District Not Recorded

9,000 Identities Stolen from the U.S. Army, Alabama State Agencies and Georgia Companies

A resident of Newnan, Georgia, was sentenced today to prison for her role as the ringleader of a $24 million stolen identity tax refund fraud (SIRF) conspiracy, 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.

Keisha Lanier was sentenced by U.S. District Court Judge Kristi K. DuBose of the Southern District of Alabama to serve 15 years in prison to be followed by three years of supervised release and ordered to forfeit $5,811,406.  She was also detained following the sentencing hearing.  On May 19, Tamika Floyd, a defendant in a related case, was sentenced to serve 87 months in prison.  On June 25, Tamaica Hoskins, a co-defendant charged in the same indictment, was sentenced to serve 145 months in prison.  And on Aug. 7, the following sentences were imposed on Lanier’s other co-defendants:

• Tracy Mitchell, of Phenix City, Alabama, was sentenced to serve 159 months in prison to be followed by three years of supervised release and ordered to forfeit $329,242, which was seized in cash from her residence;
• Talarius Paige, of Phenix City, was sentenced to serve 60 months in prison to be followed by three years of supervised release and ordered to pay $762,512 in restitution to the Internal Revenue Service (IRS);
• Mequetta Snell-Quick, of Columbus, Georgia, was sentenced to serve 24 months and one day in prison to be followed by two years of supervised release and ordered to pay $199,471 in restitution to the IRS;
• Latasha Mitchell, of Phenix City, was sentenced to serve 36 months in prison to be followed by two years of supervised release and ordered to pay $513,821 in restitution to the IRS;
• Dameisha Mitchell, of Phenix City, was sentenced to serve 65 months in prison to be followed by three years of supervised release and ordered to pay $440,176 in restitution to the IRS;
• Sharonda Johnson, of Phenix City, was sentenced to serve 24 months in prison to be followed by two years of supervised release and ordered to pay $440,176 in restitution to the IRS;
• Patrice Taylor, of Midland, Georgia, was sentenced to serve 12 months and one day in prison to be followed by two years of supervised release and ordered to pay $28,783 in restitution to the IRS; and
• Cynthia Johnson, of Phenix City, was sentenced to two years of probation and ordered to pay $5,047 in restitution to the IRS.

“Today’s sentence brings to a close an extensive criminal network led by Keisha Lanier and designed to victimize U.S. citizens and defraud the U.S. Treasury of over $20 million in fraudulent refund claims,” said Acting Assistant Attorney General Ciraolo.  “The substantial sentences imposed on Ms. Lanier and her co-defendants send a clear message that those who chose to engage in such criminal conduct will pay a very heavy price.”

According to information in court documents and at the sentencing hearings, between January 2011 and December 2013, Lanier and Tracy Mitchell led a large-scale identity theft ring in which Lanier, Tracy Mitchell and their co-defendants filed more than 9,000 false individual federal income tax returns that claimed more than $24 million in fraudulent claims for tax refunds.  The IRS paid out close to $10 million in refunds on these fraudulent claims.  The defendants obtained the stolen identities from various sources, including from the U.S. Army, several Alabama state agencies, a Georgia call center and employee records from a Georgia company.  Mitchell worked at the hospital located at Fort Benning, Georgia, where she had access to the identification data of military personnel, including soldiers who were deployed to Afghanistan.  She stole the personal information of soldiers and used that information to file false tax returns.

“Today’s sentencing of Keisha Lanier, who conspired with others to use the identities of American service members and hospital patients to enrich themselves by stealing tax refunds, demonstrates the depths of how far criminals will stoop and the extent to which IRS-CI will go to fight identity theft,” said Chief Richard Weber of IRS-Criminal Investigation (IRS-CI).  “We will use every available resource in collaboration with our law enforcement partners to combat these serious crimes.”

“This sentencing demonstrates our firm commitment to hold accountable those who commit fraud or otherwise steal from our government,” said Director Daniel Andrews of the U.S. Army Criminal Investigation Command’s (CID) Computer Crime Investigative Unit. “Special agents from our Computer Crime Investigative Unit, along with our federal law enforcement counterparts, are unwavering in our commitment to seek out and hold responsible all those who conduct criminal activity against the United States Army and the American taxpayer.”

Floyd stole personal information from two Alabama state agencies and provided those names to Lanier.  Lanier provided those names to Tracy Mitchell, Latasha Mitchell, Paige and others to file false tax returns.  Lanier also obtained stolen identities from the Alabama Department of Corrections.  Paige and Taylor worked in a call center for a payment-processing company in Columbus and stole identities.  Paige, in turn, used those identities to file false tax returns, some of which he filed from Tracy Mitchell’s residence.  Tracy and Latasha Mitchell also obtained employee files from a Columbus company and used those identities to file false tax returns.

To file the false tax returns, the defendants obtained several IRS Electronic Filing Numbers in the names of sham tax businesses.  On behalf of those sham tax businesses, the defendants applied for bank products from various financial institutions.  Under the guise of a legitimate business account, the institutions mailed blank check stock to the defendants’ homes.  The defendants directed the IRS to pay anticipated tax refunds to prepaid debit cards, in U.S. Treasury checks and to financial institutions, which in turn issued the tax refunds via prepaid debit cards or checks.  When the refunds were sent through the financial institutions, the defendants simply printed out the refund checks from the check stock that had been sent to their homes.

After a period of time, the financial institutions stopped permitting the defendants to print out the tax refund checks.  To continue the scheme, Tracy Mitchell and members of her family recruited U.S. Postal Service employees.  The corrupt postal employees specified addresses along their postal routes to have the U.S. Treasury checks mailed, then obtained those checks and turned them over to the defendants for a fee.

The scheme also involved a complex money laundering operation.  Nearly $10 million in fraudulent tax refund checks were cashed at several businesses located in Alabama, Georgia and Kentucky.  To coordinate this massive check cashing scheme, the defendants communicated using text messages and maintained detailed records.  For instance, Sharondra Johnson worked at the Walmart money center in Columbus, where she cashed checks for customers as part of her job.  Dameisha Mitchell recruited Sharondra Johnson to cash tax refund checks that were fraudulently issued in the names of other individuals.  Sharondra Johnson agreed to cash the checks and communicated with Dameisha and Tracy Mitchell via text messages.  In an attempt to conceal the crime from Walmart, the defendants had multiple individuals deliver the tax refund checks to Johnson for her to cash them.

At sentencing, the government offered victim impact statements from several individuals whose identities were stolen, from family members, and from companies and governmental agencies where the identity theft breaches occurred.  One agency representative noted that the identity theft was not only devastating financially, but that it also impaired the agency’s ability to serve the residents of this state.  The mother of a U.S. Army soldier whose identity was stolen submitted a statement describing the consequences of the fraud on her and her family:

While [my son] was fighting for our country and all back home[,] I received a very disturbing phone call from [an] Agent [] from the IRS that my son[,] while at Ft. Benning training to defend our country[,] the land of the free[,] had his identity stolen and fraudulent tax returns were filed with his social security number.  This news was devastating to think that my [] 19-year-old son[,] who was defending the very freedom this country stands [for] [,] was wronged by one of those people [he] was willing to die for.  My whole family could not believe what was happening.  We now had to worry about this terrible act by one of our own.  As I tried my best to keep composed and handle all of the gruesome mounds of paperwork to get this straightened out with the IRS, [my son] was then denied his tax refund.  This created a financial hardship on [him].  We were too afraid to tell [him] while he was deployed because we did not want to worry him and we wanted him to focus only on getting home alive and not have to worry about such an atrocious act by someone who did not even know [him].

“No sentence is too strong for those who prey on our fighting men and women,” said U.S. Attorney Beck Jr.  “War is hell on the home front, too, and the family left behind holding things together must be strongly protected.”

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of the IRS-Criminal Investigation and the U.S. Army-CID, who investigated the case, and Trial Attorneys Michael C. Boteler and Gregory P. Bailey of the Tax Division and Assistant U.S. Attorneys Todd A. Brown, Jonathan S. Ross and Kevin P. Davidson of the Middle District of Alabama, who prosecuted the case.  Ciraolo and Beck Jr. also thanked the U.S. Attorney’s Office of the Middle District of Georgia for their assistance in the case.

The Department of Justice announced today that Migros Bank AG (Migros) and Graubündner Kantonalbank (Graubündner) have reached resolutions under the department’s Swiss Bank Program.  These banks will collectively pay penalties totaling more than $18 million.

“It is abundantly clear from the agreements reached to date that for decades, many foreign financial institutions engaged in a pattern of conduct designed to facilitate the concealment of accounts owned by U.S. taxpayers, and to profit from these relationships,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “With each agreement reached under the Swiss Bank Program, and each U.S. accountholder who initiates and completes a voluntary disclosure to the Internal Revenue Service, we move a step closer to eliminating secret undisclosed accounts.”

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 penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Migros was founded in 1957 and is headquartered in Zurich.  As of Dec. 31, 2014, Migros Bank had 66 offices (all in Switzerland) and more than 1,300 employees.  In January 2001, Migros Bank 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 regarding U.S. securities.  Migros Bank issued several directives to its employees concerning the QI Agreement.  An October 2000 directive stated that persons subject to U.S. taxes who did not want to be disclosed to the “U.S. tax authority” would not be authorized to hold or purchase U.S. securities in their accounts beginning on Jan. 1, 2001.  The directive further stated that persons subject to U.S. taxes who disclosed their identities to the U.S. tax authority via an IRS Form W-9 could purchase and sell U.S. securities without restriction.

Migros Bank also created a handbook regarding the QI Agreement, which was first issued to its employees in 2003.  The handbook recognized that “the U.S. retains the right to full taxation of its citizens,” but also that a “U.S. person has the option not to disclose to U.S. tax authorities.”  The handbook instructed Migros Bank employees that “[i]f a U.S. person does not wish to disclose to U.S. tax authorities, it is sufficient if the W-9 form is not filled out for Migros Bank,” and that the customer could sign a waiver to forego investing in U.S. securities.  The handbook further instructed Migros Bank employees that clients residing in the United States “who would like to refrain from disclosure” could be “tended to” by, among other things, retaining their mail in Switzerland through hold-mail agreements, not making regular fund transfers  to the United States and not sending payment orders from the United States.

From 2001 until 2005, Migros Bank accepted referrals of U.S. persons as new clients from an external asset manager based in Switzerland.  The external asset manager brought a total of 165 U.S.-related accounts to Migros Bank during that period, and most of those accountholders were U.S. residents.  The maximum value of these accounts during that period was approximately $62 million.  The external asset manager had full control of his clients’ accounts, and Migros Bank’s relationship managers usually interacted with him rather than with his clients.  In 2005, Migros Bank decided to terminate its relationship with the external asset manager, but it did not end the relationship until the end of 2006 in order to provide the external relationship manager with additional time to contact his clients and possibly move their funds to other depositary banks.  Alternatively, his clients could elect to stay at Migros Bank and give the external asset manager powers of attorney to continue managing their accounts.

In December 2008, Migros Bank’s executive board established a working group of bank officials to study the situation of U.S.-domiciled clients, whom Migros Bank considered to be the riskiest U.S. persons from a U.S. tax-enforcement perspective, identify any related risks to Migros Bank and propose measures to limit such risks.  The working group assessed the risk of U.S. tax authorities taking actions against additional Swiss banks as moderate and the risk of Migros Bank’s website and e-banking services causing it to fall under U.S. bank supervision as low.  They also assessed the risk of relationship managers’ insufficient legal and linguistic knowledge causing erroneous advice to U.S.-domiciled clients as moderate.

The working group considered discontinuing business with all U.S.-domiciled clients to be a “low priority” because that business generated earnings with hardly any additional expenditure and had “further potential as various banks are discontinuing the provision of advisory services.”  Instead, the working group considered the creation of a U.S. desk to be a top priority.  The working group presented a business case for this option that envisioned obtaining an additional one percent share of the total U.S.-domiciled clients with more than 1 million Swiss francs in assets then being served by all Swiss banks.  The working group estimated that there were more than 2,500 UBS clients alone in that category.  The business case also envisioned potentially obtaining an additional two percent share of all other U.S.-domiciled clients, “depending on the strategy.”  The working group estimated that this course of action would result in Migros Bank having 250 million Swiss francs under management from U.S.-domiciled clients.

The executive board ultimately decided, starting in 2009, to create a U.S. desk by re-assigning all U.S.-domiciled clients, whether in premium or retail banking, to a group of premium-banking relationship managers who spoke English and had received specialized regulatory training.  The head of the premium-banking department had ultimate responsibility over this team, which eventually included nine relationship managers.  In May 2009, Migros Bank issued a directive requiring that the head of the premium-banking department approve all new U.S.-domiciled clients, prohibiting Migros Bank employees from sending correspondence to the United States or accepting orders received by telephone, fax or mail from the United States, and prohibiting U.S.-domiciled clients from initiating transactions through the e-banking system.  After issuing the directive, Migros Bank accepted 37 new U.S.-related accounts in the remainder of 2009.  Of these, 17 were funded by transfers from banks with operations already under investigation by the department, or Category 1 banks.

Since Aug. 1, 2008, Migros Bank provided banking services for 898 U.S.-related accounts, with more than $273 million in assets.  Migros Bank will pay a penalty of $15.037 million.

Graubündner was founded in 1870.  It is headquartered in Chur, Switzerland, and has 63 branches, all located within the Canton of Graubünden.

With respect to its U.S.-related accounts, Graubündner offered a variety of traditional Swiss banking services that, though available to all of its clients, were used by some U.S. taxpayers to conceal their undeclared assets and income.  These services included code word or numbered accounts and assisting U.S. clients in executing forms that directed Graubündner not to disclose their names to the IRS.  For approximately 76 U.S-related accounts, Graubündner provided hold mail services, through which Graubündner held bank statements and other mail in Switzerland rather than sending the documents to the United States.  In a few cases, Graubündner processed substantial cash withdrawals in connection with U.S. clients’ closure of their accounts.  For example, at an account closing in December 2009, the bank permitted a U.S. taxpayer to withdraw approximately $112,000 in cash.  Graubündner also closed a U.S.-related account held by a U.S. citizen and resident by transferring the account funds to another Graubündner account held in the name of the U.S. client’s parents, who lived in Switzerland.

Graubündner opened and maintained accounts for seven U.S. taxpayers in the names of offshore structures where the U.S taxpayer’s interest in the account was not reported to the IRS.  Five U.S. citizens were the beneficial owners of accounts held in the names of nominee entities, including four Liechtenstein foundations and a British Virgin Islands company.  Two of these accounts had traded in U.S. securities, but Graubündner did not report account earnings or transmit withholding taxes to the IRS as required.  Graubündner also opened and maintained two accounts in the names of Swiss companies, one for a Swiss citizen and one for a German citizen, both of whom resided in the United States.

In December 2008, Graubündner required that all new and existing U.S. clients, irrespective of domicile, submit a handwritten declaration of compliance with their U.S. tax obligations, waive Swiss banking secrecy and provide a Form W-9.  Graubündner also prohibited the opening of new accounts for entities with a U.S. beneficial owner, even with a Form W-9 and confirmation of tax compliance.  New U.S. clients who failed to submit the requested documents were not supposed to be accepted, though initially some relationship managers continued to accept U.S. customers without securing a Form W-9.  Existing clients who failed to meet these requirements were to be exited by June 2010.  In July 2009, Graubündner stopped accepting any new U.S. clients, with the exception of U.S. nationals residing in Switzerland or Swiss nationals temporarily residing in the United States.

Graubündner has fully cooperated with the department, providing all relevant and requested information and documents as part of its participation in the Swiss Bank Program.  Further evidencing Graubündner’s cooperation is the fact that its employees and members of the board of directors have not objected to the disclosure of their names and functions at Graubündner to the department.  In compliance with Swiss privacy laws, Graubündner has sought and obtained bank secrecy waivers from many of its U.S. customers, whose names were then provided to the U.S. government.

Since Aug. 1, 2008, Graubündner had 364 U.S.-related accounts with an aggregate maximum balance of approximately $105.5 million.  Graubündner will pay a penalty of $3.616 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 resolution with Migros Bank AG and Graubündner Kantonalbank continues the progress of DOJ’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division.  “This settlement aids our efforts to make sure U.S. taxpayers report their foreign accounts and pay taxes on the income earned on those accounts.  Working with DOJ, we continue to make progress fighting offshore tax evasion and those who aid such illegal activity.” 

“The Swiss Bank Program continues to pay dividends due to the strength of our partnership with the Department of Justice,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “A significant element of this program has been the influx of highly-detailed account data along with information about the variety of schemes used to hide assets overseas.  This information will continue to be used on both an individual and global basis to combat international tax evasion.”

Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business & International Division for their substantial assistance.  Ciraolo also thanked Gregory E. Van Hoey, Michael R. Pahl, John E. Sullivan and Thomas G. Voracek, 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 and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

We welcome recent progress made with the People’s Republic of China on cyber issues of concern to both the United States and China.  Through the efforts of President Obama and President Xi Jinping, as well as officials from both sides, we have made several key commitments focused on concrete actions and arrangements to address our differences on cyber issues.  These include:

• The United States and China committed that both sides should increase law enforcement communications regarding malicious cyber activities, including breaches of sensitive information, and provide timely responses to requests for information and assistance concerning those activities.  Further, both sides agreed to provide updates to the other side on the status and results of those investigations and to take action, as appropriate. 

• The United States and China committed that neither country’s government will conduct or knowingly support cyber-enabled theft of intellectual property, including trade secrets or other confidential business information, with the intent of providing competitive advantages to companies or commercial sectors. 

As a means of ensuring that these commitments are upheld and responses are provided in a timely and comprehensive manner, the United States and China committed to establish a high-level joint dialogue mechanism on cybercrime and related issues.  We will co-chair the dialogue for the United States, with participation from representatives of the FBI, the U.S. Intelligence Community and other agencies.  China will designate an official at the Ministerial level to lead representatives from the Ministry of Public Security, Ministry of State Security, Ministry of Justice and the State Internet and Information Office.  This dialogue will enable both sides to periodically assess our progress; address any issues related to investigative cooperation or information exchanges; and outline means for relevant agencies on both sides to enhance cooperation.  Further, the two countries will establish a hotline to address urgent issues or difficulties that have not otherwise been successfully resolved.  We look forward to scheduling the first session of this dialogue before the end of the calendar year.

We intend to remain personally engaged on these issues to ensure that both sides take concrete and reciprocal steps to advance progress made thus far.  These commitments do not resolve all our challenges with China on cyber issues.  However, they do represent a step forward in our efforts to address one of the sharpest areas of disagreement in the U.S.-China bilateral relationship.  The United States is prepared to fulfill our commitments and make reciprocal efforts.  We expect China to do the same and have been clear with the Chinese government that their words must be matched by actions.

The U.S. District Court for the Southern District of Florida entered a consent decree of permanent injunction against Miami-based Sunset Natural Products Inc. and the firm’s co-owners, Teresa Martinez and Elsy Cruz, to prevent the distribution of adulterated dietary supplements, the Department of Justice announced today.

The department filed a complaint in the U.S. District Court for the Southern District of Florida at the request of the U.S. Food and Drug Administration (FDA), alleging that the defendants violated the law by manufacturing and distributing dietary supplements that were deemed to be adulterated.  Under the law, dietary supplement manufacturers are required to have systems in place to ensure that their products meet specifications for identity, purity, strength and composition. 

According to the complaint, several FDA inspections between 2012 and 2014 allegedly revealed that Sunset failed to conduct at least one appropriate test or examination to verify the identity of every dietary ingredient before using the ingredient, and that the firm failed to establish product specifications for the identity, purity, strength and composition of finished batches of dietary supplements.  The defendants allegedly failed to use equipment and utensils of appropriate design, construction and workmanship to enable them to be adequately cleaned and properly maintained.

The firm and its owners agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from committing further violations of the federal Food, Drug and Cosmetic Act.  The consent decree requires Sunset to cease all operations and requires that if the defendants seek to resume manufacturing and distributing dietary supplements, the FDA first must determine that the firm’s manufacturing practices have come into compliance with the law.  The consent decree also requires the defendants to recall all dietary supplements that the defendants manufactured, prepared, processed, packed, labeled, held and/or distributed at any time since April 2014.  The defendants are then required to destroy all dietary supplements in their possession, custody and/or control.

“Manufacturers of dietary supplements who do not follow the appropriate federal regulations put the public at risk,” 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 FDA to protect consumers from adulterated products.”

On March 19, 2013, the FDA issued a warning letter to Martinez, detailing numerous violations of current Good Manufacturing Practice (cGMP) regulations the FDA observed during the 2012 inspection.  According to the complaint, all of the cGMP violations described in the warning letter were the same as, or similar to, the violations the FDA observed during the April 2014 and September 2014 inspections.  As noted in the complaint, the warning letter stated that it was the defendants’ responsibility to ensure compliance with the law and cautioned that failure to take prompt action to correct the deviations, and prevent their recurrence, may result in legal action.

According to the complaint, Martinez responded to the 2013 warning letter with promises to correct the cGMP violations.  However, according to the allegations, the defendants either did not follow through on their promises to correct and/or failed to fully correct these violations, as shown by the FDA investigators’ observation and documentation of ongoing, significant cGMP deficiencies during the subsequent inspections in 2014. 

The government is represented by Counsel Melanie Singh of the Civil Division’s Consumer Protection Branch, with the assistance from Senior Counsel Michele Svonkin of the Department of Health and Human Services’ Office of General Counsel – Food and Drug Division.

Under an agreement announced today by the Department of Justice and the Environmental Protection Agency, the Virgin Islands Water and Power Authority (VIWAPA) will come into compliance with the federal Clean Air Act at its Krum Bay facility on St. Thomas and Cruz Bay facility on St. John, U.S. Virgin Islands.  The settlement resolves numerous violations of the Clean Air Act, including VIWAPA’s failure to properly operate pollution control equipment to reduce emissions of nitrogen oxides and particulate matter that can cause serious respiratory illness.  These pollutants are linked to health problems, including asthma, lung and heart disease.  VIWAPA will spend approximately $12.2 million to comply with the agreement’s requirements.  VIWAPA will also pay a $1.3 million penalty. 

Separate from the settlement, VIWAPA has been in the process of converting several of its oil-fired turbines at the St. Thomas facility to be capable of burning liquefied petroleum gas or liquefied natural gas.  The settlement requires that at least 85 percent of the power VIWAPA generates from the converted units be from burning liquefied petroleum gas or liquefied natural gas at the converted units and renewable sources.  The agreement will result in a reduction of nitrogen oxide emissions by approximately 1,300 tons per year and particulate matter emissions by approximately 185 tons per year.  In addition, the conversion to LPG or LNG will reduce the amount of carbon dioxide, a greenhouse gas, from the St. Thomas facility by approximately 66,000 tons per year and sulfur dioxide by approximately 200 tons per year. 

“Today’s settlement marks another milestone in our ongoing efforts to enforce the Clean Air Act and reduce air pollution from power plants,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “This settlement will eliminate thousands of tons of harmful air pollution each year, significantly improving air quality in the Virgin Islands.”

“This settlement will drastically reduce the amount of air pollution in the Virgin Islands and bring the St. Thomas power plant, one of the most significant sources of air pollution in the U.S. Virgin Islands, into compliance with the Clean Air Act,” said Regional Administrator Judith A. Enck for EPA.

Under the Clean Air Act, large industrial facilities that make modifications that increase air pollution emissions must install best available control technology.  VIWAPA operates with a permit that requires it to use the best available control technology to control emissions of nitrogen oxides and particulate matter.  The complaint, which this settlement resolves, alleged numerous violations, including that VIWAPA had not properly operated nor maintained its water injection pollution control system during various times from October 2005 through December 2013.  The complaint also alleged that the St. Thomas facility failed to meet the opacity (smoke) emission limits during normal operations and failed to conduct continuous monitoring to ensure compliance with its limits, and to keep proper records.

Under the agreement, at the St. Thomas facility, VIWAPA will:

• Properly operate and maintain the water injection pollution control system;

• Properly operate and maintain the continuous monitoring equipment;

• Develop and maintain an inventory of spare parts for the St. Thomas facility’s water injection pollution control system and emission monitoring equipment;

• Arrange for third-party audits and self-audits to ensure compliance with the water injection pollution control system requirements and emission monitoring requirements;

• Install a pollution control device to reduce visible emissions from one unit; and

• Install a video camera system to monitor visible emissions from the stacks and conduct visible emission monitoring when visible emissions are observed.

Under the agreement, at the St. John facility, VIWAPA will: 

• Use cleaner fuel; and

• Submit a request to the Virgin Islands government to modify the permit to designate the unit as an emergency unit.

The EPA has worked with VIWAPA over the past several years to address its violations and operations at the St. Thomas facility and the St. John facility.  As a result of that work, VIWAPA has already repaired and replaced pollution controls and monitoring equipment at the St. Thomas facility.  It replaced its data acquisition system and installed an improved water system, which it now uses in its water injection pollution control system.

For more information on this settlement or to read the proposed consent decree, go to: http://www.justice.gov/enrd/consent-decrees

As part of her commitment to combat human trafficking, Attorney General Loretta E. Lynch announced more than $44 million in grant funding to combat human trafficking during her remarks today in Seattle, Washington, to the Washington Advisory Committee on Trafficking.  Seattle is one of 16 sites selected for an anti-trafficking task force award, receiving $1.5 million to support law enforcement efforts and victim services for the next three years.

“Human traffickers prey on some of the most vulnerable members of our society, and their crimes – which are nothing short of modern-day slavery – have no place in this country,” said Attorney General Lynch.  “These grants – administered by the Office of Justice Programs’ Bureau of Justice Assistance (BJA), the Office of Juvenile Justice and Delinquency Prevention, the Office for Victims of Crime (OVC) and the National Institute of Justice – will fund efforts across the country to fight human trafficking, to provide services for survivors and to expand research going forward.”

The grant awards include the following:

• More than $22.7 million to support 16 anti-human trafficking task forces across the country. Within each task force location, BJA will make one award to a lead law enforcement agency and OVC will make one to the lead victim service provider.  The grantees will work collaboratively with other key members of the task force, including the U.S. Attorney’s Office, local prosecutor’s office, federal, state and local law enforcement agencies and community and system-based service providers.  The task forces are listed at: http://www.ojp.gov/newsroom/pdfs/HT_Full_Chart_V.3.pdf.
• $1 million to the International Association of Chiefs of Police, Inc. to conduct a comprehensive analysis of task force training and technical assistance needs to strengthen the capacity to investigate and prosecute human trafficking. 
• More than $8.1 million to 12 victim service organizations to provide comprehensive services to any human trafficking victim identified within the target geographic region. 
• More than $5.6 million to ten grantees to provide specialized services for victims of human trafficking, including programs that are culturally, linguistically and developmentally-appropriate and trauma-informed, as well as services for underserved victims such as American Indians, Alaska Natives and individuals who identify as lesbian, gay, transgender, queer or questioning (LGBTQ). 
• Nearly $1 million total to two organizations to provide national training and technical assistance on comprehensive legal services for trafficking victims.  The Coalition to Abolish Slavery and Trafficking will build legal service providers’ and pro bono attorneys’ capacity to serve foreign national and U.S. citizen trafficking victims and the American Bar Association Fund for Justice and Education will provide attorneys who represent trafficking survivors with specialized training and assistance in criminal history expungement.
• Nearly $477,000 to the National Conference of State Legislators to develop resources on human trafficking, including an online database of human trafficking state laws, web page, webinar and human trafficking briefing papers.
• More than $3.5 million to address knowledge gaps related to trafficking in persons, expand upon existing research and evaluation efforts and inform evidence-based practices for state, local and tribal criminal justice agencies.
• More than $1 million to three organizations to provide mentoring services for young victims of human trafficking, including additional training and technical assistance for organizations that provide specialized support services for youth victims. 

For a complete list of individual grants awarded visit http://www.ojp.gov/newsroom/pdfs/HT_Full_Chart_V.3.pdf. 

The grants announced today are part of a government-wide effort to combat human trafficking and provide services to survivors, as outlined in Coordination, Collaboration, Capacity: Federal Strategic Action Plan on Services for Victims of Human Trafficking in the United States, 2013–2017, released by the White House in January 2014. 

A federal district judge in Miami has ordered a tax return preparation business based in Miami and its owner to stop assisting in the preparation of federal income tax returns that knowingly understate federal income tax liability, the Justice Department announced today.

The injunction also requires Miami-based Ebenezer Tax Services Inc. and its owner, Ernice Joseph, to exercise due diligence in preparing returns that claim the Earned Income Tax Credit and bars them from preparing any return that claims the Fuel Excise Tax Credit.  In addition, the judge ordered Ebenezer and Joseph to gather documentation to substantiate the deductions and credits claimed on the returns they prepare and to retain the documentation for a period of five years.  The defendants are also required to send a copy of the injunction to customers and others.  Finally, the injunction requires that a neutral monitor be engaged at Ebenezer’s and Joseph’s expense to review and monitor their compliance with the injunction and provide a report of its findings to the United States.

If the court later finds that Ebenezer or Joseph have violated any of the terms of the injunction, they will be permanently barred from preparing federal tax returns for others.  The court previously barred Primo Tax Services Inc., another company partly owned by Joseph, from preparing returns for others.

According to the complaint, Joseph and Ebenezer Tax Services have prepared federal income tax returns that unlawfully understate income tax liabilities and overstate refunds through a variety of schemes.  The complaint alleged that Ebenezer Tax Services prepared returns that unlawfully claimed the Earned Income Tax Credit by reporting fictitious Schedule C businesses or business income.  The complaint also alleged that Ebenezer and Joseph prepared returns that claimed credits to which the taxpayers were not entitled in order to overstate their clients’ refunds.  According to the complaint, the Internal Revenue Service (IRS) estimates that the activities of Ebenezer Tax Services and Joseph may have led to millions of dollars in revenue losses.

In consenting to the injunction, Ebenezer and Joseph admitted that they had engaged in conduct subject to penalty under Section 6701 of the Internal Revenue Code.  Section 6701 penalizes the knowing preparation of documents whose use would result in an understatement of tax liability.

Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015.  The IRS has some tips on its website for choosing a tax return preparer, and has launched a free directory of federal tax return preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters.  Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

A Colombian national was sentenced today to 63 months in prison for conspiring to launder drug trafficking proceeds, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA).

Tito Miller Parra-Isaza, 45, pleaded guilty on May 26, 2015.  U.S. District Judge Ed Kinkeade of the Northern District of Texas imposed the sentence.

According to a factual stipulation filed in connection with his guilty plea, Parra-Isaza coordinated the deposit of bulk cash, which he knew to be the proceeds of drug trafficking, into financial institutions in Mexico and elsewhere.  The bulk cash was later wire transferred into bank accounts in Dallas and then transported to Panama and elsewhere for distribution to individuals involved in drug trafficking.

Four other defendants previously pleaded guilty.  Of the remaining charged defendants, three are fugitives and one is deceased.

This case is being investigated by the DEA.  This case is being prosecuted by Senior Trial Attorney Mark Irish and Trial Attorney Nicole Grosnoff of the Criminal Division’s Asset Forfeiture and Money Laundering Section.  The Criminal Division’s Office of International Affairs also has provided substantial assistance.

A Chicago man has been charged for conspiring with his cousin and cousin’s girlfriend to kill a U.S. citizen at a resort in Bali, Indonesia, in August 2014, according to a criminal complaint unsealed in federal court in Chicago today.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Zachary T. Fardon for the Northern District of Illinois and Acting Special Agent in Charge John A. Brown of the FBI’s Chicago Division made the announcement. 

According to the complaint, Robert Ryan Justin Bibbs, 24, of Chicago, advised his cousin, Tommy Schaefer, and Schaefer’s girlfriend, Heather Mack, on how to kill Mack’s mother, Sheila Von Wiese in August 2014.  The complaint alleges that, on or about Aug. 2, 2014, Von Wiese and Mack departed Chicago for a vacation in Bali, Indonesia.  On or about Aug. 12, 2014, Schaefer allegedly departed Chicago and arrived in Indonesia at the same resort where Mack and the victim were staying.  The complaint alleges that, within hours of Schaefer’s arrival, the victim was bludgeoned to death, and Schaefer and Mack stuffed the body in a suitcase and placed it in a taxi cab, which was later discovered by Indonesian police.

According to the complaint, Bibbs knew of the plot to kill Von Wiese before Schaefer and Mack carried it out, advised them on how to kill the victim, and counseled Schaefer on how to evade detection by law enforcement.  According to the complaint, Bibbs did so because he believed that Schaefer would gain access to Von Wiese’s estate through the victim’s daughter, Mack, and that Schaefer would share the inheritance with family members, including Bibbs.

On Aug. 13, 2014, Schaefer and Mack were arrested in Bali.  In April 2015, an Indonesian court convicted Schaefer and Mack of charges related to Von Wiese’s murder.  Schaefer was sentenced to 18 years in an Indonesian prison, while Mack was sentenced to 10 years.

Bibbs was arrested today by federal authorities.  He is scheduled to make an initial court appearance before U.S. Magistrate Judge Maria Valdez today at 3 p.m. CDT.

The charges and allegations contained in a criminal complaint are merely accusations.  The defendant is presumed innocent until and unless proven guilty.

The case is being investigated by the FBI’s Chicago Division and being prosecuted by Assistant U.S. Attorneys Bolling Haxall and Julie Porter of the Northern District of Illinois and Trial Attorneys Hope Olds and Christine Duey of the Criminal Division’s Human Rights and Special Prosecutions Section.

A former Oklahoma City law enforcement officer and the owner of Polygraph.com has been sentenced to two years in prison for training customers to lie and conceal crimes and other misconduct during polygraph examinations.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Commissioner Matthew Klein of U.S. Customs and Border Protection’s Office of Internal Affairs and Special Agent in Charge Scott L. Cruse of the FBI’s Oklahoma City Division made the announcement.

Douglas G. Williams, 69, of Norman, Oklahoma, pleaded guilty on May 13, 2015, to two counts of mail fraud and three counts of witness tampering.  Chief U.S. District Judge Vicki Miles-LaGrange of the Western District of Oklahoma imposed the sentence.

According to admissions made in connection with his plea, Williams owned and operated Polygraph.com, an Internet-based business through which he trained people how to conceal misconduct and other disqualifying information when submitting to polygraph examinations in connection with federal employment suitability assessments, background investigations, internal agency investigations and other proceedings.  In particular, Williams admitted that he trained an individual posing as a federal law enforcement officer to lie and conceal involvement in criminal activity from an internal agency investigation.  Williams also admitted to training a second individual, posing as an applicant seeking federal employment, to lie and conceal crimes in a pre-employment polygraph examination.  Williams also admitted to instructing the individuals to deny receiving his polygraph training.

The investigation was conducted by U.S. Customs and Border Protection’s Office of Internal Affairs and the FBI’s Oklahoma City Division.  The case was prosecuted by Trial Attorneys Heidi Boutros Gesch and Brian K. Kidd of the Criminal Division’s Public Integrity Section.

A Chapel Hill and Durham, North Carolina, millionaire businessman was sentenced to prison yesterday for his involvement in a decades-long scheme to evade paying his federal income taxes, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand of the Middle District of North Carolina.

“The sentence imposed on Mr. Tilley demonstrates the department’s commitment to prosecuting and seeking incarceration of and restitution from those who repeatedly evade their tax obligations and impede and obstruct our nation’s tax laws,” said Acting Assistant Attorney General Ciraolo.  “No one is above the law and Mr. Tilley will pay a heavy price for his criminal conduct.”

Thomas Tilley, 80, was sentenced by Chief U.S. District Judge William L. Osteen Jr. of the Middle District of North Carolina to serve 32 months in prison to be followed by one year of supervised release, and ordered to pay $7,676,757 in restitution to the Internal Revenue Service (IRS).  At the sentencing hearing, Judge Osteen found that Tilley obstructed justice by providing misleading information to probation and the court after pleading guilty and revoked his acceptance of responsibility credit based on this conduct.  Tilley pleaded guilty on Nov. 21, 2014, to one count of corruptly endeavoring to impede and obstruct the administration of the Internal Revenue Code, which carries a statutory maximum sentence of 36 months in prison. 

“Individuals like Thomas Tilley, who engage in complex schemes to impede the administration of the tax laws in order to enrich themselves and not pay their fair share, should take notice of today’s sentencing,” said Special Agent in Charge Thomas J. Holloman III of IRS-Criminal Investigation (CI).  “If you engage in these type of schemes, IRS-Criminal Investigation will be there for the duration to ensure that you are brought to justice.”

According to court documents, beginning in 1993 and continuing through at least 2010, Tilley sent the IRS fraudulent financial instruments in an attempt to fraudulently discharge his tax debt; used nominee and sham trusts to purchase and sell real estate to conceal his assets; and placed false liens on properties to impede the IRS’ collection of his tax debt.  Tilley also failed to file federal and state income tax returns for tax years 1994 through 2013, despite earning substantial income and, in 2009, claiming a net worth as high as $30 million and annual income of $822,000 on a financial statement.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-CI, who investigated the case, and Assistant U.S. Attorney Frank J. Chut of the Middle District of North Carolina and Trial Attorney Todd P. Kostyshak of the Tax Division, who prosecuted the case.

The Justice Department’s Antitrust Division, at the request of the Federal Trade Commission, filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., against Leucadia National Corporation for violating the premerger notification and waiting period requirements of the Hart-Scott-Rodino (HSR) Act of 1976 when it acquired voting securities of KCG Holdings Inc. in July 2013.  At the same time, the department filed a proposed settlement, subject to approval by the court, under which Leucadia has agreed to pay a $240,000 civil penalty to resolve the lawsuit.

The HSR Act of 1976, an amendment to the Clayton Act, imposes notification and waiting period requirements for transactions meeting certain size thresholds so that they can undergo premerger antitrust review.  Federal courts can assess civil penalties for premerger notification violations under the HSR Act in lawsuits brought by the Department of Justice.  For a party in violation of the HSR Act, the maximum civil penalty is $16,000 per day.

Further details about this matter are described in the FTC’s press release issued today, and in the attached complaint.

Leucadia Complaint (206.18 KB)

Leucadia Stipulation (75.35 KB)

Patrick Sheridan, an Irish national, who was arrested on Jan. 9, 2015, in the United Kingdom pursuant to a request by the United States, was extradited to the United States on Friday and appeared in federal court in Waco, Texas yesterday.  The U.S. sought Sheridan’s extradition for his role in trafficking black rhinoceros horns, announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division.

“This extradition is a significant step forward in our international efforts to address wildlife trafficking and demonstrates that our international partners are also committed to ending this illegal trade in endangered species,” said Assistant Attorney General Cruden.  “Rhino horn trafficking is having a devastating effect on the rhino and the allegations facing this individual are just the type of illegal behavior that is fueling an international market for horns.  We must stop it in its tracks.”

On May 13, 2014, a federal grand jury in Waco, Texas, returned an indictment that has since been unsealed, charging Patrick Sheridan and a co-defendant with conspiring to traffic in horns from black rhinoceros.  In addition to conspiracy, the indictment charges substantive violations of the Lacey Act for wildlife trafficking and making a false wildlife document.  

According to the indictment, Sheridan, along with a co-defendant and Michael Slattery Jr., used a “straw buyer” to purchase two black rhinoceros horns from a taxidermist in Texas, which the group then transported to New York, where they sold the horns.  In January 2014, Michael Slattery Jr. pleaded guilty and was sentenced 14-months in prison for his role in the conspiracy.  In addition to the trafficking, the indictment also charges Sheridan and his co-defendant with making a fictitious and fraudulent bill of sale in connection with the rhinoceros horns, in an attempt to make their illegal purchase of the horns appear legal.

The transport of Sheridan to the Western District of Texas to face these charges concluded the extradition process from the United Kingdom, a process governed by an extradition treaty between the United States and the United Kingdom.  Sheridan’s arraignment and detention hearing is scheduled in federal court in Waco on Sept. 24, 2015.

The charges contained in the indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty in a court of law.  If convicted of these charges, the defendants each face up to five years in prison on each of the charges, as well as fines up to $250,000.

The case was investigated by agents from U.S. Fish and Wildlife Service Office of Law Enforcement.   The case is being prosecuted by Assistant U.S. Attorney Greg Gloff for the Western District of Texas and Trial Attorney Gary N. Donner of the Justice Department’s Environmental Crimes Section, with assistance from the Justice Department’s Office of International Affairs.

Allegedly Concocted Phony Businesses and Made Other False Claims on Customers’ Returns

A federal court has permanently barred an Appleton, Wisconsin, tax return preparer from preparing federal tax returns for others, the Justice Department announced today.

The civil injunction order prohibits Gerardo Garcia, aka Gerry Garcia, and his firm Garcia Enterprises LLC, from acting as a tax return preparer and from continuing to operate a tax return preparation business.  The order was entered by the U.S. District Court for the Eastern District of Wisconsin.  Garcia agreed to the entry of the injunction but did not admit to the allegations in the civil complaint against him.

According to the complaint, Garcia prepared false and improper returns during the 2015 filing season, even though the Internal Revenue Service (IRS) had previously assessed $26,000 in penalties against him.  The complaint alleged that Garcia prepared tax returns on which he concocted phony businesses for his customers in order to understate his customers’ tax liabilities or inflate their refunds.  In addition, as alleged in the complaint, Garcia fabricated business expenses, understated his customers’ business income and claimed other false or improper deductions, credits and filing statuses.  In one case, the complaint alleged that Garcia prepared two tax returns for a customer that reported more than $10,000 in losses over two years from a non-existent “aquaculture” business that Garcia asserted his customer owned.  The complaint cited several additional examples, including Garcia improperly claiming child tax credits for children, who live outside of the United States; dependency exemptions without proof the customer supported the children; and incorrect filing statuses, such as head-of-household, that resulted in more favorable tax rates.

The injunction order requires Garcia to provide the United States with a list of his customers since 2010 and to send a copy of the court’s injunction order to all customers for whom he prepared returns.  The injunction order also requires Garcia to provide a link to the court’s injunction order on any website he maintains and to post a copy in any physical business location in which he receives customers and potential customers for any bookkeeping, payroll or other financial services.

Return preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2015.  The IRS has some tips on their website for choosing a tax preparer, and has launched a free directory of federal tax preparers.  In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters. Information about these cases is available on the Justice Department’s website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.

A Brooklyn, New York, tax return preparer pleaded guilty today in U.S. District Court for the Eastern District of New York to two counts of aiding and assisting in the preparation of false income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. 

According to the indictment, Awilda Rosario owned and operated Edujas Multiservices Corporation, a tax preparation business located in Brooklyn.  She prepared false federal individual income tax returns for clients for tax years 2008 through 2013.  Rosario attached false schedules to the returns that reported business losses that the clients did not incur and reported inflated or fictitious deductions.  She also attached forms claiming fictitious education and fuel tax credits that the clients were not entitled to receive.

The indictment further alleges that after the Internal Revenue Service (IRS) revoked the electronic filing identification number (EFIN) for Edujas Multiservices Corporation, Rosario obtained at least two different EFINs and continued to prepare and submit false tax returns for her clients, listing a different paid tax return preparer and tax preparation firm.

Rosario faces a statutory maximum sentence of three years in prison and a maximum fine of $250,000 for each count of aiding and assisting in the preparation of false income tax returns.  Rosario’s sentencing is set for Jan. 8, 2016.

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief Jorge Almonte and Trial Attorney Shawn T. Noud of the Tax Division, who are prosecuting the case.

IACP Awarded $500,000 to Host a Youth-Police Roundtable and Best Practices Institute

Attorney General Loretta E. Lynch today announced that the Justice Department is launching a new initiative to bring young people together with the police officers in their community.

The Office of Juvenile Justice and Delinquency Prevention (OJJDP) awarded $500,000 to a joint effort of the International Association of Chiefs of Police and the Coalition for Juvenile Justice to convene a youth and law enforcement roundtable and to develop an institute for disseminating best practices and sharing new approaches on issues of juvenile justice.

To achieve these objectives, IACP will compile best practices and innovative approaches, help law enforcement departments conduct self-assessments and develop action plans to improve relations with youth in their communities and create a training curriculum to support these efforts.  In addition to hosting the law enforcement/youth roundtable this upcoming fiscal year, IACP will hold virtual meetings with roundtable participants to seek their recommendations to law enforcement for long-term strategies for improvement. 

Lynch announced the award today during a White House Champions of Change event co-hosted by the Office of Justice Programs and the Community Oriented Policing Services Office (COPS). The event honored law enforcement officers and young people who are leading efforts to improve interactions between law enforcement and youth in their communities.

About the Office of Justice Programs (OJP)

OJP, headed by Assistant Attorney General Karol V. Mason, provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice and assist victims. OJP has six components: the Bureau of Justice Assistance; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking. More information about OJP can be found at www.ojp.gov.

 

As part of President Obama’s commitment to building trust and transparency between law enforcement and the communities they serve, Attorney General Loretta E. Lynch today announced that the Justice Department has awarded grants totaling more than $23.2 million to 73 local and tribal agencies in 32 states to expand the use of body-worn cameras and explore their impact.  The body-worn camera pilot program announced in May 2015 includes $19.3 million to purchase body-worn cameras, $2 million for training and technical assistance and $1.9 million to examine the impact of their use.  The grants, awarded by the department’s Office of Justice Programs (OJP), build on President Obama’s proposal to purchase 50,000 body-worn cameras for law enforcement agencies within three years.  

“This vital pilot program is designed to assist local jurisdictions that are interested in exploring and expanding the use of body-worn cameras in order to enhance transparency, accountability and credibility,” said Attorney General Lynch.  “The impact of body-worn cameras touches on a range of outcomes that build upon efforts to mend the fabric of trust, respect and common purpose that all communities need to thrive.”

The grants, which require a 50/50 in-kind or cash match, can be used to purchase equipment and require that applicants establish a strong implementation plan and a robust training policy before purchasing cameras.  Each agency awarded a grant is responsible for developing a plan for long-term storage, including the cost of storing data.

In addition to funds to help purchase body-worn cameras and train officers in their use, grants under the Bureau of Justice Assistance’s (BJA’s) Smart Policing Initiative will support police departments in Miami, Milwaukee and Phoenix as they examine the impact of body-worn cameras on citizen complaints, internal investigations, privacy, community relationships and cost effectiveness.  Each of these three departments will partner with a research institution to gain insight on the merits of deploying body-worn camera programs.

Lynch announced the award today during a White House Champions of Change event co-hosted by OJP and the Community Oriented Policing Services Office (COPS Office).  The event honored law enforcement officers and young people who are leading efforts to improve relationships between law enforcement and youth in their communities.

BJA has launched a comprehensive online toolkit that consolidates research, promising practices, model policies and other tools that address issues surrounding body-worn cameras, including implementation requirements; image retention; concerns of policy makers, prosecutors, victim and privacy advocates; and community engagement and funding considerations.  The toolkit is available at https://www.bja.gov/bwc/.

OJP’s Bureau of Justice Statistics is collecting data on body-worn camera usage through surveys of law enforcement agencies.  It is also designing data collection forms for future surveys of prosecutors and public defenders to measure how body-worn camera footage is being used by the courts in criminal cases.

For additional information about the BWC Pilot Implementation Program, visit http://www.bja.gov/bwc/pdfs/BWCPIP-Award-Fact-Sheet.pdf.

About the Office of Justice Programs (OJP)

OJP, headed by Assistant Attorney General Karol V. Mason, provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice and assist victims.  OJP has six components: BJA; the Bureau of Justice Statistics; the National Institute of Justice; the Office of Juvenile Justice and Delinquency Prevention; the Office for Victims of Crime and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking.  More information about OJP can be found at www.ojp.gov

Hiring Grants Will Aim to Create, Retain 866 Law Enforcement Officers

Attorney General Loretta E. Lynch today announced more than $107 million in grant funding through the Department of Justice’s Office of Community Oriented Policing Services (COPS Office) COPS Hiring Program (CHP).  The Attorney General announced funding awards to nearly 200 law enforcement agencies across the nation, aimed at creating, and in some cases protecting, 866 law enforcement positions.

“Ensuring that local law enforcement officers have the resources they need to serve their communities fairly, faithfully, and effectively is among the Justice Department’s highest priorities,” said Attorney General Lynch.  “These awards will not only keep more officers on the beat – they will address specific issue areas like violent crime, school safety, homeland security, and community trust.  They will help our law enforcement agencies become more efficient and more responsive to the needs of their jurisdictions.  And they will promote the ongoing efforts of the Department of Justice as we work to build the safe, secure, and supportive communities that every American deserves.”

COPS Office Director Ronald L. Davis remarked that “The COPS Office is pleased to assist local law enforcement agencies throughout the country in addressing their most critical public safety issues.  Funding from this year’s program will allow many cities and counties to apply new sworn personnel to issues related to violent crime, school safety, and building trust within their communities.”

CHP provides funding directly to state, local and tribal law enforcement agencies for the hiring and rehiring of entry-level career law enforcement officers in an effort to create and preserve jobs and increase community policing capacity and crime prevention efforts.  All CHP applicants were asked to identify a specific crime and disorder problem area and how funding would be used to initiate or enhance their capacity to implement community policing approaches to that problem area.  In 2015, the COPS Office gave additional consideration to applicant agencies selecting the category of “Building Trust,” and those agencies were encouraged to refer to the final report of the President’s Task Force on 21st Century Policing for suggested actions to incorporate into their community policing strategies. Additional consideration was also given to agencies that selected the areas of school based policing, homicide or violent crime, and homeland security.  Applicants who committed to hiring or rehiring at least one military veteran under CHP also received additional consideration for funding.

In 2015, 76 agencies that selected the category of “Building Trust” will receive funding for 353 positions.  Funding will be awarded to 31 agencies to hire 303 officers to focus specifically on the reduction of homicides and other violent crimes.  In addition, 56 agencies will receive funding for 123 officer positions dedicated to our nation’s schools, and 133 agencies committed to hiring one or more officers who are military veterans.  The entire list of grantees can be found here: http://www.cops.usdoj.gov/pdf/2015AwardDocs/chp/CHP_Award_List.pdf.

The COPS Office is a federal agency responsible for advancing community policing nationwide. Since 1995, COPS has invested over $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.

Two former officials of and one broker for the Peanut Corporation of America (PCA) were sentenced to prison today in Albany, Georgia, for their roles in a conspiracy to defraud their customers by shipping salmonella-positive peanut products before the results of microbiological testing were received and falsifying microbiological test results, the Department of Justice announced today. 

Stewart Parnell, 61, of Lynchburg, Virginia, the former owner and president of PCA, was sentenced by Senior U.S. District Court Judge W. Louis Sands of the Middle District of Georgia to serve 336 months in prison to be followed by three years of supervised release.  Michael Parnell, 56, of Midlothian, Virginia, who worked at P.P. Sales and was a food broker who worked on behalf of PCA, and is Stewart Parnell’s brother, was sentenced to serve 240 months in prison to be followed by three years of supervised release.  Mary Wilkerson, 41, of Edison, Georgia, who held various positions at PCA’s Blakely, Georgia, plant including receptionist, office manager and quality assurance manager, was sentenced to serve 60 months in prison to be followed by two years of supervised release.  Judge Sands will issue a restitution order at a later date.

The Parnell brothers were convicted by a federal jury on Sept. 19, 2014, of multiple counts of conspiracy, mail and wire fraud and the sale of misbranded food.  Stewart Parnell was also convicted of the introduction of adulterated food into interstate commerce.  Stewart Parnell and Mary Wilkerson were also convicted of obstruction of justice.  Stewart Parnell was found guilty of all but one of the 68 felony counts with which he was charged on Feb. 15, 2013.

Expert evidence at trial showed that tainted food led to a salmonella outbreak in 2009 with more than 700 reported cases of salmonella poisoning in 46 states.  According to the Centers for Disease Control and Prevention (CDC), based on epidemiological projections, that number translates to more than 22,000 total cases including nine deaths.  The court found that the evidence presented at trial linked Stewart and Michael Parnell’s conduct, and specifically PCA’s contaminated peanut products, to the victims’ illnesses.  The court also found that steps taken by the CDC to link reported illnesses to the specific strain of salmonella found in PCA products established that Stewart and Michael Parnell’s conduct was the proximate cause of the victims’ illnesses.

“Americans should be able to trust that the food we buy for ourselves and our families is safe,” said Acting Associate Attorney General Stuart F. Delery.  “The sentences handed down today to officials associated with the Peanut Corporation of America demonstrate the consequences for those whose criminal actions threaten that trust by introducing contaminated food into the marketplace.  Our prosecution is just one more example of the forceful actions that the Department of Justice, with its agency partners, takes against any individual or company who compromises the safety of America’s food supply for financial gain.”

The government presented evidence at trial to establish that Stewart Parnell and Michael Parnell – with former PCA operations manager Samuel Lightsey, 50, and Daniel Kilgore, 46, both of Blakely – participated in several schemes by which they defrauded PCA customers and jeopardized the quality and purity of their peanut products.  Specifically, the government presented evidence that the defendants misled customers about the presence of salmonella in their products.  For example, the Parnells, Lightsey and Kilgore fabricated certificates of analysis (COAs) accompanying various shipments of peanut products.  COAs are documents that summarize laboratory results, including test results concerning the presence or absence of pathogens in food.  According to the evidence, on several occasions, the Parnells, Lightsey and Kilgore participated in a scheme to fabricate COAs that stated that the food at issue was free of pathogens when in fact there had been no testing of the food or tests had revealed the presence of pathogens.

The government also presented evidence that when the U.S. Food and Drug Administration (FDA) officials visited PCA’s Blakely plant to investigate the outbreak, Stewart Parnell, Lightsey and Wilkerson gave untrue or misleading answers to questions posed by those officials.

“Today’s sentencing sends a powerful message to officials in the food industry that they stand in a special position of trust with the American consumer, and those who put profit above the welfare of their customers and knowingly sell contaminated food will face serious consequences,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work aggressively with its partners to ensure that the American people are protected from food that is adulterated or misbranded within the meaning of the Food, Drug, and Cosmetic Act and pursue any person who fails to abide by the vital food safety protections in the law.  We are dedicated to using all the tools that we have at our disposal to ensure that the processors and handlers of our food have the public’s safety forefront in their minds.” 

“The sentence that was handed down today means that executives will no longer be able to hide behind the corporate veil,” said U.S. Attorney Michael J. Moore of the Middle District of Georgia.  “The tragedy of this case is that at a peanut processing plant in Middle Georgia, protecting the public lost out to increasing of profits.  This case was never just about shipping tainted peanut product; it was about making sure individual wrong doers were held accountable and the losses suffered by the victims and their families are never forgotten.”

Judge Sands took into account the fraud loss of PCA’s corporate victims when imposing today’s sentence.  The court found that Stewart Parnell and Mary Wilkerson should be held accountable for more than $100 million but less than $200 million in losses, and Michael Parnell should be held accountable for more than $20 million but less than $50 million in losses.  The court also found the government established evidence that Stewart Parnell and Mary Wilkerson should be accountable for harming more than 250 victims, and Michael Parnell should be accountable under federal sentencing guidelines for harming more than 50 victims.  The court additionally found that the Parnells should have known that their actions presented a reckless risk of death or serious bodily injury.

“At the outset, the FBI saw this case as a serious breach of the public’s trust by a corporation and its officers who were expected to comply with the various regulations that would ensure their products safe for consumption,” said Special Agent in Charge J. Britt Johnson of FBI Atlanta Field Office.  “They did not and lives were lost.  The lengthy prison sentences handed down today in federal court clearly reflects the magnitude of the criminal conduct of these corporate officers and it is hoped that these sentences can provide some solace to those victims or their families who suffered so much from that criminal conduct and waited so long for justice.”

“Americans expect and deserve the highest standards of food safety and integrity,” said Dr. Stephen Ostroff, FDA Acting Commissioner.  “Those who choose profits over the health and safety of U.S. consumers are now on notice that the FDA, working with the Department of Justice, will strive to use the full force of our justice system against them.”

Lightsey and Kilgore are scheduled to be sentenced on Thursday, Oct. 1, in Albany.

The case was prosecuted by Trial Attorneys Patrick Hearn and Mary M. Englehart of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Alan Dasher of the Middle District of Georgia.  Acting Associate Attorney General Delery, Principal Deputy Assistant Attorney General Mizer and U.S. Attorney Moore thank the investigative efforts of the FBI and FDA’s Office of Criminal Investigations.

The Department of Justice and the Environmental Protection Agency (EPA) today announced a $5.6 million settlement with Bayer CropScience LP to resolve violations of federal chemical accident prevention laws at its facility in Institute, West Virginia, where an explosion killed two people in 2008.  Under the settlement, Bayer CropScience committed to spending $4.23 million to improve emergency preparedness and response in Institute and protect the Kanawha River, pay a $975,000 penalty, and spending approximately $452,000 to implement a series of measures to improve safety at chemical storage facilities across the United States.

“Failures by a chemical manufacturer to comply with safety, accident prevention, and response requirements can have catastrophic consequences,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “The Department of Justice is committed to worker safety. Under this judicially enforceable settlement, Bayer Crop Science will not only pay a penalty but commits to significant improvements in preparedness and response capabilities at its facilities across the country.” 

“The tragic accident at the Bayer CropScience facility in West Virginia underscores the need for hazardous chemicals to be stored and handled in accordance with the law to protect worker health and the environment,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “This settlement will establish important safeguards at its facilities across the country and improve emergency response capabilities in the Institute, West Virginia community.”

Under the settlement, Bayer CropScience will implement a series of steps to prevent future chemical releases at its facilities in West Virginia, Texas, Missouri and Michigan by improving inspections to identify potential safety issues and standardize facility safety operating procedures.  At the facility in Institute, the company will conduct emergency response exercises with local responders and ensure proper certification of facility environmental management systems.  Bayer must complete the majority of these actions within three years.

The nearly $4.23 million for environmental projects will benefit the Institute community by improving mobile communications for local first responders, providing emergency response equipment and training for local fire and police departments, shelter-in-place training and hazardous waste collections at local public schools and installing equipment to prevent pollution from water used in Bayer CropScience’s manufacturing process from reaching the Kanawha River.  Local emergency responders may start receiving equipment as early as December 2015.                                                                      

The complaint details numerous problems that arose at the pesticide manufacturing facility where the company did not comply with its standard operating procedures designed to prevent accidental releases.  In 2008, a new digital control system was installed, but safety interlock associated with the control system was not properly engaged at startup.  Employees were not fully trained to understand or operate the system and failed to follow procedures for sampling, temperature control and flow safeguards.  The result was an uncontrollable buildup in a treatment unit causing a chemical reaction resulting in the explosion, fire and loss of life.  During the incident, the company delayed emergency officials trying to access the plant, and failed to provide adequate information to 911 operators.

The consent decree, lodged in the U.S. District Court for the Southern District of West Virginia, is subject to a 30-day public comment period and approval by the federal court.

For a copy of the consent decree, go to http://www.justice.gov/enrd/consent-decrees.

Adventist Health System has agreed to pay the United States $115 million to settle allegations that it violated the False Claims Act by maintaining improper compensation arrangements with referring physicians and by miscoding claims, the Justice Department announced today.  Adventist is a non-profit healthcare organization that operates hospitals and other health care facilities in 10 states. 

“Unlawful financial arrangements between heath care providers and their referral sources raise concerns about physician independence and objectivity,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Patients are entitled to be sure that the care they receive is based on their actual medical needs rather than the financial interests of their physician.”

The settlement announced today resolves allegations that Adventist submitted false claims to the Medicare and Medicaid programs for services rendered to patients referred by employed physicians who received bonuses based on a formula that improperly took into account the value of the physicians’ referrals to Adventist hospitals.  Federal law restricts the financial relationships that hospitals and clinics may have with doctors who refer patients to them.

“Adventist-owned hospitals, such as Park Ridge, allegedly paid doctors’ bonuses based on the number of test and procedures they ordered,” said Acting U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina.  “This type of financial incentive is not only prohibited by law, but can undermine patients’ medical care.  Would-be violators should take notice that my office will use the False Claims Act to prevent and pursue health care providers that threaten the integrity of our healthcare system and waste taxpayer dollars.”

“Companies that financially reward physicians in exchange for patient referrals – as the government contended in this case – undermine the physicians’ impartial medical judgment at the expense of patients and taxpayers,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) in Atlanta.  “We will continue to investigate such wasteful business arrangements.”

The settlement also resolves allegations that Adventist submitted bills to Medicare for its employed physicians’ professional services containing certain improper coding modifiers, and thereby obtained greater reimbursement for these services than entitled.

The allegations settled today arose from two lawsuits filed respectively by whistleblowers Michael Payne, Melissa Church and Gloria Pryor, who worked at Adventist’s hospital in Hendersonville, North Carolina, and Sherry Dorsey, who worked at Adventist’s corporate office, under the qui tam provisions of the False Claims Act.  The act permits private parties to file suit on behalf of the United States for false claims, and to share in any recovery.  The whistleblowers’ share of the settlement has not yet been determined. 

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $25 billion through False Claims Act cases, with more than $16 billion of that amount recovered in cases involving fraud against federal health care programs.

The cases, United States ex rel. Payne, et al. v. Adventist Health System/Sunbelt, Inc., et al. No. 12-856 (W.D.N.C), and United States ex rel. Dorsey v. Adventist Health System Sunbelt Healthcare Corp., et al., No. 13-217 (W.D.N.C), were handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Western District of North Carolina and HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability.

The United States has intervened in a lawsuit and filed a complaint against H. Ted Cain, Julie Cain, Corporate Management Inc. and Stone County Hospital Inc. for submitting false claims to the Medicare program by knowingly charging excessive and ineligible expenses from 2002 to the present.  Stone County Hospital is a critical access hospital located in rural Mississippi.  Corporate Management Inc. is a management company that provides management services to Stone County Hospital.  Ted Cain owns and controls the hospital and the management company.

Most acute care hospitals are reimbursed by Medicare under a variety of prospective payment systems, which provide a fixed payment based on a patient’s diagnosis or treatment.  However, to encourage hospital coverage in rural, underserved areas, critical access hospitals, like Stone County Hospital, are exempted from these prospective payment systems and are entitled to receive 101 percent of the actual and allowable costs of providing Medicare beneficiaries with outpatient, inpatient, laboratory, ambulance and post-acute care services.  However, Medicare requires that costs charged by critical access hospitals be reasonable and necessary.  Medicare also prohibits hospitals from charging the program for luxury items, like expensive automobiles. 

The government’s complaint alleges that Ted and Julie Cain, the hospital and the management company abused the special Medicare rules for rural hospitals.  In particular, the government contends that the Cains claimed to be serving the hospital in various management and directorship positions but in fact did little of the work for which the hospital paid them and any work they did duplicated work performed by the hospital and the management company staff, which were also paid by the hospital.  The government also contends that Ted Cain improperly claimed the expenses for his personal luxury automobiles on the hospital’s cost reports and his management company wrongfully charged to the hospital work that Cain did at his other businesses.

“The Medicare reimbursement rules for critical access hospitals are intended to ensure that Medicare beneficiaries living in rural areas receive access to the health care services they need,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will aggressively pursue providers who try to take advantage of these rules to line their own pockets.”

“In a state like ours where nearly a third of the hospitals are critical access hospitals, many of our citizens depend on this very important system, and we will protect it by ferreting out fraud where it exists,” said U.S. Attorney Gregory K. Davis of the Southern District of Mississippi. 

The government’s complaint was filed in a lawsuit initially brought under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims for government funds and to share in any recovery.  The act permits the United States to intervene and take over the lawsuit, as it has done in this case.  If a defendant is found liable under the act, the defendant is subject to trebles damages and penalties.  

The United States’ suit is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $25 billion through False Claims Act cases, with more than $16 billion of that amount recovered in cases involving fraud against federal health care programs.

The matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Southern District of Mississippi and the Department of Health and Human Services’ Office of Inspector General.  The claims asserted against Ted and Julie Cain, Corporate Management and Stone County Hospital are allegations only, and there has been no determination of liability.

The case is captioned United States ex rel. Aldridge v. Cain, et al., Case No. 3:07-CV-309 HTW-LRA (S.D. Miss.).

This week, law enforcement officials from the United States and the People’s Republic of China met in Beijing to coordinate their efforts to fight international drug trafficking.

Representatives of the two sides held two separate but related meetings to exchange law enforcement information, share their assessments of the drug problem, discuss responses in their respective countries, review progress and examine possible mechanisms for further cooperation.  In doing so, the two countries expanded their understanding of the differences in their legal systems, investigative practices and national situations.

The Bilateral Drug Intelligence Working Group, led by officials from the U.S. Drug Enforcement Administration and the Chinese Ministry of Public Security, met on Sept. 14-15, 2015.  Primarily an exchange mechanism for law enforcement information, the Bilateral Drug Intelligence Working Group conducted briefings on the major drug issues faced by each country.

The Counternarcotics Working Group, led by the Department of Justice and Chinese Ministry of Public Security, met on Sept. 16-17, 2015.  This group, which reports to the Joint Liaison Group on law enforcement cooperation, focuses on expanding mutual understanding and cooperation on drug issues.  In this meeting, among other issues, the sides discussed the legal and regulatory challenges posed by “designer drugs” – also known as new psychoactive substances – as well as potential avenues for cooperation in investigating and combating this emerging threat.

Going forward, law enforcement exchange and cooperation mechanisms such as these will facilitate more effective cooperation between the two countries in confronting their shared problem of drug trafficking and abuse. 

On September 17, 2015 INTERPOL Washington, the U.S. National Central Bureau (USNCB), held its third Congressional Open Forum in the Rayburn House Office Building. The forum was attended by many Congressional staffers as well as some INTERPOL Washington staff. These events are intended to educate staffers and members of Congress about what INTERPOL Washington is and how the agency functions. They are incredibly important for building and maintaining relationships between INTERPOL Washington and Congress as well as helping new staff to learn key facts about the agency and dispel any misconceptions that they may have.

This Congressional Open Forum was sponsored by Congressman Michael McCaul (R-TX-10), the Chairman of the House Homeland Security Committee. The Chairman opened the forum by taking time to explain how INTERPOL Washington fits into the current climate of politics and international current events and then briefly took questions from the audience. The Chairman specifically touched on the refugee crisis in the European Union and the expanding role that INTERPOL Washington could take in helping to screen any refugees who come to the United States.

The audience received an extensive INTERPOL 101 presentation and then the discussion was opened to the panel of experts who took questions from the audience. The panel included Director Shawn Bray, Deputy Director Geoff Shank, Senior Advisor to the Director Skip Sigmon, Principal Policy Advisor Wayne Salzgaber, General Counsel Kevin Smith, and Assistant Director Royce Walters. The panelists discussed the expanding Stolen and Lost Travel Document program (SLTD) and the role INTERPOL Washington plays in tracking and apprehending Foreign Terrorist Fighters.

The INTERPOL Washington Congressional Open Forum was a fantastic opportunity for all those involved and another success for the agency. The agency would like to take this opportunity to publicly thank all of those who attended the event or contributed to its success in any way.

The Department of Justice announced today that St. Galler Kantonalbank AG (SGKB) and E. Gutzwiller & Cie, Banquiers, have reached resolutions under the department’s Swiss Bank Program.  These banks will collectively pay penalties totaling more than $11 million.

“Today’s agreements signify the clear recognition by Swiss financial institutions of the need to resolve their criminal exposure in the United States in order to successfully operate in the global marketplace,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Banks reaching agreements with the department understand that they must accept full responsibility for their criminal conduct, pay appropriate penalties in accordance with the established terms of the Swiss Bank Program, and provide full, complete and timely cooperation with respect to those individuals and other entities who facilitated the concealment of U.S.-related accounts and the evasion of U.S. tax obligations.”

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 penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

St. Galler Kantonalbank AG (SGKB) has its headquarters in the Canton of St. Gallen, Switzerland.  It was founded in 1868 to provide credit services to Cantonal residents and to assist in the development of the regional economy.  By Cantonal law, the Canton of St. Gallen is SGKB’s majority shareholder, owning 54.8 percent of SGKB’s shares.

SGKB offered a variety of traditional Swiss banking services that it knew could assist, and that did in fact assist, U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS).  These services included hold mail, as well as code name or numbered account services.  These services helped U.S. clients eliminate the paper trail associated with the undeclared assets and income they held at SGKB in Switzerland.  By accepting and maintaining such accounts, SGKB assisted some U.S. taxpayers in evading their U.S. tax obligations.

SGKB agreed to open accounts for at least 58 U.S. taxpayers who had left other banks being investigated by the department without ensuring that each such account was compliant with U.S. tax law from their inception at SGKB.  SGKB also issued checks, including series of checks, in amounts of less than $10,000 that were drawn on accounts of U.S. taxpayers or structures in at least nine cases, totaling $3 million.  For example, one U.S. taxpayer made 31 wire transfers for just less than $10,000 between June 2012 and December 2012.  SGKB further processed large cash withdrawals totaling approximately $5.8 million for at least 14 U.S. taxpayers at or around the time the clients’ accounts were closed, even though SGKB knew, or had reason to know, the accounts contained undeclared assets.

Since Aug. 1, 2008, SGKB held accounts for 41 entities or structured accounts.  Eight of these accounts came to SGKB as part of the acquisition of business from Hyposwiss Privatbank AG, of which SGKB formerly was the parent company.  Of the remaining 33 entities, 18 were incorporated at or around the time their SGKB accounts were opened.  These entities were incorporated in Switzerland, Liechtenstein, St. Vincent and the Grenadines, the United States, Ireland, Panama, Haiti and Belize.

In August 2008, SGKB mandated that no new funds would be accepted from U.S. residents without a signed IRS Form W-9.  However, certain executives had full discretion and authority to make exceptions to this policy, in keeping with SGKB’s general bank policy of permitting flexibility in its directives.  One executive first requested the authority to make a specific exception because he already had agreed to accept a “pipeline” of problematic U.S.-related accounts from UBS and wanted to keep his word to his former UBS colleague.  This “pipeline” consisted of six U.S.-related accounts with approximately $9.2 million in assets under management.  This executive granted another significant exception from this policy in connection with clients of an external asset manager.  At least 72 accounts with approximately $150 million in assets under management were opened at an SGKB subsidiary between late October and December 2008 without a Form W-9 as an exception to SGKB’s policy.  The majority of these accounts were transferred from UBS.

Since Aug. 1, 2008, SGKB held a total of 626 U.S.-related accounts with approximately $303 million in assets under management.  SGKB will pay a penalty of $9.481 million.

E. Gutzwiller & Cie, Banquiers, was founded in 1886 and is headquartered in Basel, Switzerland.  This entity is affiliated with two asset managing entities in Geneva and Zurich, Gutzwiller SA Geneve and Gutzwiller AG Zurich, respectively (collectively Gutzwiller).

Of the 128 U.S.-related accounts at Gutzwiller, approximately 96 used hold mail services.  Gutzwiller also opened and maintained 11 U.S.-related accounts held by non-U.S. entities, such as a Panama foundation or a British Virgin Islands corporation, with the knowledge that a U.S. person was the true beneficial owner of assets.  With respect to some of those 11 accounts, the entity properly identified the U.S. beneficial owners of the assets for Swiss “Know Your Customer” rules, but Gutzwiller’s IRS Forms W-8BEN falsely declared that the beneficial owner of the account was not a U.S. person.  The false Forms W-8BEN thus allowed the true ownership of the accounts to be concealed. 

In addition, Gutzwiller accepted an account from a U.S. citizen and resident who presented a U.S. passport at the account opening in 1992.  At various times, the U.S. client refused to sign a Form W-9, prohibited anything relating to the account from being reported to the IRS or other U.S. governmental authority, and refused to respond to Gutzwiller’s questions about whether the account was declared to the IRS.  Although Gutzwiller did not use code names or numbers to communicate with clients, the U.S. client communicated with Gutzwiller by signing communications with an identifying number.  Beginning in 2009, Gutzwiller began to urge the U.S. client to close the account.  Over approximately the next year, the U.S. client began liquidating the account by withdrawing large amounts of cash in person in the form of U.S. dollars, Swiss francs, Euros and U.S. travelers checks.  Gutzwiller also honored the U.S. client’s requests to prepare numerous checks written in amounts below $10,000, which the U.S. client then picked up at Gutzwiller.  In late 2010, Gutzwiller declined a request to liquidate remaining funds in the account in a similar manner and informed the U.S. client that it would only close the account through a single payment in the form of a cash withdrawal, a single check or a wire transfer.  The account was closed in 2011 with a wire transfer of more than $3 million to another Swiss bank, without the U.S. client coming into compliance with U.S. tax obligations.  The U.S. client later voluntarily disclosed the account at Gutzwiller and the other Swiss bank to the IRS. 

Since Aug. 1, 2008, Gutzwiller held a total of 128 U.S.-related accounts with a high value of approximately $271 million.  Gutzwiller will pay a penalty of $1.556 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.

“The cumulative penalties the Swiss Bank Program has generated to date are extraordinary,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “However, a significant element of the program is the highly-detailed account and transactional data that has been provided to IRS specifically for law enforcement purposes.  We will continue to use this information to vigorously pursue U.S. taxpayers who may still be trying to illegally conceal offshore accounts, ensuring we are all playing by the same rules.”

Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business & International Division for their substantial assistance.  Ciraolo also thanked Kimberle E. Dodd and Kathleen E. Lyon, 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 and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Ramah Navajo Chapter v. Jewell Resolves Historic Contract Support Cost Lawsuit with Tribes

The U.S. Department of Justice and the U.S. Department of the Interior (Interior) today announced a $940 million proposed settlement with a nationwide class of Native American Tribes and tribal entities that, if approved by the federal district court, would resolve a 25-year-old legal dispute related to contract support costs for tribal agencies.  The proposed settlement would address claims that the United States contracted with tribes to run programs but did not pay the full amounts required by law.

“This landmark settlement represents another important step in the Obama Administration’s efforts to turn the page on past challenges in our government-to-government relationship with tribes,” said Interior Secretary Sally Jewell.  “Tribal self-determination and self-governance will continue to be our North Star as we navigate a new chapter in this important relationship and we are committed to fully funding contract support costs so that tribal contracting can be more successful.  Congress can and should make this happen.  Today’s announcement resolves past claims and allows money wrapped up in litigation to be used more productively.”

The proposed settlement, announced today by Interior Secretary Jewell, Assistant Secretary for Indian Affairs Kevin Washburn and Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, would address claims that the government contracted with tribes and tribal agencies to run Bureau of Indian Affairs (BIA) programs like law enforcement, forest management, fire suppression, road maintenance,  housing, federal education and other support programs, but failed to appropriate sufficient funds to pay the costs under the agreements.  Native American tribal agencies manage these programs under the Indian Self-Determination Act of 1975.

“The Department of Justice is pleased that the parties have reached an agreement to finally resolve this litigation that has spanned four administrations,” said Principal Deputy Assistant Attorney General Mizer.  “This agreement was long in the making – reached only after years of complex negotiations – and both sides can be proud of the result.”

This proposed settlement was filed yesterday in U.S. District Court in Albuquerque, New Mexico, and will require court approval.  The proposed settlement would resolve the government’s liability and avoid years of tedious contract-by-contract litigation that would require tens of thousands of hours of work by federal and tribal attorneys as well as expert auditors and accountants.

The claims arose because of a mismatch between federal self-determination laws and available appropriations.  While the federal government has signed contracts that provided for certain amounts to cover administrative costs of implementing contracts – such as workers’ compensation costs for tribal employees – Congress capped appropriated funds available to pay for these costs.  This funding gap was one of the sources of the claims, which were raised in a class action lawsuit filed in 1990.

“Time and again, we have seen that when a tribal government runs a federal program, the program is more successful and more responsive to the tribal community,” said Assistant Secretary Washburn.  “Today’s proposed settlement, together with President Obama’s request for full, mandatory funding of tribal contract support costs in the future, removes one of the significant obstacles to tribal self-determination and self-governance.  Tribes can now be confident that the federal government will pay sufficient costs to allow them to be successful in running federal programs.”

In 2012, the issue reached the Supreme Court, which ultimately agreed with the Tribes that the government was liable for the payments, regardless of whether Congress had appropriated adequate funds.  Since 2012, the United States has been negotiating with tribal entities to find a fair and efficient resolution of this dispute and to pay the money owed. 

In the president’s fiscal year 2016 budget request to Congress for the Departments of the Interior and Health and Human Services, the administration proposed a long-term solution to this persistent problem: mandatory, non-discretionary funding, beginning in fiscal year 2017, for contract support costs.

The proposed settlement marks another significant effort by the Obama Administration to address long-running litigation concerning federal policy in Indian Country, so that Tribes and the federal government can enjoy a more fruitful and constructive relationship in the future.  Since 2010, the Departments of Justice and the Interior have settled the Cobell class action lawsuit, and more than 80 similar lawsuits brought by various American Indian tribes, alleging breach of trust for federal mismanagement of their financial assets and natural resources. 

A federal jury sitting in Denver convicted a Grand Junction, Colorado, man yesterday of two counts of tax evasion, three counts of willful failure to file an individual federal income tax return and three counts of willful failure to file a corporate income tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to the evidence presented at trial, Timothy John Stubbs was the owner and president of National Rebate Fund Inc., based in Grand Junction, during 2005 through 2007.  National Rebate Fund contracted with merchants of energy-efficient and other products to provide third-party rebates to retail customers throughout the United States.  The company made more than $7 million in gross receipts between 2005 and 2007.

Stubbs earned more than $2 million in taxable income from National Rebate Fund during those same years.  In an attempt to evade his taxes, Stubbs disguised personal income that he received from the National Rebate Fund by using business accounts to pay more than $700,000 in personal expenses during 2005, 2006 and 2007.  During those years, Stubbs purchased real estate valued at more than $2.9 million in Grand Junction, Crested Butte, Colorado, and Kailua-Kona, Hawaii.  He also acquired more than $370,000 in gold and silver in 2007.  Between April 2004 and October 2007, Stubbs’ net worth increased by more than $3 million.

The evidence at trial established that Stubbs did not file his own tax returns or corporate tax returns on behalf of National Rebate Fund for 2005, 2006 and 2007, and has not filed an individual income tax return since 1992 or paid income taxes since 1993.

At sentencing, Stubbs faces a statutory maximum sentence of five years in prison and a maximum fine of $250,000 for each count of tax evasion and a statutory maximum sentence of one year in prison and a maximum fine of $100,000 for each count of failure to file an income tax return.  U.S. District Judge Christine M. Arguello of the District of Colorado set Stubbs’ sentencing for Dec. 17.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Lori A. Hendrickson and Leslie Goemaat of the Tax Division, who are prosecuting the case.  Ciraolo also thanked the U.S. Attorney’s Office of the District of Colorado for their substantial assistance.

An Ontario, Canada, man was convicted yesterday in the U.S. District Court for the Western District of New York on charges of conspiracy, making a false claim against the United States and illegally transferring stolen money in foreign commerce, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney William J. Hochul Jr. of the Western District of New York.

Kevin Cyster, 52, of Burlington, Ontario, was convicted by a federal jury after a six-day trial.  According to court documents, Cyster was a ringleader of a group of Canadian citizens who forged Internal Revenue Service (IRS) forms to falsely claim that almost $10 million in income had been withheld on their behalf by various Canadian financial institutions.  They arranged for Ronald Brekke to file the false forms electronically with the IRS.

Subsequently, Cyster and his co-conspirators used the false filings to file false federal income tax returns seeking refunds based on the fictitious withholding amounts.  Although the IRS identified some of the fraudulent returns, refunds totaling more than $3.5 million were sent to Cyster and his co-conspirators before the scope of the fraud was detected.

Cyster was charged along with Renee Jarvis, Jonathan Neufeld, Christina Starkbaum, Daveanan Sookdeo, Jose Compuesto and Timothy Johnson.  Jarvis has been convicted, Neufeld and Starkbaum are deceased, and charges are pending against Sookdeo, Compuesto and Johnson.  Brekke was convicted on federal fraud charges in the state of Washington.

Sentencing is scheduled for Jan. 4, 2016, before Chief U.S. District Judge Frank P. Geraci Jr. of the Western District of New York, who also presided over the trial of the case.  The charges carry a statutory maximum penalty of 30 years in prison and a $7 million fine.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Hochul thanked the special agents of IRS-Criminal Investigation, under the direction of Special Agent In Charge Shantelle P. Kitchen, who investigated the case, and Assistant U.S. Attorney John J. Field of the Western District of New York and Trial Attorneys Jeffrey A. McLellan and Thomas F. Koelbl of the Tax Division, who are prosecuting the case.

Kayaba Industry Co. Ltd., dba KYB Corporation (KYB) has agreed to plead guilty and to pay a $62 million criminal fine for its role in a conspiracy to fix the price of shock absorbers installed in cars and motorcycles sold to U.S. consumers. 

According to charges filed today, KYB conspired from the mid-1990s until 2012 to fix the prices of shock absorbers sold to Fuji Heavy Industries Ltd. (manufacturer of Subaru vehicles), Honda Motor Co. Ltd., Kawasaki Heavy Industries Ltd., Nissan Motor Company Ltd., Suzuki Motor Corporation and Toyota Motor Company, including their subsidiaries in the United States. 

“KYB turned the competitive process on its head by agreeing with its competitors to fix the prices of shock absorbers installed in cars and motorcycles sold in the U.S.,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Working with the FBI and our other law enforcement partners, the Antitrust Division will continue to protect American car buyers and hold automotive part suppliers accountable for their illegal conduct.”

“Any collusive agreement among competitors to restrict price competition undercuts our free enterprise system and violates the law,” said U.S. Attorney Carter M. Stewart of the Southern District of Ohio.  “We will continue to work to prosecute these fraudulent arrangements in order to protect consumers’ right to free and open competition, particularly in the auto parts industry.”

“Fixing prices and rigging bids is against the law and ultimately harms consumers by artificially inflating prices and creating a corrupt marketplace,” said Special Agent in Charge Angela L. Byers of the FBI’s Cincinnati Division.  “The FBI and our partners will continue to investigate anticompetitive practices and promote fair competition.”

According to the information filed in the U.S. District Court of the Southern District of Ohio, KYB, based in Tokyo, and its two co-conspirators agreed to allocate the supply of shock absorbers sold and determine the price submitted to the targeted vehicle manufacturers.  To keep prices up, KYB and its co-conspirators also agreed to coordinate on price adjustments requested by the vehicle manufacturers and strived to keep their conduct secret. 

Today’s charge is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s criminal enforcement sections and the FBI.  KYB has agreed to cooperate with the department’s ongoing investigation and the plea agreement is subject to court approval.  Including KYB, 37 companies and 55 executives have been charged in the division’s ongoing investigation and have agreed to pay a total of more than $2.6 billion in criminal fines.  KYB is being prosecuted by the Antitrust Division’s Chicago Office and the FBI’s Cincinnati Field Office, with assistance from the U.S. Attorney’s Office of the Southern District of Ohio.  Anyone with information on market allocation, price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Cincinnati Field Office at 513-421-4310.

Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division released the following statement today on the division’s decision to close its investigation into Expedia’s $1.3 billion acquisition of Orbitz:

“We know online travel booking is important to U.S. consumers and to the airlines, car rental companies and hotels that serve those consumers.  Over the course of a six-month investigation, lawyers and economists from the Antitrust Division reviewed tens of thousands of business documents, analyzed transactional data from the merging companies and from other industry players and interviewed over 60 industry participants of various types and sizes.

“The Antitrust Division investigated the concerns that have been expressed about this transaction.  We took those concerns seriously and factored into our analysis all of the information provided by third parties.  At the end of this process, however, we concluded that the acquisition is unlikely to harm competition and consumers.

“There are several reasons for this conclusion.  First, we uncovered no evidence in our investigation that the merger is likely to result in new charges being imposed directly on consumers for using Expedia or Orbitz.  So we focused our investigation on the commissions Expedia and Orbitz negotiate with airlines, car rental companies and hotels.    

“Second, we found that Orbitz is only a small source of bookings for most of these companies and thus has had no impact in recent years on the commissions Expedia charges.  Many independent hotel operators, for example, do not contract with Orbitz, and those hotels that do often obtain very few bookings from its site.  In addition, beyond Expedia and Orbitz, travel service providers have alternative ways to attract customers and obtain bookings, including Expedia’s largest online travel agent rival, Priceline.

“Third, the evidence suggests that the online travel business is rapidly evolving.  In the past 18 months, for example, the industry has seen the introduction of TripAdvisor’s Instant Booking service and Google’s Hotel and Flight Finder with related booking functionality.

“Looking at the facts and applying our Horizontal Merger Guidelines, we concluded that Expedia’s acquisition of Orbitz is not likely to substantially lessen competition or harm U.S. consumers.”

The Department of Justice today announced 206 awards, totaling more than $97 million, to American Indian tribes, Alaska Native villages, tribal consortia and tribal designees.  The announcement was made at the 2015 Tribal Leader Briefing, sponsored by the National Congress of American Indians and included Tribal leaders, Members of Congress and Administration officials. 

“For the past five years, the CTAS program has helped tribes develop their own comprehensive approaches to making their communities safer and healthier,” said Acting Associate Attorney General Stuart F. Delery.  “CTAS grants have funded hundreds of programs to better serve crime victims, promote community policing and strengthen justice systems.  This year’s awards also support efforts to reduce domestic and dating violence and promote wellness and healing for tribal youth, among many other programs.”

The awards are made through the department’s Coordinated Tribal Assistance Solicitation (CTAS), a single application for tribal-specific grant programs.  The department developed CTAS through its Office of Community Oriented Policing Services, Office of Justice Programs and Office on Violence Against Women and administered the first round of consolidated grants in September 2010. 

Since then, more than 1,400 grants totaling more than $620 million have been provided to enhance law enforcement practices, victim services and sustain crime prevention and intervention efforts in nine purpose areas; public safety and community policing; justice systems planning: alcohol and substance abuse; corrections and correctional alternatives; children’s justice act partnerships; services for victims of crime; violence against women; juvenile justice; and tribal youth programs.

American Indians and Alaska Natives experience disproportionate rates of violence and victimization and often encounter significant obstacles to identifying and accessing culturally relevant services.  CTAS funding helps tribes to develop and strengthen tribal justice systems’ response to crime, while significantly increasing programs and services available to them.

A listing of today’s awards is available at http://www.justice.gov/tribal/file/771691/download.  A fact sheet on CTAS is available at /media/791821/dl?inline.

Today’s announcement is part of the Justice Department’s ongoing initiative to increase engagement, coordination and action on public safety in American Indian and Alaska Native communities.  

A federal court in Miami entered an order today authorizing the Internal Revenue Service (IRS) to serve a “John Doe” summons seeking information about U.S. taxpayers who may hold offshore accounts at Belize Bank International Limited (BBIL) or Belize Bank Limited (BBL), the Justice Department announced today.  The order, which was entered by U.S. District Judge Ursula Ungaro, granted the United States’ petition for permission to seek records of BBIL’s and BBL’s correspondent accounts at Bank of America, N.A. and Citibank, N.A.  Those records will allow the IRS to identify U.S. taxpayers who hold or held interests in financial accounts at BBIL and BBL, as well as other financial institutions that used the same correspondent accounts.

“The Department and the IRS are using every tool available to identify and investigate those individuals determined to evade their U.S. tax and reporting obligations through the use of offshore financial accounts and foreign entities,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “These John Doe summonses will provide detailed information about individuals using financial institutions in Belize and, to the extent funds were transferred, other jurisdictions.  But rest assured, we are receiving information from many sources regarding hidden foreign accounts and offshore schemes.  The time to come clean is now – before we knock on your door.”

“This court action further demonstrates our relentless efforts to pursue and catch those evading taxes with hidden offshore accounts no matter where they are or what structures are used to hide behind,” said Commissioner John Koskinen of the IRS.  “This court action also reinforces the ongoing importance of the John Doe summons in international tax enforcement.”

According to the IRS declaration, BBL is incorporated and based in Belize, and directly owns BBIL.  The IRS declaration further states that Belize Corporate Services (BCS) is incorporated and based in Belize and offers corporate services including the purchase of “shelf” Belizean international business companies.  BBL, BBIL and BCS are all corporate subsidiaries of BCB Holdings Limited, according to the declaration.  The declaration describes and IRS Revenue Agent’s review of information submitted by BBL and BBIL customers who disclosed their foreign accounts through the IRS offshore voluntary disclosure programs.  The customers in the “John Doe” class may have failed to report income, evaded income taxes, or otherwise violated the internal revenue laws of the United States, according the declaration.

The IRS uses what are known as “John Doe” summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown.  The John Doe summonses approved today direct Citibank and Bank of America to produce records identifying U.S. taxpayers with accounts at Belize Bank International Limited, Belize Bank Limited, or their affiliates, including other foreign banks that used BBIL and BBL’s correspondent accounts to service U.S. clients.  The court also granted the IRS permission to seek records related to Citibank’s and Bank of America’s correspondent accounts for BCS and information related to BCS’s deposit accounts at Bank of America. 

A correspondent account is a bank account that one bank maintains for another bank.  Financial transactions involving U.S. dollars flow through U.S. banks; therefore, foreign banks that do business in U.S. dollars, but do not have an office in the United States, obtain a correspondent account in order to reach U.S. customers.  Transactions in the correspondent account leave a trail in the United States that the IRS can follow, including by using a John Doe summons.  The John Doe summons can let the IRS obtain records of money deposited, paid out through checks, and moved through the correspondent account through wire transfers.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year.  Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation.  Individuals wishing to learn more about the IRS offshore voluntary disclosure programs should visit http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program or http://www.irs.gov/Individuals/International-Taxpayers/Options-Available-For-U-S--Taxpayers-with-Undisclosed-Foreign-Financial-Assets.

The Justice Department has previously obtained similar orders from the U.S. District Court of the Southern District of New York, permitting a John Doe summons on UBS AG for records of Swiss bank Wegelin & Co.’s correspondent account at UBS and from the U.S. District Court of the Northern District of California, permitting a John Doe summons on Wells Fargo, N.A., for records of the Barbados-based Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB).

For further information about the Department of Justice’s offshore compliance initiatives, please visit: http://www.justice.gov/tax/offshore-compliance-initiative. 

A Nashville, Tennessee, resident pleaded guilty to filing a false claim with the U.S. government, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney David Rivera of the Middle District of Tennessee. 

According to court documents and statements at the plea hearing, Karen Liane Miller, 60, admitted that from in or about August 2008 until in or about July 2009, she knowingly prepared and submitted to the Internal Revenue Service (IRS) multiple false federal income tax returns on behalf of her friends, family and herself.  The returns reported false amounts of taxable income on attached Forms 1099-OID (Original Issue Discount) and Forms 1099-A that Miller created and fraudulently represented to have been issued by financial institutions.  The returns also reported identical or near-identical false amounts of federal income tax withheld from the fictitious income to generate claims for tax refunds that were significantly higher than what the taxpayers were entitled to receive.  Miller filed 48 fraudulent tax returns that falsely claimed more than $19.8 million in refunds.  The IRS issued $1,003,238 in refunds for eight of the 48 fraudulent returns.

The sentencing hearing is set for Jan. 8, 2016.  Pursuant to the plea agreement, Miller faces a potential statutory maximum sentence of five years in prison, restitution in the amount of $1,003,328 to the IRS and a fine.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rivera commended special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Alexander R. Effendi and Nathan P. Brooks of the Tax Division and Assistant U.S. Attorney Carrie Daughtrey, who are prosecuting the case.

Speaking today at the French American Foundation, Assistant Attorney General for National Security John P. Carlin called for French and European cooperation on combating nation state-sponsored theft of intellectual property, as well as destructive cyber-attacks.

Carlin highlighted the recent massive cyberattack by purported jihadis on French TV5Monde to illustrate a common purpose.  “It’s not a matter of whether a nation will fall prey to a cyber-attack, but when,” said Carlin.  He stressed the importance of global cooperation to increase the cost of hacking.  “It’s about deterrence.  Until nation states and terrorists stop stealing and committing bullying, destructive cyber-attacks, we must increase the cost.  Whether you are the Syrian Electronic Army, ISIL or a state-sponsored hacker, we can and will find you.  And when we do, there will be consequences.  Prosecution, sanctions, diplomacy and designations are just some of the many options we have.  Together, we will find the right tool, or right combination of tools, to make this activity very, very costly.”  Carlin committed to playing the long game, saying, “As international partners, we need to keep at it, keep applying that pressure.  That’s how you change behavior.  It will not happen overnight.”

Carlin has long stressed the need for global responsibility.  He told today’s attendees, including French and U.S. government officials, think tanks, private industry, academia and security and insurance professionals, “It was true when we said it in May 2014 following the PLA indictment, and it remains true today: we are aware of no nation that publicly states that theft of information for commercial gain is acceptable.  It is time for us to, once and for all, come to a common agreement about acceptable state behavior in cyberspace.”

Carlin also addressed the importance of executive involvement in cybersecurity and managing cyber risk: 

“These are C-suite decisions.  You cannot manage your corporate cyber risk if you do not understand and prioritize it.  You must make cyber defense a key component of your business strategy, and then invest in it.  Also consider cyber insurance to protect your bottom line and – most important from my vantage point – do not go it alone.  The Justice Department is here to help you when you encounter cyber threats.”

Carlin also highlighted the need for nations to apply the lessons learned in counterterrorism to emerging threats in cyberspace.  He closed his remarks by saying: 

France is one of America’s oldest and closet allies, and has long stood with us in our efforts to combat terrorism.  When nations band together to combat terrorism, as we did following the brutal attack at the offices of the Charlie Hebdo magazine, we are strong and we will win.  But that principle is not limited to terrorism – it extends to all threats to our nations’ security.  We are in this fight together, and we have to learn from one another, so that the same actors, using the same tools and signatures, cannot simply move from one country’s network to another, targeting our intellectual property and innovation or damaging our networks.  Digital security is vital to national security.

PENSACOLA, FLORIDA – Shawn P. Caldwell, 36, a registered sex offender who resides in Pensacola, Florida, was sentenced to 240 months in prison yesterday for receipt of child pornography.  The sentence was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

During an undercover operation, law enforcement officers discovered Caldwell was in possession of 76 child pornography files at his Pensacola residence.  At his plea hearing on June 24, 2015, Caldwell admitted that, between April 2011 and April 2015, he received child pornography images and videos from the internet, which he downloaded from several peer-to-peer programs.  A forensic review of Caldwell’s electronic devices revealed approximately 263 videos and more than 1,000 images of child pornography, including images of children under the age of 12.

The charges were the result of an investigation by the Federal Bureau of Investigation, the Florida Department of Law Enforcement, and the Pensacola Police Department.  The case was prosecuted by Assistant United States Attorney Jeffrey Tharp.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Officer
(850) 216-3854, [email protected]

PENSACOLA, FLORIDA – Timothy S. Faircloth, 44, a registered sex offender who resides in Pace, Florida, was sentenced to 180 months in prison yesterday for receipt of child pornography.  The sentence was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

During an online investigation, federal agents discovered that, on 40 occasions between March 8, 2014, and January 27, 2015, Faircloth received or attempted to receive child pornography images and videos.  At his plea hearing on June 17, 2015, Faircloth admitted that, between March 2014 and January 2015, he received child pornography images and videos from the internet as charged in the Indictment.  A forensic review of Faircloth’s desktop and laptop computers revealed approximately 30 child pornography images, including images of children under the age of 12.

The charges were investigated by the U.S. Immigration and Customs Enforcement Homeland Security Investigations.  The case was prosecuted by Assistant United States Attorney Jeffrey Tharp.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Office: (850) 216-3854, [email protected]

 

PENSACOLA, FLORIDA – Dr. Sheila Mohammed, 55, of Pace, Florida, was sentenced yesterday afternoon to 12 months and one day in prison for seven counts of submitting false tax returns, followed by two years of supervised release, and ordered to pay $255,158 in restitution to the Internal Revenue Service.  The sentence was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

Mohammed pled guilty on April 22, 2015, to the seven-count Indictment returned earlier this year.  During her plea, Dr. Mohammed admitted she signed and caused to be filed, false personal tax returns that grossly underreported her total income for tax years 2010 through 2013.  In addition, Dr. Mohammed admitted that, as president and owner of The Industrial Medicine Institute Inc., a medical practice in Pace, Florida, she signed and caused to be filed, false corporate tax returns for The Industrial Medicine Institute Inc., for the years 2010 through 2012.

At Mohammed’s sentencing hearing, the government showed that, between February 2010 and June 2014, Mohammed used the money she failed to disclose to the Internal Revenue Service, totaling approximately $1,166,632, to purchase vehicles and properties located in Pensacola, Pace, and Destin, Florida, and Hawaii and New Mexico.

The charges were the result of an investigation by the Internal Revenue Service – Criminal Investigation, with assistance from the Santa Rosa County Sheriff’s Office.  The case was prosecuted by Assistant United States Attorney Tiffany H. Eggers.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.   For more information about the United States Attorney’s Office, Northern

District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Officer
(850) 216-3854, [email protected]

A resident of Hammond, Louisiana, was sentenced today to serve 33 months in prison to be followed by three years of supervised release for his role in a triple-object conspiracy to defraud the United States, to commit theft of public money, and mail fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana.

Cedrick Mitchell, aka Skeet, 40, pleaded guilty on June 17 to one count of a triple-object conspiracy to defraud the United States, to commit theft of public money, and mail fraud.  U.S. District Judge Jay C. Zainey of the Eastern District of Louisiana imposed today’s sentence and set a later date to determine Mitchell’s the restitution amount that Mitchell will have to pay to the Internal Revenue Service (IRS).

According to court documents, Mitchell and his co-defendants conspired to file false federal income tax returns using stolen identities.  The conspirators used stolen names and social security numbers to prepare false tax returns that claimed tax refunds.  The refund checks were mailed to addresses in Louisiana, including to post office boxes that were opened and controlled by the conspirators.  The conspirators then falsely endorsed and cashed the checks.  Mitchell also deposited refund checks from the U.S. Treasury into a bank account under his control.

The indictment also charged Corey Lewis, aka Coco, 37; Angela Chaney, 43; Craig Lewis, 40; Brad Lewis, aka Bird, 32; Thaddeus Richardson, 49; and Martin Jackson Sr., 48, with conspiracy.  In addition, Corey Lewis, Chaney, Richardson and Jackson Sr. were charged with various counts of theft of public money.  Chaney was also charged with six counts of mail fraud and five counts of aggravated identity theft.  Corey Lewis was additionally charged with three counts of aggravated identity theft.  All of the defendants in this case have pleaded guilty to various charges and are awaiting sentencing.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Polite commended special agents of IRS-Criminal Investigation and the U.S. Postal Inspection Service, who investigated the case, and Assistant U.S. Attorneys Hayden Brockett and Dall Kammer and Trial Attorney Lauren Castaldi of the Tax Division, who are prosecuting the case.

Under a settlement with the Department of Justice and the Environmental Protection Agency (EPA), the Puerto Rico Aqueduct and Sewer Authority (PRASA) has agreed to make major upgrades, improve inspections and cleaning of existing facilities within the Puerto Nuevo system and continue improvements to its systems island-wide.  The Puerto Nuevo sewer system serves the municipalities of San Juan, Trujillo Alto, and portions of Bayamón, Guaynabo and Carolina.  The settlement updates and expands upon legal settlement agreements reached with PRASA in 2004, 2006 and 2010.  The improvements will supplement projects already being implemented under the previous settlements and PRASA’s Capital Improvement Program, which includes construction of necessary infrastructure at wastewater treatment plants and sludge treatment systems, as well as the Puerto Nuevo collection system.  Under this agreement, PRASA will prioritize island-wide capital improvement projects and take into consideration the effect of each requirement on population served.  In recognition of the financial conditions in Puerto Rico, the U.S. government waived the payment of civil penalties associated with violations alleged in the complaint filed today.

“These upgrades are urgently needed to reduce the public’s exposure to serious health risks posed by untreated sewage,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “The United States has taken Puerto Rico’s financial hardship into account by prioritizing the most critical projects first, and allowing a phased in approach in other areas, but let me be clear that these requirements are necessary for the long-term health and safety of San Juan area residents.”

“This agreement will reduce the massive amount of untreated sewage and other pollutants that harm major waterways in the San Juan area, improving water quality and public health conditions for thousands of people,” said Regional Administrator Judith A. Enck for EPA.

PRASA’s violations include releases of untreated sewage and other pollutants into waterways in the San Juan area including the San Juan Bay, Condado Lagoon, Martín Peña Canal and the Atlantic Ocean.  These releases have been in violation of PRASA’s National Pollutant Discharge Elimination System (NPDES) permits and the Clean Water Act.  PRASA also violated its NPDES permit by failing to report discharges in the Puerto Nuevo collection system and by failing to meet effluent limitations and operations and maintenance obligations at numerous facilities island-wide.

Under the agreement, PRASA will spend approximately $1.5 billion to make necessary improvements.  PRASA will undertake a comprehensive operation and maintenance program in the Puerto Nuevo sanitary sewer system, including conducting a comprehensive analysis of the system to determine whether subsequent investments must be made to ensure the system is brought into legal compliance and to conduct immediate repairs at specific areas of concern.

PRASA has also agreed to invest $120 million to construct sanitary sewers that will serve communities surrounding the Martín Peña Canal, a project that will benefit approximately 20,000 people.  For decades, the Martín Peña communities have struggled with poverty and environmental degradation.  This project, which will begin after other infrastructure improvements near the canal are completed, will greatly reduce the amount of untreated sewage and other contaminants entering the canal.

The terms and conditions of the settlement announced today will update, replace and supersede the three existing consent decrees between the United States and PRASA.  In recognition of PRASA’s financial challenges, many of the provisions of the agreement have been tailored to focus on the most critical problems first, giving more time to address the less critical problems over time.  Additionally, certain projects required under the 2006 and 2010 agreements were found to no longer be necessary, as the population has declined and they have been eliminated under this agreement.

The settlement, lodged today in the U.S. District Court of Puerto Rico, is subject to a 30-day public comment period and approval by the federal court. The settlement will be available for viewing at www.justice.gov/enrd/Consent_Decrees.html

North Broward Hospital District, a special taxing district of the state of Florida that operates hospitals and other health care facilities in the Broward County, Florida, area, has agreed to pay the United States $69.5 million to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with referring physicians, the Justice Department announced today.

“The Department of Justice has long-standing concerns about improper financial relationships between health care providers and their referral sources, because those relationships can alter a physician’s judgment about the patient’s true health care needs and drive up health care costs for everybody,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”

“Our citizens deserve medical treatment uncorrupted by excessive salaries paid to physicians as a reward for the referral of business rather than the provision of the highest quality healthcare,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.  “This office will be steadfast in continuing to devote all necessary resources to ensure that anyone rendering medical care does so for the sole benefit of the patient and in compliance with the law.”

“Improper financial rewards  given to physicians in exchange for patient referrals corrupts medical decision making and inflates health care costs,” said Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG).  “Our agency will continue to root out such behavior from our health care system.”

The settlement announced today resolved allegations that the hospital district provided compensation to nine employed physicians that exceeded the fair market value of their services.  The United States contended that these agreements violated the Stark Statute and the False Claims Act.  The Stark Statute restricts the financial relationships that hospitals may have with doctors who refer patients to them.

The allegations settled today arose from a lawsuit filed by a whistleblower, Dr. Michael Reilly, under the qui tam provisions of the False Claims Act.  Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  Dr. Reilly will receive $12,045,655.51 from the recovery announced today.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $25 billion through False Claims Act cases, with more than $16 billion of that amount recovered in cases involving fraud against federal health care programs.

The case, United States ex rel. Reilly v. North Broward Hospital District, et al., Case No. 10-60590 (S.D. Fla.), was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Southern District of Florida and the HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability.

TALLAHASSEE, FLORIDA – A federal grand jury returned an indictment charging Michael Daniel Rubens, 30, formerly of Tallahassee, with seven counts of cyberstalking, five counts of unauthorized access to a protected computer, and one count of aggravated identity theft.  Rubens was arraigned yesterday in the U.S. District Court in Tallahassee.  The indictment was announced by Christopher P. Canova, Acting United States Attorney for the Northern District of Florida.

The 13-count indictment alleges that, between January 2012 and January 2015, in the Northern District of Florida, Rubens used interactive computer services, such as social media accounts, to engage in conduct causing emotional distress to multiple women.  Rubens is also charged with hacking into various online accounts of multiple women to obtain information about them.  The trial is scheduled for November 16, 2015.

This case resulted from investigations by the United States Immigration and Customs Enforcement Homeland Security Investigations, the Florida State University Police Department, and the Leon County Sheriff’s Office.  It is being prosecuted by Assistant United States Attorney Jason S. Beaton.

An indictment is merely an allegation by a grand jury that a defendant has committed a violation of federal criminal law and is not evidence of guilt.  All defendants are presumed innocent and entitled to a fair trial, during which it will be the government’s burden to prove guilt beyond a reasonable doubt at trial.

The United States Attorney's Office for the Northern District of Florida is one of 94 offices that serve as the nation’s principal litigators under the direction of the Attorney General.  The office strives to protect and serve the citizens of the Northern District of Florida through the ethical, vigorous, and impartial enforcement of the laws of the United States, to defend the national security, to improve the safety and quality of life in our communities through the protection of civil rights, and to protect the public funds and financial assets of the United States.  To access public court documents online, please visit the U.S. District Court for the Northern District of Florida website.  For more information about the United States Attorney’s Office, Northern District of Florida, visit http://www.justice.gov/usao/fln/index.html.

For more information, contact: Amy Alexander, Public Information Officer
(850) 216-3854, [email protected]

The Department of Justice announced today that Bank La Roche & Co AG has reached a resolution under the department’s Swiss Bank Program.

“Today’s agreement is yet another example of a foreign financial institution coming forward, acknowledging its criminal conduct, taking the necessary steps to resolve its criminal exposure, cooperating with the department’s ongoing investigations and paying appropriate penalties,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “The continued success of the program is evident from the 35 agreements signed to date, and the treasure trove of information provided regarding U.S. accountholders, the foreign and domestic facilitators who assisted in the concealment of U.S- related accounts and the various entities and institutions that played critical roles in these schemes.”

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, La Roche 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 penalties in return for the department’s agreement not to prosecute this bank for tax-related criminal offenses.

La Roche was founded in 1787 and is based in Basel, Switzerland, with offices in Olten and Bern, Switzerland.  In 2011, La Roche closed a Hong Kong asset management subsidiary that opened in 2008.  On Feb. 13, 2015, La Roche sold its business to Notenstein Privatbank AG.  Most of La Roche’s employees and the clients of La Roche, with the exception of U.S. taxpayers and a few other clients, will be transferred to Notenstein Privatbank AG.  The transaction is expected to close in October 2015.  Thereafter, La Roche intends to wind down its remaining business and relinquish its banking license.

La Roche assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the Internal Revenue Service (IRS).  La Roche used a variety of means to assist some U.S. clients in concealing the assets and income the clients held in their La Roche undeclared accounts, including by:

• providing numbered accounts for 70 U.S. taxpayers;

• holding bank statements and other mail relating to 66 U.S.-related numbered accounts, as well as 20 named accounts of U.S. taxpayers domiciled in the United States;

• allowing substantial cash and precious metal withdrawals in connection with the closures of 27 U.S. taxpayers’ accounts for a total amount of $11.6 million;

• maintaining records in which certain U.S. taxpayers expressly instructed La Roche not to disclose their names to the IRS;

• providing travel cash cards to five U.S. taxpayers upon their request; and

• opening an account in June 2010 for a U.S. taxpayer who left UBS and who transferred $126,000 from UBS to the La Roche account.

In 51 instances, La Roche maintained accounts for U.S. taxpayers as beneficial owners of accounts held by non-U.S. corporations, foundations or other entities, some of which were sham entities, that concealed the beneficial ownership of the U.S. taxpayers.  These entities included Liechtenstein foundations, two of which were established or administered by a Liechtenstein trust company, whose manager and director had a long-standing personal relationship with La Roche.

Due in part to the assistance of La Roche and its personnel, and with the knowledge that Swiss banking secrecy laws would prevent La Roche from disclosing their identities to the IRS, some U.S. clients of La Roche filed false and fraudulent U.S. Individual Income Tax Returns (IRS Forms 1040), which failed to report their interests in their undeclared accounts and the related income.  Some of La Roche’s U.S. clients also failed to file and otherwise report their undeclared accounts on Reports of Foreign Bank and Financial Accounts (FBARs).

As part of its participation in the Swiss Bank Program, La Roche provided information concerning 10 U.S. client accounts held at La Roche in Switzerland since August 2008 sufficient to make treaty requests to the Swiss competent authority for U.S. client account records.  It also provided a list of the names and functions of individuals who structured, operated or supervised the cross-border business at La Roche.

Since Aug. 1, 2008, La Roche maintained 201 U.S.-related accounts with a maximum aggregate value of approximately $193.9 million.  136 of these accounts were beneficially owned by U.S. clients domiciled in the United States, 36 of which were maintained in the names of entities.  La Roche will pay a penalty of $9.296 million.

In accordance with the terms of the Swiss Bank Program, La Roche 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 La Roche 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 La Roche must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“With each agreement signed under the Swiss Bank Program, we gather more specific information about the schemes used to hide assets overseas,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “The sheer magnitude of information collected as a result of these agreements will be used to pursue tax evaders around the world and will have profound ramifications in developing innovative international tax compliance strategies in the future.”

Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business & International Division for their substantial assistance.  Ciraolo also thanked Karen M. Quesnel, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

A former FBI special agent was sentenced today to serve five years in prison, to be served consecutively with a 10 year federal sentence imposed on him previously in the District of Utah, for accepting and soliciting bribes in exchange for providing internal law enforcement documents and other confidential information about a prominent citizen of Bangladesh for use by a political rival. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Inspector General Michael E. Horowitz of the Department of Justice made the announcement.

Robert Lustyik, 53, of Westchester County, New York, pleaded guilty on Dec. 23, 2014, to all five counts in the indictment against him, including conspiracy to engage in a bribery scheme, soliciting bribes by a public official, conspiracy to defraud the citizens of the United States and the FBI, theft of government property and unauthorized disclosure of a Suspicious Activity Report.  Lustyik separately was sentenced on March 30, 2015, in the District of Utah to 10 years imprisonment for soliciting and accepting bribes in exchange for taking official actions in his capacity as an FBI special agent.

Lustyik was an FBI special agent who worked on the counterintelligence squad in the White Plains Resident Agency.  Johannes Thaler was Lustyik’s friend and Rizve Ahmed, aka Caesar, was an acquaintance of Thaler.  According to court records, from September 2011 through March 2012, Lustyik, Thaler and Ahmed engaged in a scheme in which Lustyik and Thaler solicited bribe payments from Ahmed in exchange for Lustyik’s agreement to provide confidential documents and information pertaining to a prominent citizen of Bangladesh whom Ahmed perceived to be a political rival, and whom Ahmed sought to locate and harm.  Lustyik had access to the confidential documents and information through his position as an FBI special agent.       

As part of the scheme, Lustyik and Thaler exchanged text messages, including messages about how to pressure Ahmed to pay them additional money in exchange for confidential information.  For example, in late December 2011 and early January 2012, Lustyik texted Thaler, “we need to push [Ahmed] for this meeting and get that 40 gs quick . . . . I will talk us into getting the cash . . . . I will work my magic . . . . We r sooooooo close.”  Thaler responded, “I know.  It’s all right there in front of us.  Pretty soon we’ll be having lunch in our oceanfront restaurant . . . .” 

Thaler and Ahmed previously pleaded guilty to bribery and conspiracy to commit fraud and were sentenced on March 5, 2015, to serve 30 months and 42 months in prison, respectively. 

The case was investigated by the Department of Justice’s Office of the Inspector General, and prosecuted by Trial Attorney Emily Rae Woods of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Benjamin Allee of the Southern District of New York.

PAE Government Services Inc. (PAE) and RM Asia (HK) Limited (RM Asia) have agreed to pay the United States $1.45 million to resolve allegations that they engaged in a bid-rigging scheme that resulted in false claims for payment under a U.S. Army contract for services in Afghanistan, the Justice Department announced today.  PAE, headquartered in Arlington, Virginia, provides integrated global mission services.  RM Asia, located in Hong Kong, provides motor vehicle parts and supplies.

“Our national security and those of our allies depend on quality goods and services delivered at a fair price,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government do not engage in bidrigging or other anticompetitive conduct.”

In 2007, the Army awarded PAE a contract to provide vehicle maintenance capabilities and training services for the Afghanistan National Army at multiple sites across Afghanistan.  PAE partnered with RM Asia to supply and warehouse vehicle parts.  The government alleged that former managers of PAE and RM Asia funneled subcontracts paid for by the government to companies owned by the former managers and their relatives by using confidential bid information to ensure that their companies would beat out other, honest competitors.   

In a related criminal investigation, the U.S. Attorney’s Office of the Eastern District of Virginia previously obtained guilty pleas from former PAE program manager Keith Johnson; Johnson’s wife, Angela Gregory Johnson; and RM Asia’s former project manager, John Eisner, and deputy project manager, Jerry Kieffer, for their roles in the scheme.

“This resolution, following criminal charges that were also brought against the individuals involved, represents the government’s efforts to use all of the criminal and civil tools available to the government to remedy fraudulent conduct,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

The allegations resolved by this settlement arose from a lawsuit filed by Steven D. Walker, a former employee of PAE, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and share in the recovery.  Mr. Walker will receive $261,000.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia, the Defense Criminal Investigative Service, the U.S. Department of the Army Criminal Investigation Command-Major Procurement Fraud Unit and the Defense Contract Audit Agency.

The lawsuit is captioned United States ex rel. Walker v. PAE, et al., 1:11CV382-LO/TCB (E.D. Va.).  The claims resolved by the settlement are allegations only; there has been no determination of liability. 

A Houston psychiatrist was convicted late yesterday by a federal jury of participating in a $158 million Medicare fraud scheme involving false claims for mental health treatment.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office, Special Agent in Charge C.J. Porter U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) Dallas Region, the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU) and Special Agent in Charge D. Richard Goss of the Internal Revenue Service-Criminal Investigation Division (IRS-CI) Houston Field Office made the announcement.

Sharon Iglehart, 58, of Harris County, Texas, was convicted of one count of conspiracy to commit health care fraud, one count of health care fraud and three counts of making false statements relating to health care matters, following a seven-day jury trial before U.S. District Judge Ewing Werlein Jr. of the Southern District of Texas.  Iglehart is scheduled to be sentenced on Dec. 5, 2015.

According to evidence presented at trial, from 2006 until June 2012, Iglehart and others engaged in a scheme to defraud Medicare by submitting, through Riverside General Hospital (Riverside), approximately $158 million in false and fraudulent claims for partial hospitalization program (PHP) services to Medicare.  A PHP is a form of intensive outpatient treatment for severe mental illness.

The evidence presented at trial showed that the Medicare beneficiaries for whom Riverside billed Medicare did not receive PHP services.  In fact, according to evidence presented at trial, most of the Medicare beneficiaries for whom Riverside billed Medicare rarely saw a psychiatrist and did not receive intensive psychiatric treatment.

In addition, evidence presented at trial showed that Iglehart personally billed Medicare for individual psychotherapy and other treatment to patients at Riverside locations – treatment that she never provided.  The evidence at trial also demonstrated that Iglehart falsified the medical records of patients at Riverside’s inpatient facility to make it appear as if she provided psychiatric treatment when, in fact, she did not.

To date, 12 others previously have been convicted of offenses based on their roles in the fraudulent scheme.  Earnest Gibson III, the former president of Riverside; Earnest Gibson IV, the operator of one of Riverside’s PHP satellite locations; Regina Askew, a group home owner and patient file auditor; and Robert Crane, a patient recruiter, were all convicted after a jury trial in October 2014.  Earnest Gibson III was sentenced to 45 years in prison.  Earnest Gibson IV was sentenced to 20 years in prison.  Regina Askew was sentenced to 12 years in prison.  Robert Crane has not yet been sentenced.  Mohammad Khan, an assistant administrator at the hospital, who managed many of the hospital’s PHPs, pleaded guilty and was sentenced to 40 years in prison.  William Bullock, an operator of a Riverside satellite location, as well as Leslie Clark, Robert Ferguson, Waddie McDuffie and Sharonda Holmes, who were all involved in paying or receiving kickbacks, also pleaded guilty.  Bullock, Clark and Ferguson await sentencing.

The case was investigated by the FBI, HHS-OIG, Texas MFCU, and IRS-CI with assistance from the Railroad Retirement Board-Office of Inspector General (RRB-OIG) Chicago Field Office and the Office of Personnel Management-Office of Inspector General, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.  The case is being prosecuted by Assistant Chief Laura M.K. Cordova and Trial Attorney Ashlee C. McFarlane of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 2,300 defendants who have collectively billed the Medicare program for more than $7 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to www.stopmedicarefraud.gov.

A former business manager of the Local 657 of the Laborers International Union of North America (LIUNA) was charged with stealing from the organization. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Director in Charge Paul M. Abbate of the FBI’s Washington, D.C., Field Office, Special Agent in Charge Steven D. Anderson of the Department of Labor Office of Inspector General’s Office of Labor Racketeering and Fraud Investigations Washington, D.C., Regional Office and District Director Mark Wheeler of the Department of Labor’s Office of Labor Management Standards Washington, D.C., District Office made the announcement.

Anthony Wendel Frederick Sr., 49, of Upper Marlboro, Maryland, the former Business Manager of Local 657 of LIUNA based in Washington, D.C., was charged by criminal complaint with one count of theft from a labor organization.  The defendant was arrested today and is scheduled to have his initial appearance at 1:45 p.m. EDT before U.S. Magistrate Judge G. Michael Harvey of the District of Columbia.

LIUNA is a labor organization that represents laborers in the construction industry.  LIUNA’s Local 657 represents construction laborers in Washington, D.C. and five adjacent counties.  For approximately 10 years, until June 2014, Frederick served as the business manager for Local 657.

The criminal complaint alleges that, from May 2013 to June 2014, Frederick directed more than $1.7 million in Local 657 funds to STS Contracting of Greenbelt, Maryland, without the knowledge or authorization of the Local 657 Executive Board or officials in LIUNA International.  Specifically, according to the criminal complaint, a routine audit of the local union by LIUNA in June 2014 revealed that Frederick had paid nearly $1.1 million to STS Contracting for minimal renovations at the Local 657 administrative building.  In addition, the complaint alleges that, without authorization, Frederick directed over $580,000 in Local 657 funds to STS Contracting for expediting permits for the construction of a new training center for Local 657, which project was being handled by another construction firm.  According to the criminal complaint, the LIUNA auditor also discovered that Frederick grossly overpaid STS Contracting for expediting various permits, including $20,000 to expedite a $143 excavation permit, and over $20,000 to renew existing permits, which could have been accomplished online for approximately $250 apiece.

The criminal complaint further alleges that STS Contracting paid a down payment of $225,000 on a home purchased by Frederick, and directed more than $600,000 to a corporation owned in part by Frederick’s wife.  In addition, STS Contracting principals allegedly depleted a company bank account, which contained only stolen Local 657 funds, by withdrawing more than $500,000 in cash and using the remainder for personal items, entertainment, shopping trips, hotel stays and overseas travel.

The charges and allegations contained in a criminal complaint are merely accusations.  The defendant is presumed innocent until and unless proven guilty.

The case is being investigated by the FBI and the Department of Labor.  The case is being prosecuted by Trial Attorney Vincent Falvo of the Criminal Division’s Organized Crime and Gang Section.

Frederick Criminal Complaint

The Department of Justice has filed an amicus curiae brief in the Supreme Court of Pennsylvania in Adam Kuren, et al. v. Luzerne County, et al.  The class action asserts that the public defense system in Luzerne County, Pennsylvania, is so underfunded and poorly staffed that the attorneys appointed to represent indigent adults accused of committing criminal acts are attorneys in name only.  The department’s brief focuses solely on the question of whether indigent defendants can bring a civil claim alleging a constructive denial of counsel under the Sixth Amendment to the United States Constitution.  This brief represents the department’s first filing to address constructive denial of counsel in a state’s highest court.

“For too many public defenders, crushing caseloads and scarce resources make it impossible to adequately represent clients who need and deserve assistance in legal matters,” said Attorney General Loretta E. Lynch.  “The Constitution of the United States guarantees adequate counsel for indigent defendants, and the Department of Justice is committed to ensuring that right is met.”

“This brief recognizes the importance of the right to counsel as fundamental to a fair criminal justice process,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “The Civil Rights Division will continue to ensure that this essential right is protected.”

“Public defenders around the country are being asked to do essential, even heroic work, with a fraction of the resources they need,” said Director Lisa Foster of the Office for Access to Justice.  “When defenders are unable to do their jobs, their clients are stripped of a critical constitutional right, and our justice system is diminished.”

In Kuren, the plaintiffs allege that their Sixth Amendment right to counsel has been violated by the failure of the county to provide adequate resources to the Luzerne County Office of the Public Defender (OPD).  According to the plaintiffs, due to the overwhelming volume of work, OPD lawyers are unable to engage in many of the basic functions of representation, including conferring with clients in a meaningful way prior to critical stages of their legal proceedings, reviewing client files, conducting discovery, engaging in motion practice, conducting factual investigations or devoting the time necessary to prepare for hearings, trials and appeals.  The plaintiffs claim that the conditions are systemic and so egregious that although a lawyer may technically be appointed to represent them, they will be constructively denied their right to counsel.

In its amicus brief, the department asserts that, “the Sixth Amendment right to counsel requires more than the mere appointment of a member of the bar.”  Additionally, the amicus brief goes on to explain that the right of indigent criminal defendants to an attorney may be violated by the government’s “actual denial of counsel or by a constructive denial of counsel.”  A civil action to remedy such violations is viable when traditional markers of representation such as “timely and confidential consultation with clients, appropriate investigation, and meaningful adversarial testing of the prosecution’s case” are systemically absent or compromised and when substantial structural limitations “such as a severe lack of resources, unreasonably high workloads, or critical understaffing of public defender offices” result in such absence or limited representation.

Both the trial court and the Pennsylvania Commonwealth Court ruled that the plaintiffs could not bring a civil claim for constructive denial of counsel.  The Pennsylvania Supreme Court will now consider whether the plaintiffs’ claim can proceed. 

Combined Total of $79 Million through Partnership with New York County DA’s Office

Vice President Joe Biden and Attorney General Loretta E. Lynch today announced $41 million in grant awards to 20 jurisdictions to eliminate or reduce the number of untested sexual assault kits across the country.  Today’s announcement is being announced as part of an unprecedented partnership with the New York County District Attorney’s Office (DANY) – whose own grant program is contributing $38 million to the cause for a total of $79 million to eliminate the backlog reaching 43 jurisdictions in 27 states across the country.

“Rape kits are an essential tool in modern crime fighting — not only for the victim, but, for the entire community. Studies show we solve up to 50 percent of previously unsolved rapes when these kits are tested. When we solve these cases, we get rapists off the streets. For most survivors, seeing their rapists brought to justice, and knowing that they will not return, brings peace of mind and a sense of closure. The grants we’re announcing today to reduce the national rape kit backlog will bring that sense of closure and safety to victims while improving community safety,” Vice President Biden said.

“The groundbreaking initiative we are announcing today is part of the Justice Department’s longstanding efforts to support survivors of sexual violence and to bring abusers to justice,” said Attorney General Loretta Lynch. "For anyone who has felt isolated and afraid, for anyone that has lost faith or lost hope as a result of a sexual crime, this is our pledge to you: we will not forget you.  We will not abandon you."

The National Sexual Assault Kit Initiative, a competitive grant program administered by the Justice Department’s Bureau of Justice Assistance (BJA), supports the comprehensive reform of jurisdictions’ approaches to evidence found in sexual assault kits that have never been submitted to a crime laboratory for testing. BJA created the initiative in consultation with the National Institute of Justice (NIJ), Office for Victims of Crime, (OVC), and Office on Violence Against Women (OVW).  The goals of the initiative are to create a coordinated community response that ensures just resolution to these cases whenever possible through a victim-centered approach, as well as to build jurisdictions’ capacity to prevent conditions that lead to high numbers of untested kits. The funding awarded through DANY’s program will pay directly for testing kits, and the combined effort between BJA and DANY is projected to achieve testing of approximately 70,000 sexual assault kits. BJA and DANY partnered to reach as many jurisdictions as possible and also to identify jurisdictions where funding could be combined to adequately address kit backlogs.

The initiative is part of the Justice Department’s larger ongoing effort to comprehensively address the problem of sexual assault and to support victims.  For example, NIJ maintains a webpage on Sexual Assault Investigations, Sexual Assault Kits: Using Science to Find Solutions, which provides information ranging from improving forensic sexual assault examinations to research findings on untested evidence in sexual assault cases.  OVC provides a Sexual Assault Response Team Toolkit, which has over 1.4 million views to date and includes a checklist of recommendations for victim-centered policies and practices in developing a sexual assault response. OVW updated the National Protocol for Sexual Assault Medical Forensic Examinations and released a companion document on Recommendations for Administrators of Prisons, Jails, and Community Confinement Facilities for Adapting the U.S. Department of Justice's National Protocol for Sexual Assault Medical Forensic Examinations, Adults/Adolescents.

Since 2008, the National Institute of Justice (NIJ) has provided more than $825 million for DNA analysis in crime laboratories and for activities such as research dedicated to strengthening the accuracy and reliability of forensic science.

A complete listing of today’s federal award recipients can be found at www.bja.gov/SAKI

A complete listing of the Manhattan District Attorney’s Initiative awards can be found here.

 

The Department of Justice announced today that Valiant Bank AG has reached a resolution under the department’s Swiss Bank Program.

“Offshore enforcement remains a top priority of the department, and banks seeking to avoid prosecution pursuant to the terms of the Swiss Bank Program continue to accept responsibility, provide a detailed account of the ways in which they have assisted U.S. individuals in willfully evading their U.S. tax obligations and fully cooperate with our ongoing investigations that are stretching around the globe,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Those engaged in this criminal conduct who choose not to come forward, or come forward but offer only limited cooperation, picking and choosing the facts disclosed and attempting to minimize culpability, will quickly learn that the department is committed to aggressively investigating and prosecuting these offenses, and holding both individuals and entities accountable.”

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, Valiant 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 penalties in return for the department’s agreement not to prosecute this bank for tax-related criminal offenses.

Valiant traces its origins to 1824 and is headquartered in Bern, the capital of Switzerland.  Today, Valiant is the successor of 40 banks.

Valiant offered hold mail services and numbered accounts to its U.S. clients, including some U.S. clients who had not provided Valiant with an Internal Revenue Service (IRS) Form W-9.  Valiant also accepted funds from 19 UBS accountholders who exited UBS.  Eleven of these 19 U.S. persons provided a signed Form W-9.  The remaining eight U.S. persons who did not were later forced to close their Valiant accounts.

For 26 accountholders who refused to sign a Form W-9, Valiant cashed out or converted into gold hundreds of thousands (and even millions) of dollars in account balances.  In late November 2011, one accountholder withdrew more than one million Swiss francs in various currencies and 114,000 Swiss francs in gold coins, gold bars and precious metal.  Another accountholder withdrew $2 million in cash and wired 400,000 Swiss francs to a U.S. bank.  In both instances, the accountholders refused to sign a Form W-9.  Other accountholders withdrew only amounts under $10,000 either by U.S. dollar cash withdrawals or by check or wire transfer to the United States, or transferred large sums to non-U.S. institutions.  For example, one accountholder transferred over 435,000 euros to France and $350,000 to Luxembourg.  Two other accountholders each transferred 75,000 Swiss francs to Dubai and closed their accounts with cash withdrawals of over 300,000 Swiss francs.

In 2009, an accountholder refused to sign a Form W-9 and requested that Valiant ignore the accountholder’s U.S. status.  The accountholder’s non-U.S. spouse later opened a separate account at Valiant, and the accountholder transferred more than $1 million into that account.  According to an “Agreement of Donation” between the accountholder and the accountholder’s non-U.S. spouse, the purpose of the transfer was “to make a donation” and “without any consideration.”  The agreement provided that the donation was “irrevocable.”  The non-U.S. spouse then transferred the funds to UBS and instructed Valiant to close the account.

Some U.S.-related accounts at Valiant were held in the name of non-U.S. entities with one or more U.S. beneficial owners.  In one case, a British Virgin Islands entity opened an account at Valiant through a third-party Swiss entity assigned to manage the account.  The entity holding the account designated four U.S. persons as beneficial owners, but signed a Valiant form declaring that the account was for the benefit of non-U.S. persons. 

Since Aug. 1, 2008, Valiant had 330 U.S.-related accounts, out of a total of 600,000 accounts.  The maximum aggregate dollar value of the U.S.-related accounts was $147.4 million.  Valiant will pay a penalty of $3.304 million.

In accordance with the terms of the Swiss Bank Program, Valiant 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 Valiant 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 Valiant 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 Valiant Bank AG marks another significant milestone in DOJ’s Swiss Bank Program,” said Acting Deputy Commissioner David Horton of the IRS Large Business & International Division.  “These settlements ensure that U.S. taxpayers report their foreign accounts and pay their taxes on the income earned on those accounts.  They also provide additional information that supports our efforts to fight offshore tax evasion and those who may be aiding this unlawful behavior.”

“Today is another example of the success of the Swiss Bank Program and our partnership with the Department of Justice,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “We are proud of our joint efforts and the resulting success of the program to date.  Each of these agreements is a recognition of that collaboration leading to increased international tax compliance.  With each new partnership, we gain a wealth of information and assistance to put an end to the abusive practice of illegally concealing offshore accounts.”

Acting Assistant Attorney General Ciraolo thanked the IRS, and in particular, IRS-CI and the IRS Large Business & International Division for their substantial assistance.  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 and Senior Litigation Counsel Nanette L. Davis of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

The Department of Justice and the Environmental Protection Agency (EPA) today announced a settlement with Duke Energy Corporation to resolve Clean Air Act violations at five coal-fired power plants across North Carolina.  The settlement resolves long-standing claims that Duke violated the federal Clean Air Act by unlawfully modifying 13 coal-fired electricity generating units located at the Allen, Buck, Cliffside, Dan River and Riverbend plants, without obtaining air permits and installing and operating the required air pollution control technologies.

Duke recently shut down 11 of the 13 units and under today's settlement those shutdowns also become a permanent and enforceable obligation under the consent decree.  At the remaining two units, Duke must continuously operate pollution controls and meet interim emission limits before permanently retiring them.  In addition, the settlement requires that Duke retire another unit at the Allen plant, spend a total of $4.4 million on environmental mitigation projects and pay a civil penalty of $975,000.  The United States is joined in the settlement by co-plaintiffs Environmental Defense, the North Carolina Sierra Club and Environment North Carolina.

EPA estimates that the settlement will reduce emissions by approximately 2,300 tons per year from the three Allen units, as compared to recent emission levels.  With these additional retirements, total emissions from all 13 allegedly modified units – which were in excess of 51,000 tons in 2000 when the suit was filed – will be zero.

“The settlement announced today marks another milestone in our ongoing efforts to enforce the Clean Air Act and reduce air pollution from coal-fired power plants,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “This settlement is a just and fair resolution to this long-running enforcement action in which we alleged that Duke modified these plants in ways that significantly increased their annual emissions.  It is good news for the environment and public health in North Carolina.”

“This settlement brings five more power plants into compliance under EPA’s national initiative to cut pollution from the country’s largest sources,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance.  “After many years, we’ve secured a strong resolution, one that will help reduce asthma attacks and other serious illnesses for the people of North Carolina.”

The United States initially sued Duke in 2000 and trial was set to begin in October 2015 following years of pre-trial litigation, including a landmark 2007 Supreme Court decision agreeing with EPA’s interpretation of Clean Air Act regulations covering modifications that increase the annual amount of pollution from a plant.  Under the settlement, Duke must continuously operate existing equipment to control sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions at two electricity-generating units at the Allen facility in Belmont, North Carolina, and meet enforceable emission limits, prior to permanently retiring both units in 2024.  In addition, to help mitigate the harm from the alleged violations, the settlement also requires Duke to retire an additional unit at the Allen plant by 2024.

The settlement also requires Duke to spend at least $4.4 million to fund several environmental mitigation projects.  These projects include restoring native wildlife and plants on National Park Service and Forest Service lands in North Carolina, a program to help North Carolina residents replace higher polluting wood stoves and fireplaces with cleaner burning alternatives and a program to increase the use of clean energy and energy efficiency measures in economically distressed communities.  Other projects may include efforts towards increasing truck stop electrification and electric vehicle charging stations in North Carolina.

SO2 and NOx, two predominant pollutants emitted from power plants, have numerous adverse effects on human health and are significant contributors to acid rain, smog and haze.  These pollutants are converted in the air to particulate matter that can cause severe respiratory and cardiovascular impacts and premature death.

This settlement is part of EPA’s national enforcement initiative to control harmful emissions from large sources of pollution, which includes coal-fired power plants, under the Clean Air Act’s Prevention of Significant Deterioration requirements.  The total combined SO2 and NOx emission reductions secured from all these settlements will exceed two million tons each year once all the required pollution controls have been installed and implemented.

The settlement was lodged with the U.S. District Court for the Middle District of North Carolina and is subject to a 30-day public comment period and final court approval.

For more information on the settlement and to read the proposed settlement, visit http://www.justice.gov/enrd/consent-decrees.