District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
Major Computer Hacking Forum DismantledRead the Press Release
As Part of Coordinated Law Enforcement Efforts in 20 Countries, United States Charges 12 Defendants in Connection with Computer Fraud Conspiracy
The computer hacking forum known as Darkode was dismantled, and criminal charges have been filed in the Western District of Pennsylvania and elsewhere against 12 individuals associated with the forum, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney David J. Hickton of the Western District of Pennsylvania and Deputy Director Mark F. Giuliano of the FBI.
“Hackers and those who profit from stolen information use underground Internet forums to evade law enforcement and target innocent people around the world,” said Assistant Attorney General Caldwell. “This operation is a great example of what international law enforcement can accomplish when we work closely together to neutralize a global cybercrime marketplace.”
“Of the roughly 800 criminal internet forums worldwide, Darkode represented one of the gravest threats to the integrity of data on computers in the United States and around the world and was the most sophisticated English-speaking forum for criminal computer hackers in the world,” said U.S. Attorney Hickton. “Through this operation, we have dismantled a cyber hornets’ nest of criminal hackers which was believed by many, including the hackers themselves, to be impenetrable.”
“This is a milestone in our efforts to shut down criminals’ ability to buy, sell, and trade malware, botnets and personally identifiable information used to steal from U.S. citizens and individuals around the world,” said Deputy Director Giuliano. “Cyber criminals should not have a safe haven to shop for the tools of their trade and Operation Shrouded Horizon shows we will do all we can to disrupt their unlawful activities.”
As alleged in the charging documents, Darkode was an online, password-protected forum in which hackers and other cyber-criminals convened to buy, sell, trade and share information, ideas, and tools to facilitate unlawful intrusions on others’ computers and electronic devices. Before becoming a member of Darkode, prospective members were allegedly vetted through a process in which an existing member invited a prospective member to the forum for the purpose of presenting the skills or products that he or she could bring to the group. Darkode members allegedly used each other’s skills and products to infect computers and electronic devices of victims around the world with malware and, thereby gain access to, and control over, those devices.
The takedown of the forum and the charges announced today are the result of the FBI’s infiltration, as part of Operation Shrouded Horizon, of the Darkode’s membership. The investigation of the Darkode forum is ongoing, and the U.S. Attorney’s Office of the Western District of Pennsylvania is taking a leadership role in conjunction with the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS).
The charges announced today are part of a coordinated effort by a coalition of law enforcement authorities from 20 nations to charge, arrest or search 70 Darkode members and associates around the world. The nations comprising the coalition include Australia, Bosnia and Herzegovina, Brazil, Canada, Colombia, Costa Rica, Cyprus, Croatia, Denmark, Finland, Germany, Israel, Latvia, Macedonia, Nigeria, Romania, Serbia, Sweden, the United Kingdom and the United States. Today’s actions represent the largest coordinated international law enforcement effort ever directed at an online cyber-criminal forum.
The following defendants face charges in the Western District of Pennsylvania:
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Johan Anders Gudmunds, aka Mafi aka Crim aka Synthet!c, 27, of Sollebrunn, Sweden, is charged by indictment with conspiracy to commit computer fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. He is accused of serving as the administrator of Darkode, and creating and selling malware that allowed hackers to create botnets.Gudmunds also allegedly operated his own botnet, which at times consisted of more than 50,000 computers, and used his botnet to steal data from the users of those computers on approximately 200,000,000 occasions.
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Morgan C. Culbertson, aka Android, 20, of Pittsburgh, is charged by criminal information with conspiring to send malicious code. He is accused of designing Dendroid, a coded malware intended to remotely access, control, and steal data from Google Android cellphones. The malware was allegedly offered for sale on Darkode.
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Eric L. Crocker, aka Phastman, 29, of Binghamton, New York, is charged by criminal information with sending spam.He is accused of being involved in a scheme involving the use of a Facebook Spreader which infected Facebook users’ computers, turning them into bots which Crocker controlled through the use of command and control servers. Crocker sold the use of this botnet to others for the purpose of sending out massive amounts of spam.
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Naveed Ahmed, aka Nav aka semaph0re, 27, of Tampa, Florida; Phillip R. Fleitz, aka Strife, 31, of Indianapolis; and Dewayne Watts, aka m3t4lh34d aka metal, 28, of Hernando, Florida, are each charged by criminal information with conspiring to send spam. They are accused of participating in a sophisticated scheme to maintain a spam botnet that utilized bulletproof servers in China to exploit vulnerable routers in third world countries, and that sent millions of electronic mail messages designed to defeat the spam filters of cellular phone providers.
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Murtaza Saifuddin, aka rzor, 29, of Karachi, Sindh, Pakistan, is charged in an indictment with identity theft.Saifuddin is accused of attempting to transfer credit card numbers to others on Darkode.
The following defendant faces charges in the Eastern District of Wisconsin:
- Daniel Placek, aka Nocen aka Loki aka Juggernaut aka M1rr0r, 27, of Glendale, Wisconsin, is charged by criminal information with conspiracy to commit computer fraud.He is accused of creating the Darkode forum, and selling malware on Darkode designed to surreptitiously intercept and collect email addresses and passwords from network communications.
The following defendants face charges in the District of Columbia:
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Matjaz Skorjanc, aka iserdo aka serdo, 28, of Maribor, Slovenia; Florencio Carro Ruiz, aka NeTK aka Netkairo, 36, of Vizcaya, Spain; and Mentor Leniqi, aka Iceman, 34, of Gurisnica, Slovenia, are each charged in a criminal complaint with racketeering conspiracy; conspiracy to commit wire fraud and bank fraud; conspiracy to commit computer fraud, access device fraud and extortion; and substantive computer fraud.Skorjanc also is accused of conspiring to organize the Darkode forum and of selling malware known as the ButterFly bot.
The following defendant faces charges in the Western District of Louisiana:
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Rory Stephen Guidry, aka [email protected], of Opelousas, Louisiana, is charged with computer fraud. He is accused of selling botnets on Darkode.
The charges and allegations are merely accusations. A defendant is presumed innocent until and unless proven guilty.
This investigation, Operation Shrouded Horizon, is being conducted by the FBI with assistance from Europol and their European Cyber Crime Center (EC3). This case is being prosecuted by Assistant U.S. Attorneys James T. Kitchen and Charles A. Eberle of the Western District of Pennsylvania and Trial Attorneys Gavin A. Corn, Marie-Flore Johnson and Harold Chun of CCIPS, Assistant U.S. Attorney Erica O’Neil of the Eastern District of Wisconsin and Assistant U.S. Attorney Myers Namie of the Western District of Louisiana. The Criminal Division’s Office of International Affairs also provided significant assistance.
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In a related case, Aleksandr Andreevich Panin, aka Gribodemon, 26, of Tver, Russia; and Hamza Bendelladj, aka Bx1, 27, of Tizi Ouzou, Algeria, pleaded guilty on Jan. 28, 2014, and June 26, 2015, respectively, in the Northern District of Georgia in connection with developing, distributing and controlling SpyEye, a malicious banking trojan designed to steal unsuspecting victims’ financial and personally identifiable information. Bendelladj and Panin advertised SpyEye to other members on Darkode. One of the servers used by Bendelladj to control SpyEye contained evidence of malware that was designed to steal information from approximately 253 unique financial institutions around the world. Panin and Bendelladj will be sentenced at a later date.
This case is being prosecuted by Assistant U.S. Attorneys Steven Grimberg and Kamal Ghali of the Northern District of Georgia. All press inquiries relating to this case should be directed to the U.S. Attorney’s Office for the Northern District of Georgia at [email protected] or (404) 581-6016.
Ahmed et al Information - Western District of Pennsylvania
Crocker Information - Western District of Pennsylvania
Culbertson Information - Western District of Pennsylvania
Gudmunds Indictment - Western District of Pennsylvania
Saifuddin Indictment - Western District of Pennsylvania
Placek Information - Eastern District of Wisconsin
Panin et al Indictment - Northern District of Georgia
Skorjanc et al Complaint - District of Columbia
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Department of Justice Announces Designation of New Chairman of U.S. Parole CommissionRead the Press Release
President Barack Obama has designated J. Patricia Wilson Smoot as of the U.S. Parole Commission effective May 29, 2015. Chairman Smoot, who has served as Acting Chairman since the retirement of former Chairman Isaac Fulwood on Jan. 30, 2015, was appointed to the U.S. Parole Commission by President Obama and confirmed by the U.S. Senate on Sept. 16, 2010.
While at the Commission, Chairman Smoot has spearheaded the USPC Mental Health Docket. The USPC Mental Health Docket was established in 2012 as an alternative to incarceration for low-risk, non-violent offenders with mental health disorders and/or co-occurring disorders. Through collaborative efforts with Court Services and Offender Supervision Agency, Department of Behavioral Health and Public Defender Service, a multidisciplinary team was formed in an effort to provide swift assistance and administrative sanctions for the targeted population. To date, the USPC Mental Health Docket has connected a multitude of male and female offenders to in-patient and outpatient treatment services, as well as job training and mentoring programs. Additionally, Chairman Smoot also served for several months as Acting General Counsel for the agency.
Before her appointment, Chairman Smoot served as Deputy State's Attorney for Prince George's County, Maryland, one of the largest prosecutor’s offices in the State of Maryland. She was appointed to the position in 2002. As part of her duties, Chairman Smoot oversaw the Sex Offense and Child Abuse Unit, the Domestic Violence Unit, the Juvenile Division and the District Court Division, while serving as an advisor to the state’s attorney.
From 1994 to 2002, Chairman Smoot served as an Assistant U.S. Attorney of the District of Columbia. She served, with distinction, as a trial attorney and received both the Department of Justice Special Achievement and the Victims of Crime Awards during that time. Chairman Smoot ended her tenure in the U.S. Attorney's Office as Director of Professional Development, where she was responsible for attorney movement and management of the training programs for the 700-person office.
Chairman Smoot also served as a Public Defender in Prince George's County, Maryland, as an associate in a tort defense litigation firm in the district and as a judicial law clerk in the Superior Court for the District of Columbia.
Chairman Smoot has served on a number of boards and committees including the National Black Prosecutors Association, National African American Drug Policy Coalition, Maryland Coalition Against Sexual Abuse, the Governor's (Maryland) Sex Offender Advisory Board and Community Advocates for Families and Youth (CAFY).
Because of her work in and outside of the office, Chairman Smoot was named one of Maryland's Top 100 Women by the Daily Record for 2008 and again in 2011. She has also been recognized by the PEERS Coalition for Innovative Leadership in Public Service in the District of Columbia and has received the Distinguished Service Award, from the Community Advocates for Families and Youth in Prince George's County, Maryland.
Chairman Smoot holds a B.A. in English and Sociology with a concentration in Legal Studies from Bucknell University and a J.D. from Columbus School of Law, Catholic University of America.
Army Reserve Staff Sergeant Pleads Guilty to Bulk Cash Smuggling and Theft of Government Property While Serving in AfghanistanRead the Press Release
A Fort Buchanan Army Reserve Staff Sergeant pleaded guilty today to bulk cash smuggling of $113,050 and theft of government property worth $6,302 while serving in Afghanistan.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rose Emilia Rodriguez-Velez of the District of Puerto Rico, Special Agent in Charge Carlos Cases of the FBI’s San Juan Division Field Office, Special Agent in Charge Gary J. Hartwig of U.S. Immigration and Customs Enforcement Homeland Security Investigations (ICE-HSI) Chicago Field Office, Special Inspector General for Afghanistan Reconstruction John F. Sopko, Director Frank Robey of the U.S. Army Criminal Investigation Command’s (CID) Major Procurement Fraud Unit, Acting Special Agent in Charge Paul Sternal of the Defense Criminal Investigative Service’s (DCIS) Mid-Atlantic Field Office and Brigadier General Keith M. Givens, Commander of the Air Force Office of Special Investigations (AFOSI) made the announcement.
Luis Ramon Casellas, 42, of Canovanas, Puerto Rico, pleaded guilty before U.S. Magistrate Judge Camille L. Velez-Rive of the District of Puerto Rico to three counts of bulk cash smuggling and one count of theft of government property. Sentencing before U.S. District Judge Carmen Consuelo Cerezo of the District of Puerto Rico will be scheduled at a later date.
Since 2009, Casellas has been an Army Reservist Staff Sergeant on active status based at Fort Buchanan in Guaynabo, Puerto Rico. In April 2013, Casellas was deployed by the Army to Kandahar Airfield in Afghanistan. As part of his duties, Casellas was responsible for helping to break down smaller bases in preparation for the withdrawal of U.S. military forces from Afghanistan. These duties included retrieving U.S. government property for future use and selling unsuitable material as scrap to Afghan contractors.
Between June 17 and Aug. 9, 2013, Casellas was the leader of a three-person Army team that went to a Forward Operating Base (FOB) in Afghanistan to help break down that base. In connection with his plea, Casellas admitted that, while this team was at the FOB, he stole tools and equipment, including laptops, belonging to the U.S. Department of Defense. Casellas also admitted that, in July 2013, Casellas sent approximately eight boxes from the FOB through the U.S. Postal Service addressed to his wife in Puerto Rico, and that the boxes contained some of the stolen government property and undeclared U.S. currency totaling $50,500.
In addition, in August 2013, Casellas sent two boxes from Kandahar through UPS, again addressed to his wife, that were marked as “gifts for family.” In connection with his plea, Casellas admitted that, although he declared that the items inside the boxes were valued at $700 and $400, respectively, one box contained some of the stolen government property as well as $41,750 in U.S. currency, and the other box contained $20,800 in U.S. currency. These boxes were intercepted by U.S. Customs in Louisville, Kentucky.
This case was investigated by the Special Inspector General for Afghanistan Reconstruction, the FBI, ICE-HSI, Army CID, DCIS and AFOSI. This case is being prosecuted by Trial Attorney Daniel P. Butler of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Julia M. Meconiates of the District of Puerto Rico.
Casellas Plea Agreement
Vietnamese National Sentenced to 13 Years in Prison for Operating a Massive International Hacking and Identity Theft SchemeRead the Press Release
A Vietnamese national was sentenced to 13 years in prison for hacking into U.S. businesses’ computers, stealing personally identifiably information (PII), and selling to other cybercriminals his fraudulently-obtained access to PII belonging to approximately 200 million U.S. citizens.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Donald Feith of the District of New Hampshire and Director Joseph P. Clancy of the U.S. Secret Service made the announcement.
Hieu Minh Ngo, 25, was sentenced today by U.S. District Court Judge Paul J. Barbadoro of the District of New Hampshire. Ngo previously pleaded guilty to federal charges brought in the District of New Hampshire and the District of New Jersey, including wire fraud, identity fraud, access device fraud and four counts of computer fraud and abuse.
“From his home in Vietnam, Ngo used Internet marketplaces to offer for sale millions of stolen identities of U.S. citizens to more than a thousand cyber criminals scattered throughout the world,” said Assistant Attorney General Caldwell. “Criminals buy and sell stolen identity information because they see it as a low-risk, high-reward proposition. Identifying and prosecuting cybercriminals like Ngo is one of the ways we're working to change that cost-benefit analysis.”
“This case demonstrates that identity theft is a worldwide threat that has the potential to touch every one of us,” said Acting U.S. Attorney Feith. “I want to acknowledge the excellent work of the United States Secret Service in identifying and capturing Mr. Ngo. This case proves that the United States Attorney’s Office for the District of New Hampshire will work with law enforcement to investigate and prosecute identity thieves, even if they are halfway around the world.”
“The sentencing of this transnational cybercriminal illustrates another example of Secret Service success in the disruption and dismantling of global criminal networks,” said Director Clancy. “This investigation and the resulting prosecution and sentencing should serve as a warning to criminals that we will relentlessly investigate, detect, and defend the Nation’s financial infrastructure. This sentencing joins a long list of successes in combating financial crimes over our 150 year history.”
According to admissions made in connection with his guilty plea, from 2007 to 2013, Ngo operated online marketplaces from his home in Vietnam, including “superget.info” and “findget.me,” to sell packages of stolen PII. These packages, known as “fullz,” typically included a person’s name, date of birth, social security number, bank account number and bank routing number. Ngo also admitted to acquiring and offering for sale stolen payment card data, which typically included the victim’s payment card number, expiration date, CVV number, name, address and phone number. Ngo admitted that he obtained some of the stolen PII by hacking into a New Jersey-based business and stealing customer information.
In addition to selling the “fullz,” Ngo admitted to offering buyers the ability to query online databases for the stolen PII of specific individuals. Specifically, Ngo admitted that he offered access to PII for 200 million U.S. citizens, and that more than 1,300 customers from around the world conducted more than three million “queries” through the third-party databases maintained on his websites.
Ngo made nearly $2 million from his scheme. The Internal Revenue Service has confirmed that 13,673 U.S. citizens, whose stolen PII was sold on Ngo’s websites, have been victimized through the filing of $65 million in fraudulent individual income tax returns.
The case was investigated by the U.S. Secret Service’s Manchester Resident Office. The case is being prosecuted by Senior Trial Attorney Mona Sedky of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Arnold H. Huftalen of the District of New Hampshire.
The case out of the District of New Jersey was investigated by the FBI, and is being prosecuted by the U.S. Attorney’s Office of the District of New Jersey.
U.S. Seeks to Recover $12.5 Million Obtained from High-Level Corruption in the PhilippinesRead the Press Release
The Department of Justice filed a civil forfeiture complaint today seeking to recover approximately $12.5 million in assets found in the United States that derive from bribery and kickback schemes in the Philippines spanning nearly a decade.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Field Office made the announcement.
“Over nearly a decade, Janet Napoles allegedly stole millions of dollars in funds entrusted to her for development assistance and disaster relief for the people of the Philippines,” said Assistant Attorney General Caldwell. “In an effort to disguise and enjoy her ill-gotten gains, Napoles purchased properties and other assets in the United States for herself and her family members, including a condominium at the Ritz and a Porsche. The Justice Department will not allow the United States to become a playground for the corrupt or a place to hide and invest stolen riches.”
“The FBI is committed to ensuring that the U.S. financial system is not used to launder the proceeds of foreign bribery schemes,” said Assistant Director in Charge Bowdich. “Nor is the United States a safe haven for the fruits of corruption.”
As alleged in the complaint, from approximately 2004 to 2012, Philippine businesswoman Janet Napoles, 51, paid tens of millions of dollars in bribes and kickbacks to Philippine politicians and other government officials in exchange for over $200 million in funding for purported development assistance and disaster relief. Napoles’ non-governmental organizations (NGOs), however, then either failed to provide, or under-delivered on, the promised support. The complaint further alleges that Napoles also diverted NGO funds for her own personal use and benefit, often draining accounts within days of government disbursements. For this conduct, the Philippines’ Office of the Ombudsman has charged Napoles, two of her children and numerous current and former Philippine politicians and other government officials in connection with what has been nicknamed the “pork barrel scam.”
The complaint alleges that Napoles transferred over $12 million in Philippine government-awarded funds to bank accounts in the United States in the names of, or controlled by, her family members. According the complaint, Napoles used the money to purchase numerous assets, including a condominium at the Ritz-Carlton in Los Angeles for her 21-year-old daughter. The complaint seeks to forfeit the proceeds from the sale of the Los Angeles condominium, along with several other assets, including a motel near Disneyland in Anaheim, California; properties in Covina and Irvine, California; a 19 percent stake in a California-based consulting company; and a Porsche Boxster that was purchased for another daughter.
Napoles is currently serving a sentence of life in prison in the Philippines for her role in the kidnapping and detention of her cousin, Benhur Luy, who served as Napoles’s finance officer and tracked her schemes.
The complaint was brought under the Kleptocracy Asset Recovery Initiative, in which a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section work in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office. Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to [email protected].
The investigation was conducted by the FBI’s Los Angeles Field Office. The case is being handled by Trial Attorney Alexis J. Loeb of the Criminal Division’s Asset Forfeiture and Money Laundering Section, with substantial support from the U.S. Attorney’s Office of the Central District of California, the U.S. Marshals Service and the Criminal Division’s Office of International Affairs. The Justice Department also thanks the Philippines’ Office of the Ombudsman, Anti-Money Laundering Council, National Bureau of Investigation and Department of Justice for their cooperation in this matter.
Napoles Complaint
Owner of Mortgage Company Pleads Guilty to $64 Million Mortgage Fraud SchemeRead the Press Release
Co-Developer and Underwriter Also Plead Guilty
A Miami-area real estate developer and owner of a mortgage company, his business partner and a senior mortgage underwriter each pleaded guilty to a mortgage fraud scheme involving federally insured mortgages that caused losses of $64 million to the Federal Housing Administration (FHA). Including these defendants, 25 individuals have pleaded guilty to offenses related to this scheme to date.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer for the Southern District of Florida and Special Agent in Charge Nadine Gurley of the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG) made the announcement.
Hector Hernandez, 57, of Miami; Aleida Fontao, 62, of Miami; and Olga Hernandez, 58, of Lake Mary, Florida, each pleaded guilty to conspiracy to commit wire fraud affecting a financial institution. Hector and Olga Hernandez both pleaded guilty late yesterday, while Fontao pleaded guilty on July 7, 2015. As part of his plea, Hector Hernandez also agreed to forfeit $8 million, which amounts to his profits from the scheme.
Hector Hernandez’s mortgage company, Great Country Mortgage Bankers, specialized in mortgage loans that were insured by the FHA, a division of HUD, as part of a program designed to make homeownership more accessible to first-time buyers and borrowers with lower income and imperfect credit history. To qualify for these federally-insured mortgages, potential borrowers must meet certain income and other financial requirements. Under the program, HUD relies on lenders like Great Country to review and approve only those borrowers who meet the employment, income and other financial requirements needed to qualify for an FHA mortgage.
According to admissions made in connection with the guilty pleas, although most of Great Country’s potential borrowers did not qualify for the FHA-insured loans, Hector Hernandez and his business partner, Aleida Fontao, directed Great Country employees, including underwriter Olga Hernandez, to falsify important documents in the potential borrowers’ loan applications to make them appear qualified. In particular, Hector Hernandez and Fontao admitted to pressuring their employees to approve and close loans using earnings statements and verification of employment forms that made it appear as if the borrowers had higher incomes and more favorable work histories than they actually did, and documents falsely improving or explaining borrowers’ credit histories. As an underwriter responsible for reviewing and approving loan applications, Olga Hernandez admitted that she provided her coworkers with false information and that she endorsed the applications knowing that the borrowers did not actually qualify for the loans.
After Great Country closed the fraudulent loans, the company sold the loans to financial institutions for profit. In connection with their guilty pleas, the defendants admitted that they offered kickbacks to the borrowers in the form of cash back after closing, which payments were not disclosed during the loan application process in order to hide the payments both from HUD and from the financial institutions that purchased the loans from Great Country.
The vast majority of the borrowers on these fraudulent loans failed to meet their monthly mortgage obligations and defaulted on their loans. When these loans went into foreclosure, HUD, which had insured the loans, was required to pay the outstanding loan balances to the financial institution investors, resulting in substantial losses to the FHA of at least $64 million.
This case was investigated by HUD-OIG’s Miami Field Office. This is being prosecuted by Senior Litigation Counsel David A. Bybee and Trial Attorneys Michael T. O’Neill and William E. Johnston of the Criminal Division’s Fraud Section.
Nine Defendants Charged in International Stock Fraud ScamRead the Press Release
An indictment was unsealed today charging nine defendants with offenses based on their roles in complex, international stock manipulation and money laundering schemes generating approximately $6.5 million in illicit proceeds.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington D.C. Field Office made the announcement.
Harold Bailey Gallison II, 57, of Valley Center, California; Anna Hiskey, 42, of Costa Rica; Michael Randles, 47, of Costa Rica; Roger Coleman, 79, of Las Vegas; Carl Kruse Sr., 75, of Miami; Carl Kruse Jr., 50, of Miami; Frank Zangara, 52, of Locust Valley, New York; Mark Dresner, 59, of Dix Hills, New York; and Charles Moeller, 46, of Sea Cliff, New York; were charged in an indictment filed June 24, 2015, and unsealed today in the Eastern District of Virginia.
The indictment charges Gallison, Hiskey, Kruse Jr. and Kruse Sr. with one count of conspiracy to commit wire fraud and one count of securities fraud in connection with a “pump-and-dump” securities manipulation scheme involving the common stock of Warrior Girl Corp., which was quoted on the Over-the-Counter (OTC) market under the ticker symbol WRGL. The indictment also charges Gallison, Hiskey, Zangara, Moeller and Dresner with one count of conspiracy to commit wire fraud and one count of securities fraud in connection with a pump-and-dump securities manipulation scheme involving the common stock of Everock Inc., which was quoted on the OTC market under the ticker symbol EVRN. In addition, the indictment charges Gallison, Randles, Hiskey and Coleman with one count of conspiracy to commit money laundering.
The indictment alleges that the defendants artificially “pumped” or inflated the trading volume and price of the securities by touting business activities and deceptive revenue forecasts, and by engaging in coordinated trading activity to create the appearance of increasing market demand. The defendants then allegedly “dumped” or sold the securities at the inflated prices and laundered the proceeds from their scheme through bank accounts in the United States and overseas.
According to the allegations in the indictment, the scheme was facilitated through an offshore brokerage and money laundering platform controlled by Gallison that went by various names, including Sandias Azucaradas, Moneyline Brokers and Trinity Asset Services (collectively, Moneyline). The defendants allegedly used Moneyline to create nominee accounts in the names of shell companies, and used those accounts to conceal both the true source and ownership of the securities and the flow of funds.
The conspirators also allegedly took elaborate steps to hide their illegal conduct from law enforcement, including the use of proprietary internal chat and telephone systems. In a recorded call from 2010, Gallison told Randles that Moneyline maintained a private internal telephone system that did not go through a U.S. server on which he and Randles could hold “private conversation[s] that the Fed cannot get a wiretap on.” In another conversation with Randles, Gallison noted that Moneyline’s proprietary internal chat system, which did not retain records of chats, was better than an internet service provider because “if the Fed came in with a search warrant, they’d take your computer and it’d have your last ninety days’ worth of Yahoo messengers and Skype chats.”
The charges and allegations contained in the indictment are merely accusations. The defendants are presumed innocent until and unless proven guilty.
The case is being investigated by the FBI’s Washington D.C. Field Office. The Securities and Exchange Commission, the Financial Industry Regulatory Authority and the Criminal Division’s Office of International Affairs also provided significant assistance. The case is being prosecuted by Senior Trial Attorney N. Nathan Dimock of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys James P. Gillis and Zachary Terwilliger of the Eastern District of Virginia.
Moneyline Indictment
Hawaii Businessman Convicted of Federal Tax Crimes for Failing to Report Millions of Dollars in Income Disguised as Company ExpensesRead the Press Release
A Hawaii businessman was convicted yesterday following an 11-day jury trial in Honolulu of one count of corruptly endeavoring to obstruct the administration of the Internal Revenue Code and six counts of filing false individual income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Florence T. Nakakuni of the District of Hawaii.
The jury convicted Albert S.N. Hee, 61, of Kailua, Hawaii, of filing false income tax returns for tax years 2007 through 2012, and of obstructing the Internal Revenue Service (IRS) from 2002 through 2012. According to court documents and the evidence introduced at trial, Hee owned Waimana Enterprises Inc., a telecommunications holding company based in Honolulu. Over the course of a decade, Hee directed Waimana to pay millions of dollars in personal expenses on his behalf. He falsely deducted the payments from his corporate tax returns as if they were legitimate business expenses, and failed to report the payments as income on his individual returns.
“The jury’s verdict reflects the department’s unwavering commitment to U.S. taxpayers to aggressively pursue and prosecute individuals like Mr. Hee, who cheat the government to line their own pockets and finance their extravagant lifestyles,” said Acting Assistant Attorney General Ciraolo.
Hee’s lavish spending included paying more than $96,000 for personal massages; paying his wife and children full-time salaries with benefits packages, even though they performed little to no work for the company; and paying more than $736,900 in college tuition and housing for his three children. Hee also directed Waimana to pay various expenses on his personal credit card, including family trips to Walt Disney World, Tahiti, France, Switzerland, and a four-day vacation at the Mauna Lani resort on the Big Island of Hawaii, which Hee falsely characterized as a “stockholder’s meeting” and deducted as a business expense on the company’s tax return.
In 2008, Hee used company funds to purchase a home in Santa Clara, California, valued at $1.3 million. Hee told his accountants that the property would be used as an employee retreat in an attempt to disguise it as a legitimate business expense. However, Hee’s children testified at trial that from 2008 through 2012, they lived in the home while attending college in Santa Clara and did not pay rent to Waimana for their use of the property. Hee’s son testified that the house was walking distance from the college campus, and that he and his sister rented other rooms of the house to their college friends, but kept the rent that they collected from their roommates and did not give it to their father’s company.
At Hee’s scheduled Oct. 26 sentencing, he faces a statutory maximum sentence of three years in prison for each charge, a fine of up to $250,000 and restitution to the IRS.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Nakakuni commended the special agents of IRS–Criminal Investigation, who investigated the case, and Trial Attorney Quinn P. Harrington of the Tax Division and Assistant U.S. Attorneys Les Osborne and Larry Tong of the District of Hawaii, who are prosecuting the case.
Entercom Required to Divest Three Denver Radio Stations as Part of Lincoln AcquisitionRead the Press Release
Settlement Preserves Competition That Benefits Radio Advertisers
Entercom Communications Corp. (Entercom) will be required to divest three radio stations in Denver, in order to proceed with its acquisition of Lincoln Financial Media Company (Lincoln). Without these divestitures, the transaction would have resulted in higher prices and a reduced quality of service to purchasers of English-language radio advertising in Denver.
“Entercom and Lincoln own some of the most highly rated radio stations in Denver, and advertisers targeting radio listeners in Denver have benefitted from competition between them,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “These divestures will preserve that competitive dynamic.”
The Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court of the District of Columbia to block the proposed acquisition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit. According to the complaint, the proposed merger would have eliminated the head-to-head competition that currently exists between Entercom’s and Lincoln’s radio stations for the business of local and national companies that advertise to English-language listeners on radio stations in Denver. Under the terms of the proposed settlement, Entercom has agreed to divest three stations in Denver to a department-approved buyer.
Entercom is incorporated in Pennsylvania and headquartered in Bala Cynwyd, Pennsylvania. Lincoln is an indirect, wholly owned subsidiary of Lincoln National Corp. Lincoln is organized under the laws of North Carolina, and headquartered in Atlanta. Both Entercom and Lincoln operate broadcast radio stations in various metropolitan areas throughout the United States.
As required by the Tunney Act, the proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to David Kully, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Fourth Floor, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.
Entercom Complaint
Entercom Explanation
Entercom Hold Separate Stipulation and Order
Entercom Proposed Final Judgment
Entercom Competitive Impact Statement
Assistant Attorney General John C. Cruden Announces Leadership Staff Positions in the Environment and Natural Resources DivisionRead the Press Release
Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division (ENRD) announced the appointment of key positions within his leadership staff.
Varu Chilakamarri – Chief of Staff
As Chief of Staff, Chilakamarri will advise Assistant Attorney General Cruden on strategic goals and initiatives, serve as a liaison to senior leadership offices and work on special projects, including helping to coordinate the development of the division’s new animal welfare program.
“Varu is an outstanding lawyer, and a dedicated and accomplished public servant who has already proven herself in a variety of challenging positions with this Justice Department,” said Assistant Attorney General Cruden. “We are lucky to have her now with the Environment Division and I look forward to drawing on her wise counsel, impeccable judgment and administrative skill as we carry out our mission.”
Ms. Chilakamarri has served as a career attorney in the Justice Department for the past nine years, most recently joining ENRD’s Appellate Section earlier this year. Prior to that, she served in the Office of the Associate Attorney General, where she advised department leadership on Civil Division litigation, national security cases, immigration reform and worked to improve agency coordination in the enforcement of federal animal welfare laws. Ms. Chilakamarri joined the Justice Department in 2006 through the Attorney General’s Honors Program as a Trial Attorney in the Civil Division’s Federal Programs Branch, where she was lead counsel representing federal agencies in a broad range of cases concerning the constitutionality of government policies, programs and statutes. She was the recipient of an Attorney General’s Award for Outstanding Service in 2013 and she has also received awards from the Civil Division for her work on preemption cases involving state immigration laws, including in United States v. Arizona. Before joining the Justice Department, she clerked for Judge R. Guy Cole in the U.S. Court of Appeals for the Sixth Circuit and Judge Timothy B. Dyk in the U.S. Court of Appeals for the Federal Circuit. Ms. Chilakamarri graduated from Georgetown University Law Center, where she was Order of the Coif and Articles Editor for the Georgetown Law Journal. She earned degrees in Environmental Science and Political Science from Ohio State University, with honors.
Patricia McKenna – General Counsel and Attorney Educational Coordinator
Assistant Attorney General Cruden named Patricia McKenna to the newly created position of General Counsel and Attorney Educational Coordinator. In this role, Ms. McKenna has the dual responsibility of formulating and coordinating legal policies, plans and objectives on matters related to employee and labor relations, contract and procurement law, appropriations law and other programmatic, operational, administrative and general legal issues as well as serving as the principal division official responsible for managing, overseeing and administering ENRD’s attorney training program. This new position places renewed emphasis on the importance of attorney training in the division.
“Patricia’s depth of experience makes her an ideal candidate to strengthen the human capital of the division and lead efforts to continually train and equip ENRD attorneys so they can grow professionally,” said Assistant Attorney General Cruden. “With her valuable leadership and talent, I believe we can hone the skills that in turn will strengthen our representation of the United States in federal court.”
Ms. McKenna has been an attorney with the Environmental Enforcement Section (EES) of the Environment and Natural Resources Division for 16 years, the last nine as a Senior Attorney supervising EES matters in the Northeast and the Caribbean. She has broad experience representing the United States in all of the major pollution control statutes and has worked extensively on environmental issues in the Caribbean, most notably the Puerto Rico Aqueduct and Sewage Authority and Virgin Island Water and Power Authority cases. In addition, during her time at EES she has been actively involved in hiring and training for the division. Ms. McKenna has also received multiple awards within the department, including the Attorney General’s John Marshall Award in 2002 and the Drenaye Houston Mentor Award in 2013, as well as many awards from the Environmental Protection Agency for her outstanding work. Ms. McKenna began her career as a law clerk for Magistrate Judge A. Simon Chrein in the Eastern District of New York and spent three years as a general litigation associate at O’Melveny & Myers, LLP in New York City. She graduated Order of the Coif from the College of William & Mary, Marshall Wythe School of Law and graduated magna cum laude from Siena College.
Statement of Deputy Attorney General Sally Quillian Yates on the President's Clemency DecisionsRead the Press Release
Deputy Attorney General Sally Quillian Yates released the following statement after the clemency announcement made today by President Obama:
“Last year, the President asked the Justice Department to develop criteria for identifying and recommending for executive clemency those non-violent, low-level offenders who received harsh sentences they would not receive if sentenced today. The President's decision to commute the sentences of 46 more individuals today is another sign of our commitment to correcting these inequities. We will continue to recommend to the President appropriate candidates for clemency, and we will continue to work with Congress on recalibrating our sentencing laws for non-violent drug offenders.”
Six Nigerian Nationals Extradited from South Africa to Mississippi to Face Fraud ChargesRead the Press Release
Six Nigerian nationals were extradited from South Africa to Gulfport, Mississippi, to face a nine-count federal indictment in the Southern District of Mississippi alleging various Internet fraud schemes. A total of 20 defendants are charged in this case.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Gregory K. Davis of the Southern District of Mississippi made the announcement.
Oladimeji Seun Ayelotan, 30; Rasaq Aderoju Raheem, 31; Olusegun Seyi Shonekan, 33; Taofeeq Olamilekan Oyelade, 30; Olufemi Obaro Omoraka, 26; and Anuoluwapo Segun Adegbemigun, 39, are charged along with 15 others in an Oct. 7, 2014, indictment with conspiracy to commit mail fraud, wire fraud, bank fraud, conspiracy to commit identity theft, use of unauthorized account access devices, theft of U.S. government funds and conspiracy to commit money laundering. The charges stem from the defendants alleged participation in numerous Internet-based complex financial fraud schemes, including romance scams, re-shipping scams, fraudulent check scams and work-at-home scams, as well as bank, financial and credit card account takeovers.
According to the allegations in the indictment, from as early as 2001, the defendants identified and solicited potential victims through online dating websites and work-at-home opportunities. In some instances, the defendants allegedly carried on fictitious online romantic relationships with victims for the purpose of using the victims to further certain objectives of the conspiracy. For example, the indictment alleges that the defendants convinced victims to ship and receive merchandise purchased with stolen personal identifying information (PII) and compromised credit card and banking information, to deposit counterfeit checks, and to transfer proceeds of the conspiracy via wire, U.S. mail or express delivery services.
To date, defendants Teslim Olarewaju Kiriji, 30; Olutoyin Ogunlade, 41; and Dennis Brian Ladden, 75, have been convicted of offenses relating to their roles in the schemes. Defendants Susan Anne Villeneuve, 49; and Genoveva Farfan, 45; Sesan Olumide Farin, 40; Femi Alexander Mewase, 44; Rhulane Fionah Hlungwane, 24; and Adekunle Adefila, 40, are awaiting trial. The United States is seeking extradition from Nigeria of defendants Kayode Bamidele, Ajayi Oluwaseyi Stephen and Emmanuel Adeniyi Osokomaiya. Defendants Gabriel Oludare Adeniran and Oduntan Sikiru Lawani remain fugitives.
The charges and allegations in the indictment are merely accusations. A defendant is presumed innocent until and unless proven guilty.
This case is being investigated by Homeland Security Investigations (HSI) and the U.S. Postal Inspection Service. Significant assistance was also provided by the Criminal Division’s Office of International Affairs, the HSI Cyber Crimes Center, HSI Attachés in Pretoria and Dakar, U.S. Marshals Service’s International Investigations Branch and the Southern District of Mississippi, the South African Police Service (SAPS) Directorate of Priority Crimes Investigation (DPCI) Electronic Crimes Unit, the SAPS Interpol Extradition Unit, the South African National Prosecution Authority, and the South African Department of Justice and Constitutional Development. The case is being prosecuted by Trial Attorney Robert Tully of the Criminal Division’s Organized Crime Gang Section and Assistant U.S. Attorneys Annette Williams and Scott Gilbert of the Southern District of Mississippi.
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If you believe that you may have been a victim of criminal fraud committed by any of the defendants, please go to http://www.justice.gov/usao-sdms/scams and complete the questionnaire using the password scams. Defendants allegedly used the following email addresses and names to perpetuate the scheme:
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
[email protected] [email protected]
Richard Wasser Adeline Piper
Glenn Sattelberg Folly Edwards
Samuel Maxwell Stacy Adams
Regina Darwin Justin Worsham
Marlon Chase Karen Robinson
Dickson Jones Mark Miller
Kimberly Faye Mark Smith
Lorene M. Garrett John Gervino
Mark Gentile Sarah Powell
Kevin Smith Anita Lauren
Any information that you provide through the questionnaire may be helpful in the criminal investigation and prosecution of this case. A federal investigator may contact you with additional questions or to request documents you may have. Please note that submitting the questionnaire is not a substitute for consulting with your own attorney to determine what actions and remedies may be available to you through civil litigation. If you have any questions related to this matter that are not addressed at the above websites, you may contact federal law enforcement authorities at [email protected].
Ayelotan Second Superseding Indictment
President Obama Grants CommutationsRead the Press Release
Today, President Barack Obama granted commutations of sentence to 46 individuals.
The President granted commutations of sentence to the following 46 individuals:
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Jerry Allen Bailey – Charlotte, NC
Offense: Conspiracy to violate narcotics laws (crack) (Western District of North Carolina)
Sentence: 360 months’ imprisonment; 10 years’ supervised release (Apr. 2, 1996)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Shauna Barry-Scott – Youngstown, OH
Offense: Possession with intent to distribute cocaine base (Northern District of Ohio)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Oct. 18, 2005)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Larry Darnell Belcher – Martinsville, VA
Offense: Possession with intent to distribute cocaine; possession with intent to distribute marijuana (Western District of Virginia)
Sentence: Life imprisonment; 10 years’ supervised release (Dec. 15, 1997)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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John L. Houston Brower – Carthage, NC
Offense: Distributed cocaine base (“crack”) (Middle District of North Carolina)
Sentence: Life imprisonment; 10 years’ supervised release (June 22, 2002)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Nathaniel Brown – Orange Park, FL
Offense: Conspiracy to distribute cocaine (more than five kilograms) and cocaine base (more than 50 grams); distribution of cocaine base (two counts) (Middle District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Aug. 1, 2002)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Norman O’Neal Brown – Hyattsville, MD
Offense: Distribute quantity of mixture or substance containing a detectable amount cocaine base (crack), aiding and abetting (five counts); possess with intent distribute quantity of mixture or substance containing detectable amount of cocaine base (crack), aiding and abetting (District of Maryland)
Sentence: Life imprisonment; 10 years’ supervised release (Jan. 15, 1993)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Joseph Burgos – Chicago, IL
Offense: Distribution of cocaine; use of a communication facility in the commission of a felony (Northern District of Illinois)
Sentence: 360 months’ imprisonment; eight years’ supervised release; $200,000 fine (Sept. 2, 1993)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Clarance Callies – San Antonio, TX
Offense: Conspiracy to distribute in excess of 50 grams of a mixture or substance containing a detectable amount of cocaine base (“crack cocaine”); possession with intent to distribute in excess of 50 grams of a mixture or substance containing a detectable amount of cocaine base (“crack cocaine”) (Western District of Texas)
Sentence: 240 months imprisonment; 8 years’ supervised release (Mar. 25, 2002)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Anthony Leon Carroll – Tampa, FL
Offense: Possession with intent to distribute cocaine base (Middle District of Florida)
Sentence: 262 months’ imprisonment; 5 years’ supervised release (Sept. 3, 1999)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Juan Diego Castro – Laredo, TX
Offense: Possession with intent to distribute a quantity in excess of five kilograms of cocaine (Southern District of Texas)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Feb. 1, 2002)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Joe Louis Champion – Houston, TX
Offense: Conspiracy to possess with intent to distribute 376.9 grams of cocaine base (crack); aiding and abetting the possession with intent to distribute 376.9 grams of cocaine base (crack) (Southern District of Texas)
Sentence: Life imprisonment; 10 years’ supervised release; $4,000 fine (June 19, 1997)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015, and the remaining balance of the fine remitted.
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Cedric Culpepper – Orlando, FL
Offense: Possession with intent to distribute cocaine base; possession with intent to distribute five grams or more of cocaine base (Middle District of Florida)
Sentence: 188 months’ imprisonment; 4 years’ supervised release (Nov. 15, 2004)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Walter R. Dennie – Gary, IN
Offense: Conspiracy to distribute cocaine (two counts) (Middle District of Florida)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Apr. 25, 2002)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Steven D. Donovan – Oak Creek, WI
Offense: Conspiracy to possess with intent to distribute cocaine; interstate travel to promote distribution of cocaine; possession with intent to distribute cocaine (Eastern District of Wisconsin)
Sentence: Life imprisonment; 10 years’ supervised release (Oct. 16, 1992)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Romain Dukes – Chicago, IL
Offense: Conspiracy to distribute cocaine base, “crack”; distribution of cocaine base, “crack” (two counts) (Southern District of Iowa)
Sentence: Life imprisonment; 10 years’ supervised release (Oct. 1, 1997)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Tony Lynn Hollis – Knoxville, TN
Offense: Possession with intent to distribute 26.5 grams of cocaine base (Eastern District of Tennessee)
Sentence: 262 months’ imprisonment; eight years’ supervised release (June 8, 2001)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Alex William Jackson – Mineral, VA
Offense: Conspiracy to distribute cocaine base (Western District of Virginia)
Sentence: 262 months’ imprisonment; 60 months’ supervised release (Dec. 22, 1999); amended to 240 months’ imprisonment (June 25, 2008)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Jackie Johnson – Townsend, DE
Offense: Possession with the intent to distribute more than 50 grams of a cocaine base (District of Delaware)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Jan. 30, 2007)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Jerome Wayne Johnson – Fort White, FL
Offense: 1. Cultivation of marijuana plants (Middle District of Florida)
2. Conspiracy to manufacture, distribute, and possess with intent to distribute more than 1,000 marijuana plants (Northern District of Florida)
Sentence: 1. 60 months’ imprisonment, 5 years’ supervised release (June 25, 2003)
2. 20 years’ imprisonment, concurrent to sentence imposed above, 10 years’ supervised release (May 27, 2004)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Willie C. Johnson – Steele, MO
Offense: The defendant did knowingly conspire to distribute and possess with the intent to distribute cocaine base; the defendant did knowingly distribute cocaine base; the defendant did knowingly possess with the intent to distribute cocaine base (Eastern District of Missouri)
Sentence: 360 months’ imprisonment; five years’ supervised release (Feb. 18, 2005); amended to 168 months’ imprisonment (Feb. 12, 2015)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
- Mark Anthony Jones – Boynton Beach, FL
Offense: Distribution of cocaine base (Northern District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (July 28, 1999)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Roy Larry Lee – St. Petersburg, FL
Offense: Conspiracy to possess with intent to distribute cocaine base (enhanced penalty); distribution of 50 grams or more of cocaine base (two counts) (Middle District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (May 3, 1990)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Kenneth Lorenzo Lewis – Charlottesville, VA
Offense: Conspiracy to distribute cocaine base (Western District of Virginia)
Sentence: 262 months’ imprisonment; five years’ supervised release (Nov. 17, 2000)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Douglas M. Lindsay, II – Newberry, SC
Offense: Conspiracy to possess with intent to distribute and distribution of cocaine and cocaine base (District of South Carolina)
Sentence: Life imprisonment; five years’ supervised release (Dec. 20, 1996); amended to 293 months’ imprisonment (Mar. 4, 2015)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Kevin Matthews – James Island, SC
Offense: Conspiracy to distribute and possess with intent to distribute cocaine base (District of South Carolina)
Sentence: 232 months’ imprisonment; 10 years’ supervised release (Feb. 11, 2004)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Marlon McNealy – St. Petersburg, FL
Offense: Conspiracy to commit racketeering (two counts); conspiracy to distribute cocaine base; knowingly and intentionally distributing 50 grams or more of cocaine base (three counts) (Middle District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (Aug. 18, 1993)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Brian Nickles – New Orleans, LA
Offense: Distribution of more than 50 grams of cocaine base (two counts) (Eastern District of Louisiana)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Apr. 28, 2004)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Jermaine Lee Osborne – Roanoke, VA
Offense: Conspiracy to possess with intent to distribute at least 50 grams of cocaine base (Western District of Virginia)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (May 2, 2006)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Marcus H. Richards – Miami, FL
Offense: Conspiracy to distribute and to possess with intent to distribute more than five kilograms of cocaine and more than 50 grams of cocaine base (Northern District of Florida)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (June 13, 2005)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Patrick Roberts – Detroit, MI
Offense: Conspiracy to possess with intent to distribute and to distribute controlled substances (Eastern District of Michigan)
Sentence: Life imprisonment; 10 years’ supervised release (July 8, 1999)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Bryant Keith Shelton – Kissimmee, FL
Offense: Distribution of cocaine base (Middle District of Florida)
Sentence: 188 months’ imprisonment; five years’ supervised release (Apr. 1, 2003)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Ezekiel Simpson – St. Louis, MO
Offense: Possession with intent to distribute cocaine base (Eastern District of Missouri)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Feb. 3, 2005)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Katrina Stuckey Smith – Montrose, GA
Offense: Conspiracy to possess with intent to distribute cocaine and cocaine base (Middle District of Georgia)
Sentence: 292 months’ imprisonment; 10 years’ supervised release (July 20, 2000); amended to 240 months’ imprisonment (Apr. 2, 2008).
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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James Marion Stockton – Martinsville, VA
Offense: Possession with intent to distribute more than five grams of cocaine base; possession of a firearm during and in relation to a drug trafficking offense; possession of a firearm by a convicted felon; possession with intent to distribute cocaine base (Western District of Virginia)
Sentence: 420 months’ imprisonment; eight years’ supervised release (May 27, 2003)
Commutation Grant: Prison sentence commuted to expire November 10, 2015.
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Bart Stover – Ashland, OH
Offense: Conspiracy to possess with the intent to distribute marijuana and cocaine; use of a communication facility to facilitate the commission of drug trafficking offense, aiding and abetting (Northern District of Ohio)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Apr. 12, 2005)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Robert Earl Thomas, Jr. – Houston, TX
Offense: Possession with intent to distribute a controlled substance (Eastern District of Texas)
Sentence: 262 months’ imprisonment; five years’ supervised release (June 29, 1999)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Bruce Todd – Atlanta, GA
Offense: Distribution of at least 50 grams of crack cocaine (Northern District of Georgia)
Sentence: 262 months’ imprisonment; five years’ supervised release (Mar. 3, 2003)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Jeffery Jerome Toler – Pensacola, FL
Offense: Conspiracy to possess with intent to distribute cocaine and cocaine base (Northern District of Florida)
Sentence: Life imprisonment; 10 years’ supervised release (June 13, 1996)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Donald Vanderhorst – Charleston, SC
Offense: Conspiracy to possess with intent to distribute and distribution of five kilograms or more of cocaine and 50 grams or more of cocaine base (District of South
Carolina)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Mar. 15, 2006)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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James Nathan Walton – Thibodeaux, LA
Offense: Possession with intent to distribute cocaine base (Western District of Louisiana)
Sentence: 240 months’ imprisonment; 10 years’ supervised release (Sept. 16, 2004)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Telisha Rachette Watkins – Charlotte, NC
Offense: Conspiracy to possess with intent to distribute cocaine and cocaine base (Western District of North Carolina)
Sentence: 240 months’ imprisonment; eight years’ supervised release (Oct. 25, 2007)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Dunning Wells – Fort Myers, FL
Offense: Unlawful possession of a firearm; distribution of a quantity of cocaine; possession of a firearm during and in relation to a drug trafficking crime (Middle District of Florida)
Sentence: 502 months’ imprisonment; six years’ supervised release (Feb. 20, 1992)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Kimberly A. Westmoreland – Columbus, OH
Offense: Conspiracy to distribute in excess of 50 grams of cocaine base; carrying a firearm in relation to a drug trafficking crime (Southern District of Ohio)
Sentence: 180 months’ imprisonment; five years’ supervised release (Jan. 21, 2004)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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James Rufus Woods – Leasburg, NC
Offense: Possess with intent to distribute cocaine base (“crack”) (Middle District of North Carolina)
Sentence: Life imprisonment; 10 years’ supervised release (Nov. 23, 1998)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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John M. Wyatt – Las Cruces, NM
Offense: Possession with intent to distribute marihuana (Southern District of Illinois)
Sentence: 262 months’ imprisonment; eight years’ supervised release; $500 fine (Aug. 30, 2004)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Robert Joe Young – Joppa, AL
Offense: Conspiracy to possess with the intent to distribute a mixture and substance containing methamphetamine; possession with the intent to distribute a mixture and substance containing methamphetamine; use of a firearm during and in furtherance of a drug trafficking crime; possession with the intent to distribute a mixture and substance containing cocaine; carrying a firearm during and in relation to a drug trafficking crime; endeavoring to influence and impede the administration of justice (Northern District of Alabama)
Sentence: 240 months’ imprisonment; 5 years’ supervised release (Dec. 16, 2002)
Commutation Grant: Prison sentence commuted to expire on November 10, 2015.
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Massachusetts Man Charged with Being a Felon in Possession of FirearmsRead the Press Release
Government Moves for Pretrial Detention Based on Terrorist Attack Plans
An Adams, Massachusetts, man has been arrested and charged in connection with a plot to engage in terrorism on behalf of ISIL. The announcement was made today by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Carmen M. Ortiz of the District of Massachusetts and Special Agent in Charge Vincent Lisi of the FBI’s Boston Field Division.
A criminal complaint, charging Alexander Ciccolo, aka Ali Al Amriki, 23, with being a felon in possession of firearms was unsealed today. Additional information regarding Ciccolo’s plans was filed this morning in advance of a detention hearing to be held tomorrow afternoon in Springfield, Massachusetts.
According to the complaint affidavit, on July 4, 2015, Ciccolo took delivery of four firearms which he had ordered from a person who was cooperating with members of the Western Massachusetts Joint Terrorism Task Force, and who had been communicating with Ciccolo about Ciccolo’s plans to engage in a terrorist act. Ciccolo was arrested immediately after taking delivery of the firearms, which included a Colt AR-15 .223 caliber rifle, a SigArms Model SG550-1 556 caliber rifle, a Glock 17- 9mm pistol and a Glock 20-10 mm pistol. Ciccolo had previously been convicted of a crime punishable by more than a year in jail and therefore was prohibited from possessing firearms.
In an affidavit filed in support of the government’s detention motion, it is alleged that Ciccolo is a supporter of the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization. According to the affidavit, Ciccolo spoke with a cooperating witness in recorded conversations about his plans to commit acts of terrorism inspired by ISIL, including setting off improvised explosive devices, such as pressure cookers filled with black powder, nails, ball bearings and glass, in places where large numbers of people congregate, such as college cafeterias. Prior to his arrest, agents observed Ciccolo purchase a pressure cooker similar to that used in the Boston Marathon bombings.
It is also alleged that during a search of Ciccolo’s apartment after he was arrested, agents found several partially constructed “Molotov cocktails.” These incendiary devices contained what appeared to be shredded Styrofoam soaking in motor oil. Ciccolo had previously stated that this mixture would cause the fire from the exploded devices to stick to people’s skin and make it harder to put the fire out.
A detention hearing has been scheduled for July 14 at 3:30 p.m. at the U.S. District Court in Springfield, Massachusetts.
The charge of being a felon in possession of firearms provides a sentence of no greater than 10 years in prison, three years of supervised release, and a fine of $250,000. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
This investigation is being conducted by the Western Massachusetts Joint Terrorism Task Force. The case is being prosecuted by Assistant U.S. Attorneys Kevin O’Regan and Deepika Shukla of the District of Massachusetts and the National Security Division’s Counterterrorism Section.
The details contained in the charges are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Ciccolo Complaint
Ciccolo Detention Memo
Ciccolo Detention Memo (Exhibit A)
Ciccolo Detention Memo (Exhibit B)
Ciccolo Detention Memo (Exhibit C)
Alabama Man Pleads Guilty to Involvement in Stolen Identity Refund Fraud SchemeRead the Press Release
A Montgomery County, Alabama, resident pleaded guilty to one count of mail fraud and one count of aggravated identity theft for his involvement in a stolen identity refund fraud (SIRF) scheme, Acting Assistant Attorney Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama announced today.
According to court documents, Jerome Marcel Newton obtained the personal identifying information of others in various ways, including by paying other individuals to collect multiple identities or by recruiting people to provide their identities to him. Although Newton resided in Alabama, a number of the identities were of people living in Pittsburgh. Newton also obtained the identity information of prison inmates from jail records. In 2011, Newton used the identities he obtained to file false tax returns, directing the Internal Revenue Service (IRS) to deposit the fraudulent refunds claimed on those returns into bank accounts that he controlled or onto prepaid debit cards. Some of the prepaid debit cards were then mailed to addresses within the Middle District of Alabama.
Newton’s sentencing hearing has not yet been scheduled. At sentencing, Newton faces a statutory maximum sentence of 20 years in prison and a $250,000 fine for the mail fraud count and a mandatory two-year minimum sentence and a $250,000 fine for the aggravated identity theft count. Newton will also be subject to mandatory restitution.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of the IRS – Criminal Investigation and officers of the Sheriff’s Office for Douglas County, Georgia, who investigated the case, as well as Trial Attorneys Jason H. Poole and Michael C. Boteler of the Tax Division and Assistant U.S. Attorney Jonathan S. Ross of the Middile District of Alabama, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts can be found on the division’s website.
Attorney General Lynch Statement on Escape of Joaquin Guzman Loera "Chapo" from Mexican PrisonRead the Press Release
Attorney General Loretta E. Lynch provided the following statement on the escape of Joaquin Guzman Loera "Chapo" from a Mexican prison:
“We share the government of Mexico's concern regarding the escape of Joaquin Guzman Loera ‘Chapo’ from a Mexican prison. In addition to his crimes in Mexico, he faces multiple drug trafficking and organized crime charges in the United States.
“The U.S. government stands ready to work with our Mexican partners to provide any assistance that may help support his swift recapture.”
United States Files Enforcement Action against Iowa Dietary Supplement Company and Principals to Stop Distribution of Adulterated and Misbranded Dietary SupplementsRead the Press Release
The United States filed a civil complaint today in federal court against Iowa Select Herbs LLC, of Cedar Rapids, Iowa, its president and CEO, Gordon L. Freeman, and a partial owner, Lois A. Dotterweich, to prevent the distribution of adulterated and misbranded dietary supplements, announced Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
Iowa Select Herbs LLC manufactures and distributes a variety of dietary supplements, consisting primarily of extracts from various plants, including papaya leaf, echinacea, elderberry and nettle leaf. The firm also produces a product called “Cold BeGone,” which purports to be a complex of natural ingredients. The complaint alleges that the company’s dietary supplements are manufactured under conditions that are inadequate to ensure the safety of its products and also make unlawful claims to treat or prevent diseases. The department filed the injunction action in the Northern District of Iowa on behalf of the U.S. Food and Drug Administration (FDA).
“The Department of Justice is committed to ensuring that dietary supplements are manufactured and distributed in compliance with the law,” said Principal Deputy Assistant Attorney General Mizer. “We will pursue actions against manufacturers who do not manufacture their products under proper conditions or who make unlawful claims about them.”
According to the complaint, an FDA inspection performed in August 2014 revealed that the company’s dietary supplements are adulterated within the meaning of the federal Food, Drug and Cosmetic Act because they are manufactured, prepared, packed or held in a manner that does not conform to Dietary Supplement Current Good Manufacturing Practices. The complaint alleges, for example, that the company repeatedly failed to test its dietary ingredients, in order to verify their identity, before using them. The complaint also alleges that the firm’s dietary supplements qualify as unapproved and misbranded drugs, in that they claim to treat or prevent a variety of diseases, including cancer, malaria and heart disease, but have never been submitted to the FDA for approval, and have never been found safe and effective for those purposes.
The government is represented by Trial Attorney Heide L. Herrmann of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel for Enforcement Laura Akowuah of the Department of Health and Human Services’ Office of General Counsel – Food and Drug Division.
A complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.
Justice Department Announces University of Montana Police Department Has Fully Implemented Agreement to Improve Response to Reports of Sexual AssaultRead the Press Release
The Department of Justice announced today that the University of Montana Police Department (UMPD) has fully implemented the requirements of its agreement with the department to improve the UMPD’s response to reports of sexual assault. The agreement, which was entered into in May 2013, resolved part of the department’s comprehensive investigation of the response by the Missoula, Montana, criminal justice system and the University of Montana to sexual assault. Thomas R. Tremblay, the independent reviewer who assesses whether the terms of the agreement have been met, has determined – and the department has agreed – that the UMPD has met all of its obligations under the agreement and achieved the overall purpose of the agreement.
The purpose of the agreement between the department and the UMPD was to better protect and vindicate the rights of sexual assault victims by transforming the UMPD’s response to reports of sexual assault. To do this, the agreement required significant changes to the UMPD’s policies, practices and supervision. These changes promote more reliable sexual assault investigations, and effective, nondiscriminatory law enforcement and community support for victims, the police department and its officers. The UMPD’s implementation of the agreement has resulted in a host of historic advances in the Missoula response to sexual assault, including the following:
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development and institution of model policies and protocols for the UMPD’s response to reports of sexual assault, and for its communication and cooperation with its university and local law enforcement partners;
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extensive specialized training for first responders and detectives in the response to sexual assault;
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cooperation with the development and institution of an External Review Panel – one of the first of its kind – to review closed sexual assault cases for investigative comprehensiveness and indications of gender bias;
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completion of an audit of the community-wide response to sexual assault – one of the first community audits to focus exclusively on sexual assault – including all of the key law enforcement agencies, advocacy organizations and medical service providers serving victims of sexual assault in Missoula County; and
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community advocates and students reporting better communication and coordination with UMPD officers than ever before.
“Our agreement with the University of Montana Police Department following our investigation into the handling of sexual assault complaints made by women in Missoula has been a catalyst for powerful changes in the law enforcement, the university, and the community’s coordinated response to sexual assault,” said Vanita Gupta, the head of the Civil Rights Division. “We are grateful for the efforts of the University of Montana, the UMPD and the entire Missoula community because, as a result of these reforms, the women of Missoula are safer, more trusting of the criminal justice system and subject to more fair and respectful treatment by campus police. The University of Montana and the UMPD had the courage and leadership to acknowledge and address these problems on its campus, and as a result, they are poised to become a model for institutions of higher education and campus police departments grappling with these issues around the country.”
“Today signals a true accomplishment by the University of Montana and its police department,” said U.S. Attorney Michael Cotter of the District of Montana. “They have worked tirelessly toward changes that are substantial, sustainable, and will benefit the community for generations to come. Thanks to this community effort, today the university is safer and is a place where students can learn and thrive.”
The full implementation of the department’s agreement with the UMPD marks the second completion of the four agreements stemming from the department’s multi-pronged investigation, launched in May 2012, regarding the handling of sexual assault complaints made by women in Missoula. The investigation, conducted under the Violent Crime and Law Enforcement act of 1994, the Safe Streets Act, Title VI of the Civil Rights Act of 1964 and Title IX of the Education Amendments of 1972, evaluated the response to sexual assault at the University of Montana at Missoula, the UMPD, the Missoula Police Department (MPD) and the Missoula County Attorney’s Office. The department entered into agreements with the university, the UMPD and the MPD in May 2013, to resolve findings related to those parties and address deficiencies in their response to sexual assaults. The department, together with the Montana Attorney General’s Office, entered into an agreement with the Missoula County Attorney’s Office the following year, in June 2014. The implementation of those agreements has already improved these parties’ response to sexual assaults.
These agreements, as well as a description of the Department of Justice’s work regarding sexual assault in Missoula are available at: http://www.justice.gov/crt/about/spl/. The independent reviewer’s final compliance report, describing in detail his determination that the UMPD has successfully achieved full compliance with the Justice Department agreement, is forthcoming, and will be available on the Justice Department’s website upon its release.
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Happy's Pizza Founder and Co-Conspirators Sentenced to Prison for Multi-Million Dollar Income and Employment Tax Fraud SchemeRead the Press Release
A Detroit-area businessman and other co-conspirators were sentenced to prison this week for income and employment tax fraud in the U.S. District Court for the Eastern District of Michigan, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
“Fraudulent business owners who underreport their income and employment taxes cheat not only the IRS and U.S. taxpayers, but also other businesses that comply with their tax obligations and seek to compete on a level playing field,” said Acting Assistant Attorney General Ciraolo. “Today’s sentencing of Happy Asker and the sentences imposed on his co-conspirators demonstrate that there is a heavy price for this conduct, and for obstructing and misleading IRS agents in the course of their investigation.”
Happy Asker, 38, of West Bloomfield, Michigan, was sentenced today to serve 50 months in prison, three years of supervised release and ordered to pay $2.5 million in restitution to the Internal Revenue Service (IRS) and a special assessment of $3,300 by U.S. District Court Chief Judge Denise Paige Hood. According to court documents and statements made during a 10-day jury trial in November 2014, Happy Asker was the president, founder and public face of the Happy’s Pizza franchise, a pizza chain based in Farmington Hills, Michigan, that operated restaurants throughout Michigan, Ohio and Illinois. Asker was convicted of three counts of filing false income tax returns for the years 2006 through 2008, 28 counts of aiding and assisting in the filing of false income and payroll tax returns for several of Happy’s Pizza franchise restaurants for the years 2006 through 2009, and corruptly endeavoring to obstruct and impede the administration of the Internal Revenue Code.
Asker’s co-conspirators and other individuals involved in the tax scheme, Maher Bashi, 47, Tom Yaldo, 42, and Tagrid Bashi, 47, all of West Bloomfield; and Arkan Summa, 42, of Walled Lake, Michigan, all pleaded guilty for their roles prior to Asker’s trial. On Oct. 23, 2014, Maher Bashi and Yaldo pleaded guilty to conspiracy to defraud the United States. On July 15, 2014, Summa pleaded guilty to obstruction of the IRS and Tagrid Bashi pleaded guilty to willfully delivering false documents to the IRS.
Maher Bashi, who served as Happy's Pizza's corporate chief operating officer, and Yaldo, an owner of numerous Happy's Pizza franchises, were also sentenced this week. On July 7, Bashi was sentenced to serve two years in prison, three years of supervised release and ordered to pay $620,297 in restitution to the IRS. Yaldo was sentenced to serve 18 months in prison, three years of supervised release and ordered to pay $314,078 in restitution to the IRS.
On April 1, Summa, an owner of numerous Happy’s Pizza franchises, was sentenced to serve 18 months in prison and ordered to pay $199,847 in restitution to the IRS. Tagrid Bashi, a nominee Happy’s Pizza franchise owner, was sentenced to three years of supervised probation.
“The license to run a business is not a license to avoid paying taxes,” said Chief Richard Weber of IRS-Criminal Investigation. “Mr. Asker and his co-defendants chose greed over legal business practices. As business owners, they had a responsibility to withhold income taxes for their employees and then remit those taxes to the Internal Revenue Service, as well as file timely individual and corporate tax returns. Time and again, our special agents untangle the web of financial transactions to bring to justice those that would try to cheat the government and the American taxpayer.”
Evidence at trial established that from 2004 through 2011, Asker, along with certain franchise owners and employees, executed a systematic and pervasive tax fraud scheme to defraud the IRS. Gross sales and payroll amounts were substantially underreported on numerous corporate income tax returns and payroll tax returns filed for nearly all 60 Happy’s Pizza franchise locations. From 2008 to 2010, Asker and his co-conspirators diverted for personal use more than $6.1 million in cash gross receipts from approximately 35 different Happy’s Pizza stores in the Detroit area, Illinois and Ohio. In total, Asker and certain employees and franchise owners failed to report approximately $3.84 million of gross income and approximately $2.39 million in payroll taxes from the various Happy’s Pizza franchises to the IRS. A portion of the unreported income was shared among most of the franchise owners, including Asker, in a weekly cash “profit split.” As a result of the scheme, the IRS is owed more than $6.2 million in income and employment taxes. The evidence also established that Asker intentionally misled IRS-Criminal Investigation special agents during voluntary interviews conducted with him in 2010.
Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, the Drug Enforcement Administration and the FBI, who investigated the case, and Senior Litigation Counsel Corey Smith and Trial Attorney Mark McDonald of the Tax Division, who prosecuted the case. Ciraolo also thanked the U.S. Attorney’s Office of the Eastern District of Michigan for their substantial assistance.
District Court Enters Permanent Injunction against Nevada Animal Drug Manufacturer to Prevent Distribution of Adulterated DrugRead the Press Release
The U.S. District Court for the District of Nevada entered a consent decree of permanent injunction against Bio Health Solutions LLC, of Reno, Nevada, and Mark Garrison, its manager, to prevent the distribution of RenAvast, an animal drug that is adulterated, the Department of Justice announced today.
“The department will not hesitate to bring enforcement actions against animal drug producers who do not follow the necessary procedures to comply with our nation’s animal drug laws,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.
On July 9, the department filed a complaint in U.S. District Court at the request of the U.S. Food and Drug Administration (FDA) alleging that Bio Health Solutions and Garrison caused the shipment of RenAvast in interstate commerce in violation of federal law. The complaint alleged that Bio Health Solutions markets, sells and distributes RenAvast, which the company describes as an animal supplement, and that the company intended that RenAvast be used to treat and prevent kidney disease and chronic renal failure in cats and dogs.
Under the federal Food, Drug and Cosmetic Act (FDCA), a new animal drug includes any drug intended for use for animals, the composition of which is such that it is not generally recognized as safe and effective for use under the conditions prescribed, recommended or suggested in its labeling. A new animal drug that lacks FDA approval or otherwise fails to meet an exception under the law is deemed to be unsafe, and a new animal drug that is unsafe under the law is deemed to be adulterated. The complaint alleged that defendants caused the shipment of RenAvast, an adulterated animal drug, into interstate commerce.
In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree of permanent injunction that prohibits them from introducing or delivering for introduction into interstate commerce, manufacturing, processing, packaging, labeling, holding, selling or distributing RenAvast. In addition, these same restrictions apply to any other product intended to diagnose, cure, mitigate, treat or prevent disease, unless and until a new animal drug application has been approved, or the product meets the requirements for an investigational new animal drug exemption in the law.
According to the complaint, the FDA issued a warning letter to Garrison on Aug. 1, 2012. The letter cited numerous statements throughout the defendants’ website and other promotional materials that showed the intended use of RenAvast was to prevent and/or treat kidney disease and chronic renal failure in cats. The FDA’s letter warned Garrison that RenAvast could not be legally marketed because it was a new animal drug that was not approved by the FDA.
The complaint further alleged that in November 2012, a representative for the company informed the FDA that the company had complied with FDA requests to remove statements on its website and in other promotional materials that showed its intent that RenAvast be used to mitigate, treat and prevent chronic renal failure in cats and in dogs. Nevertheless, the complaint alleged that after these assurances, Bio Health Solutions created a password-protected section on its website that contained numerous express disease claims. In addition, as alleged in the complaint, the FDA conducted undercover purchases of RenAvast, and such purchases confirmed that the defendants continued to make claims about RenAvast that caused it to be an adulterated drug under the FDCA.
The government is represented by Trial Attorney David A. Frank of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel Steven J. Tave of the Department of Health and Human Services’ Office of General Counsel-Food and Drug Division and Assistant U.S. Attorney Greg Addington of the District of Nevada.
Detroit Area Doctor Sentenced to 45 Years in Prison for Providing Medically Unnecessary Chemotherapy to PatientsRead the Press Release
A Detroit area hematologist-oncologist was sentenced today to serve 45 years in prison for his role in a health care fraud scheme that included administering medically unnecessary infusions or injections to 553 individual patients and submitting to Medicare and private insurance companies approximately $34 million in fraudulent claims.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Chicago Regional Office and Chief Richard Weber of the Internal Revenue Service – Criminal Investigation (IRS-CI) made the announcement.
Farid Fata, M.D., 50, of Oakland Township, Michigan, pleaded guilty in September 2014 to 13 counts of health care fraud, one count of conspiracy to pay or receive kickbacks and two counts of money laundering. U.S. District Judge Paul D. Borman of the Eastern District of Michigan imposed the sentence and ordered Fata to forfeit $17.6 million.
“Rather than use his medical degree to save lives, Dr. Fata instead destroyed them in pursuit of profit,” said Assistant Attorney General Caldwell. “Time and again, Dr. Fata callously violated his patients' trust as he used false cancer diagnoses and unwarranted and dangerous treatments as tools to steal millions of dollars from Medicare, even stooping to profit from the last days of some patients' lives. While no sentence can restore what was taken from his patients and their families, the sentence imposed ensures that never again will Dr. Fata lay hands on another patient.”
“Health care fraud has been a serious problem in Michigan, but no case has been as egregious as the conduct of Dr. Farid Fata,” said U.S. Attorney McQuade. “Dr. Fata did not care for patients; he exploited them as commodities. He over-treated, under-treated and outright lied to patients about whether they had cancer so that he could maximize his own profits.”
“Fata’s heinous acts did far worse than defraud government health care programs and breach his professional oath,” said Special Agent in Charge Abbate. “Fata caused grievous emotional and physical harm, betraying the trust of hundreds of innocent patients by selfishly placing his personal financial gain over the health and welfare of those who entrusted him with their medical care. The many brave individuals impacted by this defendant’s criminal acts had the strength to come forward, express their experiences of pain and suffering, and collaborate with law enforcement and prosecutors to ensure that Fata’s despicable actions were brought to an end and justice delivered.”
“It is startling and abhorrent when greed is so potent that it drives a medical professional to recklessly abandon the most basic and important principle of his profession, ‘First, Do No Harm,” said Special Agent in Charge Pugh. “Dr. Fata did just that when he falsely diagnosed his patients with cancer and administered toxic chemotherapy with potentially harmful and even deadly side effects. Today’s sentencing is a clear message that, working closely with our law enforcement partners, we will continue to investigate, charge and prosecute medical professionals who jeopardize the health of patients.”
“This is the most egregious case of fraud and deception that I have seen in my career," said Chief Weber. “Dr. Fata not only defrauded the government out of millions of dollars, but he lied to his patients about their health and intentionally put their lives at risk. In fact, because of his lies, some of those patients who he was entrusted to care for likely died as a result of his actions. This defendant greedily cared more about his own financial well-being than the lives of his patients. This disgusting and diabolical scheme has hurt hundreds of patients and their families and stolen from them something that no punishment from the court can do to make them whole.”
As set forth at sentencing, Fata was a licensed medical doctor who owned and operated a cancer treatment clinic, Michigan Hematology Oncology P.C. (MHO), which had locations in Rochester Hills, Michigan; Clarkston, Michigan; Bloomfield Hills, Michigan; Lapeer, Michigan; Sterling Heights, Michigan; Troy, Michigan; and Oak Park, Michigan. He also owned a diagnostic testing facility, United Diagnostics PLLC, located in Rochester Hills, Michigan.
In connection with his guilty plea, Fata admitted to prescribing and administering unnecessary aggressive chemotherapy, cancer treatments, intravenous iron and other infusion therapies to patients in order to increase his billings to Medicare and other insurance companies. Fata then submitted fraudulent claims to Medicare and other insurers for these unnecessary treatments.
Fata also admitted to soliciting kickbacks from Guardian Angel Hospice and Guardian Angel Home Health Care in exchange for his referral of patients to those facilities.
Fata further admitted to using the proceeds of the health care fraud at his medical practice, MHO, to promote the carrying on of additional health care fraud at United Diagnostics, where he administered unnecessary and expensive positron emission tomography (PET) scans for which he billed a private insurer.
This case was investigated by the FBI, HHS-OIG and IRS-CI 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 of the Eastern District of Michigan. This case is being prosecuted by Assistant Chief Catherine K. Dick, Deputy Chief Gejaa T. Gobena, and Trial Attorney Matthew C. Thuesen of the Fraud Section, and by Assistant U.S. Attorney Sarah Resnick Cohen, White Collar Crime Unit Chief John K. Neal, and Health Care Fraud Unit Chief Wayne F. Pratt of the U.S. Attorney’s Office of the Eastern District of Michigan.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion. In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.
To learn more about the Health Care Fraud Prevention and Enforcement Team, go to: www.stopmedicarefraud.gov.
Army National Guard Official Sentenced to 42 Months in Prison for Accepting $30,000 BribeRead the Press Release
An Army National Guard official was sentenced today to 42 months in prison for accepting a $30,000 bribe in exchange for steering a $3.6 million contract to a retired sergeant major of the Minnesota Army National Guard and his consulting company.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Acting U.S. Attorney Kelly T. Currie of the Eastern District of New York, Assistant Director in Charge Andrew McCabe of the FBI’s Washington Field Office, Acting Special Agent in Charge Paul Sternal of the Defense Criminal Investigative Service (DCIS) Mid-Atlantic Field Office and Director Frank Robey of the U.S. Army Criminal Investigative Command’s Major Procurement Fraud Unit (Army-CID) made the announcement.
Jason Rappoccio, 39, of Hampton, South Carolina, pleaded guilty on Feb. 3, 2015, to one count of conspiracy to commit bribery and one count of bribery. U.S. District Judge Liam O’Grady of the Eastern District of Virginia imposed the sentence and ordered Rappoccio to forfeit $31,328.
Rappoccio was an active duty sergeant first class in the Army National Guard. In connection with his guilty plea, Rappoccio admitted to accepting a $30,000 bribe from Timothy Bebus, a retired sergeant major of the Minnesota Army National Guard and owner of Mil-Team Consulting and Solutions LLC (Mil-Team). In exchange, Rappoccio agreed to steer a $3.6 million contract to Mil-Team by awarding the contract to a Small Business Administration (SBA) 8(a) certified company, chosen by Bebus, that Rappoccio understood would sub-contract a portion of the work to Mil-Team.
Rappoccio admitted that the $30,000 bribe was structured to conceal the payment. Specifically, Bebus gave $6,000 in cash directly to Rappoccio, and the remaining $24,000 was paid in a cashier’s check in the name of Rappoccio’s wife.
Rappoccio also admitted to accepting additional benefits in exchange for steering an additional $4 million contract to Mil-Team. In particular, Rappoccio solicited and received from Bebus airline tickets for two of Rappoccio’s family members. He also received NFL tickets worth over $1,300 from another co-conspirator.
In connection with this investigation into corruption within the National Guard Bureau, eight others, including Bebus, have been convicted of offenses related to the awarding of millions of dollars of Army National Guard marketing, retention and recruitment contracts. The investigation is ongoing.
The case was investigated by the FBI’s Washington Field Office, with assistance from DCIS’s Mid-Atlantic Field Office and Army-CID’s Expeditionary Fraud Resident Agency’s Major Procurement Fraud Unit. The case was prosecuted by Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section, Assistant U.S. Attorney Jonathan Fahey of the Eastern District of Virginia and Assistant U.S. Attorneys Marisa Seifan and Martin Coffey of the Eastern District of New York.
Ohio Insurance Salesman Indicted for Tax Evasion Spanning More than 10 YearsRead the Press Release
A Parma, Ohio, resident was indicted by a grand jury sitting in Cleveland in the Northern District of Ohio for one count of tax evasion of payment for conduct spanning from 2001 through 2015, and five counts of failure to file federal income tax returns for tax years 2008 through 2012, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division.
According to the allegations in the indictment, John Christopher Raschella worked as an insurance salesman, and also had a degree in accounting and had previously worked as a tax return preparer. From 1989 through 2012, Raschella earned substantial income and failed to file timely federal income tax returns with the Internal Revenue Service (IRS) to report his insurance commissions as an independent contractor and other income that he earned in those years. Even after Raschella received notices from the IRS indicating that he owed taxes, he failed to pay the amounts due. From 1989 through 1991, 1993 through 1999, and 2001 through 2010, Raschella also delinquently filed tax returns on which he reported that he owed income taxes. However, even in the 1992, 2000, 2011 and 2012 tax years, Raschella failed to pay all of the taxes due and owing, and the delinquent tax returns for some of those years contained false statements about Raschella’s home address, marital status, gross receipts and business expenses.
The indictment further alleges that beginning in or around 2001, the IRS attempted to collect Raschella’s unpaid taxes by levying his bank accounts and insurance commissions. In response to these actions, Raschella took steps to obstruct the IRS’ collection efforts. He attempted to assign his insurance commissions to third parties, including nominee corporations that he established in Nevada and Utah. He also directed that his insurance commissions be deposited into the bank account of his girlfriend, and leased and purchased three luxury vehicles that he registered in nominee names. In or around 2010, Raschella caused an individual in the state of Texas to submit a fraudulent IRS Form for Release of Levy/Release of Property from Levy, to the company for which Raschella sold insurance in an effort to reduce the amount of money that the insurance company paid over to the IRS pursuant to a levy.
If convicted, Raschella faces a statutory maximum sentence of five years in prison and a $250,000 fine for the tax evasion count, and a statutory maximum sentence of one year in prison and a $100,000 fine for each count of failure to file tax returns.
Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated this case, and Trial Attorneys Melissa S. Siskind and Jeffrey A. McLellan of the Tax Division, who are prosecuting this case. Ciraolo also thanked the U.S. Attorney’s Office of the Northern District of Ohio for providing substantial assistance.
An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Justice Department Announces Two Banks Reach Resolutions under Swiss Bank ProgramRead the Press Release
Banque Pasche SA Will Pay $7.229 Million Penalty and ARVEST Privatbank AG Will Pay $1.044 Million Penalty; Both Continue to Cooperate With Department of Justice
The Department of Justice announced today that two banks, Banque Pasche SA and ARVEST Privatbank AG, have reached resolutions under the department’s Swiss Bank Program.
“Banque Pasche and ARVEST have provided detailed information regarding the ways in which Swiss banks helped U.S. taxpayers conceal foreign accounts and evade their U.S. tax obligations, including through the use of numbered and coded accounts and sham offshore entities,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “As required under the program, these banks will continue to cooperate as we aggressively pursue those individuals and the professionals who facilitated their criminal conduct.”
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
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Make a complete disclosure of their cross-border activities;
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Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
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Cooperate in treaty requests for account information;
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Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
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Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
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Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
Banque Pasche SA is headquartered in Geneva, Switzerland, and owns and controls a group of companies in various jurisdictions, including Monaco and the Bahamas. From at least August 2008 to August 2013, Banque Pasche assisted certain U.S. taxpayers in evading their U.S. taxes and filing obligations, filing false income tax returns with the IRS and hiding offshore assets from the IRS.
Banque Pasche offered a variety of traditional Swiss banking services that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS. For example, Banque Pasche offered hold mail service, as well as code name or numbered account services. These services allowed certain U.S. taxpayers to minimize the paper trail associated with their undeclared assets and income.
Banque Pasche also permitted certain U.S. taxpayers to open accounts held in the name of sham, conduit or nominee offshore structures where the U.S. taxpayer’s interest in the account was not reported to the IRS. With respect to these accounts, Banque Pasche would obtain from the entity’s directors an IRS Form W-8BEN (or equivalent bank document) that falsely declared that the beneficial owner was not a U.S. taxpayer. As of Dec. 31, 2008, Banque Pasche had U.S.-related accounts held by entities created in Panama or the British Virgin Islands with U.S. beneficial owners. The majority of these accounts had false IRS Forms W-8BEN in the file.
Banque Pasche also opened accounts for U.S. taxpayers who had left other Swiss banks that were being investigated by the department, including UBS and Credit Suisse. Banque Pasche knew or should have known that the beneficial owners of the majority of these accounts were attempting to evade U.S. tax and foreign account reporting requirements. Many of these accounts were held by Panamanian corporations with U.S. beneficial owners. Some of these accounts were managed by a particular Geneva-based attorney who held a power of attorney over them. When these accounts were subsequently closed, the assets were transferred to banks located in Israel and Hong Kong in an attempt to further escape detection from U.S. authorities.
Banque Pasche has fully cooperated with the department during its participation in the Swiss Bank Program. For example, it described in detail the structure of its business with U.S. persons, which included the policies concerning U.S. accountholders. Banque Pasche also provided the names of members of its management committee and information about its relationships with external asset managers.
Since Aug. 1, 2008, Banque Pasche had 186 U.S.-related accounts, as defined under the Swiss Bank Program, with an aggregate maximum balance of approximately $655 million. Of these 186 accounts, 110 had U.S. beneficial owners and an aggregate maximum balance of approximately $111 million. Banque Pasche will pay a penalty of $7.229 million.
ARVEST Privatbank AG was a private bank headquartered in Pfaffikon, Switzerland. It provided portfolio management and related private banking services primarily to high net worth clients. On April 15, 2015, it ceased being a licensed Swiss bank.
ARVEST opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury, as required by U.S. law. The bank helped clients set up entities, including trusts and foundations, in Liechtenstein, St. Kitts and other jurisdictions, with bank representatives serving as officers of certain of these entities, and opened ARVEST accounts in the names of these entities.
For several U.S. customers, ARVEST gave the accountholders a travel debit card, which did not have a name imprinted on the card. These cards were tied to accounts that the accountholders held in their names at a third-party Swiss Bank specializing in this service.
Since Aug. 1, 2008, ARVEST had 52 U.S.-related accounts, with a maximum aggregate asset value of over $134 million. ARVEST will pay a penalty of $1.044 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 growing number of non-prosecution agreements for the Swiss Bank Program demonstrates the DOJ and IRS resolve to make it increasingly difficult for taxpayers to leave offshore accounts undeclared,” said Deputy Commissioner Douglas O’Donnell of the IRS Large Business and International Division. “Two additional agreements by ARVEST and Banque Pasche highlight the momentum of resolving these potential criminal liabilities and eliminating institutions holding undeclared funds for U.S. account holders.”
“Today’s agreements are significant both individually and in conjunction with the previous Swiss Bank Program agreements,” said Chief Richard Weber of IRS-Criminal Investigation. “Individually, each bank agreement provides additional information to the IRS to assist us in going after illegally concealed offshore accounts and the financial professionals who helped U.S. taxpayers hide assets abroad. Collectively, the bank agreements are a testament to the progress of the Swiss Bank Program and our commitment to the ongoing work with Swiss banks still in the process.”
Acting Assistant Attorney General Ciraolo thanked the IRS, in particular, IRS-Criminal Investigation and the IRS Large Business and International Division for their substantial assistance, as well as John E. Sullivan, Thomas G. Voracek, and Brian D. Bailey, who served as counsel on these matters, Senior Litigation Counsel Nanette L. Davis, and Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer of the Tax Division.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
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Former FBI agent sentenced for obstructing justice, falsifying records, and possessing heroinRead the Press Release
PHILADELPHIA - Matthew Lowry, 33, of Upper Marlboro, Maryland, was sentenced today to 36 months in prison for tampering with substantial quantities of drug evidence while working as a Special Agent with the Federal Bureau of Investigation ("FBI"). Lowry pleaded guilty to 20 counts of obstruction of justice, 18 counts of falsification of records, 13 counts of conversion of property, and 13 counts of possession of heroin. U.S. District Court Judge Thomas F. Hogan, in the District of Columbia, also ordered 2 years of supervised release, a $15,000 fine, and a $5,425. special assessment.
Lowry was assigned to the Washington, D.C. Field Office ("WFO"), and was a member of the Cross-Border Task Force ("CBTF"). He participated in the undercover purchase of heroin and, in lieu of turning the heroin into evidence and documenting its seizure, Lowry ingested the heroin. He also tampered with heroin evidence seized during several of his investigations.
The matter was referred to the Department of Justice Office of the Inspector General, which conducted the investigation, with assistance from the Federal Bureau of Investigation as requested by the OIG. It was prosecuted by Assistant United States Attorneys Kevin R. Brenner and Maureen McCartney.
Because Lowry’s investigations, as an agent, occurred within the District of Columbia and the districts surrounding it, those offices were recused by the Department of Justice.
Attorney General Lynch Announces Federal Marriage Benefits Available to Same-Sex Couples NationwideRead the Press Release
Attorney General Lynch announced today that federal marriage benefits will be available to same-sex couples nationwide following the Supreme Court ruling in Obergefell v. Hodges:
“Following the Supreme Court’s historic decision in Obergefell that every couple has the same right to participate in the institution of marriage, whether the partners are of the same-sex or opposite sexes, I directed Justice Department staff to work with the agencies to ensure that the ruling be given full effect across the federal government. Thanks to their leadership and the quick work of the Social Security Administration and the Department of Veterans Affairs, today I am proud to announce that the critical programs for veterans and elderly and disabled Americans, which previously could not give effect to the marriages of couples living in states that did not recognize those marriages, will now provide federal recognition for all marriages nationwide. The agencies are currently working towards providing guidance to implement this change in law. Just over a year ago, Attorney General Holder announced that agencies across the federal government had implemented the Supreme Court’s Windsor decision by treating married same-sex couples the same as married opposite-sex couples to the greatest extent possible under the law as it then stood. With the Supreme Court’s new ruling that the Constitution requires marriage equality, we have now taken the further step of ensuring that all federal benefits will be available equally to married couples in all 50 states, the District of Columbia and the US Territories. The department will continue to work across the administration to fulfill our commitment to equal treatment for all Americans, including equal access to the benefits of marriage that the Obergefell decision guarantees.”
Two Northern California Real Estate Investors Plead Guilty to Bid Rigging and Fraud at Public Foreclosure AuctionsRead the Press Release
Two Northern California real estate investors pleaded guilty for their role in bid-rigging conspiracies and mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced today.
Real estate investors John Shiells, of Danville, California, and Miguel De Sanz, of San Francisco, each pleaded guilty to three counts of bid rigging and three counts of mail fraud in the U.S. District Court of the Northern District of California in Oakland, California, today. Both were charged in an indictment returned by a federal grand jury in the Northern District of California on Nov. 19, 2014.
“These defendants took turns paying others or being paid by others to not bid at foreclosure auctions, all so that the conspirators could buy properties at reduced prices,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “The defendants and their co-conspirators corrupted these auctions and deprived lenders and homeowners of auction proceeds that were rightfully theirs.”
To date, 56 individuals have pleaded guilty to criminal charges as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public foreclosure auctions in Northern California. In addition, multi-count indictments are pending against 19 real estate investors that have been charged for their roles in bid-rigging and fraud schemes at foreclosure auctions in Alameda, Contra Costa, San Mateo and San Francisco counties.
According to court documents, Shiells and De Sanz agreed not to compete to purchase selected properties at public real estate foreclosure auctions, designated which conspirator would win the selected properties and refrained from bidding on the selected properties at the public auctions. This collusion began in Alameda County as early as June 2007; in Contra Costa County as July 2008; and in San Francisco County as early as November 2008. The deals continued until approximately January 2011.
Both Shiells and De Sanz were also charged with using the mail to carry out the schemes to fraudulently acquire the titles to selected properties sold at public auctions in Alameda, Contra Costa and San Francisco counties, to make and receive payoffs and to divert money to co-conspirators that would have otherwise gone to mortgage holders and other beneficiaries.
“The FBI continues to work closely with the Antitrust Division to target those individuals who engage in fraudulent bid rigging and other anticompetitive activities at foreclosure auctions,” said Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division. “We are committed to bringing to justice those who engage in illegal and unfair practices that adversely impact legitimate home buyers and sellers.”
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for violations of the Sherman Act may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. Each count of mail fraud carries a maximum sentence of 20 years in prison and a $1 million fine.
Today’s charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda counties in California. These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Division. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300, or call the FBI tip line at 415-553-7400.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit www.StopFraud.gov.
**The fraud charge(s) referenced in this press release were subsequently dismissed on the government’s motion.**
Three Real Estate Developers Sentenced to Prison for their Roles in $27.8 Million Mortgage Fraud SchemeRead the Press Release
Three Miami real estate developers were sentenced to prison terms today for their roles in a mortgage fraud scheme that caused losses of $27.8 million.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge Nadine Gurley of the Department of Housing and Urban Development’s Office of Inspector General (HUD-OIG) and Special Agent in Charge Timothy A. Mowery of the Federal Housing Finance Agency’s Office of Inspector General (FHFA-OIG) made the announcement.
Stavroula Mendez, 68, was sentenced to 135 months in prison; Lazaro Mendez, 42, was sentenced to 108 months in prison; and Marie Mendez, 49, was sentenced to 57 months in prison. U.S. District Judge Patricia A. Seitz of the Southern District of Florida also ordered each of the defendants to forfeit $35,252,331 in fraudulent proceeds and to pay $21,240,064 in restitution. In November 2014, all three defendants were convicted of wire fraud, bank fraud and conspiracy. Eleven other co-conspirators were previously convicted of fraud in connection with the scheme.
Stavroula Mendez, Lazaro Mendez and Marie Mendez owned, controlled or managed various condominium developments in the Miami area. According to evidence presented at trial, the defendants engaged in a scheme in which they facilitated payments to straw buyers as well as the submission of false loan applications on behalf of the straw buyers to secure mortgages to purchase units in the developments. Once the units were sold, the defendants retained both the profits from the sales and control over the units.
The trial evidence showed that Lazaro Mendez recruited family members and others to be straw buyers of units that he controlled at one development and that he facilitated the submission of false loan applications. In addition, Lazaro Mendez enlisted mortgage brokers and another individual to recruit straw buyers and to assist them in obtaining fraudulent loans. Lazaro Mendez received kickbacks for each referred buyer.
The evidence at trial demonstrated that, after units were sold at a development that Stavroula Mendez and her husband controlled, Stavroula Mendez funneled a portion of the loan proceeds to shell companies to pay the straw buyers’ closing cash obligations and mortgage payments. The evidence presented at trial further established that, in 2008 and 2009, Stavroula Mendez used other shell companies to divert more than $2 million of the fraudulent proceeds to bank accounts in Switzerland and Liechtenstein.
According to the evidence presented at trial, Marie Mendez used rental payments received by the conspirators to make mortgage payments, and directed cash to another individual to make mortgage payments on behalf of straw buyers. The evidence also showed that Marie Mendez submitted fraudulent loan applications for three condominium units that were purchased in her name.
Eventually, the defendants and their co-conspirators were unable to make mortgage payments, which caused dozens of condominium units to go into foreclosure. The scheme caused the Federal Housing Administration, Freddie Mac, Fannie Mae and private lenders to sustain combined losses of $27.8 million.
The case was investigated by the HUD-OIG and the FHFA-OIG. The case was prosecuted by Trial Attorneys Gary A. Winters, Brian R. Young and Kyle Maurer of the Criminal Division’s Fraud Section.
Owner of Louisiana Automotive Businesses Pleads Guilty for Role in Stolen Identity Refund Fraud SchemeRead the Press Release
A resident of Tangipahoa Parish, Louisiana, and the owner of two automotive businesses pleaded guilty today for his involvement in a stolen identity refund fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana.
Martin Jackson Sr., 48, pleaded guilty to one count of a triple object conspiracy to defraud the United States, to commit theft of public money and mail fraud. According to court documents, Jackson conspired with at least six other individuals to use stolen identities to file false federal income tax returns that fraudulently claimed tax refunds. Jackson owns Woodscale Automotive Sales LLC and Woodscale Autobody and Mec. LLC. He used the business bank accounts as part of the scheme. Some of the co-conspirators prepared and filed the false tax returns using the stolen identity information and requested that the Internal Revenue Service (IRS) mail the refund checks to addresses in Louisiana, including to post office boxes that were opened by co-conspirators. Jackson deposited refund checks into his business bank accounts and gave cash or checks to his co-conspirators, while retaining a portion of the proceeds for himself.
Jackson is the final co-conspirator to plead guilty of the seven defendants indicted in this case. Previously, Angela Chaney, 43, Thaddeus Richardson, 50, Corey Lewis, aka Coco, 37, Craig Lewis, 40, Brad Lewis, aka Bird, 32, and Cedrick Mitchell, aka Skeet, 39, pleaded guilty. Their sentencings are scheduled in August and September.
U.S. District Court Judge Jay Zainey of the Eastern District of Louisiana set sentencing for Jackson on Oct. 6. Jackson faces a statutory maximum sentence of five years in prison and a $250,000 fine, or twice the gross gain or loss caused by the offense and restitution.
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 Trial Attorneys Hayden Brockett and Lauren Castaldi of the Tax Division and Assistant U.S. Attorney Dall Kammer of the Eastern District of Louisiana, who are prosecuting the case.
Investment Company Executives Indicted for $1.5 Billion Ponzi SchemeRead the Press Release
The president and chief executive officer and two former Asia-based executives of a Las Vegas investment company were indicted today for their roles in an alleged $1.5 billion Ponzi scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Division made the announcement.
“The defendants allegedly preyed on thousands of unsuspecting Japanese victims to enrich themselves by operating a billion-plus dollar Ponzi scheme,” said Assistant Attorney General Caldwell. “This prosecution shows that the Criminal Division will pursue not only those who victimize American citizens, but also those who use the U.S. as a home base to defraud victims abroad.”
“Investment fraud and other financial fraud cases are a high priority for the U.S. Attorney’s Office in Nevada,” said U.S. Attorney Bogden. “These defendants are accused of using a Nevada corporation to conduct their $1.5 billion fraud scheme and falsely telling thousands of overseas victims that their investments would be safely held and managed by an independent, third-party escrow agent in Nevada. Fraudulent ruses and schemes perpetrated by Nevadans using Nevada corporations and entities will continue to be addressed by this office.”
“These indictments are a reminder of the FBI’s determination to identify, investigate and bring to justice those who are committing financial crimes against innocent consumers,” said Special Agent in Charge Bucheit. “We are appreciative of the continued support we receive from our international, federal, state and local law enforcement partners.”
Edwin Fujinaga, 68, of Las Vegas; Junzo Suzuki, 66, of Tokyo; and Paul Suzuki, 36, of Tokyo, were charged in an indictment with eight counts of mail fraud and nine counts of wire fraud. Fujinaga also is charged with three counts of money laundering. The indictment seeks from all three defendants forfeiture of the proceeds from the alleged crimes.
Fujinaga was the president and CEO of Las Vegas-based MRI International Inc. (MRI). Junzo Suzuki previously was MRI’s executive vice president for Asia Pacific, and Paul Suzuki previously was the company’s general manager for Japan operations. MRI purportedly specialized in “factoring,” whereby the company purchased accounts receivable from medical providers at a discount, and then attempted to recover the entire amount, or at least more than the discounted amount, from the debtor.
According to allegations in the indictment, from at least 2009 to 2013, Fujinaga and the Suzukis fraudulently solicited investments from thousands of Japanese residents, and MRI currently owes investors over $1.5 billion. Specifically, the indictment alleges that Fujinaga and the Suzukis promised investors a series of interest payments that would accrue over the life of the investment and that would be paid out along with the face value of the investment at the conclusion of the investments’ duration. The defendants allegedly solicited investments by, among other things, promising investors that their investments would be used only for the purchase of medical accounts receivable (MARS) and by representing that investors funds would be managed and safeguarded by an independent third-party escrow company.
The indictment further alleges that MRI operated as a Ponzi scheme, wherein the defendants used new investors’ money to pay prior investors’ maturing investments. According to the indictment, the defendants also allegedly used investors’ funds for purposes other than the purchase of MARS, including paying themselves sales commissions, subsidizing gambling habits, funding personal travel by private jet, and other personal expenses.
The charges contained in an indictment are merely accusations. A defendant is presumed innocent until and unless proven guilty.
This case is being investigated by the FBI’s Las Vegas Division. Significant assistance was provided by the U.S. Securities and Exchange Commission, the Criminal Division’s Office of International Affairs and Japanese authorities. This case is being prosecuted by Assistant Chief Albert B. Stieglitz Jr. and Trial Attorney Melissa Aoyagi of the Criminal Division’s Fraud Section and First Assistant U.S. Attorney Steven W. Myhre of the District of Nevada.
If you believe you are a victim of this offense, please click on the following link for more information: justice.gov/usao-nv/united-states-v-edwin-fujinaga-junzo-suzuki-and-paul-suzuki-mri.
MRI Indictment
Former President of Townsend Controls Inc. Sentenced to Prison for Failing to Pay over $3.3 Million in Federal Employment Taxes and InterestRead the Press Release
A Burbank, Washington, businesswoman was sentenced yesterday to serve more than three years in prison following her February 2015 conviction of 10 counts of failing to pay over federal employment taxes to the Internal Revenue Service (IRS) after a five-day jury trial in U.S. District Court for the Eastern District of Washington, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Michael C. Ormsby of the Eastern District of Washington.
Maria Elizabeth Townsend, 39, was sentenced by U.S. District Court Judge Thomas O. Rice to serve 40 months in prison to be followed by three years of supervised release, and ordered to pay $3,327,124.49 in restitution to the IRS for employment taxes due and owing plus interest for her 10 counts that she was convicted of in the indictment, a $1,000 special assessment and $8,048.49 in prosecution costs. At the conclusion of yesterday’s sentencing hearing, Judge Rice remanded Townsend to the custody of the U.S. Marshals Service.
“Holding business owners accountable who willfully evade their employment tax obligations to line their own pockets is among the Tax Division’s highest priorities,” said Acting Assistant Attorney General Ciraolo. “These offenders, who not only steal from the United States, but also take advantage of honest competitors, will be prosecuted to the fullest extent of the law, and like Ms. Townsend, will face incarceration and substantial financial penalties.”
“The sentence imposed in this case reflects the seriousness of ‘white collar’ crime and that those accused of failing to pay over payroll taxes deducted from their employee’s pay checks to the IRS will be fairly and justly held accountable for their criminal conduct,” said U.S. Attorney Ormsby. “This case is yet another example of the commitment of the U.S. Attorney’s Office to prosecute aggressively fraud cases in the Eastern District of Washington. IRS-Criminal Investigation is commended for its tireless efforts in thoroughly investigating this case.”
“Employers who do not withhold employment taxes are not only cheating the government, they are cheating their own employees and creating financial problems for them,” said Chief Richard Weber of IRS-Criminal Investigation. “Ms. Townsend chose to ignore her duty to timely file and pay employment taxes and now has to pay the consequences. Investigating employment tax crimes remains one of IRS-CI’s highest priorities, keeping the playing field level for all businesses in the United States who obey the law and pay their taxes.”
According to information disclosed in court documents and at trial, Townsend was the president and majority shareholder of Townsend Controls Inc. (TCI), a Pascoelectrical contractor. Over time, TCI grew from a small company of 15 employees to more than 150 employees by 2008. The majority of TCI’s employees were members of Local 112 of the International Brotherhood of Electrical Workers Union (Local Union 112). Townsend was responsible for TCI’s operations and finances, and was required to file the Employer’s Quarterly Federal Tax Returns (IRS Forms 941) and pay over to the IRS the company’s federal income, social security and Medicare taxes, known as Federal Insurance Contribution Act (FICA) taxes, that were withheld from the wages of TCI’s employees. For 16 tax quarters, between Oct. 1, 2005, and Sept. 30, 2009, Townsend withheld $3,361,246 in federal employment taxes from the wages of Local Union 112 TCI employees, as well as TCI’s non-union employees, and failed to pay over those taxes due and owing to the IRS. In addition to failing to pay over the taxes due and owing, Townsend also did not file any Forms W-2 for her employees for 2007 and 2008 with the Social Security Administration.
Between April 2007 and September 2009, rather than pay the accumulating employment taxes due to the IRS, Townsend authorized the disbursement of more than $31 million in TCI funds to pay vendors and other business and personal expenses. Specifically, using TCI’s funds, Townsend paid TCI’s vendors and employees; paid a dividend of approximately $200,000 to one of her partners who co-signed a business loan; disbursed $300,000 towards the payment of her joint personal income tax obligations; disbursed more than $260,000 in funds to family members; and spent $22,000 to construct a pool at her residence, $30,000 to purchase a boat, $30,000 to purchase a Cadillac Escalade, $42,982 to purchase a Jeep Commander, $14,850 to purchase a timeshare at Walt Disney World and to fund various physical improvements to TCI’s headquarters.
During court proceedings, a psychiatrist for Townsend testified that she was suffering from multiple psychiatric disorders that paralyzed her when it came to being able to pay over the quarterly employment taxes to the IRS, despite receiving quarterly notices from the IRS that taxes were due and owing. At sentencing, Judge Rice credited the testimony of the psychiatrist who testified for the government and commented that in every other aspect of her life, Townsend was functioning, which included paying the company’s state tax obligations.
Acting Assistant Attorney General Ciraolo and U.S. Attorney Ormsby commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney George J.C. Jacobs III of the Eastern the District of Washington and Trial Attorney Lisa L. Bellamy of the Tax Division, who are prosecuting the case.
Former Military Contractor Sentenced to 54 Months in Prison for Paying Bribe to Army Officer During Iraq WarRead the Press Release
A former military contractor who ran two Kuwaiti companies during the Iraq War was sentenced today to 54 months in prison for paying a $15,000 bribe to a lieutenant in the Army National Guard in exchange for the award of a contract. Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania made the announcement.
George H. Lee, 71, of Philadelphia, was sentenced by U.S. District Judge Joel H. Slomsky of the Eastern District of Pennsylvania.
In connection with his guilty plea, Lee admitted that, as the president and chief executive officer of American Logistics Services (ALS), a Kuwaiti company providing supplies to the U.S. military in Iraq, he paid a $15,000 bribe to former Lieutenant Markus E. McClain in exchange for favorable official action in the awarding of an extension of a lucrative bus contract to ALS. Specifically, Lee admitted that, in August 2004, several of his employees met with former Lieutenant McClain at Camp Arifjan, Kuwait, and offered McClain $15,000 and a Rolex watch in exchange for former Lieutenant McClain’s assistance in getting the contract extension to ALS. Former Lieutenant McClain ultimately accepted the bribe payment.
During the sentencing hearing, the court also made specific findings that Lee directed the payment of over $1 million in bribes to other Army personnel.
Former Lieutenant McClain previously pleaded guilty to one count of accepting a gratuity, and will be sentenced on Oct. 23, 2015. In addition, Lee’s son, Justin Lee, previously pleaded guilty to one count of conspiracy to commit bribery and four counts of bribery for his role in the scheme, and is scheduled to be sentenced on Oct. 29, 2015.
The case is being investigated by the U.S. Army Criminal Investigation Command, the Defense Criminal Investigative Service and the U.S. Department of Homeland Security Immigration and Customs Enforcement, and previously was investigated by the Office of the Special Inspector General for Iraq Reconstruction. The case is being prosecuted by Trial Attorneys John Keller and Richard Evans of the Criminal Division’s Public Integrity Section and the U.S. Attorney’s Office of the Eastern District of Pennsylvania.
Chief Mate Sentenced to Three Months in Prison for Environmental CrimesRead the Press Release
Valerii Georgiev, 42, a Russian citizen, and the former chief mate of the ocean cargo vessel M/V Murcia Carrier, was sentenced to a term of three months prison for failing to maintain an accurate oil record book in violation of the Act to Prevent Pollution from Ships (APPS), by the Honorable Joseph Rodriguez, the Department of Justice Environment and Natural Resources Division and the U.S Attorney’s Office for the District of New Jersey announced today.
APPS requires vessels like the M/V Murcia Carrier to maintain a record known as an oil record book in which all transfers and disposals of oil-contaminated waste, including the discharge overboard of such waste, must be fully and accurately recorded.
On April 27, 2014, at the direction of Georgiev, crew members on board the M/V Murcia Carrier dumped overboard several barrels containing some hydraulic oil. While Georgiev disputes the number of barrels dumped into the sea, the government believes that approximately 20 barrels of hydraulic oil were dumped overboard. The dumping occurred in international waters off the coast of Florida while the vessel was in transit from Costa Rica to New Jersey. The dumping was not recorded in the ship’s oil record book. During the course of the Coast Guard boarding, Georgiev denied that dumping occurred and instructed crew members on board the vessel to deny that dumping had occurred.
On June 17, 2015, Norbulk Shipping UK Ltd, a company in Glasgow, United Kingdom and operator of the M/V Murcia Carrier pleaded guilty failing to maintain an accurate oil record logbook and providing false statements with respect to the vessel’s garbage record book. The company was sentenced to pay a fine of $750,000 and placed on probation for three years.
The case was investigated by U.S. Coast Guard Sector Delaware Bay and the U.S. Coast Guard Investigative Service. The case was prosecuted by Joel La Bissonniere of the Environmental Crimes Section of the Department of Justice and Assistant U.S. Attorneys Kathleen O’Leary and Matthew Smith of the U.S. Attorney’s Office of the District of New Jersey.
United States Sues Estate and Trusts of Deceased Man for False Claim to U.S. Treasury to Obtain $17.3 Million Investment in Arkansas BankRead the Press Release
The United States has sued the estate and trusts of the late Layton P. Stuart, former owner and president of One Financial Corporation, and its wholly-owned subsidiary, One Bank & Trust N.A., both based in Little Rock, Arkansas, alleging that Stuart made misrepresentations to induce the U.S. Department of the Treasury to invest $17.3 million of Troubled Asset Relief Program (TARP) funds in One Financial as part of Treasury’s Capital Purchase Program (CPP), the Justice Department announced today.
“TARP was enacted in 2008 to restore liquidity and stability to the financial system of the United States by injecting needed capital into financial institutions,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Obtaining TARP funds based on false representations to the government frustrates those goals and harms the American taxpayer.”
According to the United States’ complaint, Stuart, on behalf of One Financial, applied in late 2008 for a TARP investment totaling $17.3 million. The complaint alleges that Stuart knowingly made false statements about the financial condition of One Bank and its intentions for the use of the TARP funds. In particular, the statements and TARP application allegedly concealed serial frauds that Stuart and other One Financial directors and bank executives had been committing and intended to continue committing on One Bank. As set forth in the complaint, the schemes involved Stuart’s diversion of funds from One Bank for personal use including, within 30 days of receiving the $17.3 million in TARP funds, the diversion of more than $2 million into personal accounts for his own use. Stuart was terminated from One Bank in September 2012.
The investigation was conducted by the U.S. Treasury, Internal Revenue Service-Criminal Investigation Division, the Office of the Special Inspector General for TARP, the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the Eastern District of Arkansas. The case is captioned United States v. Estate of Layton P. Stuart, et al., No. 1:15-cv-01044-RDM (D.D.C.). The claims asserted by the government are allegations only and there has been no determination of liability.
Kentucky Doctor Sentenced to Prison for Tax Fraud for Claiming Millions in Fraudulent Business ExpensesRead the Press Release
A London, Kentucky, doctor was sentenced today to federal prison in the U.S. District Court for the Eastern District of Kentucky in London for filing false federal income tax returns that claimed millions in fictitious business expenses, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Dr. Visa Haran Sivasubramaniam, 44, was sentenced by U.S. District Judge Amul R. Thapar to serve two years in prison and one year of supervised release to be served in the county jail with work release involving providing services at a local medical clinic. At sentencing, Judge Thapar also ordered Sivasubramaniam to pay a fine of $100,000 and restitution of $4,532,777 to the Internal Revenue Service (IRS).
According to court documents, Sivasubramaniam owned and operated Hematology Oncology Physicians East (HOPE), a medical clinic where he offered oncology and hematology services. From 2007 through 2009, Sivasubramaniam earned more than $16 million in total income from HOPE. However, on his 2008 and 2009 personal and corporate income tax returns, Sivasubramaniam underreported his income and claimed millions in false and fictitious medical supply expenses. Over a three-year period, he claimed nearly $13 million in fraudulent business expenses. On Jan. 9, Sivasubramaniam pleaded guilty to two counts of filing false individual income tax returns.
Acting Assistant Attorney General Ciraolo commended special agents of IRS–Criminal Investigation, who investigated the case, and Trial Attorneys Yael T. Epstein and Thomas Voracek of the Tax Division, who are prosecuting the case.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Fulton Fish Market Dealer and President Plead Guilty in Long Island to Fraud, Falsifying Federal Records, and Lacey Act ViolationsRead the Press Release
Lou’s Fish Market Inc , a federally-licensed fish dealer located in the Bronx, New York, and its company president, Mark Parente, of Englishtown, New Jersey, pleaded guilty today in federal court in Central Islip, New York, to federal felonies stemming from their role in systematically covering up purchases of illegal fluke (summer flounder), scup and black sea bass that were being harvested in violation of the federal Research Set-Aside (RSA) Program, the Justice Department’s Environment and Natural Resources Division announced.
Parente pleaded guilty to two counts of wire fraud, one count of aiding and abetting mail fraud and one count of falsification of federal records for fraud schemes that ran from May through December 2011. Parente’s schemes involved two Long Island trawlers, one based in southern Nassau County and another in northern Suffolk County. The trawlers utilized the RSA Program as a mask for unlawful quota overages. In order to conceal the fishermen’s illicit catch, Parente directed unwitting company personnel to prepare and file at least 78 false dealer reports to the National Oceanic and Atmospheric Administration (NOAA), which omitted or misidentified approximately 203,000 pounds of fluke, 50,000 pounds of scup and 12,000 pounds of black sea bass. The wholesale value of the fish was stipulated as $481,000. Lou’s Fish Market Inc. pleaded guilty to the falsification of federal records charge as well as one count of Lacey Act False Labeling for the knowing use of false documents in connection with approximately 70,000 pounds of fluke that was shipped to interstate customers.
As part of the plea deal, the two defendants agreed to pay $932,000 in combined fines and restitution. The defendants also agreed to make a $110,000 community service payment for the enhancement of seagrass and fluke habitat around Long Island. The jointly proposed sentence includes a ban on Parente from holding a federal dealer license, accessing NOAA’s SAFIS computer system, participating in the RSA program, or being in a position to direct others to complete dealer reports. Lou’s Fish Market also agreed to increased recordkeeping and auditing requirements. The court will hear sentencing recommendations regarding non-agreed terms at a hearing set for Dec. 3, 2015.
“The Department will continue to vigorously prosecute those who jeopardize our nation’s fisheries by providing a market for illegally caught fish,” said Assistant Attorney General John C. Cruden. “In this case, the crime is all the more aggravated because the participants took advantage of a federal program designed to study fish populations and enable law-abiding fishermen to increase their catch.”
“Protecting our nation's honest fishermen is, and will always be, a top priority for NOAA. Egregious acts that undermine the sustainable management of our fisheries resources and steal from those in the industry who follow the rules will not be tolerated,” said Eileen Sobeck, Assistant Administrator for NOAA Fisheries.
The case was investigated by agents of NOAA’s National Marine Fisheries Service. The case is being prosecuted by Christopher L. Hale of the Justice Department’s Environmental Crimes Section, Environment and Natural Resources Division.
Federal Court Prohibits Three Florida Tax Preparers and Their Businesses from Preparing Tax Returns for OthersRead the Press Release
A federal court has barred three Florida men from preparing federal tax returns for others, the Justice Department announced today.
The civil injunction order, to which Geto Dorlizier, Lival Gourdet and Jourmel Thomas consented, was signed by U.S. District Judge Kenneth A. Marra of the U.S. District Court for the Southern District of Florida. The order also bars the businesses the defendants were operating — Atlantic Multi Services LLC, Authentic Financial Services LLC, and JTS Paperworks and Tax Services Inc. — from preparing federal tax returns for others.
According to the complaint, the defendants prepared federal income tax returns for customers that understated the tax that was due or overstated customers’ refunds by improperly claiming fuel tax credits, education credits and earned income tax credits. Of the returns the defendants prepared for tax years 2009 through 2012 that were examined by the Internal Revenue Service (IRS), all returns contained false or frivolous tax credits or deductions. The injunction requires the defendants to provide the government with a list of all customers for whom they have prepared federal tax returns since Jan. 1, 2009.
Dorlizier and Thomas previously were sentenced to serve 111 months in prison to be followed by three years of supervised release and 61 months in prison to be followed by three years of supervised release, respectively, following their guilty pleas to aggravated identity theft, among other crimes, for their participation in a scheme to commit stolen identity tax refund fraud. Dorlizier and Thomas obtained identifying information on individuals, filed fraudulent tax returns on their behalf, and then cashed U.S. Treasury checks they received using these stolen identities, according to the suit. As part of their plea agreements, Dorlizier and Thomas agreed to be permanently enjoined from preparing tax returns for others.
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 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 here. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.
LB&B Associates Inc. Agrees to Pay $7.8 Million for Alleged False Claims Related to Small Business Administration Set Aside ContractsRead the Press Release
LB&B Associates Inc. and its principals, Lily A. Brandon and F. Edward Brandon, have agreed to pay the government $7.8 million to resolve allegations that they made false statements to obtain contracts through the Small Business Administration’s (SBA’s) 8(a) Business Development Program for Small Disadvantaged Businesses, the Justice Department announced today. LB&B is a North Carolina corporation headquartered in Columbia, Maryland.
“The purpose of the 8(a) Program is to assist small disadvantaged businesses to compete in the American economy,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division. “The Justice Department is committed to making sure that those who participate in 8(a) contracts do so honestly and fairly.”
“The basic purpose of this federal program is undermined when contractors falsely claim to be a small or disadvantaged business,” said Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia. “This $7.8 million settlement demonstrates our commitment to protecting the integrity of this important program. Working with relators and federal investigators, we will do all that we can to act against those who illegitimately bill the American taxpayers.”
The government alleged that in seeking certification under SBA’s 8(a) Program, LB&B falsely represented that Lily Brandon – who satisfied the criteria for a socially and economically disadvantaged person under the program – controlled the operations of LB&B, when she did not. Securing 8(a) certification allowed LB&B to obtain 8(a) set aside contracts from various government agencies. Throughout the performance of these contracts, Lily Brandon allegedly failed to exercise actual control over LB&B’s operations, a key component to qualifying for the set aside contracts.
“This case shows the lengths we will go to protect the integrity of SBA’s 8(a) program,” said General Counsel Melvin F. Williams Jr. of the SBA. “Both the Justice Department and SBA are prepared to do what it takes to make certain that the program helps folks who are really disadvantaged, and for whom it is intended to assist.”
The civil settlement resolves a lawsuit filed by Steven O. Sansbury and James T. Buechler, former employees of LB&B, under the whistleblower provision of the False Claims Act, which permits private parties, known as relators, to file suit on behalf of the government for false claims and to share in any recovery. The act permits the government either to intervene in and take over the whistleblowers’ suit, or to allow the whistleblowers to pursue the action. In addition to alleging LB&B’s improper receipt of 8(a) set aside contracts, Mr. Sansbury and Mr. Buechler alleged that LB&B made false claims in connection with contracts it obtained pursuant to the SBA’s Mentor-Protégé Program, which allows participants to obtain set aside contracts following LB&B’s graduation from the 8(a) Program. The United States intervened in the whistleblowers’ 8(a) claims but not the Mentor-Protégé claims. The settlement resolves both claims, and Mr. Sansbury and Mr. Buechler will recover a total of $1.5 million of the settlement.
The settlement with LB&B was the result of a coordinated effort among the Civil Division, the U.S. Attorney’s Office of the District of Columbia, the SBA’s Office of Inspector General and SBA’s Office of General Counsel.
The civil lawsuit was filed in the District of Columbia and is captioned United States ex rel. Sansbury, et al. v. LB&B Associates, Inc., et al., No. 07-cv-00251 (D. D.C.).
The claims resolved by this settlement are allegations only, and there has been no determination of liability.
AstraZeneca and Cephalon to Pay $46.5 Million and $7.5 Million, Respectively, for Allegedly Underpaying Rebates Owed Under Medicaid Drug Rebate ProgramRead the Press Release
AstraZeneca LP has agreed to pay the United States and participating states a total of $46.5 million, plus interest, to resolve allegations that it knowingly underpaid rebates owed under the Medicaid Drug Rebate Program, the Justice Department announced today. Of that amount, AstraZeneca will pay roughly $26.7 million, plus interest, to the United States, and the remainder to states participating in the settlement.
In a separate settlement arising out of the same case, Cephalon Inc. has agreed to pay the United States and participating states a total of $7.5 million, plus interest, to resolve similar allegations. Of that amount, Cephalon will pay roughly $4.3 million, plus interest, to the United States, and the remainder to states participating in the settlement.
“The Medicaid Drug Rebate Program relies on drug manufacturers reporting accurate pricing information used in the rebate calculations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, the head of the Justice Department’s Civil Division. “These settlements demonstrate the Department of Justice’s commitment to ensuring that state Medicaid programs receive the full amount of rebates from manufacturers that Congress intended.”
“We will continue to police the pharmaceutical industry when the Medicaid program overpays for drugs,” said First Assistant U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania. “As these settlements demonstrate, it is critical for pharmaceutical manufacturers to comply with requirements of programs such as the Medicaid Drug Rebate Program to ensure that the government and the taxpayers are treated fairly in the reimbursement process.”
Pursuant to the Medicaid Drug Rebate Program, drug manufacturers are required to pay quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the manufacturers’ drugs. The quarterly rebates are based, in part, on the Average Manufacturer Prices (AMPs) that the manufacturers report to the government for each of their covered drugs. Generally, the higher the reported AMP for a drug, the greater the rebate the manufacturer pays to state Medicaid programs for the drug. These settlements resolve allegations that AstraZeneca and Cephalon underreported AMPs for a number of their drugs by improperly reducing the reported AMPs for service fees they paid to wholesalers. As a result, the government contends that AstraZeneca and Cephalon underpaid quarterly rebates owed to the states and caused the United States to be overcharged for its payments to the states for the Medicaid program.
The two settlements partially resolve a lawsuit filed 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 to share in any recovery. The amounts to be received by the whistleblower in this suit, Ronald J. Streck, a pharmacist, have not yet been determined.
These settlements illustrate the government’s emphasis on combating health care fraud and mark 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 $24.8 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.
The settlements with AstraZeneca LP and Cephalon Inc. were the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Pennsylvania and the Department of Health and Human Services-Office of Inspector General.
The lawsuit is captioned United States ex rel. Streck v. Allergan, Inc., et al., Case No. 08-cv-5135 (E.D. Pa.). The claims settled by these agreements are allegations only, and there have been no determinations of liability.
Two Louisiana Residents Plead Guilty in Stolen Identity Refund Fraud SchemeRead the Press Release
Two residents of Tangipahoa Parish, Louisiana, pleaded guilty today to multiple criminal charges for their involvement in a stolen identity tax refund fraud scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana.
At today’s plea hearing in the U.S. District Court for the Eastern District of Louisiana, Angela Chaney, 43, pleaded guilty to one count of conspiracy to defraud the United States and one count of aggravated identity theft, and Thaddeus Richardson, 50, pleaded guilty to one count of conspiracy to defraud the United States, one count of conspiracy to commit money laundering and seven counts of theft of public money.
According to court documents, Chaney and Richardson conspired with each other and others to file false federal income tax returns using stolen identities that included false claims for tax refunds. Richardson owned and operated a funeral home in Tangipahoa Parish and used the business bank account as part of the scheme. Chaney and others used individuals’ names and social security numbers to prepare false tax returns and directed the Internal Revenue Service (IRS) to mail refund checks to addresses in Louisiana, including to post office boxes opened by some of the co-conspirators. Chaney and others falsely endorsed the refund checks and then brought those checks to Richardson and others. Richardson deposited the checks into the business bank account before dividing the proceeds amongst the co-conspirators.
The defendants are scheduled to be sentenced on Oct. 6 and each faces a statutory maximum sentence of five years in prison for conspiracy to defraud the United States. Chaney also faces a mandatory minimum sentence of two years in prison for aggravated identity theft. Richardson also faces a statutory maximum sentence of 10 years in prison for each theft of public money count and 20 years in prison for conspiracy to commit money laundering. In addition to a prison sentence, the defendants face potential fines, forfeiture and restitution.
After today’s guilty pleas, six of the seven defendants charged in the indictment have pleaded guilty. Corey Lewis, aka Coco, 37; Craig Lewis, 40; Brad Lewis, aka Bird, 32; and Cedrick Mitchell, aka Skeet, 39, previously pleaded guilty to conspiracy and related charges and await their sentencing hearings scheduled in August and September. The case of Martin Jackson Sr., 48, of Tangipahoa Parish, is still pending.
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 Trial Attorneys Hayden Brockett and Lauren Castaldi of the Tax Division and Assistant U.S. Attorney Dall Kammer of the Eastern District of Louisiana, who are prosecuting the case.
Three Defendants Charged with Operating Forced Labor Scheme That Exploited Guatemalan Migrants at Ohio Egg FarmsRead the Press Release
Victims Included Minors as Young as 14 or 15 Years Old
Today, a federal court in the Northern District of Ohio unsealed a 15-count superseding indictment charging three defendants with luring Guatemalan minors and adults into the United States on false pretenses, then using threats of physical harm to compel their labor at egg farms in Ohio. The indictment was announced by Head of the CIvil Rights Division, Vanita Gupta, and U.S. Attorney Steven M. Dettelbach of the Northern District of Ohio. A fourth defendant was charged with related immigration offenses.
Aroldo Castillo-Serrano, 33, Ana Angelica Pedro Juan, 21, both of Guatemala, and Conrado Salgado Soto, 52, of Mexico, are charged with labor trafficking conspiracy. Castillo-Serrano is also charged with 10 counts of forced labor, and Salgado Soto and Pedro Juan are charged in 8 of those 10 counts. Castillo-Serrano and Salgado Soto are also charged with related immigration offenses, along with a fourth defendant, Pablo Duran Jr., 23, an American citizen.
According to the indictment, the defendants and their associates recruited workers from Guatemala, some as young as 14 or 15 years old, falsely promising them good jobs and a chance to attend school in the United States. The defendants then smuggled and transported the workers to a trailer park in Marion, Ohio, where they ordered them to live in dilapidated trailers and to work at physically demanding jobs at Trillium Farms for up to 12 hours a day. The work included cleaning chicken coops, loading and unloading crates of chickens, de-beaking chickens and vaccinating chickens.
The defendants threatened workers with physical harm and withheld their paychecks in order to compel them to work. Eight minors and two adults are identified in the indictment as victims of the forced labor scheme.
Castillo-Serrano and Pedro Juan are also charged with witness tampering, and Pedro Juan is further charged with making false statements to law enforcement.
Each of the 11 forced labor and forced labor conspiracy counts carries a statutory maximum sentence of 20 years in prison. The charges involving immigration violations, witness tampering and false statements carry statutory maximum sentences of five years in prison.
An indictment is merely an accusation, and the defendants are presumed innocent unless and until proven guilty. The investigation is ongoing.
This case is being investigated by the FBI Cleveland Office’s Mansfield Resident Agency and the Department of Homeland Security. The case is being jointly prosecuted by Trial Attorney Dana Mulhauser of the Civil Rights Division and Assistant U.S. Attorney Chelsea Rice of the Northern District of Ohio.
Swiss Bank Reaches Resolution under Justice Department's Swiss Bank ProgramRead the Press Release
The Department of Justice announced today that Privatbank Von Graffenried AG has reached a resolution under the department’s Swiss Bank Program.
The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
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Make a complete disclosure of their cross-border activities;
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Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
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Cooperate in treaty requests for account information;
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Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
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Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
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Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreement signed today, Von Graffenried 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 Von Graffenried for tax-related criminal offenses. Von Graffenried also has provided certain account information related to U.S. taxpayers that will enable the government to make requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders.
Von Graffenried is a private bank founded in 1992 and based in Bern, Switzerland. Starting in at least July 1998, Von Graffenried, through certain practices, assisted U.S. taxpayer-clients in evading their U.S. tax obligations, filing false federal tax returns with the Internal Revenue Service (IRS) and otherwise hiding assets maintained overseas from the IRS.
Von Graffenried opened and maintained undeclared accounts for U.S. taxpayers when it knew or should have known that, by doing so, it was helping these U.S. taxpayers violate their legal duties. Von Graffenried offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS. For example, Von Graffenried would hold all mail correspondence, including periodic statements and written communications for client review, thereby keeping documents reflecting the existence of the accounts outside the United States. Von Graffenried also offered numbered account services, replacing the accountholder’s identity with a number on bank statements and other documentation that was sent to the client.
In late 2008 and early 2009, Von Graffenried accepted accounts from two European nationals residing in the United States who had been forced to leave UBS and Credit Suisse, respectively. At the time it accepted the accounts, Von Graffenried knew that UBS was the target of an investigation by the Department of Justice. It also knew that both individuals had been forced to leave their respective banks because the banks were closing their accounts, and that both individuals had U.S. tax obligations and did not want the accounts disclosed to U.S. authorities. Senior management at Von Graffenried approved the opening of these accounts.
When Von Graffenried compliance personnel sought to obtain an IRS Form 8802, Application for U.S. Residency Certification, from one of the accountholders, that accountholder replied that completing the form would be problematic for him and that he believed the relationship manager knew why. The beneficial owner of the second account was referred by an external fiduciary, who handled the account at Credit Suisse. The fiduciary told a Von Graffenried relationship manager that Credit Suisse was attempting to exit its U.S. offshore clients to other banks if the clients would not sign an IRS Form W-9. The relationship manager agreed to take on the account, which was held by a Liechtenstein “stiftung,” or foundation, with the beneficial owner as the primary beneficiary and U.S. citizens as other beneficiaries.
Between July 1998 and July 2000, Von Graffenried accepted approximately two dozen accounts from a specific external asset manager. Von Graffenried was aware that the external asset manager seemed to be targeting U.S. clientele. Sixteen of the accounts were beneficially owned by individuals with U.S. tax and reporting obligations, and most of those accounts were held by U.S. citizens residing in the United States. At the time, Von Graffenried did not have a policy in place that required U.S. clients to show tax compliance. Consequently, Von Graffenried accepted these accounts without obtaining IRS Forms W-9 or assurances that the accounts were in fact tax compliant. By early 2009, Von Graffenried determined that some of the external asset manager’s accountholders likely were attempting to evade U.S. tax requirements. In 2010, Von Graffenried began to close the existing U.S.-related accounts that originated with the external asset manager. Von Graffenried did not complete the exit process for these accounts until late 2012.
Since Aug. 1, 2008, Von Graffenried held a total of 58 U.S.-related accounts with approximately $459 million in assets. Von Graffenried will pay a penalty of $287,000.
In accordance with the terms of the Swiss Bank Program, Von Graffenried 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 Von Graffenried 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 Von Graffenried must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS, and in particular, IRS-Criminal Investigation and the IRS Large Business and International Division for their substantial assistance, Kathleen E. Lyon, 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.
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Statement by Justice Department Spokesperson on Recent Church Fires Across Five StatesRead the Press Release
The following statement is attributable to Justice Department spokesperson Melanie Newman regarding recent church fires across five states:
“The federal law enforcement team of ATF, FBI, the Civil Rights Division and U.S. Attorneys’ Offices are actively investigating several church fires across five states that have occurred over the past two weeks. Preliminary investigations indicate that two of the fires were started by natural causes and one was the result of an electrical fire. All of the fires remain under active investigation and federal law enforcement continues to work to determine the cause of all of the fires. To date the investigations have not revealed any potential links between the fires.
“If in fact there is evidence to support hate crime charges in any one of these cases, the FBI, in coordination with the ATF and local authorities, will work closely with the Civil Rights Division and the U.S. Attorneys’ Offices to bring those forward.”
Statement by Attorney General Loretta E. Lynch on the Agreement in Principle with BP to Settle Civil Claims for the Deepwater Horizon Oil SpillRead the Press Release
Today, BP disclosed that it has reached agreements in principle with the United States, state, and local governments for a settlement of civil claims arising from the April 20, 2010, Deepwater Horizon oil spill in the Gulf of Mexico. The Attorney General made the following statement:
“Since the Deepwater Horizon oil spill – the largest environmental disaster in our nation’s history – the Justice Department has been fully committed to holding BP accountable, to achieving justice for the American people and to restoring the environment and the economy of the Gulf region at the expense of those responsible and not the American taxpayer. In December 2010, my predecessor, Attorney General Eric Holder, announced a civil lawsuit against BP and its co-defendants. Since that time, the Deepwater trial team has fought aggressively in federal court for an outcome that would achieve this mission, proving along the way that BP’s gross negligence resulted in the Deepwater disaster.
“Today, I am pleased to say that after productive discussions with BP over the previous several weeks, we have reached an agreement in principle that would justly and comprehensively address outstanding federal and state claims, including Clean Water Act civil penalties and natural resource damages. BP is also resolving significant economic claims with the impacted state and local governments. We will work diligently during the next several months to incorporate the agreement in principle into a consent decree, which would then undergo public comment before court approval. If approved by the court, this settlement would be the largest settlement with a single entity in American history; it would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come.
“I am so very grateful to the Deepwater civil trial team, made up of men and women from the department’s Environment and Natural Resources Division and Civil Division, as well as the incredible response, investigative and supporting efforts of the Departments of Homeland Security, Interior, Commerce and Agriculture and the Environmental Protection Agency, whose efforts have made this important step possible. I also appreciate the extraordinary effort of the many state leaders and environmental professionals who collaborated to advance this agreement in principle.”
Justice Department Settles Lawsuit Against Pima Community College for Violating the Employment Rights of Arizona Army National GuardsmanRead the Press Release
The Justice Department announced today it has reached a settlement agreement with Pima Community College (PCC) that, if approved by the U.S. District Court of the District of Arizona, will resolve allegations that PCC violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by discriminating against Army National Guardsman Timothy Stoner. USERRA prohibits employment discrimination based on a service member’s past, current or future military status, service or obligation. Stoner, a PCC police officer, is a veteran of active duty military deployments in Afghanistan and Iraq with 22 years of total military service. He is currently a Sergeant First Class in the Army National Guard.
The department’s complaint alleges that PCC violated USERRA by failing to promote Stoner to the position of police corporal in 2010 and in 2013. According to the department’s complaint, PCC created the supervisory position of police corporal in 2010. Before that position was created, Stoner was effectively performing comparable duties in his position as a lead police officer. The lead police officer assignment was abolished by PCC when it created the supervisory police corporal job. In 2010 and 2013, Stoner applied for promotion to police corporal, but both times he was not selected. As alleged in the lawsuit, Stoner’s military service was a motivating factor in PCC’s decision to deny him promotion on both occasions. As the complaint alleges, the former police chief, who was one of the selecting officials, demonstrated military animus toward Stoner by making anti-military statements to Stoner before and during the corporal selection process. Under the terms of the settlement, PCC must provide Stoner the back pay that he lost due to its failure to promote him and PCC must place him in a regular police corporal position. In addition, PCC must amend its written personnel policies to advise its employees of their rights and obligations under USERRA.
“The men and women who serve in the National Guard makes a tremendous sacrifice to protect our nation,” said Acting Associate Attorney General Stuart F. Delery. “We are dedicated to enforcing the laws ensuring that guard members do not have to sacrifice even more in their civilian careers.”
“This lawsuit and settlement reinforces the commitment of the Department of Justice to requiring employers to comply with their legal obligations under USERRA so that members of our military who sacrifice to serve this country are considered fairly for promotions and other employment opportunities,” said Vanita Gupta, Head of the Civil Rights Division. “The Department of Justice will continue to vigorously enforce USERRA so that the rights of our uniformed service members are protected from unlawful discrimination in the workplace based on their military service obligations.”
Stoner initially filed a complaint with the U.S. Labor Department’s Veterans’ Employment and Training Service, which investigated this matter and, after resolution failed, referred it to the Justice Department. The department’s Civil Rights Division, through its Employment Litigation Section, then filed suit on Stoner’s behalf. The Civil Rights Division has given a high priority to the enforcement of service members’ rights under USERRA. Additional information about USERRA can be found on the Justice Department’s websites at http://www.usdoj.gov/crt/emp and http://www.servicemembers.gov, as well as on the Labor Department’s website at http://www.dol.gov/vets/programs/userra/main.htm.
Army Sergeant Pleads Guilty to Conspiracy in Afghanistan Bribery SchemeRead the Press Release
A Fort Campbell Army Sergeant pleaded guilty today to conspiracy to commit bribery in connection with contracting for supplies while serving in Afghanistan.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney John E. Kuhn Jr. of the Western District of Kentucky, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office, Special Inspector General for Afghanistan Reconstruction John F. Sopko, Director Frank Robey of the U.S. Army Criminal Investigation Command’s (CID) Major Procurement Fraud Unit, Acting Special Agent in Charge Paul Sternal of the Defense Criminal Investigative Service’s (DCIS) Mid-Atlantic Field Office and Brigadier General Keith M. Givens, Commander of the Air Force Office of Special Investigations (OSI) made the announcement.
Ramiro Pena Jr., 43, of Fort Campbell, Kentucky, pleaded guilty before U.S. District Judge Thomas B. Russell of the Western District of Kentucky to a one-count information charging him with conspiracy to commit bribery. Pena’s sentencing hearing is scheduled for Oct. 15, 2015.
From January 2008 through September 2009, Pena worked as a U.S. Army Sergeant First Class at the Humanitarian Assistance (HA) Yard at Bagram Airfield in Afghanistan. Pena and his supervisor, Army Master Sergeant Jimmy W. Dennis, were responsible for contracting with local vendors to purchase supplies necessary to support humanitarian relief in Afghanistan. On behalf of the Army, between June 2008 and March 2009, Pena and Dennis entered into approximately 217 such contracts for approximately $30,760,255.
In connection with his guilty plea, Pena admitted that he received money and jewelry from the vendors – primarily through Dennis – in return for Pena and Dennis taking action favorable to the vendors in connection with the HA Yard contracts. Specifically, Pena admitted that he received from the vendors, through Dennis, a Rolex watch in addition to $100,000 in bribe payments, which he received in approximately six installments.
Pena admitted that he sent some of the cash to his family in Kentucky, which he dispersed throughout numerous greeting cards to avoid drawing attention to the thickness of any particular envelope. Pena also used the bribe money to pay his family’s personal expenses both in Afghanistan and in the U.S., and to purchase a Harley Davidson motorcycle.
In May 2014, Dennis pleaded guilty in the Western District of Tennessee to conspiracy to launder bribe payments. In January 2015, Dennis was sentenced to serve 41 months in prison and was ordered to forfeit $115,000.
This case was investigated by the Special Inspector General for Afghanistan Reconstruction, the FBI, CID, DCIS and OSI. This case is being prosecuted by Trial Attorney Daniel P. Butler of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Nute A. Bonner of the Western District of Kentucky.
Virginia Resident Sentenced to Prison in Connection with Lottery Scheme Based in JamaicaRead the Press Release
A Jamaican citizen residing in Virginia was sentenced to prison today for his role in an international lottery scam, the Justice Department and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) announced.
Carlos O’Brien Ricketts, 32, was sentenced by U.S. District Court Judge Michael F. Urbanski of the Western District of Virginia to serve 10 months in prison to be followed by three years of supervised release, and ordered him to pay $74,450 in restitution to his victims.
Ricketts was indicted on Nov. 6, 2014, by a federal grand jury in Harrisonburg, Virginia, in connection with a fraudulent lottery scheme based in Jamaica that induced elderly victims to send thousands of dollars to cover fees for lottery winnings that the victims had not in fact won. On March 24, Ricketts pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud.
“The masterminds of lottery fraud from Jamaica use co-conspirators in the United States not only to help collect money from innocent victims, but also to make their scheme appear less suspicious,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to prosecute those who direct or facilitate these international lottery schemes.”
As part of his guilty plea, Ricketts acknowledged that, had the case gone to trial, the government would have proved beyond a reasonable doubt that from May 2010 through April 2011, he was a middleman in the United States for a fictitious sweepstakes operating from Jamaica. According to the indictment, a co-conspirator induced elderly victims in the United States to send thousands of dollars to Ricketts to cover fees for purported lottery winnings that, in fact, the victims had not won.
This case is part of the government’s crackdown on international fraudulent lottery schemes that target elderly individuals in the United States. The indictment alleged that the co-conspirator instructed the victims to send their payments to Ricketts in the form of cash and checks via mail and as wire transfers.
As part of his guilty plea, Ricketts acknowledged that, had the case gone to trial, the government would have proved beyond a reasonable doubt that he received payments at his home address in Stephens City, Virginia, and at another address in Winchester, Virginia, sometimes using his own name and at other times used the name “Kevin Brown” to receive the money. Ricketts further acknowledged that had the case gone to trial, the government would have proved that he kept part of the money for himself and then sent the remainder of the money in wire transfers to Jamaica, sometimes using the “Kevin Brown” name and addresses other than his own in order to evade detection.
“Fraud schemes like this one that prey on senior citizens will not be tolerated,” said Acting U.S. Attorney Anthony P. Giorno of the Western District of Virginia. “Our office will provide whatever resources and assistance may be required in order to identify and bring these criminals to justice.”
“Homeland Security Investigations is committed to disrupting and combatting these international lottery schemes,” said Special Agent in Charge Clark E. Settles of HSI Washington, D.C., which oversees the agency’s Harrisonburg office. “While fraudulent schemes of any kind are despicable, targeting vulnerable populations is especially depraved and will not be tolerated.”
Principal Deputy Assistant Attorney General Mizer and Acting U.S. Attorney Giorno commended HSI’s investigative efforts. The case was prosecuted by Trial Attorney Kathryn Drenning of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Grayson Hoffman of the Western District of Virginia.
Readout of Attorney General Lynch's Visits to Raleigh-Durham, North CarolinaRead the Press Release
On her first official visit to her home state of North Carolina, Attorney General Loretta E. Lynch traveled today to Durham and Raleigh to attend meetings with civil rights leaders and individuals combatting human trafficking.
In Durham, the Attorney General held a civil rights roundtable meeting with law enforcement, local officials, community leaders, students and faith leaders. The topics discussed at the roundtable, which was held at the North Carolina Central University the School of Law, included hate crimes, voting rights and community-police relations.
During the roundtable, the Attorney General noted recent events in the South have brought back painful memories of the past for many.
“These are in fact challenging times as we all know,” the Attorney General told those assembled. “You’ve alluded to the recent events that have traumatized many of our houses of worship. There have also been events traumatizing many of our individuals of color. Also, of course, the events just a few weeks ago in Charleston highlight days that I think many of us thought were behind us.”
The Attorney General also noted that the Justice Department continues to investigate the heartbreaking church shooting in Charleston, reiterating that the investigation will explore “all angles, be it hate crime or domestic terrorism.”
She also spoke about the recent spate of church fires in southern states, saying that the department does not yet have all the details but that those incidents “have our full attention.”
“This is a serious issue that we will be addressing with the appropriate care and we will see where those matters lead us,” she said.
The Attorney General also emphasized her commitment to pursuing the justice in the face of hate crimes and civil rights abuses.
“While we cannot guarantee the absence of hate, we can guarantee the presence of justice. We could do that. And I am committed, as Attorney General, to making good on that guarantee,” the Attorney General said. “And I know that everyone in this room has spent most of their lives working towards living up to that guarantee and I’m so happy to count you as partners in this fight because it’s a fight that will cover all types of issues -- the traditional ones that we’ve seen here as well as the new threats that our newest citizens face, all of the things that make this country great. Sometimes people are looking to push back on that. But I want you to know that the Department of Justice and this Attorney General is committed to working with you in this fight.”
While in Raleigh, the Attorney General met with the North Carolina Coalition Against Human Trafficking and lauded their “cooperative and innovative approach,” including their efforts to bring together state and local leaders, law enforcement officials and legal and social service organizations. She highlighted the importance of having law enforcement team up with direct service agencies and first responders as a way to ensure that traffickers are brought to justice and survivors receive the support they need.
“One of my top priorities as Attorney General is to bring human traffickers to justice, assist trafficking survivors and secure the rights and dignity of anyone unable to do so for themselves,” the Attorney General said. “But as the people in this room are all too aware, responding to a crime as complex and as devastating as human trafficking is neither easy nor straightforward. Such crimes must be fought persistently and aggressively, while drawing on ingenuity and collaboration across many disciplines, organizations and professions.”
The Attorney General also praised the work of U.S. Attorney Thomas G. Walker of the Eastern District of North Carolina and U.S. Attorney Ripley Rand of the Middle District of North Carolina, whose offices have had recent successes in holding traffickers accountable. The Attorney General highlighted the Justice Department’s recent announcement on the success of an interagency Anti-Trafficking Coordination Team Initiative – or ACTeam Initiative – and the expansion of those efforts to other parts of the country.
The Attorney General also met with local officers from the Durham Police Department to thank them for their service and for being on the front lines to advance public safety. The Attorney General also stressed the importance of improving relationships, trust and respect between law enforcement and the communities they serve.
The Attorney General was joined on her visits in Durham and Raleigh by U.S. Attorney Walker and U.S. Attorney Rand.
Participants in the Durham civil rights roundtable included:
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Attorney General Loretta E. Lynch, Office of the Attorney General
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U.S. Attorney Thomas G. Walker, United States Attorney’s Office for the Eastern District of North Carolina
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Mayor William “Bill” Bell, City of Durham
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U.S. Representative G.K. Butterfield
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District Liaison Sonia Price, Office of U.S. Representative David Price
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Professor James Coleman, Duke Law School
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Chancellor Debra Saunders-White, North Carolina Central University
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Dean Phyliss Craig Taylor, North Carolina Central University School of Law
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Professor Irving Joyner, North Carolina Central School of Law
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President Everett Ward, St. Augustine’s University
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President-Elect Tashni Dubroy, Shaw University
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Chief Cassandra Deck-Brown, Raleigh Police Department
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Chief Jose Lopez, Durham Police Department
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Chief Chris Blue, Chapel Hill Police
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Reverend Lorenzo Lynch
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Reverend Marion Robinson, St. Matthews AME Church
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Reverend Earl Johnson, President, Raleigh-Wake Citizens Association; Martin Street Baptist Church
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Reverend Nancy Petty, Pullen Memorial Baptist Church
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Reverend Paul Anderson, President of Raleigh Ministerial Alliance
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Reverend William Everett, President of Interdenominational Ministers Alliance of Durham
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Imam Adeel Zeb, Director of Muslim Life at Duke University
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Imam Oliver Mohammed, Chaplain at Butner Federal Correctional Complex and As Salaam Islamic Center
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Zainab Baloch, North Carolina State Muslim Association
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Hamzu Butler, UNC-Chapel Hill Muslim Association
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Rabbi Lucy Dinner, Temple Beth Or
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Rabbi Larry Bach, Judea Reform Congregation
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Bhupinder Singh, Sihk Gurdwara of North Carolina
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President William Barber, North Carolina NAACP
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President Fred Foster, North Carolina NAACP (Durham)
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President Ralph Hunt Sr., Durham Committee on the Affairs of Black People
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Chris Sgro, Executive Director of Equality NC
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Helena Cragg, LGBT Center of Durham
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Civic Engagement Manager Juliana Cabrales, National Association of Latino Elected and Appointed Officials
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Executive Director Angeline Echevarria, El Pueblo Inc.
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President Pilar Rocha-Goldberg, El Centro Hispano
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Janice McKenzie Cole, Cole Immigration Law Center
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Justice Department Files Antitrust Lawsuit to Stop Electrolux from Buying General Electric's Appliance BusinessRead the Press Release
The Department of Justice filed a civil antitrust lawsuit today seeking to block the acquisition of General Electric Company’s appliance business by AB Electrolux and Electrolux North America Inc., whose brands include Frigidaire. The department said that the $3.3 billion acquisition would combine two of the leading manufacturers of ranges, cooktops and wall ovens sold in the United States, eliminating competition that has benefited American consumers through lower prices and more options. According to the department’s complaint, purchasers in the United States spent over $4 billion on these major cooking appliances in 2014.
“Electrolux’s proposed acquisition of General Electric’s appliance business would leave millions of Americans vulnerable to price increases for ranges, cooktops and wall ovens, products that serve an important role in family life and represent large purchases for many households,” said Deputy Assistant Attorney General Leslie C. Overton of the Justice Department’s Antitrust Division. “This lawsuit also seeks to prevent a duopoly in the sale of these major cooking appliances to builders and other commercial purchasers, who often pass on price increases to home buyers or renters.”
The Antitrust Division’s lawsuit, which seeks to prevent the companies from merging and to preserve their existing head-to-head competition, was filed in the U.S. District Court for the District of Columbia.
Electrolux North America Inc. is an Ohio corporation headquartered in Charlotte, North Carolina. Electrolux North America Inc. makes and sells major appliances, including those under the brand names Frigidaire, Tappan and Electrolux. Electrolux’s annual major-appliance sales in the United States total approximately $2.6 billion. Electrolux North America Inc. is a wholly owned subsidiary of defendant AB Electrolux.
General Electric Company is a New York corporation headquartered in Fairfield, Connecticut. General Electric’s appliance business is based in Louisville, Kentucky. It makes and sells major appliances, including those under the brand names GE Monogram, GE Café, GE Profile, GE, GE Artistry and Hotpoint. In the United States, General Electric’s annual major appliance sales total approximately $3.4 billion.
Four Individuals Charged for Importing and Trafficking Counterfeit Apple and Sony Technology into the United StatesRead the Press Release
Four individuals were arraigned today in Newark, New Jersey, based on charges for allegedly smuggling counterfeit Sony Camcorders, Apple iPhones, iPads and iPods, from China for sale in the United States, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Paul Fishman of the District of New Jersey, Acting Special Agent in Charge Kevin Kelly of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) in Newark and Bergen County Prosecutor John Molinelli.
Andreina Becerra, 30, a Venezuelan national, and Roberto Volpe, 33, an Italian national, both residing in Miami; Jianhua Li, 40, a Chinese national and resident of Guangzhou, China; and Rosario La Marca, 52, an Italian national and resident of Italy, are charged in an eight-count indictment with importing and trafficking fake iPhones, iPads and iPods bearing counterfeit Apple trademarks and fake Camcorders bearing counterfeit Sony trademarks, as well as smuggling, structuring and international money laundering.
The defendants were arrested last week in a coordinated multi-district effort by HSI in Los Angeles, Miami and Newark. The defendants were arraigned this afternoon before U.S. District Judge Kevin McNulty of the District of New Jersey.
According to the allegations in the indictment, from July 2009 through February 2014, the defendants conspired to smuggle into the United States from China over 40,000 electronic devices and accessories, including fake iPads, iPhones and iPods, along with labels and packaging, most bearing counterfeit Apple trademarks. The indictment alleges that the estimated manufacturers’ suggested retail prices for an equivalent number of genuine items would have exceeded $15 million.
The indictment alleges that, to avoid detection by U.S. Customs officials, the devices often were shipped separately from the labels bearing counterfeit trademarks, and then were labeled and packaged after they passed through U.S. Customs and Border Protection. According to the indictment, the defendants then re-shipped the devices throughout the United States to co-conspirators. According to the indictment, proceeds from the sales of the devices were funneled back to the defendants’ accounts in Florida and New Jersey via structured cash deposits – broken into multiple deposits of less than $10,000 each to avoid bank reporting requirements. The indictment further alleges that a portion of the proceeds was then transferred to co-conspirators in Italy, further disguising the source of the funds. According to the indictment, the defendants made more than 100 illegal wire transfers totaling over $1.1 million to Li’s Hong Kong accounts to facilitate their criminal activity.
The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
This case was investigated by the HSI Newark Seaport Investigations Group and the Bergen County Prosecutor’s Office White Collar Crimes Squad, with significant assistance from Europol and Italian law enforcement authorities. The case is being prosecuted by Senior Counsel Evan Williams and Rudy Orjales of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorneys Leslie Schwartz and Sarah Devlin of the District of New Jersey.
The enforcement action announced today is one of many efforts being undertaken by the Department of Justice Task Force on Intellectual Property (IP Task Force). The IP Task Force supports prosecution priorities, promotes innovation through heightened civil enforcement, enhances coordination among federal, state, and local law enforcement partners, and focuses on international enforcement efforts, including reinforcing relationships with key foreign partners and U.S. industry leaders. To learn more about the IP Task Force, go to www.justice.gov/dag/iptaskforce/.
Becerra et al Indictment