligence in bringing these criminals to justice.”
Operation Crash is a continuing investigation being conducted by USFWS in coordination with other federal and local law enforcement agencies. A “crash” is the term for a herd of rhinoceros. Operation Crash is an ongoing effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns. As of November 2015, the coordinated efforts of Operation Crash has prosecuted and sentenced nearly 22 subjects and received forfeiture and restitution amounts totaling $5.5 million.
The black rhinoceros is an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth. They have no known predators other than humans. All species of rhinoceros are protected under U.S. and international law, including the Endangered Species Act. Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 180 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets.
The investigation was handled by the USFWS’s Office of Law Enforcement, the U.S. Attorney’s Office for the District of Nevada and the Justice Department’s Environmental Crimes Section. The government is represented by Trial Attorneys Jennifer Blackwell and Ryan Connors, Assistant U.S. Attorney Kathryn Newman and paralegal Amanda Backer.
Accountant for Michael ‘The Situation’ Sorrentino Admits Tax Fraud ConspiracyRead the Press Release
The former tax preparer for television personality Michael “The Situation” Sorrentino and his brother, Marc Sorrentino, today admitted filing fraudulent tax returns on their behalf, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Paul J. Fishman of the District of New Jersey announced.
Gregg Mark, 51, of Spotswood, New Jersey, pleaded guilty before U.S. District Judge Susan D. Wigenton in Newark federal court to an information charging him with one count of conspiracy to defraud the United States.
According to documents filed in this case and statements made in court: Mark, formerly an accountant at a Staten Island, New York-based accounting firm, admitted preparing fraudulent tax returns for the Sorrentinos for tax years 2010 and 2011, during which time the Sorrentinos and their businesses – MPS Enterprises LLC and Situation Nation Inc. – received millions of dollars in income. To reduce the taxes the Sorrentinos owed, Mark caused to be prepared and filed with the Internal Revenue Service (IRS) fraudulent business and personal tax returns. Mark admitted the Sorrentinos’ false returns defrauded the IRS out of $550,000 to $1.5 million.
On Sept. 24, a grand jury in Newark returned a seven-count indictment charging the Sorrentinos with conspiracy to defraud the United States and filing false tax returns. Michael Sorrentino was also charged with failing to file a tax return. According to the indictment, the brothers received several million dollars in connection with Michael Sorrentino’s role as a cast member on the MTV television show “Jersey Shore” and other promotional activities. The brothers are charged with failing to report all of the income they received. They are also charged with claiming personal expenses as business expenses, including payments for luxury vehicles and high-end clothing, and making distributions – or direct payments – from the businesses to personal bank accounts. Both have pleaded not guilty; a trial date has not yet been set.
The conspiracy charge to which Mark pleaded guilty carries a statutory maximum sentence of five years in prison and a $250,000 fine. Sentencing is scheduled for March 24, 2016.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Fishman credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Jonathan D. Larsen, with the investigation leading to today’s guilty plea.
The government is represented by Assistant U.S. Attorney Jonathan W. Romankow of the U.S. Attorney’s Office Criminal Division in Newark and Assistant Chief Tino M. Lisella and Trial Attorneys Yael T. Epstein and Jeffrey B. Bender of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
North Carolina Man Charged with Tax Fraud and Other CrimesRead the Press Release
A federal grand jury sitting in Greensboro, North Carolina, returned a superseding indictment against a Thomasville, North Carolina, man charging him with one count of evading the payment of income taxes, three counts of filing false tax returns, one count of making false statements on aircraft maintenance records, one count of aggravated identity theft and four counts of serving as an airman without an airman’s certificate, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand for the Middle District of North Carolina announced today.
According to the superseding indictment, from 2011 through 2014, Paul Douglas Tharp aka Doug Tharp, attempted to evade payment of income taxes he owed for the tax years 2004 through 2007 by filing false documents, including false tax returns, with the Internal Revenue Service (IRS). The superseding indictment also alleges that Tharp forged the signature of a licensed mechanic on aircraft maintenance records and served as an airman without the required certification.
If convicted, Tharp faces a statutory maximum sentence of five years in prison for the tax evasion charge, three years in prison for each count of filing a false tax return, three years in prison for each count of serving as an airman without an airman’s certificate, five years in prison for making false statements and a two year mandatory prison sentence for aggravated identity theft. He also faces substantial monetary penalties, supervised release and restitution.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Anand Ramaswamy and Trial Attorney Nathan Brooks of the Tax Division, who are prosecuting this 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.
Justice Department Requires AMC Entertainment to Divest Two Movie Theaters in Order to Complete Acquisition of Starplex CinemasRead the Press Release
Theater Divestitures Will Preserve Movie Theater Competition in Connecticut and New Jersey
The Department of Justice announced today that it has reached a settlement with AMC Entertainment Holdings Inc. and SMH Theatres Inc. (Starplex Cinemas) that requires AMC to divest movie theaters in Connecticut and New Jersey, in order to proceed with its $172 million acquisition of Starplex Cinemas.
The Antitrust Division and the State of Connecticut filed a civil antitrust lawsuit today in U.S. District Court for the District of Columbia to block the proposed acquisition. At the same time, the department and the Connecticut Attorney General filed a proposed settlement that would resolve the competitive concerns alleged in the lawsuit.
“Consumers have benefitted from the competition on price and on quality of the viewing experience between AMC’s and Starplex Cinemas’ theatres in Berlin, Connecticut, and East Windsor, New Jersey,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “The divestiture of two theatres in those areas ensures that movie theater competition is preserved.”
AMC’s and Starplex Cinemas’ theaters in the Berlin, Connecticut, and East Windsor, New Jersey, areas compete to attract moviegoers on ticket prices as well as through the quality of the viewing experience, such as by offering moviegoers the most sophisticated sound systems, largest screens, best picture clarity, premium seating, and high quality food and drink. Because AMC and Starplex Cinemas are each other’s most significant competitor in the Berlin and East Windsor areas, the proposed acquisition would likely reduce price competition as well as the overall quality of the movie viewing experience.
Under the terms of the proposed consent decree, the Starplex Town Center Plaza 10 in East Windsor, New Jersey, and the Starplex Berlin 12 in Berlin, Connecticut, must be divested to a buyer or buyers approved by the United States.
AMC, a Delaware corporation, operates 349 theaters with a total of 4,975 screens in locations primarily throughout the United States. Its U.S. box office revenues were approximately $1.8 billion in 2014.
Starplex Cinemas, a Dallas-based company, owns and operates 33 movie theaters with a total of 346 screens in 12 states. Its U.S. box office revenues were approximately $57 million in 2014.
As required by the Tunney Act, the proposed settlement and 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 C. Kully, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, N.W., Suite 4000, Washington, D.C. 20530 (telephone: 202-305-9969). At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed consent decree upon finding that it serves the public interest.
AMC Complaint (185.57 KB)
AMC CIS (83.43 KB)
AMC Hold Separate (160.41 KB)
AMC Explanation (80.16 KB)
AMC PFJ (73.47 KB)
Justice Department Issues Guidance on Identifying and Preventing Gender Bias in Law Enforcement Response to Sexual Assault and Domestic ViolenceRead the Press Release
Attorney General Loretta E. Lynch announced today a new guidance from the Justice Department designed to help law enforcement agencies prevent gender bias in their response to sexual assault and domestic violence, highlighting the need for clear policies, robust training and responsive accountability systems.
“Gender bias, whether explicit or implicit, can severely undermine law enforcement’s ability to protect survivors of sexual and domestic violence and hold offenders accountable,” said Attorney General Lynch. “This guidance – developed in collaboration with law enforcement leaders and advocates from across the country – is designed to help state, local, and tribal authorities more fairly and effectively address allegations of domestic violence and sexual assault. In the days and months ahead, the Department of Justice will continue to work with our law enforcement partners nationwide to ensure that they have the tools and resources they need to prevent, investigate, and prosecute these horrendous crimes.”
Today’s guidance – which reflects input from a wide array of stakeholders, including police leaders, victim advocates and civil rights advocates – aims to enhance the Justice Department’s partnership with law enforcement officers who work tirelessly to protect their communities, advance bias-free policing and uphold the civil rights of the people they serve. The Justice Department’s Office on Violence Against Women (OVW), the Civil Rights Division and the Office of Community Oriented Policing Services (COPS Office) collaborated to produce the guidance.
The guidance serves two key purposes. First, it aims to examine how gender bias can undermine the response of law enforcement agencies (LEAs) to sexual assault and domestic violence. Second, it provides a set of basic principles that – if integrated into LEAs’ policies, trainings and practices – will help ensure that gender bias, either intentionally or unintentionally, does not undermine efforts to keep victims safe and hold offenders accountable.
The guidance, through a series of detailed case examples, advises law enforcement agencies to incorporate the following principles into clear policies, comprehensive training and effective supervision protocols:
- Recognize and address biases, assumptions and stereotypes about victims.
- Treat all victims with respect and employ interviewing tactics that encourage a victim to participate and provide facts about the incident.
- Investigate sexual assault or domestic violence complaints thoroughly and effectively.
- Appropriately classify reports of sexual assault or domestic violence.
- Refer victims to appropriate services.
- Properly identify the assailant in domestic violence incidents.
- Hold officers who commit sexual assault or domestic violence accountable.
- Maintain, review and act upon data regarding sexual assault and domestic violence.
A form of discrimination, gender bias may result in LEAs providing less protection to certain victims on the basis of gender, failing to respond to crimes that disproportionately harm a particular gender or offering less robust services due to a reliance on gender stereotypes.
Gender bias can manifest in police officers misclassifying or underreporting sexual assault and domestic violence cases; inappropriately jumping to conclusions and labeling sexual assault cases unfounded; failing to test sexual assault kits; interrogating rather than interviewing victims and witnesses; treating domestic violence as a family matter rather than a crime; failing to enforce protection orders; or failing to treat same-sex domestic violence as a crime. These failures may ultimately compromise law enforcement’s ability to ascertain the facts, determine whether the incident constitutes a crime and develop a case that holds the perpetrator accountable.
The Department of Justice has included additional resources in an appendix to the guidance to further assist LEAs in improving their response to sexual assault and domestic violence.
Identifying and Preventing Gender Bias Guidance
Gender Bias Policing Guidance Fact Sheet
Justice Department Announces Three Banks Reach Resolutions Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Crédit Agricole (Suisse) SA (CAS), Dreyfus Sons & Co Ltd, Banquiers (Dreyfus), and Baumann & Cie, Banquiers (Baumann), reached resolutions under the department’s Swiss Bank Program. These banks collectively will pay penalties of more than $130 million.
“The department continues to receive detailed information regarding the myriad schemes used by Swiss banks, their employees and other individuals to encourage and profit from the concealment by U.S. taxpayers of foreign accounts,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Our offshore investigations into this conduct expand as each new entity, individual and foreign jurisdiction is disclosed.”
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.
CAS, a corporation organized under the laws of Switzerland and headquartered in Geneva, operates a financial services business predominantly focused on offering private banking and wealth management services to high net worth clients. In the period since Aug. 1, 2008, CAS operated Swiss branch offices in Lausanne, Lugano, Basel and Zurich. CAS closed the Basel office in 2013. CAS is wholly owned by Crédit Agricole Private Banking, a French holding company created in 2011 to hold private banking entities of the French Crédit Agricole Group. CAS is the result of the 2005 merger of two Swiss banks that were originally formed by two French banks: Crédit Lyonnais (Suisse) S.A., which was formed in 1876 by the French bank Crédit Lyonnais, and Banque Indosuez (Suisse) SA, which was formed in 1956 by the French bank Banque Indosuez.
CAS opened, maintained and profited from undeclared accounts belonging to clients that it knew, or should have known, were U.S. taxpayers—including those who CAS knew, or should have known, were likely not complying with their U.S. tax obligations. CAS provided certain of its clients, including ones with U.S. tax reporting obligations, with access to its then wholly-owned subsidiary Crédit Agricole Suisse Conseil (CASC), based in Geneva. CASC, directly or through its subsidiaries, provided services that included international estate and tax planning, as well as the establishment and administration of non-U.S. entities. CASC provided its services exclusively to private banking clients of the Crédit Agricole Group, including CAS. CAS sold its interest in CASC to an unaffiliated third party on July 8, 2015.
Effective in 2001, CAS 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 relating to U.S. securities. Pursuant to its interpretation of the terms of its QI Agreement, CAS’s view was that the reporting and withholding obligations of its QI Agreement did not apply to accountholders who were not trading in U.S. securities or accounts that were held in the names of non-U.S. entities that, for U.S. tax purposes, were deemed to be corporations and the beneficial owners of such accounts. As a result, from in or about 2001 and continuing past Aug. 1, 2008, CAS serviced and profited from certain U.S. taxpayers without disclosing their identities to the IRS.
In a number of instances, CAS maintained accounts for certain U.S. taxpayers in the names of corporations, foundations, trusts or other legal entities that were organized in non-U.S. jurisdictions, including the Bahamas, the British Virgin Islands, Columbia, Curaçao, Hong Kong, Mauritius and Panama. CASC provided, directly or through its subsidiaries, corporate services to at least 25 such accounts. Eighteen of these accounts held U.S. securities, two of which received services from CASC or subsidiaries. In some cases, CAS knew or had reason to know that certain offshore entity accounts were operated without strict adherence to corporate formalities. In at least seven instances, CAS accepted from the directors of these entities an IRS Form W-8BEN (or CAS’s substitute “Declaration of Non U.S. Status” form) that falsely declared or implied that the entity was the beneficial owner of the assets deposited in the account when CAS knew, or had reason to know, that the entity was being operated as a sham, conduit or nominee with respect to its U.S. taxpayer owner. At least six such offshore entity accounts held U.S. securities and were not reported to the IRS, in violation of CAS’s QI Agreement.
Upon client instruction, CAS transferred the assets of certain U.S.-related accounts belonging to some of its U.S. taxpayer clients in ways that concealed the U.S. connection to those accounts. CAS implemented a flawed account closing protocol that enabled certain U.S. taxpayer clients to exit their CAS accounts using ways and means that continued to conceal the accounts from the IRS. As a result, certain U.S. taxpayer clients were able to utilize, and in some instances fully deplete, the assets of undeclared accounts held at CAS through substantial and/or successive withdrawals of cash, reloads of prepaid stored value cash cards or bank checks. In one such instance, an employee of CAS asked a CAS relationship manager to encourage the use of a prepaid stored value cash card as a means of facilitating account closure.
In addition, in certain instances and on the client’s instruction, CAS transferred assets from U.S.-related accounts briefly through non-U.S. accounts at CAS en route to accounts at unaffiliated banks without documenting the U.S. relationship to these assets at the time of the transfers. As a result of such transactions, the receiving banks were unable to identify the assets that they received as U.S.-related assets. In a number of other instances, CAS followed client instructions to remove U.S. taxpayers as the holders or beneficial owners of U.S.-related accounts or to close U.S.-related accounts by transferring assets from the accounts to other accounts maintained by CAS or a CAS affiliate held in the names of other people or entities. CAS documented such instances as donations to, or other bona fide transactions with, the transferees. However, certain CAS relationship managers knew, or had reason to know, that the U.S. taxpayers originally named on such accounts or in control of such assets:
-
Continued to maintain effective economic ownership, control and/or enjoyment of the accounts and their assets, or
-
Regained ownership or control over the assets after being transferred to accounts at unaffiliated financial institutions.
Before and throughout its participation in the Swiss Bank Program, CAS committed to providing full cooperation to the U.S. government and has made timely and comprehensive disclosures regarding its U.S. cross border business. Among other things, CAS described in detail the structure of its cross border business for U.S.-related accounts including, but not limited to:
-
Its cross border policies and directives;
-
Data on desks and employees with elevated concentrations of U.S.-related accounts;
-
Information on key external asset managers that had significant involvement with U.S.-related accounts;
-
The names and functions of individuals who were involved in the structuring, operation or supervision of CAS’s cross border business for U.S.-related accounts; and
-
Written summaries on its largest U.S.-related accounts and those involving conduct disclosed herein.
Since Aug. 1, 2008, CAS maintained approximately 954 declared and undeclared U.S.-related accounts having a maximum aggregate dollar value in excess of $1.8 billion. CAS will pay a penalty of $99.211 million.
Dreyfus is a traditional private bank founded in 1813 in Basel, Switzerland. As one of the oldest family-owned banks in Switzerland, Dreyfus is managed today by the sixth generation of the founder’s family. In November 2013, Dreyfus opened a representative office in Tel Aviv to serve existing and new clients in the Israeli market. Other than the Tel Aviv representative office, Dreyfus has never operated a desk outside of Switzerland.
Following World War II, Dreyfus created Panama corporations to hold funds for clients. This practice had its roots in the desire of Jewish clients to protect their assets for reasons of personal safety, and the purpose and operation of the entities was to conceal ownership of the assets from all government authorities, “friendly” or otherwise. However, the practice extended well into the 2000s. Among the Panama entity accounts created by Dreyfus are 33 U.S.-related accounts, the oldest of which opened in 1951. The combined high value of these accounts was approximately $90 million. The U.S. person beneficial owners of the Panama entity accounts were properly identified as beneficial owners of the entities on Forms A pursuant to Swiss know your customer rules. However, the entities were identified as the beneficial owner on IRS Forms W-8BEN, when, as Dreyfus well knew, the true beneficial owners were U.S. persons. Dreyfus employees – primarily the Deputy Chairman of the Executive Management, a former member of Dreyfus’s Board of Directors and Head of the Gérance division, which provides services mainly to corporate entities, and a former deputy manager – also served as corporate directors of the entities.
With respect to at least two Panama entity accounts, the entity structure was used to conceal payments into the United States. For example, one Panama entity account was opened in 1991 with a husband and wife, both U.S. nationals living in the United States, as beneficial owners. The account, which had a high value of over $1 million during the period since Aug. 1, 2008, was opened with funds inherited from a relative with an account at Dreyfus. Beginning in 2008, checks in amounts between $4,000 and $5,000 each were sent to the husband and the couple’s three sons in the United States on a regular basis. In total, 205 checks with a combined value of approximately $925,000 were sent to the individual family members in the United States. Dreyfus’s efforts to convince the beneficial owners to disclose the account were unsuccessful, and the account was closed in 2012 without being disclosed to U.S. authorities.
For four Panama entity accounts, Dreyfus allowed the accounts to be closed in the form of bearer shares, which assisted in the further concealment of assets in the accounts. A bearer share is a security that is not required to be registered and which can be transferred without an endorsement of any kind. Thus, a bearer share is negotiable by whoever possesses it. For example, an individual can purchase shares from an issuer and exchange the shares for cash at a financial institution that redeems bearer shares or may give the shares to another individual, who may exchange the shares for cash. The four Panama entities used assets in the accounts to purchase bearer shares at Dreyfus, with the shares then physically delivered to representatives of the Panama entities in closure of the accounts. Because the shares could then be delivered to the U.S. persons whose assets were converted to bearer shares, or to anyone else, funds from these accounts left Dreyfus in a virtually untraceable manner. With respect to these four accounts, over $4 million in assets left Dreyfus in the form of bearer shares.
Dreyfus also opened and maintained at least 34 U.S.-related accounts for domiciliary entities created in foreign countries including the Bahamas, the British Virgin Islands, the Isle of Man, Liberia, Liechtenstein, Mauritius, Nevis and Switzerland. For each account, the U.S. beneficial owner was properly identified in bank documents for purposes of Swiss know your customer rules, but the non-U.S. entity was identified as the beneficial owner of the account on IRS Forms W-8BEN. In this manner, Dreyfus assisted U.S. persons in concealing ownership of the assets.
Separate from its traditional private banking services, over 20 years ago, Dreyfus management agreed to serve as a custodian for physical gold and cash for clients of a third party, a British Virgin Islands entity whose business operations are based in Switzerland (Entity #1). Entity #1 also maintained and operated a storage facility at the Zurich airport for the storage of precious metals other than gold, independent of its relationship with Dreyfus. Dreyfus’s relationship with Entity #1 is overseen by Dreyfus’s Head of Legal and Compliance. For introducing customers to Dreyfus, Entity #1 receives a share of the general fees earned by Dreyfus for storing the gold and cash.
A total of 315 U.S.-related accounts with a combined high value of approximately $440 million in gold and/or cash were held through Entity #1 and custodied by Dreyfus. Although Entity #1’s master account at Dreyfus is held in the name of a British Virgin Islands entity, each U.S. person storing gold or cash with the bank has a subaccount of Entity #1’s master account and can hold the subaccount in the name of an individual, trust, foundation, corporation or other structure. Ninety-two of these 315 U.S.-related gold and cash accounts were held in the name of an entity. Although some of the gold and cash client base maintained their accounts because of fears related to the collapse of the banking system, upon review by Dreyfus and the department, certain of the gold and cash storage accounts show strong indicia of the concealment of assets, such as being held in the name of nominee entities.
Since Aug. 1, 2008, Dreyfus held a total of 855 U.S.-related accounts with a combined high value of assets under management of approximately $1.76 billion. Dreyfus will pay a penalty of $24.161 million.
Baumann is a traditional private bank founded in 1920, which is headquartered in Basel, Switzerland. In June 2009, Baumann opened a branch in Zurich dedicated purely to private banking.
The majority of Baumann’s U.S. clients structured their accounts so that they appeared as if they were held by a non-U.S. legal structure, such as an offshore corporation or trust, which aided and abetted the clients’ ability to conceal their undeclared accounts from the IRS. Baumann was not involved in setting up these entities, but those entities were generally created or serviced by a few Zurich-based lawyers with whom the relationship managers in Baumann’s Zurich branch were personally acquainted. In the period since Aug. 1, 2008, Baumann opened U.S.-related accounts for non-U.S. structures, such as offshore corporations or trusts. These offshore entities included British Virgin Islands, British West Indies, Panama and Seychelles corporations, as well as Liechtenstein foundations, all of which were established by external law firms.
As one example, Baumann opened an account in June 2009 for a Panama corporation, established in 2000, where the beneficial owner as listed on Form A was a U.S. citizen domiciled in the United States. This person was a retired lawyer living in Las Vegas. The beneficial owner provided a U.S. passport upon opening the account, which was funded by $27 million from the accountholder’s account at another bank. The accountholder signed Baumann’s compliance form indicating that the Panama corporation was in fact the beneficial owner of the assets for U.S. tax withholding purposes when Baumann knew or should have known this was untrue.
Baumann offered a variety of other traditional Swiss banking services that, although available to all its clients, it knew could assist, and did assist, its U.S. clients in concealing their undeclared assets and income. Among other things, Baumann opened numbered accounts and held bank statements and other mail relating to some U.S.-related accounts at Baumann’s offices in Switzerland, rather than sending the statements and mail to the U.S. taxpayers in the United States.
Regarding one numbered account, in July 2010, the clients transferred $2 million to an account at Baumann from an account at Credit Suisse. The taxpayers were American horse breeders who had granted a power of attorney to an external asset management company based in Zurich. That external asset manager introduced the clients to Baumann, and Baumann was instructed to retain the correspondence, to send copies to the clients’ external asset manager and not to invest in U.S. securities. In 2010 and 2011, Baumann was instructed to make repeated payments of under $10,000 to a U.S. bank account in the name of a U.S.-based coin dealer. From June to August 2011, the clients instructed Baumann to buy 2,279 pieces of Krugerrand gold coins, at that time worth approximately $3.7 million. In September 2011, the clients instructed Baumann to close the account. The remaining assets were withdrawn in cash, and the account closed in 2011.
Since Aug. 1, 2008, Baumann maintained a total of 167 U.S.-related accounts, with an aggregate peak value of $514.1 million. Baumann will pay a penalty of $7.7 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 tough but measured terms of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International (LB&I) Division. “Large and small financial institutions are accepting their responsibility and putting their non-compliance behind them. They are also providing us information that will lead us to those U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes.”
“Although the end of the year is upon us, we will not slow down in our efforts to bring banks and U.S. citizens hiding money offshore into compliance,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “The agreements signed today are further evidence that the Swiss Bank Program has effectively decimated the hidden offshore banking industry. Collectively, the magnitude of data provided by these banks increases the amount of information we know exponentially about individuals hiding their money and the countries that are facilitating it. IRS-CI will continue to use all of the information we gather from these agreements to vigorously pursue individual U.S. taxpayers who illegally conceal assets offshore and to develop innovative strategies to combat international tax evasion worldwide.”
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 Paul G. Galindo, Kathleen E. Lyon 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.
-
Attorney General Loretta E. Lynch Announces $2.7 Million in Grants to Strengthen the Justice System's Response to Sexual AssaultRead the Press Release
Attorney General Loretta E. Lynch today announced seven awards totaling $2.7 million in funding through the Department of Justice’s Office on Violence Against Women’s Sexual Assault Justice Initiative (SAJI) to improve how the justice system in general, and prosecution in particular, handles sexual assault cases. The seven pilot sites will implement performance measures that reflect promising practices for prosecuting sexual assault and promoting justice for victims, receiving technical assistance from AEquitas: The Prosecutor’s Resource on Violence Against Women and participating in the evaluation of the initiative.
“Sexual and domestic violence is a heinous crime, inflicting physical and emotional trauma that can linger for years, with grave consequences for survivors and their loved ones; for neighborhoods and communities and for our country as a whole,” said Attorney General Lynch. “The Department of Justice is committed to doing everything it can to help prevent, investigate and prosecute these horrendous crimes – including working to ensure that our greatest partners in this effort, the state and local law enforcement officers on whom we all rely, have the tools, training and resources they need to fairly and effectively address allegations of sexual assault and domestic violence.”
The seven pilot sites that will receive funding through the OVW’s Sexual Assault Justice Initiative are: Jefferson County Commission, Birmingham, Alabama; city of Los Angeles, Los Angeles; Cobb County Board of Commissioners, Marietta, Georgia; city and county of Honolulu, Honolulu; New Hampshire Department of Justice, Concord, New Hampshire; Cherokee Nation, Tahlequah, Oklahoma; and county of Sauk, Baraboo, Wisconsin. The awards for each site range from $390,000 – $400,000.
Attorney General Lynch made the announcement at an event announcing the release of a Justice Department guidance on “Identifying and Preventing Gender Bias in Law Enforcement Response to Sexual Assault and Domestic Violence,” in Washington, D.C. The grants are part of the Justice Department’s ongoing commitment to protecting women from violence and strengthening the capacity of communities to respond to domestic and sexual violence.
The demonstration initiative is designed to strengthen the justice system’s response to sexual violence and enhance collaborations among sexual assault victim services providers, law enforcement agencies and sexual assault medical forensic services providers. With funding from the Grants to Encourage Arrest Policies and Enforcement of Protection Orders Program, the Rural Sexual Assault, Domestic Violence, Dating Violence and Stalking Grant Program and the Tribal Governments Grant Program, SAJI sites will be able to use the funds to strengthen services in their communities that support sexual assault victims.
For more information on OVW and its programs, please visit: www.justice.gov/ovw.
Alabama Resident Indicted for Stolen Identity Tax Refund Fraud SchemeRead the Press Release
An Alabama resident was arrested today after being indicted on Dec. 9 by a federal grand jury sitting in Montgomery, Alabama, on 15 counts of wire fraud, 15 counts of aggravated identity theft and two counts of passing U.S. Treasury checks with a false endorsement, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck, Jr. of the Middle District of Alabama.
According to the allegations in the indictment, James Vernon Battle, a resident of Montgomery County, used stolen personal identification information to prepare and file false federal income tax returns for tax years 2013 and 2014 for the purpose of obtaining fraudulent tax refunds. Battle directed the Internal Revenue Service (IRS) to issue the requested refunds by depositing the funds onto prepaid debit cards and by issuing U.S. Treasury checks.
If convicted, Battle faces a statutory maximum sentence of 20 years in prison for each count of wire fraud, a mandatory minimum sentence of two years in prison for aggravated identity theft and a statutory maximum sentence of 10 years in prison for each count of passing a U.S. Treasury check with a false endorsement. He also faces substantial monetary penalties and restitution.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation and the U.S. Secret Service, who investigated the case, and Trial Attorneys Michael C. Boteler and Robert J. Boudreau of the Tax Division and Assistant U. S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting this 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.
Departments of Justice and Homeland Security Announce Joint Guidance to Employers on Internal Form I-9 AuditsRead the Press Release
The Department of Justice’s Civil Rights Division and the Department of Homeland Security’s U.S. Immigration and Customs Enforcement (ICE) announced today the issuance of a joint Guidance for Employers Conducting Internal Employment Eligibility Verification Form I-9 Audits.
Under the Immigration and Nationality Act (INA), employers are required to verify the work-authorization of their employees using the Form I-9 and are prohibited from knowingly hiring unauthorized workers. Employers seeking to ensure their Form I-9 practices comply with federal law are increasingly conducting internal audits of their Forms I-9. To ensure that these audits are conducted properly and do not discriminate against employees, ICE and OSC have collaborated to issue formal guidance on the topic.
“Employers have a responsibility to ensure their Form I-9 practices are in compliance with the Immigration and Nationality Act,” said Director Sarah Saldaña of ICE. “If used properly, audits can be an effective tool to achieve this end.”
“Today’s guidance provides critical information for employers to ensure that their internal audits of I-9 forms are conducted fairly and accurately, without discrimination or retaliation against their employees,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “Without clear and effective guidelines, internal audits can create barriers to employment for work-authorized individuals.”
The joint guidance was developed by the two agencies with significant input from the Department of Homeland Security’s Office of Civil Rights and Civil Liberties, the U.S. Citizenship and Immigration Services, the Department of Labor, the National Labor Relations Board, the Equal Employment Opportunity Commission and stakeholders around the country.
This guidance is part of the six-month action plan of the Interagency Working Group for the Consistent Enforcement of Federal Labor, Employment and Immigration Laws (interagency working group). The interagency working group’s goals are to enhance coordination in those cases where federal responsibilities to enforce labor, employment and immigration laws may overlap; to ensure that workers who cooperate with labor and employment enforcement may continue to do so without fear of retaliation; to ensure that unscrupulous parties do not attempt to misuse immigration enforcement or labor laws to thwart or manipulate worker protections or labor and immigration enforcement; and to ensure the effective enforcement of these laws.
Among other things, the guidance provides employers with information regarding the scope and purpose of audits; considerations before conducting internal audits; details regarding how to correct errors, omissions or other deficiencies found on Forms I-9 and how to cure deficiencies related to E-Verify queries; and guidance regarding the anti-discrimination mandate. The joint guidance can be found on DHS’s website https://www.ice.gov/sites/default/files/documents/Document/2015/i9-guidance.pdf and on the Civil Rights Division’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) website /media/807576/dl?inline.
ICE is responsible for enforcing the employer sanctions provision of the INA, and OSC enforces the anti-discrimination provision of the statute. For more information about protections against employment discrimination under immigration laws, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TTY for hearing impaired), call OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TTY for hearing impaired), sign up for a free webinar at www.justice.gov/crt/about/osc/webinars.php, email [email protected] or visit the website at www.justice.gov/crt/about/osc.
Former New York City Corrections Officer Pleads Guilty to Multimillion Dollar Tax Refund ConspiracyRead the Press Release
A Middle Island, New York resident pleaded guilty today in the U.S. District Court for the Eastern District of New York to one count of conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Rodney Chestnut, a retired corrections officer for the New York City Department of Corrections, pleaded guilty to count one of the pending indictment, which alleged that between 2008 and 2012, he participated in a scheme to submit false tax returns seeking fraudulent income tax refunds in excess of $3.4 million to the Internal Revenue Service (IRS). According to the indictment, Chestnut worked with Clive Henry, a former IRS employee in the business of preparing tax returns, and another individual, to recruit clients to this scheme, which involved using fraudulent IRS Forms 1099-OID to falsely claim refunds of taxes that never paid over to the IRS. The indictment alleged that Chestnut, Henry and the other individual collected fees from clients based on a percentage of the refunds received, and supplied the clients with correspondence containing false and frivolous claims to send to the IRS in response to IRS warning letters regarding the false tax returns.
In 2013, a federal court permanently enjoined Chestnut from promoting a tax fraud scheme involving fraudulent Forms 1099-OID and from preparing tax returns for anyone other than himself.
U.S. District Judge Kiyo A. Matsumoto scheduled sentencing for May 12, 2016. Chestnut faces a statutory maximum sentence of five years in prison and a fine of up to $250,000, or twice the loss from the offense. Henry pleaded guilty to conspiracy to defraud the United States on Nov. 17. His sentencing is set for March 23, 2016.
Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Erin Pulice, Mark Kotila and Jeffrey A. McLellan 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.
Engineering Officers Charged in Scheme to Cover up Oil Discharges from Cargo VesselRead the Press Release
A federal grand jury in Greenville, North Carolina, has returned a nine-count indictment charging two engineering officers employed by Oceanfleet Shipping Limited with crimes relating to the illegal discharge of oily wastes directly into the sea, announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division and U.S. Attorney Thomas G. Walker for the Eastern District of North Carolina.
Oceanfleet Shipping Limited is a Greek shipping company that operates the cargo carrier M/V Ocean Hope. The two engineering officers indicted are the vessel’s Chief Engineer, Rustico Yabut Ignacio, 65, of the Philippines; and the Second Engineer, Cassius Flores Samson, 51, of the Philippines.
According to the indictment, in 2015 Samson bypassed pollution prevention equipment with an unauthorized hose connection, or “magic pipe,” to discharge oil sludge generated by the M/V Ocean Hope directly into the sea. Samson also ordered crewmembers on numerous other occasions to pump oily mixtures from the vessel’s bilges into the sea using the ship’s General Service Pump rather than processing these mixtures through the vessel’s pollution prevention equipment.
The operation of marine vessels like the M/V Ocean Hope generates large quantities of waste oil and oil-contaminated waste water. International and U.S. law requires that these vessels use pollution prevention equipment to preclude the discharge of these materials. Should any overboard discharges occur, they must be documented in an oil record book, a log that is regularly inspected by the U.S. Coast Guard. To hide the illegal discharges, Ignacio and Samson allegedly maintained a fictitious oil record book that failed to record the disposal, transfer, or overboard discharge of oil from the vessel. The oil record book also contained false entries stating that pollution prevention equipment had been used when it had not.
The indictment further alleges Ignacio and Samson ordered subordinate crewmembers to lie to the U.S. Coast Guard during an inspection in Wilmington, North Carolina. The crewmembers were allegedly instructed to deny knowledge of the connection of the pipe used discharge sludge and to tell the Coast Guard that Oily Water Separator had been used as required under international law to process oily mixtures before discharge when they knew it had not.
Both engineering officers were charged with violating the federal Act to Prevent Pollution from Ships for failing to record overboard discharges in the vessel’s oil record book, conspiracy for their agreement to violate federal law, obstruction of justice for presenting false documents intended to deceive the Coast Guard and witness tampering for ordering subordinate crewmembers to mislead and lie to the Coast Guard. Samson was also charged with false statements and obstruction of justice for lying to Coast Guard inspectors about the discharges. An indictment is merely a formal charge that a defendant has committed a violation of criminal laws and every defendant is presumed innocent until and unless proven guilty.
The U.S. Coast Guard, Sector North Carolina, investigated the case. Assistant U.S. Attorney Banumathi Rangarajan with the U.S. Attorney's Office for the Eastern District of North Carolina and Trial Attorneys Shane N. Waller and Brendan Selby with the Department of Justice’s Environmental Crimes Section are prosecuting the case.
Oregon Resident Sentenced to Prison for Role in One Million Dollar Tax Fraud SchemeRead the Press Release
A Portland, Oregon, resident was sentenced today to more than two years in prison for her role in a fraudulent income tax refund scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Jasmine Mason, 33, was sentenced to 32 months in prison followed by three years of supervised release. According to the indictment and information disclosed in related court proceedings, Mason conspired with Tataneisha White, Shawntina Ware, Brandon Leath and another individual to file more than 227 false income tax returns falsely claiming more than $1 million in refunds. The indictment charged all five individuals with conspiracy to file false claims and multiple counts of filing false claims, wire fraud and theft of government funds.
Mason pleaded guilty in June, to one count of conspiracy to file false claims, one count of filing a false claim and one count of theft of government funds. In her plea agreement, Mason admitted that she and her co-conspirators prepared and filed false income tax returns that included fictitious W-2 wages and inflated amounts of income tax withheld to generate refunds ranging from $1,000 to $12,000. Mason also admitted that she and her co-conspirators shared personal identifying information with each other to file the false tax returns and used multiple bank accounts controlled by the co-conspirators or their family and friends to split the fraudulent refunds.
In addition to the prison term, U.S. District Judge Robert E. Jones for the District of Oregon ordered Mason to pay $336,937.61 in restitution to the Internal Revenue Service (IRS). On Nov. 3, co-conspirator Leath was sentenced to 24 months in prison and ordered to pay $55,635.61 in restitution to the IRS. White and Ware are awaiting sentencing on their guilty pleas to similar charges.
Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Lori A. Hendrickson and Ryan R. Raybould of the Tax Division, who are prosecuting the case with valuable assistance from the U.S. Attorney’s Office in Portland.
Justice Department Announces Two Banks Reach Resolutions Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Cornèr Banca SA (Cornèr) and Bank Coop AG (Bank Coop) reached resolutions under the department’s Swiss Bank Program.
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
-
Make a complete disclosure of their cross-border activities;
-
Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
-
Cooperate in treaty requests for account information;
-
Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
-
Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
-
Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of 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.
Cornèr is headquartered in Lugano, Switzerland, with branch offices in Chiasso, Geneva, Locarno and Zurich, Switzerland. Cornèr has two wholly owned affiliates: Cornèr Banque (Luxembourg) SA, based in Luxembourg, and Cornèr Bank (Overseas) Ltd., based in the Bahamas. Cornèr offers a full range of traditional banking services, but it specializes in private banking, payment cards and securities trading.
For 40 years, Cornèr has offered both credit cards and prepaid debit cards under its CornèrCard brand name to its clients and clients of other financial institutions. Since Aug. 1, 2008, U.S. persons held 1,312 CornèrCard accounts at Cornèr. Use of CornèrCards by U.S. persons facilitated their access to and use of any undeclared funds on deposit at Cornèr and at other Swiss banks.
Cornèr assisted certain of its U.S. clients to evade their U.S. tax obligations, file false federal tax returns with the Internal Revenue Service (IRS) and hide overseas assets from the IRS. Cornèr opened, maintained and serviced accounts for U.S. persons that it knew were likely not declared to the IRS or the U.S. Department of the Treasury as required by U.S. law. Cornèr also maintained correspondent accounts at a U.S. bank to facilitate certain transactions for its clients – namely, conducting wire transfers in U.S. dollars and collecting checks issued in U.S. dollars. Such transfers included transactions involving U.S.-related accounts.
Between 2001 and 2008, Cornèr relationship managers traveled to the United States on at least 10 occasions to visit existing Cornèr clients. All of the U.S. client visits were approved by Cornèr management. Cornèr executives accompanied relationship managers on several of the trips to the United States and also visited with U.S. clients. Matters discussed during these client visits included account performance, account fees, account investment positions, alternative investments, increasing client deposits at Cornèr, client satisfaction with Cornèr, how to send account funds to the United States to purchase assets and referrals of new clients to Cornèr by existing clients. Cornèr relationship managers also met with holders of U.S.-related accounts in countries other than the United States and Switzerland, such as Italy.
In August 2008, Cornèr’s executive board decided that:
-
There would be no changes to Cornèr’s existing U.S.-related accounts at that time, based on the board’s assessment that Cornèr had not engaged in the same type of conduct as had UBS;
-
Cornèr would continue accepting new U.S. clients, but only after review by Cornèr’s compliance department and approval by an executive board member; and
-
Cornèr would not accept any new U.S. clients coming from UBS.
However, after August 2008, Cornèr accepted new U.S.-related accounts from UBS, and Cornèr had reason to know that some of these accounts were undeclared. Also, after August 2008, Cornèr accepted new U.S.-related accounts, including one of the above-mentioned UBS accounts, without approval by an executive board member.
Cornèr provided its U.S. clients with the option to enter into hold-mail agreements, which allowed U.S. persons to keep evidence of their accounts outside of the United States in order to conceal assets and income from the IRS. Cornèr also provided its U.S. clients with the option to request numbered accounts, including code-name accounts. Holders of these accounts were permitted to use code names in all of their correspondence addressed to Cornèr and agreed that correspondence from Cornèr addressed to the code names would be considered as addressed to the clients. Examples of code names used by U.S. persons for their numbered accounts at Cornèr include “Dumbledor,” “Windstopper,” “Rocking” and “Anticipation.” Cornèr understood that providing numbered accounts and permitting code-name correspondence allowed U.S. persons to keep their identities secret from U.S. authorities in order to conceal assets and income from the IRS.
Cornèr had U.S.-related accounts that were beneficially owned by U.S. persons but held in the names of structures, including entities such as corporations, foundations or trusts. Cornèr knew, or had reason to know, that many of these structures were used by U.S. clients to help conceal their identities from the IRS. The structures were organized under the laws of various jurisdictions, including the Bahamas, Belize, the British Virgin Islands, Jersey, Liberia, Liechtenstein, the Marshall Islands, the Netherlands Antilles, Panama, St. Kitts and Nevis, St. Vincent and the Grenadines and Uruguay. Cornèr Bank (Overseas), Cornèr’s Bahamian affiliate, created international business corporations organized under the laws of the Bahamas, and several such corporations opened accounts at Cornèr that were beneficially owned by U.S. persons.
Since Aug. 1, 2008, Cornèr held 383 U.S.-related accounts with over $351 million in assets. Cornèr will pay a penalty of $5.068 million.
Bank Coop is a Swiss retail bank headquartered in Basel, Switzerland. Bank Coop was founded in 1927, when the Swiss Confederation of Trade Unions and the Federation of Swiss Consumer Associations established it as a cooperative society under the name Cooperative Central Bank. Today, Bank Coop is a publicly traded company listed on the SIX Swiss Exchange. Basler Kantonalbank has been Bank Coop’s majority shareholder since December 1999. Bank Coop has 32 branches throughout Switzerland. It has never had offices, branches or subsidiaries outside the country.
Bank Coop offered a variety of traditional Swiss banking services that it knew could assist, and did assist, U.S. clients in concealing their undeclared assets and income. These services included hold mail, numbered accounts and travel cash cards. Bank Coop accepted regular instructions from one client who is a U.S. citizen and resident to transfer approximately $9,500 to his account in the United States each month. After Aug. 1, 2008, Bank Coop opened accounts for U.S. residents who transferred assets from other Swiss financial institutions, including UBS and Credit Suisse AG, knowing that it was likely that the assets were undeclared.
Bank Coop also processed substantial cash withdrawals in connection with the closure of some U.S.-related accounts. For example, in February 2012, a client visited Bank Coop three times and withdrew $30,000, 30,000 in euros and 25,000 in euros, respectively, on those visits. At that time, the client informed Bank Coop that he decided to close the account, expressing concern about recent developments regarding Swiss bank secrecy and disclosure requests by U.S. and EU authorities. In March 2012, the client withdrew approximately 30,000 in Swiss francs and, upon closing the account in June 2012, withdrew the remaining balance of approximately 5,000 euros.
In April 2010, one client visited Bank Coop and requested that the bank purchase one kilogram of gold, which the client stored in his safety deposit box at Bank Coop. In August 2010, the client instructed Bank Coop to purchase another kilogram of gold, which was collected by the client’s daughter. In March 2011, the client instructed Bank Coop to purchase another kilogram of gold, which the client stored in his safety deposit box. In September 2012, after being advised by Bank Coop that his account would be closed on account of his U.S. residence, the client instructed Bank Coop to sell the gold in his safety deposit box and credit the proceeds to his account at Bank Coop. In October 2012, the client instructed Bank Coop to close the account and send a “crossed” check of approximately $335,000 to a Swiss law firm.
Bank Coop opened and maintained accounts held in the name of non-U.S. entities, including a Panama corporation and a Hong Kong corporation, while knowing that U.S. taxpayers were the true beneficial owners of the accounts held by these non-U.S. entities. In at least one instance, Bank Coop was aware that a U.S. person was the true beneficial owner of an account held by a Panama entity but accepted a false IRS Form W-8BEN from the entities’ directors. The false Form W-8BEN falsely declared that the beneficial owner was not a U.S. taxpayer and was signed by a director of the entity, who also was the director of the external asset manager that introduced the client to Bank Coop.
In 2001, Bank Coop entered into a Qualified Intermediary (QI) Agreement with the IRS. The QI regime provided a comprehensive framework for U.S. securities-related information reporting and tax withholding by a non-U.S. financial institution. In general, if an accountholder wanted to trade in U.S. securities and avoid mandatory U.S. tax withholding, the QI Agreement required Bank Coop to obtain the consent of the accountholder to disclose the client’s identity to the IRS. Bank Coop continued to service certain U.S. customers without disclosing their identity to the IRS and without considering the impact of U.S. criminal law on that decision. In 2001, a relationship manager, after winning a contest sponsored by Bank Coop, visited the United States. During the visit he secured from an accountholder a “Declaration of U.S. Taxable Persons,” in which the accountholder declared that she did not authorize Bank Coop to disclose her name to the U.S. tax authorities and instructed Bank Coop to sell her U.S. securities.
Since Aug. 1, 2008, Bank Coop maintained 385 U.S.-related accounts, with an aggregate maximum balance of approximately $71.4 million. Bank Coop will pay a penalty of $3.223 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 Gregory E. Van Hoey, Michael R. Pahl and Michael N. Wilcove, 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.
-
Attorney General Loretta E. Lynch Joint Statement with Foreign Counterparts Following G6 Ministerial MeetingRead the Press Release
Attorney General Loretta E. Lynch released a joint statement with U.K. Home Secretary Theresa May, the Interior Ministers of the U.K., France, Germany, Italy and Spain, U.S. Secretary for Homeland Security Jeh Johnson and European Commissioner for Migration, Home Affairs and Citizenship Dimitris Avramopoulos following a G6 meeting in London on Dec. 9 and 10, 2015:
“Condemning recent terrorist attacks worldwide, including in Sousse, Paris, Bamako, Beirut and San Bernardino, we are united in our determination to combat terrorism through a strong yet proportionate national and international response.
“We reaffirm our commitment to tackling the threat posed by Daesh/ISIL and to countering violent extremism and radicalization with the values that we all share: respect, tolerance and democracy. At the heart of this work is a partnership with wider society: at the same time as we work with them to root out radicalization to violence, we reject any attempts to create division and marginalization amongst those we endeavor to protect.
“We are committed to stepping up cooperation in tackling this threat to our democracies. In particular, consistent with national law, we agree to:
- work with civil society and religious and faith groups to deliver positive counter-narratives which promote the values underpinning peace, freedom and democracy;
- counter violent extremism, including by disrupting those who support terrorist activity, prosecuting all those who break the law and supporting those vulnerable to radicalisation;
- maximise cooperation and information-sharing between our respective law enforcement and other agencies including through European, US and international mechanisms;
- encourage communications service providers to consider taking further steps to remove from the internet content which encourages, promotes or inspires the violent extremism associated with Daesh/ISIL and other such terrorist groups;
- enhance further the security of air travel by ensuring that airports worldwide meet the highest international standards both for passengers and cargo;
- continue and enhance cooperation within Europe and with the US on important initiatives, including passenger name records - welcoming political agreement on an EU Passenger Name Records Directive and the EU/US “Umbrella” agreement on data protection and privacy - as well as terrorist finance and further agreements to ensure effective data sharing in the interests of public security and protection; and
- enhance the security of the external border of the EU.
“We undertake to work together resolutely at an EU and international level to deliver the outcomes agreed at our meeting in London.”
Three German Executives Indicted for Participation in Parking Heater Price-Fixing SchemeRead the Press Release
A federal grand jury in Detroit returned an indictment against Frank Haeusler, Volker Hohensee and Harald Sailer for their alleged participation in a conspiracy to fix the prices of parking heaters.
The indictment charges the three German executives – one current and two former – with conspiring to fix the prices of parking heaters used in commercial vehicles and sold in the aftermarket in the United States and elsewhere. Parking heaters are devices that heat the interior compartment of a motor vehicle independent of the operation of the vehicle’s engine.
“These senior company officials conspired to fix the aftermarket prices of parking heaters sold to hundreds of businesses throughout the United States and North America,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “Today’s indictment reinforces the Department of Justice’s commitment to prosecute those who scheme to thwart competition.”
“Today’s charges outline a deceptive scheme to subvert competition in the marketplace,” said Assistant Director in Charge Diego G. Rodriguez. “Those who engage in this type of criminal activity not only stand to defraud consumers, but erode the public’s trust in the competitive bidding process. The FBI will continue to work with the Antitrust Division to ensure the integrity of competition across all industries.”
The indictment, filed today in the U.S. District Court for the Eastern District of Michigan, alleges that Hohensee, Haeusler and Sailer worked together with other conspirators to artificially set aftermarket prices for parking heaters used in commercial vehicles in the United States and beyond. The charged executives and their co-conspirators met to discuss parking heater prices, agreed to set a price floor for parking heater kits and also agreed to coordinate the timing and amount of price increases for parking heaters.
According to the charge, the conspiracy existed from as early as October 2007 and lasted until at least Nov. 19, 2012. Hohensee is the former president of Espar Inc. and a resident of Canada; Haeusler is a former vice president of Espar Inc.’s German affiliate, Eberspaecher Climate Control Systems; and Sailer held the same position at Eberspaecher and remains an executive with the company.
On March 12, 2015, Espar Inc. admitted its role in the price-fixing conspiracy and pleaded guilty in the U.S. District Court for the Eastern District of New York. The company was sentenced on June 25, 2015 and has paid a $14.9 million criminal fine.
Today’s charge is the result of an ongoing federal antitrust investigation handled by the Antitrust Division’s New York Office with assistance from the FBI’s New York Field Office. Anyone with information concerning price fixing or other anticompetitive conduct in the parking heater industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.
Haeusler et al Indictment (464.22 KB)
Oregon Man Indicted for Failure to File Tax ReturnsRead the Press Release
A federal grand jury sitting in Portland, Oregon, returned an indictment yesterday charging a Hillsboro, Oregon, resident with six counts of willfully failing to file an income tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
According to the indictment, Winston Shrout received gross income for the years 2009 through 2014 in amounts that required him to file a federal income tax return. However, for each of those years, Shrout willfully failed to file any income tax returns. Shrout’s income included payments for services as a presenter at seminars; licensing fees associated with the sale of products in his name and the name of his business, Winston Shrout Solutions in Commerce; and annual pension payments.
If convicted, Shrout faces a statutory maximum sentence of six years in prison and a maximum fine of $150,000.
Acting Assistant Attorney General Ciraolo thanked special agents of Internal Revenue Service-Criminal Investigation, who investigated the case and Trial Attorneys Stuart A. Wexler and Ryan R. Raybould of the Tax Division who are prosecuting the case.
An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent until proven guilty beyond a reasonable doubt.
Justice Department Settlement Successfully Releases More than $115 Million in Alleged Corruption Proceeds to People in KazakhstanRead the Press Release
Today, the Department of Justice filed a motion to dismiss a forfeiture action against approximately $115 million alleged to be proceeds of foreign official corruption and involved in money laundering in accordance with a 2007 settlement that directed the funds to be used for the benefit of poor youth and families in Kazakhstan, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.
The filing marked the formal completion of the settlement terms through which the governments of the United States, Switzerland and Kazakhstan agreed to release the alleged corruption proceeds in installments to a Kazakh foundation established under the guidance and supervision of the World Bank Group and administered by international development organizations IREX and Save the Children, which managed the foundation’s programs.
In 2007, the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office of the Southern District of New York filed a forfeiture action against approximately $84 million plus interest that had been restrained in Switzerland in 1999 in connection with the prosecution of James H. Giffen and his company, Mercator, by the U.S. Attorney’s Office and the Criminal Division’s Fraud Section. The funds were allegedly the proceeds of illegal bribe payments to senior Kazakh officials in exchange for oil transactions and property involved in money laundering. In an apparent attempt to evade criminal investigation, the funds had been transferred into an account in the name of the government of Kazakhstan where they were later restrained and grew to $115,228,671. Contemporaneous with the forfeiture action, the United States and Kazakhstan filed the settlement agreement, which incorporates a series of international agreements authorizing the release of the funds to the BOTA Foundation, a new Kazakh foundation required to be independent of the government of Kazakhstan, managed by a respected international non-governmental organization and established with the assistance of the World Bank. In addition, the government of Kazakhstan entered into technical assistance agreements with the World Bank regarding its participation in the Extractive Industries Transparency Initiative and a Public Finance Management Review.
“Transparent, responsible repatriation of corruption proceeds can make a real difference for communities harmed by the abuse of public office,” said Assistant Attorney General Caldwell. “In just five years of operations, the BOTA Foundation helped more than 208,000 people in need in Kazakhstan, turning more than $115 million in alleged bribe money into assistance to parents, families with disabled children and youth seeking higher education. Through our Kleptocracy Asset Recovery Initiative, the Department of Justice is committed to fighting back against impunity and seeking creative ways to reduce the harms caused by corruption.”
Under the 2007 agreements, the parties released more than $115 million to the BOTA Foundation for programs running from 2009 through 2014. The BOTA Foundation utilized the funds in three primary programs, each targeting needs of poor youth in Kazakhstan: a conditional cash transfer program providing financial resources and incentives for health and other needs, a social services program providing grants to local communities and a tuition assistance grant program.
Partnership with the governments of Switzerland and Kazakhstan and close collaboration with the World Bank, program managers IREX and Save the Children, the BOTA Foundation’s Board of Directors, the State Department and USAID were essential to the success of the settlement. Deputy Assistant Attorney General Bruce Swartz of the Criminal Division, Principal Assistant Deputy Chief Daniel Claman of AFMLS and Assistant U.S. Attorney Barbara Ward of the District of New Jersey negotiated and implemented the agreement on behalf of the United States. The Criminal Division’s Office of International Assistance provided assistance in this case. The FBI investigated the matter.
Under the Kleptocracy Asset Recovery Initiative, dedicated prosecutors in AFMLS work in partnership with U.S. Attorneys’ Offices and federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where possible and appropriate, put forfeited corruption proceeds to use for the benefit of the people of the country harmed by the abuse of public office. Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected].
Bollinger Shipyards Agrees to Settle False Claims Act SuitRead the Press Release
Bollinger Shipyards will pay the United States $8.5 million and release contract claims to settle a False Claims Act action filed against it in the Eastern District of Louisiana, the Department of Justice announced today. The False Claims Act suit alleges that Bollinger misrepresented the longitudinal strength of patrol boats it delivered to the Coast Guard that resulted in the boats buckling and failing once they were put into service. Bollinger Shipyards is located in Lockport, Louisiana.
“Those who expect to do business with the government must do so fairly and honestly,” said Principal Deputy Assistant Attorney General Benjamin Mizer, head of the Justice Department’s Civil Division. “We expect the utmost integrity and reliability from the contractors that design and build equipment that is essential to public safety and our national defense.”
In 2002, the U.S. Coast Guard contracted to lengthen the Coast Guard’s existing fleet of 110-foot patrol boats to 123 feet and to make other modifications. Bollinger was the subcontractor that performed the 123-foot patrol boat design and conversion work. An essential element of the conversion was that the modified boats have sufficient longitudinal strength to meet the performance requirements set forth in the contract. The United States alleged Bollinger provided the Coast Guard with engineering calculations that falsely represented the longitudinal strength of the boats and was two times greater than their actual longitudinal strength. The United States alleged Bollinger ran the calculations three times and only provided the Coast Guard with the highest and most inaccurate, of the three calculations. The United States further alleged Bollinger also failed to follow the quality control procedures that were mandated by the contract that would have ensured against such engineering miscalculations.
The case was handled jointly by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Eastern District of Louisiana.
The case is captioned United States v. Bollinger Shipyards, et al. Case No. 2:12cv-00920 (E.D. La.). The claims resolved by the settlement are allegations only, and there has been no determination of liability.
United States Files Consent Decree of Permanent Injunction Against Vermont Dairy Farm to Stop Distribution of Adulterated Food and Unlawful Administration of Veterinary DrugsRead the Press Release
The Department of Justice filed a complaint in the U.S. District Court for the District of Vermont seeking a permanent injunction against the Correia Farm Limited Partnership d/b/a Wynsum Holsteins, a dairy farm located in West Addison, Vermont, and its co-owners Anthony and Barbara Correia and their son and limited partner Stephen Correia, to prevent violations of the federal Food, Drug and Cosmetic Act (FDCA).
According to the complaint, which was filed by the Department of Justice’s Consumer Protection Branch and the U.S. Attorney’s Office for the District of Vermont on behalf of the U.S. Food and Drug Administration (FDA), the farm and individual defendants violated the FDCA by unlawfully administering new animal drugs for uses not approved by the FDA and unlawfully selling livestock for slaughter and human consumption despite the presence of unsafe drug residues in the animals’ edible tissues. The complaint states that previous inspections of the farm by the FDA and lab tests performed by the U.S. Department of Agriculture found recurring FDCA violations of the same nature, which the defendants failed to correct despite FDA warnings.
“When farms fail to implement and maintain appropriate controls for the administration of antibiotics and other drugs to food-producing animals, they jeopardize public health,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to work with the FDA to try to make sure that consumers are getting safe food.”
In conjunction with the filing of the complaint, the defendants have agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from violating the FDCA. The consent decree subjects the defendants to heightened FDA oversight and requires them to cease all operations until the defendants implement a number of new record-keeping and operational protocols designed to ensure consumer safety. In order for the defendants to resume food production, the FDA first must determine that their manufacturing practices have come into compliance with the law. The proposed decree is currently awaiting judicial approval.
This matter was handled by Trial Attorney Megan Englehart of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Ben Weathers-Lowin of the District of Vermont, with assistance from Yen Hoang of the FDA’s Office of the Chief Counsel.
A complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.
Justice Department Announces Aargauische Kantonalbank Reaches Resolution Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Aargauische Kantonalbank (AKB) reached a resolution under the department’s Swiss Bank Program.
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
-
Make a complete disclosure of their cross-border activities;
-
Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
-
Cooperate in treaty requests for account information;
-
Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
-
Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
-
Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreement signed today, AKB 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.
AKB was founded in 1912 and is headquartered in Aarau, Switzerland. The canton of Aargau owns 100 percent of AKB and guarantees its deposits.
AKB offered a variety of traditional Swiss banking services that it knew could assist, and did assist, U.S. taxpayers in concealing their identity from the Internal Revenue Service (IRS) by minimizing the paper trail associated with their undeclared assets and income. AKB offered to identify accounts only by number and agreed not to send any mail to U.S. resident clients, which ensured that documents acknowledging the existence of the accounts remained outside of the United States and beyond the reach of U.S. tax authorities. AKB accepted some former UBS clients following the U.S. investigation of untaxed assets and opened accounts for foundations and other entities that hid their U.S. ownership.
As early as 2008, AKB knew that some U.S.-related accounts held untaxed funds, which were described within AKB in one instance as “Schwarzgeld” or “black money.” AKB knew that U.S. persons had a duty under U.S. law to report their income to the IRS and to pay taxes on that income, including all income earned in accounts maintained by AKB in Switzerland. Despite this knowledge, AKB 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 U.S. Department of the Treasury as U.S. law required.
AKB clients who lived in the United States engaged in a pattern of cash withdrawals. For instance, one client personally came to AKB and, over the counter, withdrew large amounts of cash from her account – over 100,000 Swiss francs in 2009 and over 180,000 Swiss francs in 2010. AKB also assisted its U.S. clients in sending money to themselves, relatives, business partners or other businesses in the United States by issuing checks drawn on one of AKB’s bank accounts. Because these checks listed only AKB as the accountholder, they did not reveal that the funds were ultimately paid out of the U.S. clients’ Swiss bank account. U.S. clients were thus able to utilize this technique to conceal their ownership of a Swiss account.
In 2009, responding to what AKB considered “astonishing and alarming” international pressure to lift Switzerland’s longstanding client-bank confidentiality for tax-offending foreign clients, AKB decided to start dealing with “openly declared black money and domiciliary companies.” The latter situation, where the domiciliary company was in truth a nominee or sham entity, was one AKB knew its employees either “knew or should expect” to involve tax evasion.
From at least 2008 through 2014, AKB maintained and serviced 454 U.S.-related accounts having a maximum aggregate value of more than $639 million. AKB will pay a penalty of $1.983 million.
In accordance with the terms of the Swiss Bank Program, AKB 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 AKB 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 AKB 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 Brian D. Bailey, 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.
-
Justice Department Opens Pattern or Practice Investigation into the Chicago Police DepartmentRead the Press Release
Attorney General Loretta E. Lynch announced today that the Justice Department has opened a civil pattern or practice investigation into Chicago Police Department (CPD), pursuant to the Violent Crime Control and Law Enforcement Act of 1994. The department’s investigation of CPD will seek to determine whether there are systemic violations of the Constitution or federal law by officers of CPD. The investigation will focus on CPD’s use of force, including racial, ethnic and other disparities in use of force, and its systems of accountability.
“Building trust between law enforcement officers and the communities they serve is one of my highest priorities as Attorney General,” said Attorney General Lynch. “The Department of Justice intends to do everything we can to foster those bonds and create safer and fairer communities across the country. And regardless of the findings in this investigation, we will seek to work with local officials, residents, and law enforcement officers alike to ensure that the people of Chicago have the world-class police department they deserve.”
During the course of the investigation, the Justice Department will consider all relevant information, particularly the CPD’s policies, training and practices related to using, reporting, investigating and reviewing force. The Justice Department will also look into CPD’s practices related to disciplinary and other corrective action; and its practices related to intake and handling of allegations of misconduct.
"The Justice Department's investigation – opened with currently available, preliminary information – seeks to determine whether the Chicago Police Department's use of force practices and accountability systems comply with constitutional standards necessary to effectively serve its community and productively support its police officers,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. ”In the coming months, we look forward to engaging directly with all stakeholders in Chicago – including the city's residents, law enforcement officers and public officials – as part of our fact-driven and thorough review.”
“Today's launch of this investigation marks an important and positive opportunity for Chicago and its police department," said U.S. Attorney Zachary T. Fardon for the Northern District of Illinois. “The U.S. Attorney's Office is fully committed to doing everything in our power, in partnership with our colleagues in the Civil Rights Division, to ensure that this process is a success.”
As part of the investigation the department will gather information directly from police officers and local officials; community members, and other criminal justice stake holders, such as public defenders and prosecutors. The department will also observe officer activities through ride-alongs and other means; as well as review documents and specific incidents that are relevant to the investigation. Pattern or practice investigations of police departments do not assess individual cases for potential criminal violations; instead they look at incidents for patterns created by systems and practices.
The Justice Department has taken similar steps involving a variety of state and local law enforcement agencies, both large and small, in jurisdictions throughout the United States. When investigations result in findings of systemic violations of federal law and the Constitution they have in many instances resulted in comprehensive, court-overseen agreements to fundamentally change the law enforcement agency’s police practices. When the department’s investigations do not result in findings of violations of federal law and the Constitution the department will close the investigation without an agreement.
This matter is being investigated by attorneys and staff from the Civil Rights Division with assistance from the U.S. Attorney’s Office for the Northern District of Illinois. They will be assisted by experienced law enforcement experts. The department welcomes the views of anyone wishing to provide relevant information.
Police Reform and Accountability Fact Sheet
How P&P Investigations Work
Justice Department Announces New Accreditation Policies to Advance Forensic ScienceRead the Press Release
Deputy Attorney General Sally Quillian Yates announced today that the Justice Department will, within the next five years, require department-run forensic labs to obtain and maintain accreditation and require all department prosecutors to use accredited labs to process forensic evidence when practicable. Additionally, the department has decided to use its grant funding mechanisms to encourage other labs around the country to pursue accreditation.
The new policies arose out of recommendations made by the National Commission of Forensic Science (NCFS), which was established to advance the field of forensic science and make suggestions to the Attorney General on how to ensure that reliable and scientifically valid evidence is used when solving crimes. The Attorney General made the decision to implement several of the commission’s recommendations last week and the Deputy Attorney General, who serves as co-chair of the NCFS, announced their adoption at a meeting of the commission today.
“The department believes that accreditation is one of the most important tools for ensuring that forensic science is practiced in a reliable, scientifically rigorous way,” said Deputy Attorney General Yates. “Accreditation provides valuable oversight by ensuring that someone outside the participating laboratory has confirmed that the lab is following their required procedures. We support accreditation and we want to expand accreditation as widely as possible.”
Though department forensic labs at ATF, DEA and FBI are already accredited, the new policy will ensure that, by 2020, those labs will have to maintain that accreditation. Also by 2020, department prosecutors will be required to use accredited forensic labs when it is practicable. The Executive Office for U.S. Attorneys (EOUSA) has been directed to develop guidance that will ensure the successful implementation of this new policy in the field.
The new policy does not apply to digital forensic labs. Instead, the Deputy Attorney General has asked the NCFS to develop separate recommendations on accrediting of labs that conduct digital forensic work, given the difference in the practices of forensic analysis of digital evidence.
As a result of the commission’s recommendations, the Attorney General also has directed two changes to the department’s grant funding in an effort to encourage and support state and local forensic labs in the process of becoming accredited. First, solicitations for both Edward Byrne Memorial Justice Assistance Grant funding and Paul Coverdell Forensic Science Improvement Grant funding will be re-drafted to make clear that applicants can use this money to seek accreditation, because labs have not always used these funds to seek accreditation. Second, relevant discretionary grant programs at the Office of Justice Programs will be modified to give preferences to labs that will use the money to obtain accreditation. These applicants will get a “plus factor,” increasing their likelihood of getting the money they need.
Accreditation assesses a forensic lab’s capacity to generate and interpret results in a particular forensic discipline and helps to ensure an ongoing compliance to industry and applicable international standards. An independent accrediting body assesses and monitors the quality of the lab’s management system by examining factors that include staff competence; method validation; appropriateness of test methods; calibration and maintenance of test equipment; testing environment and quality assurance data. Accreditation is one way to increase the quality of work and reducing the likelihood of errors.
Based on further recommendations by the NCFS, the Deputy Attorney General also announced that the department will help to establish an interagency working group aimed at bringing higher levels of scientific rigor and reliability to the field of medico-legal death investigation (MDI). The department has asked the White House’s Office of Science and Technology Policy to help convene the working group, which would focus on a broad range of MDI issues. Though the department does not conduct its own MDI– which is typically handled by state and local agencies – it believes an interagency group will help accomplish the goals of the NCFS in strengthening the MDI field.
Electrolux and General Electric Abandon Anticompetitive Appliance Transaction After Four-Week TrialRead the Press Release
Electrolux and General Electric Company announced today the termination of the agreement under which Electrolux was to purchase General Electric’s appliance business.
The department brought suit on July 1, 2015, to challenge the $3.3 billion acquisition because it would combine two of the leading manufacturers of ranges, cooktops and wall ovens sold in the United States, eliminating competition that benefits American consumers and home builders through lower prices and more options. Trial before the Honorable Emmet G. Sullivan began on Nov. 9 in the U.S. District Court for the District of Columbia.
“In the courtroom, facts matter,” said Deputy Assistant Attorney General David I. Gelfand of the Justice Department’s Antitrust Division. “Rhetoric does not. This deal was bad for the millions of consumers who buy cooking appliances every year. Electrolux and General Electric could not overcome that reality at trial. The American public has been very well-served by the outstanding work of the trial team in this case, led by Ethan Glass. The abandonment of the transaction is a testament to their tremendous dedication and the thoroughness with which they presented the evidence to the Court.”
Electrolux makes and sells major appliances under the brand names Frigidaire, Tappan and Electrolux. Its annual major-appliance sales in the United States total approximately $2.6 billion. Electrolux North America Inc. is a wholly owned subsidiary of defendant AB Electrolux.
General Electric also makes and sells major appliances, including those under the brand names GE Monogram, GE Café, GE Profile, GE, GE Artistry and Hotpoint. In the United States, General Electric’s annual major appliance sales total approximately $3.4 billion.
Defendant Convicted of Perjury Sentenced to 46 MonthsRead the Press Release
SAIPAN, CNMI – ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), announced that on Friday, December 4, 2015, the NMI U.S. District Court Chief Judge Ramona V. Manglona sentenced Randy A. Igisomar, age 23, to 46 months in prison followed by three years of supervised release for perjury. Igisomar pleaded guilty on November 26, 2014.
During his sentencing hearing, Igisomar addressed Judge Manglona in open court and admitted he had lied during his testimony at the trial of Raymond Borja Roberto, who had been charged with three counts of enticement of a minor and one count of witness tampering, and was acquitted on all counts by a jury on September 29, 2014.
Following the sentencing, United States Attorney for the Districts of Guam and the Northern Mariana Islands, Alicia A.G. Limtiaco, stated, “The Defendant's perjured testimony was an affront to our system of justice. The United States Attorney’s Office, together with its federal law enforcement partners, will continue in its efforts to ensure that those who obstruct justice are held accountable and prosecuted for their crimes.”
The case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorneys Ross K. Naughton and Garth R. Backe.
2015 Pacific Region OCDETF Advisory Council Meeting in San FranciscoRead the Press Release
ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands (NMI), together with Michael Puralewski, Resident Agent in Charge of the Drug Enforcement Administration (DEA), and Assistant U.S. Attorney (AUSA) Clyde Lemons, attended the 2015 Pacific Region OCDETF Advisory Council Meeting on December 3, 2015, in San Francisco, California.
OCDETF (Organized Crime Drug Enforcement Task Force) is a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies. The participants of the OCDETF Program include the 94 U.S. Attorneys’ Offices, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the DEA, the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS), the U.S. Coast Guard, the U.S. Immigration and Customs Enforcement (ICE), the U.S. Marshals Service, the Criminal and Tax Divisions of the U.S. Department of Justice and numerous state and local agencies.
The 2015 Pacific Region OCDETF Advisory Council Meeting was attended by United States Attorneys, Lead OCDETF AUSAs, Special Agents in Charge of DEA, and U.S. Marshals in the Pacific Region. The Pacific Region encompasses Guam, the Commonwealth of the Northern Mariana Islands, Hawaii, California, Washington, Nevada, Oregon, Idaho and Alaska. The meeting covered the state of the OCDETF Program, Pacific Region district updates and a review of the Pacific Region Drug Threat Assessment.
Two Massachusetts Men Indicted in Massive Stolen Identity Tax Refund Fraud SchemeRead the Press Release
A federal grand jury sitting in Boston returned an indictment yesterday, which was unsealed today, charging two Massachusetts residents with conspiracy to defraud the United States, theft of government property, access device fraud and aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, U.S. Attorney Carmen M. Ortiz for the District of Massachusetts, and Special Agent in Charge William Offord of Internal Revenue Service-Criminal Investigation (IRS-CI), Boston Field Office.
Furvio Flete-Garcia, 42, and Juan Santiago, 36, both of Lawrence, Massachusetts and nationals of the Dominican Republic, are alleged to have participated in a scheme to prepare and file fraudulent federal income tax returns using stolen identities for the purpose of obtaining U.S. Treasury tax refund checks. According to the indictment, during 2013 and 2014, Flete-Garcia and Santiago possessed more than 800 names and social security numbers of U.S. citizens including Puerto Rican residents, which Santiago sold to another individual for the purpose of using those identities to prepare and file fraudulent federal income tax returns. The indictment further alleges that Flete-Garcia and Santiago sold more than 16 U.S. Treasury tax refund checks with a total face value of more than $100,000 to the same individual. These tax refund checks were issued by the IRS as a result of the fraudulent income tax returns that were filed using the stolen identities.
Acting Assistant Attorney General Ciraolo, U.S. Attorney Ortiz and Special Agent in Charge Offord thanked agents of IRS-CI, Homeland Security Investigations, U.S. Secret Service and the Social Security Administration’s Office of the Inspector General, who investigated the case and Senior Litigation Counsel Corey J. Smith of the Tax Division, who is prosecuting the case.
Sixteen Additional FIFA Officials Indicted for Racketeering Conspiracy and CorruptionRead the Press Release
A 92-count superseding indictment was unsealed earlier today in federal court in Brooklyn, New York, charging an additional 16 defendants with racketeering, wire fraud and money laundering conspiracies, among other offenses, in connection with their participation in a 24-year scheme to enrich themselves through the corruption of international soccer. The superseding indictment also includes additional charges for seven of the defendants still pending extradition following the return of the original indictment last May. The guilty pleas of eight defendants – including Jeffrey Webb, Alejandro Burzaco and José Margulies, three of the defendants indicted last May – were also announced today.
The new defendants charged in the superseding indictment include high-ranking officials of FIFA, the organization responsible for the regulation and promotion of soccer worldwide, as well as high-ranking officials of other soccer governing bodies that operate under the FIFA umbrella. Alfredo Hawit and Juan Ángel Napout – the current presidents of CONCACAF and CONMEBOL, as well as current FIFA vice presidents and executive committee members – are among the 16 additional soccer officials charged with racketeering and bribery offenses. CONCACAF and CONMEBOL are two of FIFA’s six continental confederations. The new defendants also include Marco Polo del Nero and Ricardo Teixeira, the current and former presidents of the Brazilian soccer federation, both of whom are also former members of the FIFA executive committee, as well as José Luís Meiszner and Eduardo Deluca, the current and former general secretaries of CONMEBOL. Within UNCAF, the Central American regional soccer union operating within CONCACAF, the charges in the superseding indictment name the current and/or former presidents of nearly every country in the region: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. Taken together, the 27 defendants in the superseding indictment are alleged to have engaged in a number of schemes all designed to solicit and receive well over $200 million in bribes and kickbacks to sell lucrative media and marketing rights to international soccer tournaments and matches, among other valuable rights and properties.
The charges were announced by Attorney General Loretta E. Lynch, FBI Director James B. Comey, U.S. Attorney Robert L. Capers of the Eastern District of New York, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office, Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Erick Martinez of the IRS-CI Los Angeles Field Office.
Early this morning, Swiss authorities in Zurich arrested two of the defendants charged in the superseding indictment – Hawit and Napout – at the request of the United States. Also this morning, a search warrant was executed at Media World, a sports marketing company based in Miami.
The new charges unsealed today bring the total number of individuals and entities charged to date to 41. Of those, 12 individuals and two sports marketing companies have already been convicted as a result of the ongoing investigation. The convicted defendants have agreed to pay more than $190 million in forfeiture. In addition, more than $100 million has been restrained in the United States and abroad in connection with the alleged criminal activity. The United States has issued mutual legal assistance requests seeking the restraint of assets located in 13 countries around the world.
“The Department of Justice is committed to ending the rampant corruption we have alleged amidst the leadership of international soccer – not only because of the scale of the schemes, or the brazenness and breadth of the operation required to sustain such corruption, but also because of the affront to international principles that this behavior represents,” said Attorney General Lynch. “The message from this announcement should be clear to every culpable individual who remains in the shadows, hoping to evade our investigation: You will not wait us out. You will not escape our focus.” Attorney General Lynch extended her grateful appreciation to the authorities of the government of Switzerland for their continuing outstanding assistance and collaboration in this investigation, and to the authorities in a number of other countries, including Brazil and Colombia, for their assistance as well.
“For decades, these defendants used their power as the leaders of soccer federations throughout the world to create a web of corruption and greed that compromises the integrity of the beautiful game,” said Director Comey. “I want to thank all the agencies for their hard work and for showing the world that we do not tolerate this criminal activity.”
“The charges unsealed today send a clear message to those who corrupted a sport beloved by millions to satisfy their own greed: We are determined to put a stop to bribery and corruption in international soccer and to make room for a new era of integrity and reform,” said U.S. Attorney Capers. “This indictment is the latest step in that effort, but our work is not done. While our investigation continues at home, we also look forward to continuing our collaboration with our international partners, including in particular the Swiss authorities, because there is so much yet to be done.” Mr. Capers extended his thanks to the agents, analysts, and other investigative personnel with the FBI New York Eurasian Joint Organized Crime Squad and the IRS-CI Los Angeles Field Office, as well as their colleagues in the United States and abroad, for their continuing tremendous effort in this case. Mr. Capers also thanked the U.S. Marshals Service for its continuing assistance.
“The brazenness with which the individuals indicted today breached the integrity of the U.S. financial system to promote and conceal their criminal schemes is quite alarming,” said Chief Weber. “While it is one of the most complex worldwide financial investigations ever conducted, it is also an eye opener to everyone that such greed and corruption could be hiding in plain sight within the world’s most popular sport. By conspiring to enrich themselves through bribery and kickback schemes relating to media and marketing rights, the defendants undermined the process of fair and open competition, corrupting the beautiful game for their own personal gain.”
The charges in the superseding indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
Overview of the Superseding Indictment
As alleged in the superseding indictment, FIFA and its six continental confederations – including CONCACAF, headquartered in the United States, and CONMEBOL, the confederation headquartered in South America – together with affiliated regional federations, national member associations and sports marketing companies, constitute an enterprise of legal entities associated in fact for purposes of the federal racketeering laws. The principal – and entirely legitimate – purpose of the enterprise is to regulate and promote the sport of soccer worldwide.
As in the original indictment, the superseding indictment alleges that, between 1991 and the present, the defendants and their co-conspirators corrupted the enterprise by engaging in various criminal activities, including fraud, bribery and money laundering. Two generations of soccer officials abused their positions of trust for personal gain, frequently through an alliance with unscrupulous sports marketing executives who shut out competitors and kept highly lucrative contracts for themselves through the systematic payment of bribes and kickbacks. All told, the soccer officials are charged with conspiring to solicit and receive more than $200 million in bribes and kickbacks in exchange for their official support of the sports marketing executives who agreed to make the unlawful payments.
The schemes alleged in the original indictment related to the solicitation and receipt of bribes and kickbacks by soccer officials from sports marketing executives in connection with the commercialization of the media and marketing rights associated with various soccer matches and tournaments, as well as schemes related to the payment and receipt of bribes and kickbacks in connection with the sponsorship of the Brazilian soccer federation by a major U.S. sportswear company, the selection of the host country for the 2010 World Cup and the 2011 FIFA presidential election.
The new allegations in the superseding indictment relate to a series of bribery schemes in connection with multiple cycles of FIFA World Cup qualifiers and international friendly matches involving six Central American member associations within UNCAF; a bribery scheme implicating many top CONMEBOL officials relating to the sale of broadcasting rights to the CONMEBOL Copa Libertadores over an extended period; and a scheme by an Argentinian sports marketing company to obtain various rights properties from CONCACAF by paying bribes to three Central American soccer officials to cause them to exert their influence in favor of the company.
The 16 New Defendants
As set forth in the superseding indictment, the 16 newly indicted defendants are all current or former soccer officials who acted at various times in a fiduciary capacity within FIFA and one or more of its constituent organizations:
CONCACAF Region Officials
- Alfredo Hawit: Current FIFA vice president and Executive Committee member and CONCACAF president. Former CONCACAF vice president and Honduran soccer federation president.
- Ariel Alvarado: Current member of the FIFA Disciplinary Committee. Former CONCACAF Executive Committee member and Panamanian soccer federation president.
- Rafael Callejas: Current member of the FIFA Television and Marketing Committee. Former Honduran soccer federation president and President of the Republic of Honduras.
- Brayan Jiménez: Current Guatemalan soccer federation president and member of the FIFA Committee for Fair Play and Social Responsibility.
- Rafael Salguero: Former FIFA Executive Committee member and Guatemalan soccer federation president.
- Héctor Trujillo: Current Guatemalan soccer federation general secretary and judge on the Constitutional Court of Guatemala.
- Reynaldo Vasquez: Former Salvadoran soccer federation president.
CONMEBOL Region Officials
- Juan Ángel Napout: Current FIFA vice president and Executive Committee member and CONCACAF president. Former Paraguayan soccer federation president.
- Manuel Burga: Current member of the FIFA Development Committee. Former Peruvian soccer federation president.
- Carlos Chávez: Current CONMEBOL treasurer. Former Bolivian soccer federation president.
- Luís Chiriboga: Current Ecuadorian soccer federation president and member of the CONMEBOL executive committee.
- Marco Polo del Nero: Current president of the Brazilian soccer federation. Announced resignation from FIFA Executive Committee on Nov. 26, 2015.
- Eduardo Deluca: Former CONMEBOL general secretary.
- José Luis Meiszner: Current CONMEBOL general secretary.
- Romer Osuna: Current member of the FIFA Audit and Compliance Committee. Former CONMEBOL treasurer.
- Ricardo Teixeira: Former Brazilian soccer federation president and FIFA Executive Committee member.
The Convicted Defendants
The following defendants pleaded guilty under seal and agreed to forfeit more than $40 million:
On May 26, 2015, Zorana Danis, the co-founder and owner of International Soccer Marketing Inc., a New Jersey-based sports marketing company, waived indictment and pleaded guilty to a two-count information charging her with wire fraud conspiracy and filing false tax returns. As part of her plea, Danis agreed to forfeit $2 million.
On Nov. 9, 2015, Fabio Tordin, the former CEO of Traffic Sports USA Inc. and currently an executive with Media World LLC, a Miami-based sports marketing company, waived indictment and pleaded guilty to a four-count information charging him with three counts of wire fraud conspiracy and tax evasion. As part of his plea, Tordin agreed to forfeit more than $600,000.
On Nov. 12, 2015, Luis Bedoya, a member of the FIFA Executive Committee, a CONMEBOL vice president and, until last month, the president of the Federación Colombiana de Fútbol, the Colombian soccer federation, waived indictment and pleaded guilty to a two-count information charging him with racketeering conspiracy and wire fraud conspiracy. As part of his plea, Bedoya agreed to forfeit all funds on deposit in his Swiss bank account, among other funds.
On Nov. 16, 2015, Alejandro Burzaco, the former general manager and chairman of the board of Torneos y Competencias S.A., an Argentinian sports marketing company, pleaded guilty to racketeering conspiracy, wire fraud conspiracy, and money laundering conspiracy. As part of his plea, Burzaco agreed to forfeit more than $21.6 million.
On Nov. 17, 2015, Roger Huguet, the CEO of Media World and its parent company, waived indictment and pleaded guilty to two counts of wire fraud conspiracy and one count of money laundering conspiracy. As part of his plea, Huguet agreed to forfeit over $600,000.
On Nov. 23, 2015, Jeffrey Webb, a former FIFA vice president and Executive Committee member, CONCACAF president, Caribbean Football Union Executive Committee member and Cayman Islands Football Association president, pleaded guilty to racketeering conspiracy, three counts of wire fraud conspiracy and three counts of money laundering conspiracy. As part of his plea, Webb agreed to forfeit more than $6.7 million.
On Nov. 23, 2015, Sergio Jadue, a vice president of CONMEBOL and, until last month, the president of the Asociación Nacional de Fútbol Profesional de Chile, the Chilean soccer federation, waived indictment and pleaded guilty to a two-count information charging him with racketeering conspiracy and wire fraud conspiracy. As part of his plea, Jadue agreed to forfeit all funds on deposit in his U.S. bank account, among other funds.
On Nov. 25, 2015, José Margulies, the controlling principal of Valente Corp. and Somerton Ltd, who served as an intermediary who facilitated illicit payments between sports marketing executives and soccer officials, pleaded guilty to racketeering conspiracy, wire fraud conspiracy and two counts of money laundering conspiracy. As part of his plea, Margulies agreed to forfeit more than $9.2 million.
As announced last May, all money forfeited by the defendants is being held in reserve to ensure its availability to satisfy any order of restitution entered at sentencing for the benefit of any individuals or entities that qualify as victims of the defendants’ crimes under federal law.
* * *
The indicted and convicted defendants face maximum terms of incarceration of 20 years for the Racketeer Influenced and Corrupt Organizations Act (RICO) conspiracy, wire fraud conspiracy, wire fraud, money laundering conspiracy, money laundering and obstruction of justice charges. In addition, Tordin and Danis face maximum terms of five and three years in prison, respectively, for the tax charges. Each defendant also faces mandatory restitution, forfeiture and a fine.
The superseding indictment and guilty pleas unsealed today are assigned to the U.S. District Judge Raymond J. Dearie of the Eastern District of New York.
The government’s investigation is ongoing.
The charges and guilty pleas announced today are part of an investigation into corruption in international soccer being led by the U.S. Attorney’s Office of the Eastern District of New York, the FBI’s New York Field Office and the IRS-CI Los Angeles Field Office. The work in the U.S. Attorney’s Office involves prosecutors from the National Security and Cybercrime Section, the Organized Crime and Gang Section, the Business and Securities Fraud Section and the Public Integrity Section. The prosecutors in Brooklyn are receiving considerable assistance from attorneys in various parts of the Justice Department’s Criminal Division in Washington, D.C., including the Office of International Affairs, the Organized Crime and Gang Section, the Asset Forfeiture and Money Laundering Section and the Fraud Section, as well as from INTERPOL Washington.
The charges and guilty pleas announced today are being prosecuted by Assistant United States Attorneys Evan M. Norris, Amanda Hector, Darren A. LaVerne, Samuel P. Nitze, M. Kristin Mace, Paul Tuchmann, Keith D. Edelman, Tanya Hajjar and Brian D. Morris of the Eastern District of New York.
The Newly-Indicted Defendants:
ARIEL ALVARADO
Age: 56
Nationality: Panama
MANUEL BURGA
Age: 58
Nationality: Peru
RAFAEL CALLEJAS
Age: 72
Nationality: Honduras
CARLOS CHÁVEZ
Age: 57
Nationality: Bolivia
LUÍS CHIRIBOGA
Age: 69
Nationality: Ecuador
MARCO POLO DEL NERO
Age: 74
Nationality: Brazil
EDUARDO DELUCA
Age: 75
Nationality: ARGENTINA
ALFREDO HAWIT
Age: 64
Nationality: Honduras
BRAYAN JIMÉNEZ
Age: 61
Nationality: Guatemala
JOSÉ LUÍS MEISZNER
Age: 69
Nationality: Argentina
JUAN ÁNGEL NAPOUT
Age: 57
Nationality: Paraguay
ROMER OSUNA
Age: 72
Nationality: Bolivia
RAFAEL SALGUERO
Age: 70
Nationality: Guatemala
RICARDO TEIXEIRA
Age: 68
Nationality: Brazil
HÉCTOR TRUJILLO
Age: 62
Nationality: Guatemala
REYNALDO VASQUEZ
Age: 59
Nationality: El Salvador
The Convicted Defendants:
LUIS BEDOYA
Age: 56
Nationality: Colombia
ALEJANDRO BURZACO
Age: 51
Nationality: Argentina
ZORANA DANIS
Age: 52
Nationality: Belgium
ROGER HUGUET
Age: 52
Nationality: USA, Spain
SERGIO JADUE
Age: 36
Nationality: Chile
JOSÉ MARGULIES
Age: 76
Nationality: Brazil
FABIO TORDIN
Age: 50
Nationality: Brazil
JEFFREY WEBB
Age: 51
Nationality: Cayman Islands
E.D.N.Y. Docket Numbers:
United States v. Zorana Danis, 15 Cr. 240 (RJD)
United States v. Jeffrey Webb et al., 15 Cr. 252 (RJD)
United States v. Fabio Tordin, 15 Cr. 564 (RJD)
United States v. Luis Bedoya, 15 Cr. 569 (RJD)
United States v. Sergio Jadue, 15 Cr. 570 (RJD)
United States v. Roger Huguet, 15 Cr. 585 (RJD)
Justice Department Partners with Republic of Ecuador to Combat Employment DiscriminationRead the Press Release
Today, the Justice Department and the Republic of Ecuador established a formal partnership to fight employment discrimination based on citizenship, immigration status and national origin. Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, and Ecuadorean Ambassador Francisco Borja Cevallos signed a Memorandum of Understanding (MOU) creating a partnership between the embassy and its consulates, and the Civil Rights Division’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC). The Immigration and Nationality Act’s (INA) anti-discrimination provision prohibits employers in the United States from discriminating in hiring, firing, recruiting or verifying a worker’s employment eligibility because of citizenship, immigration status or national origin.
The MOU seeks to empower work-authorized Ecuadorians in the United States by educating them about their rights and providing them with the resources needed to protect those rights. The MOU will also promote training for employers on their responsibilities under the anti-discrimination provision of the INA, which prohibits employment discrimination because of citizenship, immigration status and national origin. Specifically, the MOU provides that:
• OSC will help train Ecuadorean consular staff on the anti-discrimination provision of the INA, participate in events organized by Ecuadorean consulates to educate workers and employers and distribute educational materials to the embassy and its consulates.
• The embassy will establish a system for referring discrimination claims from the embassy and consulates to OSC.
“The signing of today’s historic MOU marks a critical stride of progress in the dynamic partnership between our countries,” said Principal Deputy Assistant Attorney General Gupta. “Together, we will continue to advance our shared commitment to empowering workers, combating unlawful discrimination and protecting the rights of our people.”
“These agreements are vital to ensure that the Ecuadorian community in the United States is informed of its rights and the different resources that the Department of Justice provides through its offices and phone support lines,” said Ambassador Borja Cevallos. “Our goal is to make sure that the rights of Ecuadorian immigrants are respected.”
Today’s agreement builds on the joint outreach to immigrant communities already underway between OSC and Ecuador’s embassy and consulates.
OSC is responsible for enforcing the anti-discrimination provision of the INA. Among other things, this law prohibits discrimination based on citizenship status and or national origin discrimination in hiring, firing or recruitment or referral for a fee; discrimination in the employment eligibility verification process; retaliation; and intimidation. In addition to its enforcement work, OSC educates the public on rights and responsibilities under the INA’s anti-discrimination provision. More information on OSC is available at www.justice.gov/crt/about/osc.
For more information about protections against employment discrimination under immigration laws, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TTY for hearing impaired); call OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TTY for hearing impaired); sign up for a free webinar at www.justice.gov/crt/about/osc/webinars.php; email [email protected]; or visit OSC’s website at www.justice.gov/crt/about/osc.
Ecuador MOU
El Departamento de Justicia Colabora con la República del Ecuador para Combatir la Discriminación en el EmpleoRead the Press Release
WASHINGTON – El Departamento de Justicia de los Estados Unidos y la República del Ecuador firmaron hoy un acuerdo de asociación formal para combatir la discriminación en el empleo por motivos de ciudadanía, estatus migratorio o nacionalidad de origen. Secretaria de Justicia Auxiliar Adjunta Principal Vanita Gupta, Jefa de la División de Derechos Civiles, y el embajador ecuatoriano Francisco Borja Cevallos firmaron un memorándum de entendimiento (MOU, por sus siglas en inglés) que establece una asociación entre la embajada y sus consulados y la Oficina del Consejero Especial para Prácticas Injustas en el Empleo Relacionadas a Inmigración (OSC, por sus siglas en inglés), de la División de Derechos Civiles. La disposición antidiscriminatoria de la INA prohíbe que empleadores en los Estados Unidos discriminen durante la contratación, el despido, el reclutamiento o la verificación de la elegibilidad de empleo de un trabajador por motivos de ciudadanía, estatus migratorio o nacionalidad de origen.
El propósito del MOU es habilitar a los ecuatorianos con autorización para trabajar en los Estados Unidos al educarles en cuanto a sus derechos y brindarles los recursos que necesitan para proteger dichos derechos. Asimismo, el MOU promoverá la capacitación de empleadores con respecto a sus responsabilidades en virtud de la disposición antidiscriminatoria de la ley de Inmigración y Nacionalidad (INA, por sus siglas en inglés), la cual prohíbe la discriminación en el empleo por motivos de ciudadanía, estatus migratorio o nacionalidad de origen. En concreto, el MOU dispone que:
-
La OSC ayudará a capacitar al personal consular ecuatoriano en cuanto a la disposición antidiscriminatoria de la INA, participará en eventos organizados por los consulados ecuatorianos para educar a los trabajadores y empleadores y distribuirá materiales educativos a la embajada y sus consulados.
-
La embajada establecerá un sistema para transferir denuncias de discriminación de la embajada y sus consulados a la OSC.
“La ratificación hoy de este MOU histórico representa un avance crítico en la asociación dinámica entre nuestro dos países,” declaró Secretaria de Justicia Auxiliar Adjunta Principal Gupta. “Juntos, seguiremos promoviendo nuestro compromiso compartido de habilitar a los trabajadores, combatir la discriminación ilegal y proteger los derechos de nuestra gente.”
“Estos acuerdos son vitales para asegurar que la comunidad ecuatoriana en los Estados Unidos esté informada de sus derechos y los diferentes recursos que el Departamento de Justicia ofrece a través de sus oficinas y líneas de ayudas, así como de la ayuda que la Embajada ecuatoriana y sus consulados pueden proveer para asegurar que los derechos de los inmigrantes ecuatorianos sean respetados,” dijo el Embajador Borja Cevallos.
El acuerdo de hoy aprovecha el trabajo conjunto de educación de la comunidad ya en curso entre la OSC y la Embajada del Ecuador y sus consulados.
La OSC es responsable de aplicar la disposición antidiscriminatoria de la INA. Entre otras cosas, esta ley prohíbe la discriminación por motivos de estatus de ciudadanía o nacionalidad de origen en la contratación, el despido o el reclutamiento o la recomendación por comisión; la discriminación en el proceso de verificación de la elegibilidad de empleo; las represalias y la intimidación. Además de sus esfuerzos por aplicar la ley, la OSC se dedica a educar al público acerca de sus derechos y responsabilidades de acuerdo con la disposición antidiscriminatoria de la INA. Más información sobre la OSC se encuentra disponible en www.justice.gov/crt/about/osc.
Para más información sobre las protecciones contra la discriminación en el empleo en virtud de las leyes migratorias, llame a la línea directa de la OSC para trabajadores al 1-800-255-7688 (1‑800-237-2515, TTY para personas con discapacidades auditivas); llame a la línea directa de la OSC para empleadores al 1-800-255-8155 (1-800-237-2515, TTY para personas con discapacidades auditivas); matricúlese para un seminario en línea gratuito en www.justice.gov/crt/about/osc/webinars.php; mande un correo electrónico a [email protected] o visite la página web de la OSC en www.justice.gov/crt/about/osc.
Ecuador Memorandum de Entendimiento
-
E-Commerce Exec and Online Retailer Charged with Price Fixing Wall PostersRead the Press Release
A one-count indictment was unsealed yesterday in the U.S. District Court for the Northern District of California in San Francisco against Daniel William Aston and his company, Trod Ltd. (doing business as Buy 4 Less, Buy For Less, and Buy-For-Less-Online), a U.K. company headquartered in Birmingham, England. According to the felony charges, Aston, a director and part owner of Trod, and his co-conspirators fixed the price of certain posters sold online through Amazon Marketplace from as early as September 2013 to in or about January 2014. Today’s announcement comes after U.K. law enforcement and the FBI successfully conducted searches of Trod Ltd.’s headquarters and Aston’s residence in West Midlands, U.K.
“U.S. consumers deserve competitive markets when they shop online.” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “This company and its owner conspired to fix the prices for poster art and consumers unknowingly suffered the consequences. It doesn’t matter whether price-fixers operate from an office in California or a warehouse in England. We will continue to prosecute conspiracies that subvert online competition.”
According to the charge, Aston and his co-conspirators discussed the prices of certain posters sold in the United States through Amazon Marketplace and agreed to adopt specific pricing algorithms for the sale of certain posters, with the goal of offering online shoppers the same price for the same product and coordinating changes to their respective prices.
Aston is charged with price fixing in violation of the Sherman Act, which carries a maximum sentence for individuals of 10 years and a fine of $1 million. Trod Ltd. is charged with one count of price fixing in violation of the Sherman Act, which carries a maximum penalty of a $100 million criminal fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and the United Kingdom.
This prosecution arose from an ongoing federal antitrust investigation into price fixing in the online wall décor industry, which is being conducted by the Antitrust Division’s San Francisco Office with the assistance of the FBI’s San Francisco Division. Anyone with information on price fixing or other anticompetitive conduct related to other products in the wall décor industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.
Second Individual Charged in Ongoing New York Power Authority Procurement Fraud InvestigationRead the Press Release
Construction Company Owner Pleads Guilty to Tax Violation
Law enforcement agencies conducting a joint federal and state investigation into bid-rigging, fraud and tax-related offenses in the award of contracts by the New York Power Authority announced today that a construction company owner from Orangeburg, New York, has pleaded guilty to filing a false tax return. This is the second guilty plea in the investigation, which was initiated by the New York State Inspector General.
According to the one-count felony charge filed in the U.S. District Court for the Southern District of New York, in White Plains, New York, Peter Shine filed a Form 1040 for the tax year 2013 that substantially understated his taxable income. Shine pleaded guilty to subscribing to a false tax return, which carries a maximum penalty of three years in prison and a $250,000 fine.
“Business owners who willfully do not report their true income and expenses potentially expose themselves to criminal investigation and the ensuing consequences,” said Special Agent in Charge Shantelle P. Kitchen of the IRS Criminal Investigation’s New York Field Office. “IRS Criminal Investigation is committed to ensuring that everyone pays his or her fair share.”
“Shine essentially siphoned funds he was not entitled to and sidestepped his responsibility to pay taxes on underreported income,” said Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office. “This guilty plea is proof of the FBI’s continued determination to work with our partners in rooting out those who engage in unlawful schemes for profit.”
“This guilty plea originates from a bid rigging investigation begun at the state level and clearly demonstrates the commitment of my office, and that of my federal law enforcement partners, to follow the evidence wherever it may lead,” said New York State Inspector General Catherine Leahy Scott.
“The division will continue to work with our law enforcement partners to ensure that any crimes uncovered during our investigations will be prosecuted,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.
The investigation is being conducted by the Antitrust Division’s New York Office with the assistance of the FBI, IRS Criminal Investigation and the New York State Office of the Inspector General. NYPA is cooperating with the investigation. Anyone with information on bid rigging or other anticompetitive conducted related to the award or performance of municipal and state contracts should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258 or visit http://www.justice.gov/atr/contact/newcase.html.
Justice Department Recovers over $3.5 Billion from False Claims Act Cases in Fiscal Year 2015Read the Press Release
Recoveries Exceed $3.5 Billion for Fourth Consecutive Year
The Department of Justice obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, announced today. This is the fourth year in a row that the department has exceeded $3.5 billion in cases under the False Claims Act, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.
“The False Claims Act has again proven to be the government’s most effective civil tool to ferret out fraud and return billions to taxpayer-funded programs,” said Mizer. “The recoveries announced today help preserve the integrity of vital government programs that provide health care to the elderly and low income families, ensure our national security and defense, and enable countless Americans to purchase homes.”
Of the $3.5 billion recovered last year, $1.9 billion came from companies and individuals in the health care industry for allegedly providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs. The $1.9 billion reflects federal losses only. In many of these cases, the department was instrumental in recovering additional millions of dollars for consumers and state Medicaid programs.
The next largest recoveries were made in connection with government contracts. The government depends on contractors to feed, clothe, and equip our troops for combat; for the military aircraft, ships, and weapons systems that keep our nation secure; as well as to provide everything that is needed to fund myriad programs at home. Settlements and judgments in cases alleging false claims for payment under government contracts totaled $1.1 billion in fiscal year 2015.
The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans’ benefits, federally insured loans and mortgages, highway funds, research grants, agricultural supports, school lunches, and disaster assistance. In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government.
Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government. If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery. Whistleblowers filed 638 qui tam suits in fiscal year 2015 and the department recovered $2.8 billion in these and earlier filed suits this past year. Whistleblower awards during the same period totaled $597 million.
Health Care Fraud
Including this past year’s $1.9 billion, the department has recovered nearly $16.5 billion in health care fraud since January 2009 to the end of fiscal year 2015 – more than half the health care fraud dollars recovered since the 1986 amendments to the False Claims Act. These recoveries restore valuable assets to federally funded programs such as Medicare, Medicaid, and TRICARE – the health care program for the military. But just as important, the department’s vigorous pursuit of health care fraud prevents billions more in losses by deterring others who might otherwise try to cheat the system for their own gain. The department’s success is a direct result of the high priority the Obama Administration has placed on fighting health care fraud. In 2009, the Attorney General and the Secretary of the Department of Health and Human Services, the department that administers Medicare and Medicaid, announced the creation of an interagency task force called the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.
Two of the largest health care recoveries this past year were from DaVita Healthcare Partners, Inc., the leading provider of dialysis services in the United States. DaVita paid $450 million to resolve allegations that it knowingly generated unnecessary waste in administering the drugs Zemplar and Venofer to dialysis patients, and then billed the government for costs that could have been avoided. DaVita paid an additional $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to physicians to induce patient referrals to its clinics. DaVita is headquartered in Denver, Colorado, and has dialysis clinics in 46 states and the District of Columbia.
Hospitals were involved in nearly $330 million in settlements and judgments this past year. A cardiac nurse and a health care reimbursement consultant filed a qui tam suit against hundreds of hospitals that were allegedly implanting cardiac devices in Medicare patients contrary to criteria established by the Centers for Medicare and Medicaid Services in consultation with cardiologists, professional cardiology societies, cardiac device manufacturers, and patient advocates. The department settled with nearly 500 of these hospitals for a total of $250 million, including $216 million recovered in the past fiscal year. For details, see 500 Hospitals.
Several settlements involved violations of the Stark Law. The Stark Statute prohibits certain financial relationships between hospitals and doctors that could improperly influence patient referrals. Services provided in violation of the Stark Statute are not reimbursable by Medicare or Medicaid. Hospitals settling false claims involving Stark violations include Adventist Health System for $115 million, an organization that operates hospitals and other health care facilities in 10 states; North Broward Hospital District for $69.5 million, a special taxing district of Florida that operates hospitals and other health care facilities in Broward County, Florida; and Georgia hospital system Columbus Regional Healthcare System and Dr. Andrew Pippas for $25 million plus contingent payments up to an additional $10 million. The Adventist settlement also involved allegations of miscoding claims to obtain higher reimbursements for services than allowed by Medicare and Medicaid.
Claims involving the pharmaceutical industry accounted for $96 million in settlements and judgments. Daiichi Sankyo Inc., a global pharmaceutical company with its U.S. headquarters in New Jersey, paid $39 million to resolve allegations of false claims against the United States and state Medicaid programs. Daiichi allegedly paid kickbacks to physicians to induce them to prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol. Medicare and Medicaid prohibit reimbursement for drugs involved in kickback schemes. AstraZeneca LP and Cephalon Inc. paid the United States $26.7 million and $4.3 million, respectively, in separate settlements for allegedly underpaying rebates owed under the Medicaid Drug Rebate Program. As part of those settlements, the two drug manufacturers agreed to pay an additional $23 million to state Medicaid programs for their losses. And in another settlement, PharMerica Corp., the nation’s second largest nursing home pharmacy, agreed to pay the United States $9.25 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting the drug Depakote for nursing home patients. PharMerica is headquartered in Louisville, Kentucky.
Skilled nursing homes and rehabilitation facilities have also been fertile ground for civil fraud and false claims actions. In the largest failure of care settlement with a skilled nursing home chain in the department’s history, Extendicare Health Services Inc. and its subsidiary, Progressive Step Corporation, agreed to pay the United States $32.3 million to resolve allegations that Extendicare billed Medicare and Medicaid for deficient nursing services and billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services. Extendicare and Pro-Step paid an additional $5.7 million to eight states for their Medicaid losses. The department has ongoing litigation against additional nursing home chains and rehabilitation centers based on similar allegations of false claims for medically unreasonable or unnecessary rehabilitation therapy. For example, see HCR ManorCare.
Housing and Mortgage Fraud
The department has recovered over $5 billion in housing and mortgage fraud from January 2009 to the end of fiscal year 2015, including this past year’s recoveries of $365 million. Notable recoveries this past year include a $212.5 million settlement with First Tennessee Bank N.A. First Tennessee admitted that from 2006 to 2008, through its subsidiary, First Horizon Home Loans Corporation, it originated and endorsed mortgages for federal insurance by the Federal Housing Administration (FHA) that did not meet eligibility requirements. First Tennessee also admitted failing to report such deficiencies to the authorities as required under the program despite widespread knowledge by its senior managers by early 2008. In August 2008, First Tennessee sold First Horizon to MetLife Bank N.A., a wholly-owned subsidiary of MetLife Inc. Metlife admitted similar misconduct regarding the loans it originated and endorsed from September 2008 to March 2012. MetLife paid the United States $123.5 million to resolve liability under the False Claims Act arising from its misconduct in endorsing mortgagees for FHA insurance.
The department also settled claims against Walter Investment Management Corp. for $29.63 million. The government alleged that the company, through subsidiaries Reverse Mortgage Solution Inc., REO Management Solutions LLC, and RMS Asset Management Solutions LLC, caused false claims for fees and other costs in servicing reverse mortgages under the Department of Housing and Urban Development’s (HUD’s) Home Equity Conversion Mortgages (HECM) program. Reverse mortgage loans allow elderly people to access the equity in their homes. The loans provide monthly payments that enable the elderly to meet their day-to-day living expenses while remaining in their homes. To encourage these loans, HUD insures banks and other institutions that service the mortgages against loss, providing the institution complies with requirements to ensure the quality of such loans. Walter Investment allegedly failed to comply with these requirements.
These recoveries are part of the broader enforcement efforts by President Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force in 2009, to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force, visit www.stopfraud.gov.
Government Contracts
Government contracts and federal procurement accounted for $1.1 billion in fraud settlements and judgments in fiscal year 2015, bringing procurement fraud totals to nearly $4 billion from January 2009 to the end of the fiscal year. Significant cases include a $146 million settlement with Supreme Group B.V. and several of its subsidiaries for alleged false claims to the Department of Defense (DoD) for food, water, fuel, and transportation of cargo for American soldiers in Afghanistan. Supreme Group is based in Dubai, United Arab Emirates (UAE). In addition, Supreme Group affiliates Supreme Foodservice GmbH, a privately held Swiss company, and Supreme Foodservice FZE, a privately-held UAE company, pleaded guilty to related criminal violations and paid more than $288 million in criminal fines.
In two other defense contract settlements, Lockheed Martin Integrated Systems, a subsidiary of aerospace giant Lockheed Martin Inc., paid $27.5 million and DRS Technical Services Inc. paid $13.7 million to resolve allegations that their employees lacked required job qualifications while the companies charged for the higher level, qualified employees required under contracts with U.S. Army Communication and Electronics Command (CECOM). The CECOM contracts were designed to give the Army rapid access to products and services for operations in Iraq and Afghanistan.
In a pair of cases involving contracts with the General Services Administration, VMware Inc. and Carahsoft Technology Corporation paid the United States $75.5 million and Iron Mountain Companies paid $44.5 million to settle their respective liability under the False Claims Act. The government alleged that California-based VMware and Virginia-based Carahsoft misrepresented their commercial sales practices, which resulted in overcharging government agencies for their software products and services sold through GSA’s Multiple Award Schedule. Similarly, Iron Mountain, a records storage company headquartered in Massachusetts, misrepresented its commercial sales practices to GSA and failed to give certain discounts given to its commercial customers, as required to gain access to the vast federal marketplace available to contractors through the Multiple Award Schedule.
The department settled allegations that private contractor U.S. Investigations Services Inc. (USIS) violated the False Claims Act in performing a contract with the Office of Personnel Management (OPM) to perform background investigations of federal employees and those applying for federal service. The government alleged that USIS took shortcuts that compromised its contractually-required quality review and that, had the government known, it would not have paid for the services. USIS agreed to forego at least $30 million in payments legitimately owed to the company to settle the government’s allegations.
Other Fraud Recoveries and Actions
Although health care, mortgage, and government contract fraud dominated fiscal year 2015 recoveries, the department has aggressively pursued fraud wherever it is found in federal programs. For example, the department recovered $44 million from Fireman’s Fund Insurance Company for alleged fraud under the U.S. Department of Agriculture’s federal crop insurance program. The United States alleged that Fireman’s Fund knowingly issued federally reinsured crop insurance policies that were ineligible for federal reinsurance. Specifically, Fireman’s Fund allegedly backdated policies, forged farmers’ signatures, accepted late and altered documents, whited-out dates and signatures, and signed documents after relevant deadlines. The policies were issued by Fireman’s Fund offices in California, Kansas, Mississippi, North Dakota, Texas, and Washington.
The department also recovered $13 million from Education Affiliates, a for-profit education company based in White Marsh, Maryland, for alleged false claims to the Department of Education for student aid for students whose qualifications for admission were falsified to get them enrolled so they could receive aid which would be paid to the school. Education Affiliates operates 50 campuses throughout the United States under various trade names.
In other actions, the department filed lawsuits to recover funds disbursed under the Troubled Asset Relief Program (TARP) and payments made under contracts awarded to benefit disadvantaged populations identified under the Small Business Administration’s set-aside programs. In one action, the department sued the estate and trusts of the late Layton P. Stuart, former owner and president of One Financial Corporation, and its operating subsidiary, One Bank & Trust N.A., both based in Arkansas, alleging that Stuart made misrepresentations to induce the Department of the Treasury to invest TARP funds in One Financial as part of Treasury’s Capital Purchase Program. The department recently settled with the Stuart estate and trusts for $4 million, but claims remain pending against One Financial Corporation.
In a second action, the department filed suit against Florida-based Air Ideal Inc. and its owner, Kim Amkraut. The government alleged that Air Ideal and Amkraut falsely certified that the company qualified for preferences given to small businesses located in a Historically Underutilized Business Zone (HUBZone) when Air Ideal’s HUBZone location was no more than a virtual office and its principal place of business was in a non-HUBZone location. The government further alleged that Air Ideal used its fraudulently-procured HUBZone certification to obtain contracts from the Coast Guard, Army, Army Corps of Engineers, and Department of the Interior that were worth millions of dollars. The department settled with Air Ideal and Amkraut for $250,000 plus five percent of Air Ideal’s gross revenues for five years.
These suits and settlements illustrate the diversity of cases pursued by the department and the department’s quest to root out fraud and false claims against the government wherever it may be found.
Holding Individuals Accountable
On Sept. 9, Deputy Attorney General Sally Quillian Yates issued a memorandum on individual accountability for corporate wrongdoing. This memorandum reinforced the department’s commitment to use the False Claims Act and other civil enforcement tools to deter and redress fraud by individuals as well as corporations.
In addition to those suits involving individuals described above, the department settled or filed suit against individuals in an array of cases. For example, Two Florida couples agreed to pay the United States $1.137 million collectively, to resolve allegations that they accepted kickbacks in exchange for home health care referrals to A Plus Home Health Care Inc. The United States previously settled with A Plus, its owner Tracy Nemerofsky, and five other couples that allegedly accepted payments from A Plus. Dr. Charles Denham, of Laguna Beach, California, paid the United States $1 million to settle allegations that he solicited and accepted kickbacks from CareFusion in return for promoting a CareFusion product and influencing recommendations by the National Quality Forum. Denham was a patient safety consultant who co-chaired a National Quality Forum Committee. After settling with two cardiovascular testing laboratories for $48.5 million - Health Diagnostics Laboratory Inc. (HDL) and Singulex Inc., the department intervened in three qui tam suits against another laboratory, Berkeley HeartLab Inc., a marketing company, BlueWave Healthcare Consultants Inc. and three individuals – BlueWave’s owners, Floyd Calhoun Dent III and Robert Bradley Johnson and HDL’s co-founder and former chief executive officer, LaTonya Mallory. The department also intervened in two qui tam suits against Florida cardiologist Dr. Asad Qamar and his practice, the Institute for Cardiovascular Excellence PLLC, alleging that Qamar and his practice billed Medicare for medically unnecessary peripheral artery procedures and interventions and paid kickbacks to patients by waiving Medicare copayments irrespective of financial hardship. The department also filed a complaint against H. Ted Cain, Julie Cain, Corporate Management Inc. and Stone County Hospital Inc. for false claims for Medicare reimbursement. The government alleged that Ted and Julie Cain, the hospital and hospital management company owned and controlled by Ted Cain, claimed reimbursement for the hospital’s costs at inflated rates and for ineligible expenses. These matters are ongoing.
Outside the health care arena, EDF Resource Capital Inc. agreed to transfer assets worth $5.8 million to the United States, and its chief executive officer, Frank Dinsmore, agreed to pay $200,000 to the United States, to settle allegations that they violated the False Claims Act in failing to remit payments to the Small Business Administration under the 504 loan program. The 504 loan program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. The program operates through local lenders like EDF, who reap benefits from the program in return for shouldering certain financial obligations which Dinsmore and EDF allegedly ignored. The department also entered settlements with two individuals for evasion of Customs duties owed on imports of aluminum extrusions from the People’s Republic of China (PRC). Robert Wingfield, the U.S. sales representative of a Chinese manufacturer, and Bill Ma, owner of an ostensible importer, allegedly misrepresented the country of origin of goods to avoid steep antidumping and countervailing duties imposed by the Department of Commerce and collected by U.S. Customs and Border Protection on imports of aluminum extrusions from the PRC to protect domestic manufacturers from unfair foreign pricing practices. The government previously settled related allegations with four importers, bringing total settlements in the case to $4.6 million, including the $435,000 from Wingfield and Ma.
Recoveries in Whistleblower Suits
Of the $3.5 billion the government recovered in fiscal year 2015, more than $2.8 billion related to lawsuits filed under the qui tam provisions of the False Claims Act. During the same period, the government paid out $597 million to the individuals who exposed fraud and false claims by filing a qui tam complaint, often at great risk to their careers.
The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 638 qui tam suits filed this past year. The growing number of qui tam lawsuits, particularly since 2009, has led to increased recoveries. From January 2009 to the end of fiscal year 2015, the government recovered $19.4 billion in settlements and judgments related to qui tam suits and paid whistleblower awards of $3 billion during the same period.
“Many of the recoveries obtained under the False Claims Act result from courageous men and women who come forward to blow the whistle on fraud they are often uniquely positioned to expose,” said Principal Deputy Assistant Attorney General Mizer.
In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud. In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes. And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.
Principal Deputy Assistant Attorney General Mizer also expressed his deep appreciation for the many dedicated public servants who investigated and pursued these cases – the attorneys, investigators, auditors and other agency personnel throughout the Department of Justice’s Civil Division and the U.S. Attorneys’ Offices, as well as the agency Offices of Inspector General and the many federal and state agencies that contributed to the department’s recoveries this past fiscal year.
“The department’s lawyers and staff, together with our law enforcement partners in federal and state governments, work tirelessly and often overcome daunting challenges to achieve these successes on behalf of the taxpayers,” said Principal Deputy Assistant Attorney General Mizer.
The government’s claims in the matters described above are allegations only; except where indicated, there has been no determination of liability.
Justice Department Files Lawsuit Against Lubbock, Texas, Alleging National Origin and Sex Discrimination in Hiring of Police OfficersRead the Press Release
The Justice Department yesterday filed a lawsuit against the city of Lubbock, Texas, alleging that the city’s police department engaged in a pattern or practice of employment discrimination against Hispanics and women in violation of Title VII of the Civil Rights Act of 1964.
The lawsuit, filed in the U.S. District Court for the Northern District of Texas, alleges that the Lubbock Police Department’s (LPD) written and physical fitness examinations had the effect of excluding Hispanic and female applicants from consideration for hire as entry-level police officers without a showing that these tests screened candidates for skills that are required for the job.
“We share with Lubbock the goal of hiring qualified applicants to perform critical public safety functions,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division. “Federal law prohibits employers from using discriminatory employment practices that do not meaningfully evaluate one’s ability to perform a given job. The Department of Justice will ensure that the city eliminates the use of these unlawful tests and we hope to work cooperatively with the city to create new selection procedures that do not unlawfully discriminate.”
This lawsuit seeks a court order requiring LPD to stop using the challenged examinations, develop selection procedures for entry-level police officer positions at LPD that comply with Title VII and provide make-whole relief including, where appropriate, offers of hire, back pay and retroactive seniority, to qualified Hispanics and women who have been or will be harmed as a result of LPD’s use of the challenged examinations.
The enforcement of federal employment discrimination laws is a top priority for the Justice Department. Additional information about Title VII and other federal employment laws is available on the Civil Rights Division’s website at http://www.justice.gov/crt/.
Lubbock Complaint
Justice Department Collects More Than $23 Billion in Civil and Criminal Cases in Fiscal Year 2015Read the Press Release
Attorney General Loretta E. Lynch announced today that the Justice Department collected $23.1 billion in civil and criminal actions in the fiscal year (FY) ending Sept. 30, 2015. Collections in FY 2015 represent more than seven and a half times the approximately $2.93 billion of the Justice Department’s combined appropriations for the 94 U.S. Attorneys’ offices and the main litigating divisions in that same period.
“The Department of Justice is committed to upholding the rule of law, safeguarding taxpayer resources and protecting the American people from exploitation and abuse,” said Attorney General Lynch. “The collections we are announcing today demonstrate not only the strength of that commitment, but also the significant return on public investment that our actions deliver. I want to thank the prosecutors and trial attorneys who made this achievement possible, and to reiterate our dedication to this ongoing work.”
The largest civil collections were from affirmative civil enforcement cases, in which the United States recovered government money lost to fraud or other misconduct or collected fines imposed on individuals and/or corporations for violations of federal financial, health, safety, civil rights and environmental laws. In addition, civil debts were collected on behalf of several federal agencies, including the U.S. Department of Housing and Urban Development, Health and Human Services, Internal Revenue Service, Small Business Administration and Department of Education.
The total includes all monies collected as a result of Justice Department-led enforcement actions and negotiated civil settlements. It includes more than $16.2 billion in payments made directly to the Justice Department and more than $6.8 billion in indirect payments made to other federal agencies, states and other designated recipients.
In measuring collections recovered in FY 2015, this figure necessarily includes some cases that were resolved in previous years but the proceeds of which were collected in FY 2015.
Among the top 20 debt collections, the largest came from financial institutions whose risky practices led up to the 2008 financial crisis and collapse of the U.S. housing market, including $8.2 billion of the settlement in August 2014 with Bank of America Corporation, which included $5 billion in penalties for claims under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever – and $687 million from the February 2015 settlement with McGraw Hill Financial Inc. and Standard & Poor’s Financial Services LLC.
The department continued to make polluters pay to safeguard the environment and the taxpayer, collecting $1.8 billion of the total $5.1 billion settlement of the Tronox Inc. bankruptcy in January 2015, the majority of which is being used for cleanups of Kerr-McGee sites, including on tribal lands and in low-income communities across the United States. From the November 2014 settlement with Hyundai and Kia, the automakers paid $93.6 million to the United States, of a $100 million civil penalty owed to the United States and the California Air Resources Board, to resolve violations concerning the testing and certification of vehicles sold in America.
As in previous years, recoveries for health care fraud were among the largest, including $807 million from DaVita Healthcare Partners to settle two False Claims Act cases which involved kickback schemes and fraudulent billing of the federal government.
Growing out of the international scheme to manipulate the London Interbank Offer Rate (LIBOR), the department obtained resolutions from several banks. Notably, Deutsche Bank entered into a deferred prosecution agreement in which it admitted its role in fraud and price-fixing conspiracies by rigging Yen LIBOR contributions with other banks and paid $625 million in penalties, in addition to regulatory penalties and disgorgements imposed by other agencies. A Deutsche Bank subsidiary in the United Kingdom also pleaded guilty for its role in the rate manipulation.
Additionally, in March, Commerzbank AG, agreed to pay a $79 million fine to the department, in addition to a $563 million forfeiture, as part of a global settlement of charges for violating the International Emergency Economic Powers Act and the Bank Secrecy Act. For six years Commerzbank knowingly and willfully moved approximately $263 million through the U.S. financial system on behalf of sanctioned entities in Iran and Sudan.
The Swiss Bank Program yielded more than $350 million in penalties from dozens of Swiss banks that reached non-prosecution agreements with the department in FY 2015.
The department collected hundreds of millions of dollars in criminal fines and penalties from companies involved in conspiracies to subvert competitive markets. Over the last year, the department collected fines greater than $10 million from nine companies involved in price-fixing conspiracies, including more than $200 million from auto parts suppliers and over $100 million from ocean freight companies. The department has also brought civil suits to stop anticompetitive behavior and collected civil penalties and disgorgement that deprived companies of the proceeds of illegal pre-merger coordination.
Justice Department Announces EFG Bank European Financial Group SA, Geneva, and EFG Bank AG Reach Joint Resolution Under Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that EFG Bank European Financial Group SA, Geneva (EFG Group), and EFG Bank AG (EFG Bank) reached a joint resolution under the department’s Swiss Bank Program. EFG Group and EFG Bank (collectively EFG) will pay a penalty of more than $29 million.
“The Tax Division continues to receive detailed information regarding U.S. accountholders, the methods they used to conceal their foreign accounts and the individuals and entities that assisted in this criminal conduct,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Today’s agreement makes clear that our focus extends well beyond Switzerland, and to those who fled Swiss accounts to hide in other foreign financial institutions – we are right on your trail.”
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, EFG 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.
EFG Group is a holding company and Swiss bank based in Geneva, Switzerland, which is owned by European Financial Group EFG (Luxembourg) SA. EFG Group is the direct and controlling shareholder of EFG International AG, which is a holding company. EFG Bank, which is headquartered in Zurich, Switzerland, and has another Swiss office in Geneva, is the main Swiss private banking subsidiary of EFG International AG. EFG Bank also has representative offices and branches in Asia and the Americas. In 2003, EFG Bank acquired the Geneva-based bank Banque Édouard Constant (BEC). While EFG Group and EFG Bank are participating jointly in the Swiss Bank Program, these two EFG banks are separate legal entities with distinct management and board control.
Until 2013, EFG 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. EFG 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.
Certain EFG Bank private bankers based in Switzerland traveled to the United States approximately two to three times per year until July 2008. At least 72 business trips to the United States took place in connection with seven EFG Bank private bankers between 2005 and 2013. Private bankers from EFG Bank conducted meetings with clients in the United States in Arizona, California, Connecticut, Florida, Georgia, Illinois, Massachusetts, Nevada, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, Texas, Washington, Wisconsin and Washington, D.C.
One EFG Bank private banker had an established third-party client referral model for U.S. clients that involved two lawyers in the United States, one U.S. accountant and one Swiss fiduciary company. At least one member of EFG’s senior management approved and supported this private banker’s relationship with one of the two U.S. lawyers. This same U.S. lawyer asked the EFG private banker not to travel into the United States with a computer and requested that they communicate about U.S. taxpayer clients through faxes rather than email. The EFG private banker responded, “[R]ight – next travel I travel will take no computer with me – I will then buy me one at BestBuy and leave it there for use when I am travelling. So I never will cary [sic] a computer over the border.”
In 2001, EFG entered into a Qualified Intermediary Agreement (QI Agreement) with the Internal Revenue Service (IRS). The Qualified Intermediary 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. The QI Agreement required EFG to obtain IRS Forms W-9 and to undertake IRS Form 1099 reporting for new and existing U.S. clients engaged in U.S. securities transactions. Notwithstanding this requirement, EFG chose to continue to service U.S. clients without disclosing their identity to the IRS. In September 2009, a member of EFG Bank’s management discussing its decision to require Forms W-9 from its U.S. clients said that “[t]he intention of the Bank is to cover its back with the IRS, but when clients remitted their W9, I was told that [EFG private bankers] comforted clients by telling them that the Bank will not declare anything systematically to the IRS.” Until June 2013, EFG requested but did not require all of its U.S. clients to provide a signed IRS Form W-9 and to confirm whether their accounts were disclosed to the IRS.
In EFG’s view, the QI Agreement did not apply to accountholders who were not trading in U.S.-based securities or to accounts that were nominally structured in the name of a non-U.S.-based entity. For example, when asked in July 2007 whether an account should be considered a U.S. account if the new corporate account is in the name of a Panama company that was in reality beneficially owned by a U.S. resident, a manager advised that the “account is non-us [sic] for withholding tax QI purposes.” The same manager was asked in March 2008 by an EFG Bank private banker what could be offered to a U.S. couple residing in Mississippi who wanted to open two accounts for $1 million each, and the manager responded, “[i]f they’re declared, they can open in their name and sign W9. If not, suggest they use a pic [private investment company].”
While EFG did not provide direct structuring services to U.S. clients, EFG private bankers and members of EFG’s management suggested the use of structures for EFG’s U.S. clients and provided referrals to third-party service providers. External trust companies created and administered offshore structures incorporated or based in offshore locations such as the British Virgin Islands, Panama and Liechtenstein for certain of EFG’s U.S. clients.
EFG also serviced certain U.S. clients with undeclared accounts held in the names of insurance companies and not the actual beneficial owner of the funds, known colloquially as an insurance wrapper. Insurance wrappers were marketed by third-party providers in the wake of the UBS investigation as a means of disguising the beneficial ownership of U.S. clients. These particular accounts were all held in the name of insurance providers. By the operation of Swiss bank secrecy laws, the U.S. client’s ownership would not be disclosed to U.S. authorities, including the IRS.
In connection with some of the accounts that U.S. clients created and opened in the name of sham offshore entities and insurance wrappers, certain EFG employees suggested, accepted and included in EFG’s account records IRS Forms W-8BEN (or EFG’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, for U.S. federal income tax purposes, of the assets in the accounts. These false Forms W-8BEN were maintained in EFG’s files at the same time as the Swiss Forms A that accurately and truthfully represented the true beneficial owners of the assets in the accounts.
Certain accounts were closed at EFG, since Aug. 1, 2008, in such a way that EFG assisted its U.S. clients in continuing to conceal the assets and income they held at EFG in Switzerland from the IRS. EFG, including senior management in certain instances, assisted U.S. clients with retaining undeclared assets at EFG and allowed undeclared U.S. clients whose accounts were being closed to transfer their assets to non-U.S. accounts at EFG, including accounts held by relatives.
With respect to assets transferred to accounts in countries other than the United States and Switzerland upon account closure, significant amounts were transferred to numerous other jurisdictions. For example, the following amounts were transferred in connection with the closure of U.S.-related accounts:
-
At least $12,680,000 was transferred to Bermuda;
-
At least $12,460,000 was transferred to Guernsey;
-
At least $25,200,000 was transferred to Liechtenstein;
-
At least $12,260,000 was transferred to Monaco;
-
At least $25,000,000 was transferred to Luxembourg; and
-
At least $33,550,000 was transferred to Hong Kong.
In connection with the closure of U.S.-related accounts, significant amounts also were transferred to the Bahamas, the British Virgin Islands, the Cayman Islands, Cyprus, Israel, Panama, Singapore and the United Arab Emirates.
EFG has cooperated with the department and provided timely and comprehensive information to the U.S. government about its cross-border business with U.S.-related accounts. Among other things, EFG provided detailed information concerning the operation of its U.S. cross-border business that included misconduct committed by EFG; names of those private bankers who serviced U.S. clients; and names of those members of management who supervised private bankers servicing U.S. clients, including those private bankers who committed misconduct. EFG also provided responsive, specific and actionable information to the department concerning associated persons, entities and areas of concern for use in other ongoing and potential department investigations.
Since Aug. 1, 2008, EFG held a total of 919 U.S.-related accounts, which included both declared and undeclared accounts, with an aggregate peak of approximately $1.58 billion in assets under management. Of EFG’s 919 U.S.-related accounts, approximately 12 percent were timely disclosed to the IRS through Form 1099 reporting. EFG will pay a penalty of $29.988 million.
In accordance with the terms of the Swiss Bank Program, EFG 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 EFG 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 EFG must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
“Today’s resolution with EFG Bank European Financial Group SA, Geneva and EFG Bank AG reflects the continued progress of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International (LB&I) Division. “In resolving these matters, large and small financial institutions are putting their non-compliance behind them and providing information that will lead us to those U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes.”
“The data we’ve collected to date through the agreements as part of the Swiss Bank Program has already uncovered more banks, more facilitators and more account holders,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “Noncompliant account holders who believe their funds are still hidden will find that simply is not true. With each agreement signed, the probability that these criminals will be found grows even more certain. CI and our partners will vigorously pursue those who hide offshore accounts and those who aided this illegal activity.”
Acting Assistant Attorney General Ciraolo of the Justice Department’s Tax Division 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 Kimberle E. Dodd, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
-
J.R. Simplot Company to Reduce Emissions at Sulfuric Acid Plants in Three StatesRead the Press Release
The Department of Justice and the Environmental Protection Agency (EPA) today announced a settlement with the J.R. Simplot Company that resolves alleged Clean Air Act violations related to modifications made at Simplot’s five sulfuric acid plants near Lathrop, California, Pocatello, Idaho, and Rock Springs, Wyoming. Under the settlement, Simplot will spend an estimated $42 million on pollution controls that will significantly cut sulfur dioxide (SO2) emissions at all five plants and fund a wood stove replacement project in the area surrounding the Lathrop plant. Simplot’s Pocatello plant will receive $15 million in pollution control upgrades.
Once fully implemented, the settlement will reduce SO2 emissions from Simplot’s five sulfuric acid plants by more than 50 percent for approximately 2,540 tons per year of reductions (825 tons per year of which will be at the Pocatello plant). Simplot will implement a plan to monitor SO2 emissions continuously at all five plants and pay an $899,000 civil penalty. Additionally, Simplot will spend $200,000 on a wood stove replacement mitigation project in the San Joaquin Valley, the location of Simplot’s Lathrop facility, to reduce emissions of fine particulate matter (PM2.5), as well as emissions of volatile organic compounds (VOCs), carbon monoxide (CO) and hazardous air pollutants (HAPs).
“Under this proposed settlement, Simplot must upgrade its pollution controls and cut harmful air pollution in half at its acid plants, bringing lasting benefits to communities in three states,” said Principal Deputy Assistant Attorney General Sam Hirsch for the Justice Department’s Environment and Natural Resources Division. “The Justice Department will continue to vigorously enforce the Clean Air Act, which protects public health and air quality for Americans each and every day.”
“This settlement helps address public health risks for local communities in California, Idaho and Wyoming, and furthers EPA’s commitment to reduce harmful air pollution from the largest sources,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “The system-wide pollution controls Simplot will install will significantly reduce sulfur dioxide emissions, which can cause serious respiratory problems and exacerbate asthma.”
“The people of southeastern Idaho will receive significant benefits from the cleaner air and better health produced by this settlement,” said U.S. Attorney Wendy J. Olson for the District of Idaho. “I am pleased that the federal government and the J.R. Simplot Company are able to reach this agreement that serves Idahoans so well.”
The Department of Justice and EPA alleged that Simplot made modifications at its five sulfuric acid plants without applying for or obtaining the necessary Clean Air Act permits and obtaining “best available control technology” limits for SO2, as well as for sulfuric acid mist and PM2.5 at one of the sulfuric acid plants in Pocatello.
Short-term exposures to SO2 can lead to serious respiratory problems, including constriction of airways in the lungs and increased asthma symptoms. Additionally, SO2 is a precursor to the formation of PM2.5, which causes a wide variety of health and environmental impacts, including asthma attacks, reduced lung function and aggravation of existing heart disease. Simplot’s Lathrop sulfuric acid plant is located in the San Joaquin Valley in California, which is currently classified as nonattainment for the PM2.5 National Ambient Air Quality Standards and has some of the most difficult challenges meeting those standards in the country. SO2 is a precursor for the formation of fine particulates, so both the SO2 emission reductions from Simplot’s Lathrop plant and the wood stove replacement mitigation project will help reduce PM2.5 emissions in the San Joaquin Valley.
The state of Idaho on behalf of its Department of Environmental Quality and the San Joaquin Valley Unified Air Pollution Control District are parties to the proposed settlement.
This settlement is part of EPA’s national enforcement initiative to control harmful emissions from large sources of pollution, which includes acid plants, under the Clean Air Act’s Prevention of Significant Deterioration requirements. The emission rates secured in this settlement will result in the best-controlled, system-wide emissions achieved in any sulfuric acid plant settlement to-date.
The consent decree formalizing the settlement was lodged with the U.S. District Court in the District of Idaho and is subject to a 30-day public comment period and final court approval. The proposed consent decree can be viewed at: http://www.justice.gov/enrd/consent-decrees.
General Electric to Pay $2.25 Million for Violating Federal and State Environmental Laws in Waterford, New YorkRead the Press Release
The General Electric Company (GE) has agreed to pay a $2.25 million civil penalty to resolve a complaint alleging violations of federal and state environmental laws in connection with GE’s use of an incinerator at a manufacturing facility that it once owned and operated in Waterford, New York, announced the Department of Justice, the U.S. Attorney’s Office for the Northern District of New York and , the Environmental Protection Agency (EPA), the New York State Attorney General’s Office and the New York State Department of Environmental Conservation (DEC). Both the complaint and the settlement agreement were filed today in U.S. District Court in Albany.
According to allegations in the complaint, GE owned the Waterford facility from 1947 through 2006 and continued to operate it through early 2007. GE manufactured various products at the facility, including sealants made of silicone. The silicone manufacturing process generated hazardous waste. GE sought and received permits from DEC to dispose of the hazardous waste onsite, subject to compliance with the Clean Air Act (CAA) and the Resource Conservation and Recovery Act (RCRA).
GE disposed of hazardous waste in a rotary kiln incinerator that included an automatic waste feed cut-off system designed to shut down the incinerator if GE deviated from operating parameters designed to ensure compliance with the CAA and RCRA. Unbeknownst to federal and state authorities, GE used a computer program to override the incinerator’s automatic waste feed cut-off system, allowing GE to continue to burn hazardous waste in the incinerator in violation of its CAA and RCRA permits. On at least 1,859 occasions during the period of September 2006 until February 2007, GE employees manually overrode the automatic waste feed cut-off system, thereby potentially exposing the public and the environment to harmful hazardous air pollutants, such as carbon monoxide, dioxins and furans. Though its employees were violating federal and state law, GE submitted routine compliance reports to the United States and the state of New York falsely attesting to compliance with RCRA, the CAA and permits issued pursuant to those statutes.
“GE violated the nation’s and New York’s bedrock environmental laws that were put in place to protect the American public and the environment from harmful air pollution and hazardous materials,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division. “This settlement penalizes GE for these violations of law, and represents the combined efforts of the federal government and the state of New York to uphold the law and protect public health.”
“By operating a system to bypass safety controls, GE put the public and the environment in harm’s way,” said First Assistant U.S. Attorney Grant C. Jaquith for the Northern District of New York “This office will continue to pursue vigorously companies that thwart laws designed to protect public health, safety, and our environment.”
“GE overrode a system designed to deal with dangerous air pollutants from a hazardous waste incinerator,” said Regional Administrator Judith A. Enck for EPA. “By overriding the system, GE allowed the hazardous waste to continue to be fed into the incinerator, leading to levels of carbon monoxide that exceeded the permit limits.”
“Violations of New York State’s environmental laws and regulations are serious offenses, which carry serious consequences,” said Acting Commissioner Basil Seggos for DEC. “This fine is the result of the collaborative efforts of state and federal partners working together to accomplish a shared mission to protect our citizens and communities and should send a strong message that New York State has zero tolerance for those who shirk environmental policies and procedures put in place as protections. I commend DEC’s Law Enforcement Officers for their determined vigilance in this investigation. This is a great example of the important work they perform in the course of their sworn duty to protect the citizens of New York and the environment.”
This case was investigated by EPA and DEC, and is being handled by Assistant U.S. Attorneys Thomas Spina Jr. and Adam J. Katz and Assistant Attorneys General Maureen F. Leary and James C. Woods.
Former Bank Teller Pleads Guilty to Theft of Public MoneyRead the Press Release
Cashed More than 361 Fraudulent Tax Refund Checks
A Columbus, Georgia resident pleaded guilty today to one count of conspiracy to commit theft of public money, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney G.F. “Pete” Peterman, III for the Middle District of Georgia.
According to court documents, Vicky Wheeler, 54, worked as a bank teller at a Suntrust Bank branch in Columbus. Between February 2013 and May 2014, Wheeler cashed fraudulent tax refund checks at the request of several individuals in exchange for a fee. These individuals informed Wheeler that the tax refund checks were generated from tax returns filed using stolen identities. To disguise the fraudulent nature of the checks, Wheeler made false entries on the face of the checks to make it appear as if she received identification when the checks were cashed. Wheeler never received any forms of identification. In total, Wheeler received and cashed approximately 361 fraudulent tax refund checks that claimed $780,760.17 in tax refunds.
Sentencing is scheduled for April 12, 2016. Wheeler faces a maximum sentence of five years in prison and a fine of up to $250,000, or twice the loss from the offense. As per the plea agreement, Wheeler agreed to pay restitution in the amount of $780,760.17.
Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Peterman commended special agents of Internal Revenue Service-Criminal Investigation and the U.S. Secret Service, who investigated the case and Trial Attorney Michael C. Boteler of the Tax Division and Assistant U.S. Attorney Crawford L. Seals of the Middle District of Georgia, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Fact Sheet on White House and Justice Department Convening--A Cycle of Incarceration: Prison, Debt and Bail PracticesRead the Press Release
On Dec. 2, 2015, the Justice Department hosted a convening to address the effect and fairness of fees and fines. The department convened judges, academics and practitioners to develop a research and policy agenda that will inform jurisdictions in their efforts to reform court practices. On Dec. 3, the White House and the department co-sponsored an event called, “A Cycle of Incarceration: Prison, Debt and Bail Practices,” to bring public attention to the connection between poverty and the criminal justice system and highlight state reform efforts. The White House Council of Economic Advisers also released an issue brief exploring the economic inefficiency of fines, fees and bail and their disproportionate impact on the poor.
THE JUSTICE DEPARTMENT’S COMMITMENT TO FAIRNESS IN THE CRIMINAL JUSTICE SYSTEM
-
Criminal justice reform is a top priority for the administration and specifically for the Justice Department. The department has taken significant steps to prevent vulnerable communities from becoming justice-involved, and to promote initiatives that reduce the likelihood of recidivism.
-
The department’s efforts also include addressing problems that obstruct opportunity, such as poverty, since those who are economically disadvantaged are more easily caught up in the criminal justice system and face greater barriers to reentry. Among these efforts are numerous diversion and reentry programs, as well as the White House Legal Aid Interagency Roundtable, which works to improve federal anti-poverty programs by providing access to legal aid.
-
The department is particularly concerned about criminal justice system practices that perpetuate and exacerbate poverty by imposing unnecessary and exorbitant fees and fines, unjust collection practices, unwarranted suspension of drivers' licenses and other legal obligations. Such penalties may appear small in isolation, but in the obligations can easily and rapidly add up.
-
These and other practices are not only unwise and harmful, but also inconsistent with constitutional mandates. For example, people are routinely assessed fines that they cannot afford and then jailed for nonpayment without any inquiry into their ability to pay, as required by the Constitution.
-
These harms are most frequently felt by the most vulnerable members of our communities, and often in cases involving minor offenses, such as traffic citations. Fees and fines have significant consequences. Individuals face repeated, unnecessary incarceration in already overcrowded jails, lose their jobs and their housing, face escalating debt and often become trapped in cycles of poverty that can be nearly impossible to escape.
JUSTICE DEPARTMENT’S REFORM EFFORTS
-
Ferguson Report: In March 2015, the Civil Rights Division released its report on the investigation of the Ferguson, Missouri, Police Department. In addition to finding a series of unconstitutional police practices, the investigation found that the city focused its municipal court operations on revenue generation rather than public safety, resulting in practices that violate the constitutional rights of area residents. The investigation found that courts routinely imposed excessive fines; ordered the arrest of low-income residents for failure to appear or make payments, despite inadequate notice and without inquiring into their ability to pay; and used unlawful bail practices resulting in unnecessary incarceration. Many of these practices disproportionately impacted African Americans. The department is committed to systemic reform in Ferguson including ensuring a court system that respects peoples’ constitutional rights and avoids unnecessary incarceration.
-
Statements of Interest and Amicus Briefs: The Civil Rights Division and the Office for Access to Justice have filed a number of briefs in courts to protect the rights of the indigent in criminal proceedings, on a range of topics, including unconstitutional bail practices, meaningful right to counsel under the Sixth Amendment and the criminalization of homelessness.
-
Assistance to States and Localities:Through the Office of Justice Programs (OJP), the department will make funding available to support innovative approaches and alternatives to criminal justice fees, fines and other legal financial obligations that contribute to the cycle of incarceration and poverty. OJP’s Office of Civil Rights is also evaluating discrimination complaints against several court systems to determine whether their pretrial and bail policies violate federal laws. Following the convening, the OJP Diagnostic Center will prepare a report to outline a research and policy agenda that will help advance the conversation about criminal justice reform.
COUNCIL OF ECONOMIC ADVISERS ISSUE BRIEF
-
Increasing Use of Fines, Fees and Bail:As higher levels of incarceration and law enforcement have placed budgetary pressure on states and local governments, they have increasingly turned to criminal justice payments as a source of additional revenue. Available data suggests that about two-thirds of all prison inmates have criminal justice debts, and rising use of bail payments has contributed to a 60 percent increase in the number of un-convicted inmates in jails between 1996 and 2014.
-
Disproportionate Impact on the Poor: Because fines and fees do not take into account the defendants’ ability to pay, they place a disproportionate burden on lower-income defendants and create a highly regressive system of raising revenue and paying for criminal justice operations. Low-income individuals with criminal justice debts may face difficult tradeoffs between paying their debt and purchasing other necessities, and those unable to pay can face incarceration, demonstrating the large human cost of these policies as well. Bail payments set without consideration of financial circumstances can also result in detaining the poorest defendants rather than the most dangerous. For example, in New York City in 2010, nearly 80 percent of arrestees failed to make bail at arraignment for bail amounts less than $500.
-
Economic Inefficiency: Assigning fines and fees to low-income offenders represents a highly inefficient way to raise revenue, as these individuals likely do not have the means to pay. Some states are able to collect less than 20 percent of some types of fees, and the low rate of collection sometimes means that the cost of operating the program exceeds the revenue collected. Incarcerating individuals for failure to pay only furthers this problem, with the cost of incarceration alone sometimes exceeding the debt owed.
-
Chicken of the Sea and Bumble Bee Abandon Tuna Merger After Justice Department Expresses Serious ConcernsRead the Press Release
Thai Union Group P.C.L., owner of Tri-Union Seafoods LLC, d/b/a Chicken of the Sea International, and Bumble Bee Foods LLC abandoned their plans to merge after the Department of Justice informed the companies it had serious concerns that the proposed transaction would harm competition.
Thai Union’s proposed acquisition of Bumble Bee would have combined the second and third largest sellers of shelf-stable tuna in the United States in a market long dominated by three major brands, as well as combined the first and second largest domestic sellers of other shelf-stable seafood products.
“Consumers are better off without this deal,” said Assistant Attorney General Bill Baer of the department’s Antitrust Division. “Our investigation convinced us – and the parties knew or should have known from the get go – that the market is not functioning competitively today, and further consolidation would only make things worse.”
Thai Union, a publicly-held Thai corporation headquartered in Samutsakhon, Thailand, is the largest global producer of shelf-stable tuna and also offers other shelf-stable and frozen seafood products globally. Thai Union’s Chicken of the Sea subsidiary is headquartered in San Diego, California. Chicken of the Sea sells shelf-stable seafood products under the brand names “Chicken of the Sea,” “Van Camps,” “Genova,” “Pacific Pearl,” and “Ace of Diamonds.” In 2013, Chicken of the Sea earned over $400 million in U.S. revenues.
Bumble Bee is also headquartered in San Diego. Bumble Bee sells shelf-stable seafood products under the brand names “Bumble Bee,” “Wild Selections,” “Beach Cliff,” “Brunswick,” and “Snow’s.” Bumble Bee is wholly owned by privately-held Lion Capital LLP.
Franklin American Mortgage Company Agrees to Pay $70 Million to Resolve Alleged False Claims Act Liability Arising from Federal Housing Administration-Insured Mortgage LendingRead the Press Release
Franklin American Mortgage Company has agreed to pay the United States $70 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today. Franklin American is headquartered in Franklin, Tennessee.
“This settlement is another step forward in the government’s efforts to hold lenders accountable for the harm caused by years of improper and inadequate underwriting of mortgages insured by the federal government,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “As this settlement makes clear, we will hold accountable anyone whose conduct results in loss to the government, whether it is a large bank or a smaller mortgage lender.”
“Franklin promised that its loans met HUD’s quality standards in order to obtain HUD insurance, but ignored widespread, systemic defects in those loans,” said U.S. Attorney John F. Walsh of the District of Colorado. “This case is the latest step in our ongoing effort to hold lenders accountable for fraudulent conduct that wreaked havoc on our housing market.”
During the time period covered by the settlement, Franklin American participated as a direct endorsement lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance. If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, the FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, neither the FHA nor HUD reviews a loan before it is endorsed for FHA insurance. DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance; to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices; and to self-report any deficient loans identified by their quality control program.
The settlement announced today resolves allegations that Franklin American failed to comply with certain FHA origination, underwriting and quality control requirements. As part of the settlement, Franklin American admitted to the following facts: between Jan. 1, 2006, and March 31, 2012, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. Franklin American’s FHA loan production grew substantially from 2006 until 2010. During this time, Franklin American employed unqualified junior underwriters to perform important underwriting functions. Franklin American also set high quotas for its underwriters and subjected underwriters to discipline if they did not meet their quotas. The company also sought to incentivize the production of loans by offering bonuses to its FHA underwriters. Loans underwritten by Franklin American were later reviewed in post-close audits. Oftentimes, those audits did not satisfy HUD’s requirements. Nevertheless, the audits identified substantial percentages of seriously deficient loans underwritten by Franklin American. Although these deficient loans were shared with management, Franklin American reported very few deficiencies to HUD. Franklin American’s conduct caused the FHA to insure hundreds of loans that were not eligible and, as a result, the FHA suffered substantial losses when it later paid insurance claims on those loans.
“The resolution of this matter against Franklin American reflects that all loan originators, whether large or small, receive the same scrutiny of their FHA loan underwriting practices,” said Inspector General David A. Montoya of the HUD Office of Inspector General (OIG). “The FHA program depends on the good faith and utmost integrity of the participants in the program and we will continue to devote substantial resources to identify instances in which participants in the FHA program fail to meet those standards.”
“Today’s settlement demonstrates HUD’s commitment to hold lenders accountable for serious violations of FHA requirements,” said General Counsel Helen R. Kanovsky of HUD’s Office of General Counsel. “We’re pleased that Franklin American accepted financial responsibility for its actions, which will restore funds to FHA.”
The settlement was the result of a joint investigation conducted by HUD, HUD OIG, the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the District of Colorado.
Former Enzyme Company Owner Sentenced to Prison for Filing False Tax Returns and PerjuryRead the Press Release
An Indiana resident was sentenced to more than two years in prison for filing false federal income tax returns and perjury, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Jared E. Hochstedler, 40, of Fort Wayne, Indiana, was sentenced to 27 months in prison, one year of supervised release and ordered to pay $1,232,739 in restitution to the Internal Revenue Service (IRS). According to court documents, Hochstedler pleaded guilty on Feb. 26 to two counts of willfully filing false income tax returns for 2008 and 2009 and one count of committing perjury during a deposition conducted by the U.S. Securities and Exchange Commission (SEC).
Hochstedler owned Enzyme Environmental Solutions (EESO), a company focused on creating cleaning products using enzymes. As the owner of EESO, Hochstedler participated in stock exchanges of EESO stock with third party companies for which he received more than $2.8 million. Hochstedler failed to report these funds as income on his 2008 and 2009 individual income tax returns. In addition, Hochstedler received loans from these third party companies which he did not repay. Hochstedler used a substantial portion of the loan proceeds for personal expenditures and failed to report that income on his tax returns. In 2009, Hochstedler also sold stock in another company for more than $1 million and failed to report the full amount of the proceeds as a capital gain on his 2009 tax return.
In June 2009, in the course of an investigation, the SEC deposed Hochstedler under oath regarding the stock transactions he executed with the third parties. During the deposition, the SEC inquired about the details of the transactions and Hochstedler lied about the nature of the transactions and the amount of money he received.
Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Richard M. Rolwing and Christopher P. O’Donnell of the Tax Division, who prosecuted the case. Acting Assistant Attorney General Ciraolo also commended the SEC for its work on the related civil matter, prior to the initiation of this criminal case.
Additional information about the Tax Division and its enforcement efforts may be found on the division website.
First U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues Summary of OutcomesRead the Press Release
On Dec. 1, 2015, in Washington, D.C., Attorney General Loretta E. Lynch and Department of Homeland Security Secretary Jeh Johnson, together with Chinese State Councilor Guo Shengkun, co-chaired the first U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues. Under the commitments made by U.S. President Barack Obama and Chinese President Xi Jinping during the state visit in September 2015, the primary objectives of the dialogue were to review the timeliness and quality of responses to requests for information and assistance with respect to cybercrime or other malicious cyber activities and to enhance cooperation between the United States and China on cybercrime and related issues. In addition to members of the Departments of Justice and Homeland Security, representatives from the Department of State, National Security Council and Intelligence Community participated for the United States, while the Chinese delegation included representatives from the Committee of Political and Legal Affairs of CPC Central Committee, the Ministry of Public Security, the Ministry of Foreign Affairs, the Ministry of Industry and Information Technology, the Ministry of State Security, the Ministry of Justice and the State Internet Information Office.
During the dialogue, both countries discussed ways to enhance cooperation within the bounds of each nation’s legal framework and assessed progress made on cases identified during their discussions in September 2015. They reached the following specific outcomes:
1. Guidelines for Combatting Cybercrime and Related Issues. Attorney General Lynch, Secretary Johnson and State Councilor Guo reached agreement on a document establishing guidelines for requesting assistance on cybercrime or other malicious cyber activities and for responding to such requests. These guidelines will establish common understanding and expectations regarding the information to be included in such requests and the timeliness of responses.
2.Tabletop Exercise. Both sides decided to conduct a tabletop exercise in the spring of 2016 on agreed-upon cybercrime, malicious cyber activity and network protection scenarios to increase mutual understanding regarding their respective authorities, processes and procedures. During the tabletop exercise, both sides will assess China’s proposal for a seminar on combatting terrorist misuse of technology and communications, and will consider the U.S.’s proposal on inviting experts to conduct network protection exchanges.
3. Hotline Mechanism. Pursuant to the commitment between the two presidents to establish a hotline for escalation of issues that may arise in the course of responding to cybercrime and other malicious cyber activities, both sides decided to develop the scope, goals and procedures for use of the hotline before the next High-Level Dialogue.
4. Enhance Cooperation on Combatting Cyber-Enabled Crime and Related Issues. Both sides decided to further develop case cooperation on combatting cyber-enabled crimes, including child exploitation, theft of trade secrets, fraud and misuse of technology and communications for terrorist activities, and to enhance exchanges on network protection. Both sides decided to improve cooperation among the relevant agencies, within the framework of the high-level dialogue, on network protection issues. U.S. and Chinese cyber incident and network protection experts will meet on Dec. 3, 2015, and will continue to meet regularly during future dialogues.
5. Second U.S.-China High-Level Joint Dialogue on Cybercrime and Related Issues. Attorney General Lynch, Secretary Johnson and State Councilor Guo decided to schedule the second U.S.-China High-Level Dialogue on Combatting Cybercrime and Related Issues in June 2016. The dialogue will take place in Beijing, China.
Dietary Supplement Manufacturer Pleads Guilty to Criminal Contempt of CourtRead the Press Release
The Department of Justice announced today that a Livingston, Montana resident pleaded guilty to selling dietary supplements in violation of two court orders.
Toby McAdam, 57, pleaded guilty before U.S. District Judge Susan P. Watters in the District of Montana to one count of criminal contempt of court. McAdam was immediately sentenced to four months in prison. He was ordered to pay $80,000 in liquidated damages and $4,936.48 in attorney's fees.
“The Department of Justice will use all available tools to ensure that dietary supplement and drug manufacturers obey court orders,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “As demonstrated by our recently announced dietary supplements sweep, the Consumer Protection Branch will aggressively pursue those who distribute these products in violation of the law.”
The criminal contempt action arose out of a prior civil action the Department filed in 2010 against McAdam, who was the owner and operator of Risingsun Health, based in Livingston. According to court documents, McAdam sold misbranded and adulterated dietary supplements and drugs that made unsupported claims to cure cancer, ADD/ADHD, epilepsy and intestinal parasites, among other things. McAdam agreed to close his business until the U.S. Food and Drug Administration (FDA) authorized him to return to business. No such authorization was given and McAdam was later held in civil contempt for violation of the consent decree. The Ninth Circuit Court of Appeals later upheld the order of civil contempt against McAdam.
The criminal contempt charges against McAdam alleged that he violated a 2010 court order and an order of civil contempt issued in 2013, which prohibit him from selling dietary supplements. McAdam admitted to continuing to sell both supplements and drugs and failed to close down his business and online sites.
Principal Deputy Assistant Attorney General Mizer commended the efforts of the U.S. Postal Inspection Service and FDA for the investigation. The matter was handled by Trial Attorney David Sullivan of the Department’s Consumer Protection Branch.