District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
Michigan Ferrari Mechanic Convicted of Tax FraudRead the Press Release
A Smiths Creek, Michigan, resident who specialized in repairing classic and rare cars was convicted today by a federal jury in the Eastern District of Michigan of one count of tax evasion and four counts of failure to file income tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
According to the evidence presented at trial, the Internal Revenue Service (IRS) assessed Terry Myr approximately $195,000 in taxes, interest and penalties for his failure to report all of his income for the years 2000 through 2003. Myr willfully evaded payment of this tax assessment. To prevent the IRS from collecting the taxes that he owed, Myr transferred property that he owned to a third party, used nominee companies to conceal his income and assets and otherwise dealt in cash. In addition, in 2009, Myr sold a rare Ferrari car engine for $610,000 and attempted to hide the proceeds. The evidence established that although Myr was required to file individual federal income tax returns, he had not filed a tax return or paid federal income taxes since 2001.
Myr 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 of the four failure to file counts. Myr’s sentencing is scheduled for Aug. 25, before U.S. District Court Judge Nancy Edmunds.
Acting Assistant Attorney General Ciraolo commended the special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Tiwana Wright and Kenneth Vert of the Tax Division, who are prosecuting the case. Ciraolo also thanked the U.S. Attorney’s Office of the Eastern District of Michigan for their substantial assistance.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Justice Department, EPA and State of California Require Lehigh Cement to Cut Toxic Discharges to San Francisco BayRead the Press Release
Today, the Department of Justice, the Environmental Protection Agency (EPA) and the state of California announced a settlement requiring the Lehigh cement plant near Cupertino, California, to reduce toxic discharges of selenium and other metals to Permanente Creek, a tributary of San Francisco Bay. The company, owned by Hanson Permanente Cement Inc. and operated by Lehigh Southwest Cement Co., will spend more than $5 million to install wastewater treatment and make other facility improvements to prevent future violations. The company will also pay $2.55 million in civil penalties to settle the case.
The settlement addresses Lehigh’s and Hanson’s violations of the Clean Water Act. The Cupertino facility routinely discharged excessive selenium into Permanente Creek in violation of Lehigh’s permits from at least 2009 to 2014. The plant’s discharges also routinely exceeded standards for total suspended solids, total dissolved solids, turbidity, and pH and in some cases exceeded standards for mercury, hexavalent chromium, nickel and thallium.
“Today’s Clean Water Act settlement, done jointly with the state of California, will remove selenium and other toxic substances from Permanente Creek and help protect the fragile and life-sustaining ecosystem of San Francisco Bay,” said Assistant Attorney General John C. Cruden of the Justice Department’s Environment and Natural Resources Division. “By bringing this older facility up to contemporary standards, and by pushing it to introduce cutting-edge treatment technology, the Department of Justice and our partners are helping create a level playing field, where all industry members are held to the same standards and no company can gain an economic advantage over its competitors by shortchanging environmental compliance.”
“EPA and California are working together to enforce the Clean Water Act and help restore San Francisco Bay,” said Regional Administrator Jared Blumenfeld for EPA for the Pacific Southwest. “Every action we take to remove selenium and other toxic metals improves water quality and leads to a healthier and more resilient Bay.”
“Lehigh Cement discharged millions of gallons of industrial wastewater that flowed into the San Francisco Bay,” said Attorney General Kamala D. Harris for California. “This settlement holds Lehigh Cement accountable for its actions and will prevent future toxic discharges. I thank our state and federal partners for their work to protect this precious resource and consumers from the serious environmental and health damage caused by water pollution.”
“This settlement will result in important reductions in pollutant discharges, in facility upgrades, and in improvements to help protect and restore water quality in Permanente Creek and San Francisco Bay,” said Executive Officer Bruce Wolfe for the San Francisco Bay Regional Water Board. “We will continue our multiagency efforts to regulate all water quality aspects of this facility, including installation of the full-scale wastewater treatment system, restoration of stream habitat and control of stormwater runoff.”
Since at least 2009 to 2014, the limestone mine and cement plant discharged millions of gallons daily of quarry process water and stormwater polluted with thousands of pounds of sediment and hundreds of pounds of selenium and other toxic metals, to Permanente Creek, in violation of the federal Clean Water Act. The settlement requires Lehigh to construct an advanced wastewater treatment system to significantly reduce its selenium and other metals discharges. Lehigh already installed an interim treatment system and a permanent system will be completed by 2017. Lehigh will make other facility improvements to remove sediment from its stormwater runoff, spending more than $5 million overall to come into compliance.
Selenium is a naturally occurring element in limestone and other rock formations. When discharged at high concentrations to waterways, selenium becomes toxic to fish and other aquatic life and to birds and other animals that consume selenium-contaminated aquatic organisms. Permanente Creek, to which the Lehigh cement facility discharges, is listed as “impaired” for selenium under the Clean Water Act. Permanente Creek provides important habitat for red-legged frogs, a species listed as threatened under the Endangered Species Act.
The proposed Clean Water Act settlement, subject to a 30-day public comment period and court approval, is available at: www.justice.gov/enrd/Consent_Decrees.html
For more information about the investigation and settlement, including photos, visit: http://www.epa.gov/region9/mediacenter/lehigh/
Learn more about EPA’s work to restore San Francisco Bay: www2.epa.gov/sfbay-delta/
More information about the San Francisco Bay Regional Water Board’s permits and enforcement actions is available at: www.waterboards.ca.gov/sanfranciscobay/water_issues/hot_topics/lehigh.shtml
Black & Decker Agrees to Pay $1.575 Million for Delay in Reporting Hazards in Cordless Electric LawnmowersRead the Press Release
The Department of Justice and the Consumer Product Safety Commission (CPSC) jointly announced today that Black & Decker (United States) Inc. has agreed to pay a $1.575 million penalty to settle allegations that it knowingly violated the reporting requirements of the Consumer Product Safety Act (CPSA) with respect to cordless electric lawnmowers that started spontaneously and that continued to operate after consumers released the lawnmower handles and removed the safety keys. Black & Decker has also agreed to establish and maintain a compliance program with internal recordkeeping and monitoring systems to keep track of information about product safety hazards. The settlement agreement is awaiting judicial approval.
Black & Decker has previously paid four civil penalties relating to Black & Decker’s untimely reporting of defects and risks presented by other Black & Decker products.
“Not for the first time, Black & Decker held back critical information from the public about the safety of one of its products,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “The Department of Justice will continue to protect the public against companies that put profits over safety.”
“Black & Decker’s persistent inability to follow these vital product safety reporting laws calls into question their commitment to the safety of their customers,” said Chairman Elliot F. Kaye of the CPSC. “They have a lot of work to do to earn back the public’s trust. Companies are required to report potential product hazards and risks to CPSC on a timely basis. That means within 24 hours, not months or years as in Black & Decker’s case.”
The complaint relates to cordless lawnmowers manufactured and sold by Black & Decker from 1995 to 2006. According to the complaint, in as early as November 1998, Black & Decker started receiving reports that its cordless electric lawnmowers continued to run even after a user released the lawnmower’s handle and removed the safety key, referred to as a continuous-run defect. A second defect involved lawnmowers that unexpectedly started even though the handle was released and the safety key removed, referred to as a spontaneous ignition defect.
The United States alleged that between 1998 and 2009, Black & Decker received more than 100 complaints regarding the continuous-run or spontaneous ignition defects. Dozens of these complaints specifically reported that the lawnmower continued to run or exhibited spontaneous ignition after the lawnmower’s handle was released and the safety key was removed. The United States further alleged that, after consulting an outside expert, the company knew in 2004 that the lawnmowers could continue to run even if a user released the handle and removed the safety key. Despite knowledge of all of this information, Black & Decker failed to report to the CPSC until early 2009, even though federal law requires “immediate reporting.”
The complaint further notes that at least two consumers informed Black & Decker that the lawnmower’s blades started unexpectedly while the consumer cleaned them, resulting in injury. The complaint states that in one case, the lawnmower continued to run, with the handle released and without the safety key, for several hours while the consumer sought treatment in a hospital emergency room for injury to the consumer’s hand, and after fire department personnel arrived and removed the blade.
In addition to the civil penalty, Black & Decker agreed to be bound by a consent decree of permanent injunction that prohibits the company from committing future violations of the CPSA. The consent decree requires that Black & Decker continue to implement and maintain a robust compliance program that ensures timely, truthful, complete and accurate reporting to the CPSC as required by law. In addition Black & Decker is subject to liquidated damages for each day the company is not in compliance with the consent decree.
The government is represented by former Trial Attorney Dan Baeza of the Civil Division’s Consumer Protection Branch, with the assistance of Patricia Vieira of the CPSC’s Office of the General Counsel.
In agreeing to settle this matter, Black & Decker has not admitted that it knowingly violated the CPSA.
Yamada Manufacturing Co. Agrees to Plead Guilty to Price Fixing and Bid Rigging on Automobile Parts Installed in U.S. CarsRead the Press Release
Yamada Manufacturing Co. Ltd. has agreed to plead guilty and to pay a $2.5 million criminal fine for its role in a conspiracy to fix prices and rig bids for manual (non-electric or non-hydraulic-powered) steering columns installed in cars sold in the United States and elsewhere, the Department of Justice announced today.
According to a one-count felony charge filed today in U.S. District Court of the Southern District of Ohio in Cincinnati, Yamada Manufacturing, based in Kiryu City, Gunma Prefecture, Japan, conspired to rig bids and fix prices of steering columns sold to certain subsidiaries of Honda Motor Co. Ltd. in the United States and elsewhere. According to the charge, Yamada carried out the conspiracy from at least as early as the fall of 2007 and continuing until as late as September 2012. Yamada Manufacturing has agreed to cooperate in the department’s ongoing investigation. The plea agreement is subject to court approval.
“Yamada’s collusion deprived Honda and its U.S. customers the benefits of freely set prices for manual steering columns, a simple but necessary auto part,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “Companies that conspire to undermine competition and harm U.S. consumers will continue to be held accountable for their crimes.”
According to the charge, Yamada Manufacturing, and others participating in the scheme, conspired through a meeting and conversations in which they discussed and agreed upon bids and price quotations to be submitted to Honda. Based on those discussions, Yamada Manufacturing and its co-conspirators sold steering columns to Honda at collusive and non-competitive prices and employed measures to keep their conduct secret.
Including Yamada Manufacturing, 35 companies and 29 executives have pleaded guilty or agreed to plead guilty in the division’s ongoing investigation into price fixing and bid rigging in the auto parts industry and have agreed to pay a total of more than $2.5 billion in criminal fines.
Yamada Manufacturing is charged with one count of price fixing and bid rigging in violation of the Sherman Act, which carries maximum penalties of a $100 million criminal fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
The charges are the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s criminal enforcement sections and the FBI. Today’s charges were brought by the Antitrust Division’s Chicago Office and the FBI’s Cincinnati Field Office with assistance from the U.S. Attorney’s Office for the Southern District of Ohio. Anyone with information on price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258, visit www.justice.gov/atr/contact/newcase.html, or call the FBI’s Cincinnati Field Office at 513-421-4310.
Yamada Information
Statement by Attorney General Lynch on Supreme Court Arguments on Same-Sex MarriageRead the Press Release
Attorney General Loretta Lynch released the following statement regarding arguments before the U.S. Supreme Court on same-sex marriage:
“I am committed – as is this department – to ensuring equal dignity and equal treatment for all members of society, regardless of sexual orientation. As we argued today before the Supreme Court, same-sex couples deserve that treatment now. ”
Rhode Island Real Estate Businessman Sentenced to Prison for Tax FraudRead the Press Release
A Cranston, Rhode Island, man was sentenced today to prison for tax fraud in the District of Rhode Island, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
John Fall was sentenced by U.S. District Judge John J. McConnell to serve 30 months in prison and three years of supervised release. On Jan. 26, after a federal jury trial in Providence, Rhode Island, Fall was convicted of one count of corruptly endeavoring to obstruct and impede the IRS, one count of tax evasion and two counts of aiding and assisting in the preparation and filing of false corporate tax returns.
According to the evidence presented at trial, Fall was a real estate consultant who bought, sold and brokered real estate. Fall also participated in handling the financial affairs of his wife and her businesses, including her dental practice, Comfort Dental Inc., and Broad Street Investments. Between 1999 and 2010, Fall used numerous nominee entities and business names to conceal his business and financial transactions. Fall also concealed his transactions using multiple bank accounts, including commingled or “warehouse” bank accounts in at least six states, as well as the entities Comfort Dental and Broad Street Investments. To further disguise business and financial transactions, Fall used aliases to conceal his ownership and control over his nominee entities. Fall filed false federal income tax returns for 1998 and 1999, and failed to file tax returns for the tax years 2000 through 2010. The IRS audited Fall for tax years 1998 through 2000, and assessed taxes due and owing totaling approximately $72,000.
Fall also caused the filing of false tax returns on behalf of Comfort Dental for the years 2005 through 2007. Fall caused his wife’s businesses to make payments to various entities that he controlled, which were falsely recorded on the corporate tax returns as deductible business expenses. When Comfort Dental and Fall’s wife were audited by the IRS in late 2008, Fall attempted to obstruct the audit by attempting to obstruct his wife’s compliance with an IRS summons and by encouraging his wife’s accountant to not provide the IRS with information requested. Instead, Fall provided false and fraudulent information and documentation to the IRS concerning the nature of the payments by Comfort Dental and Broad Street Investments to his various entities.
Acting Assistant Attorney General Ciraolo commended the special agents of IRS – Criminal Investigation, who investigated the case. Ciraolo also thanked Assistant Chief John Kane and Trial Attorney Jeffrey Bender of the Tax Division, who prosecuted the case, and the U.S. Attorney’s Office of the District of Rhode Island for their substantial assistance.
Additional information about the Tax Division and its enforcement efforts may be found at the division website.
Readout of Justice Department Officials' Visit in BaltimoreRead the Press Release
The Department of Justice released the following readout of meetings attended by senior department officials to address the ongoing situation in Baltimore:
At the direction of Attorney General Loretta Lynch, the head of the Civil Rights Division, Vanita Gupta, the director of the Community Oriented Policing Services (COPS) office, Ron Davis, and the head of the Community Relations Services (CRS) office, Grande Lum, participated in several meetings today with city leadership, law enforcement, faith leaders, young people and members of the community to discuss the unrest in Baltimore following the death of Freddie Gray. Department officials reiterated their offer to the city to provide federal resources, such as technical assistance to the Baltimore Police Department. Department officials also reaffirmed their commitment to expeditiously and thoroughly carryout the ongoing, independent civil rights investigation into the death of Mr. Gray.
The COPS office assured law enforcement and the community members that the Collaborative Reform Review into the Baltimore Police Department will continue and that the department plans to announce their initial report in the coming weeks. COPS encouraged faith leaders and members of the community who attended the meetings to participate in the Collaborative Reform Initiative and share their stories and provide information that may be useful to the team leading the review. Department officials heard from residents about concerns regarding the Baltimore Police Department and the lack of trust that they feel exists between the police and community.
CRS shared that their conciliators have been on the ground in Baltimore since Thursday and will continue to bring in staff as necessary to help open lines of communication within the community and between the community and local officials.
The department officials thanked community members that have been engaged in constructive discussions, discouraging violence and encouraging peaceful demonstrations. The department officials met with the officer who is still hospitalized after being injured during the violence on Monday afternoon and reiterated that officer safety must remain a priority. Department officials also met with the family of Mr. Gray and expressed their condolences on behalf of the department.
The department officials provided continuous updates throughout the day to Attorney General Lynch and her closest advisors.
Justice Department and the Los Angeles County Sheriff's Department Agree to Policing Reforms and Settlement of Police-Related Fair Housing Claims in the Antelope ValleyRead the Press Release
The Justice Department today announced a comprehensive settlement agreement with the Los Angeles County Sheriff’s Department (LASD) that will support wide-ranging reforms in LASD’s Antelope Valley stations in the cities of Lancaster and Palmdale. The Justice Department and the county of Los Angeles have agreed to enter into a court-enforceable settlement agreement that will require reforms to LASD’s data collection, training and accountability systems to improve the quality and effectiveness of LASD’s interactions with Antelope Valley residents, and reduce bias in its practices. The settlement agreement also provides for a monetary fund of $700,000 to compensate persons harmed by LASD’s alleged violation of the Fair Housing Act, and a civil penalty of $25,000 to the United States.
The agreement follows the department’s issuing of a findings letter in June 2013 following an investigation which began in August 2011. Sheriff Jim McDonnell, his predecessors and Housing Authority of the County of Los Angeles Executive Director Sean Rogan were all cooperative throughout the investigation and began working with the department to negotiate a remedy to the problems revealed by the investigation.
This settlement resolves claims from the department's investigation which found patterns of excessive use of force, biased policing practices, including housing discrimination, and unlawful searches and seizures. LASD has already begun to implement many of the negotiated reforms under the leadership of Sheriff Jim McDonnell. The Justice Department and the county filed the settlement agreement with the United States District Court for approval and entry as an order.
“Constitutional policing and effective policing go hand in hand,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “We are confident that this settlement represents a commitment by the Los Angeles County Sheriff’s Department to respect the rights of residents and promote mutual confidence between law enforcement and the community. This agreement puts in place a structure that will foster lawful, bias-free policing in the Antelope Valley, and ensures compensation for persons harmed by past unlawful conduct. We look forward to continuing our positive partnership with the Los Angeles Sheriff’s Department to implement the terms of this settlement agreement and to help restore the community’s confidence in fair, equitable, and effective law enforcement.”
The investigation was brought pursuant to the Violent Crime Control and Law Enforcement Act of 1994, Title VI of the Civil Rights Act of 1964 and the Fair Housing Act. The investigation concluded that there was reasonable cause to believe that deputies engaged in a pattern or practice of misconduct in violation of the Constitution and federal law. The findings, which were announced in June 2013, include:
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Pedestrian and vehicle stops that violated the Fourth Amendment;
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Stops that appeared motivated by racial bias, in violation of the Fourteenth Amendment and federal statutory law;
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The use of unreasonable force in violation of the Fourth Amendment; and
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A pattern of intimidation and harassment by LASD deputies against African-Americans who held Section 8 housing choice vouchers. The goal of that intimidation and harassment, which violated the Fair Housing Act, was to terminate African-American voucher holders from the Section 8 program and to pressure them to move out of the Antelope Valley.
Under the settlement agreement, LASD has agreed to implement comprehensive reforms to ensure lawful policing and restore public trust. An independent monitoring team will oversee the reforms, which LASD intends to implement within four years. In addition, the monitoring team will provide technical assistance and publicly report on the LASD’s compliance efforts. The settlement agreement provides for a $700,000 fund to compensate persons harmed by LASD’s alleged violation of the Fair Housing Act, and a $25,000 civil penalty to the United States. The areas covered by the settlement agreement include:
- Stops, searches and seizures: measures to improve collection and analysis of policing data to identify instances and patterns of unlawful police-civilian contact, such as stops without adequate legal justification;
- Bias-free policing: improved training and supervisory review to prevent and identify biased or discriminatory conduct;
- Use of force: measures to improve the quality of use-of-force investigations and develop a better means to detect and correct problematic force patterns and trends;
- Policies and training: revised policies on use of force, preventing retaliation, supporting officers who report misconduct, and improving the field training program to ensure that officers develop the necessary technical and practical skills required to use force in a lawful and effective manner, with an emphasis on de-escalation and use of the minimal amount of force necessary;
- Internal and civilian complaint investigations: including standards for conducting objective, thorough and timely investigations;
- Supervision: including holding supervisors accountable for close and effective supervision; and providing guidance on effective accountability systems to improve public trust;
- Housing: measures to ensure proper limits on deputy involvement in searches of Section 8 voucher holders’ homes for compliance with program rules; and
- Community engagement: including measures to strengthen civilian involvement and feedback in setting policing priorities; public information programs to keep civilians informed of policing activities; requirements for community interaction at all levels of LASD; and establishing community advisory entities to ensure that meaningful feedback is obtained from the community.
This agreement does not resolve the department’s claims against the Housing Authority of Los Angeles County, the county of Los Angeles as it relates to the Housing Authority of the county of Los Angeles, the city of Lancaster or the city of Palmdale for related conduct under the Fair Housing Act. Those parties are continuing to work toward a resolution.
The investigation was conducted by the Civil Rights Division. The investigation involved an in-depth review of thousands of pages of documents, including written policies and procedures, training materials, and internal reports, data, video footage and investigative files. Department of Justice attorneys and investigators also conducted interviews with officers, supervisors, command staff and city officials as well as spoke with hundreds of community members and local advocates, and worked with experts in police practices.
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DOD Employee Pleads Guilty for Engaging in Illicit Sexual Conduct with a Minor in HondurasRead the Press Release
A civilian employee from the Department of Defense pleaded guilty today to one count of engaging in illicit sexual conduct with a minor in a foreign place, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas.
William Curry McGrath, 55, of San Antonio, Texas, pleaded guilty before U.S. District Judge Lee H. Rosenthal of the Southern District of Texas. A sentencing hearing is scheduled for Aug. 6, 2015. McGrath was arrested in October 2014, and has been in custody since his arrest.
According to admissions made in connection with his guilty plea, McGrath was the Director of the Network Enterprise Center at the Soto Cano Air Base in Comayagua, Honduras, from December 2012 until his departure in March 2014. McGrath admitted that while stationed in Honduras, he met a 13 year-old girl and began a sexual relationship with her. He further admitted that he gave the girl money, gifts and other items of value in exchange for sexual acts.
The investigation was conducted by the FBI’s Houston Division. The case is being prosecuted by Trial Attorney Amy E. Larson of the Criminal Division’s Child Exploitation and Obscenity Section and Assistant U.S. Attorney Sherri Zack of the Southern District of Texas.
This case was brought as part of Project Safe Childhood, a nationwide initiative to combat the growing epidemic of child sexual exploitation and abuse launched in May 2006 by the Department of Justice. Led by U.S. Attorneys’ Offices and the Criminal Division’s Child Exploitation and Obscenity Section, Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.projectsafechildhood.gov.
Two Former Marion, South Carolina, Police Officers Sentenced for Using Excessive Force While Tasing a WomanRead the Press Release
Franklin Brown, 35, and Eric Walters, 39, both former police officers with the city of Marion Police Department in Marion County, South Carolina, were sentenced to serve 18 months and one year and one day in prison, respectively, today in federal court in Florence, South Carolina, by U.S. District Court Judge R. Bryan Harwell for repeatedly tasing a former local female resident during the course of her detainment. For both defendants, three years of supervised release will follow the prison sentences and they each face a $100 special assessment. Brown and Walters previously pleaded guilty to violating the victim’s civil rights during this incident.
According to court documents, on April 2, 2013, in the course of detaining the victim, Walters tased the victim causing her to fall to the ground and injure her head. Once she was on the ground, Walters continued to tase the victim multiple times. Brown subsequently arrived on scene and proceeded to tase the victim as she was seated on the curb, restrained in handcuffs and surrounded by law enforcement. Walters and Brown admitted there was no legitimate law enforcement purpose for repeatedly tasing the victim as she did not pose a threat to the officers.
“The defendants abused their authority as law enforcement officers by repeatedly tasing a defenseless, compliant victim,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “Today’s sentence is a reminder that this type of abusive and dishonorable behavior will not go unpunished.”
“I thank the Marion Police Department, the FBI and the Civil Rights Division,” said U.S. Attorney Bill Nettles of the District of South Carolina. “Due to their collective efforts in concert with our office, the officers in this case were brought to justice.”
Today’s sentence resulted from the investigative work of the FBI’s Myrtle Beach Division. The case is being prosecuted by Trial Attorneys Henry Leventis and Nicholas Murphy of the Civil Rights Division, and Assistant U.S. Attorney John Potterfield of the District of South Carolina.
Statement by Attorney General Lynch on the Situation in BaltimoreRead the Press Release
Attorney General Loretta Lynch released the following statement on the situation in Baltimore, Maryland:
“I condemn the senseless acts of violence by some individuals in Baltimore that have resulted in harm to law enforcement officers, destruction of property and a shattering of the peace in the city of Baltimore. Those who commit violent actions, ostensibly in protest of the death of Freddie Gray, do a disservice to his family, to his loved ones, and to legitimate peaceful protestors who are working to improve their community for all its residents.
“The Department of Justice stands ready to provide any assistance that might be helpful. The Civil Rights Division and the FBI have an ongoing, independent criminal civil rights investigation into the tragic death of Mr. Gray. We will continue our careful and deliberate examination of the facts in the coming days and weeks. The department’s Office of Community Oriented Policing Services has also been fully engaged in a collaborative review of the Baltimore City Police Department. The department’s Community Relations Service has already been on the ground, and they are sending additional resources as they continue to work with all parties to reduce tensions and promote the safety of the community. And in the coming days, Vanita Gupta, head of the Civil Rights Division, and Ronald Davis, Director of Community Oriented Policing Services, will be traveling to Baltimore to meet with faith and community leaders, as well as city officials.
“As our investigative process continues, I strongly urge every member of the Baltimore community to adhere to the principles of nonviolence. In the days ahead, I intend to work with leaders throughout Baltimore to ensure that we can protect the security and civil rights of all residents. And I will bring the full resources of the Department of Justice to bear in protecting those under threat, investigating wrongdoing, and securing an end to violence.”
San Diego Jury Finds Former Iranian National Guilty of Illegal Scheme to Export Sensitive US Technology to IranRead the Press Release
On Thursday, April 23, a federal jury convicted a naturalized U.S. citizen and former Iranian national of violations of U.S. export and money laundering laws, arising from his involvement in a scheme to purchase marine navigation equipment and military electronic equipment for illegal export to, and end-use in, Iran, announced Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Laura E. Duffy of the Southern District of California.
Arash Ghahreman, 45, of Staten Island, New York, was convicted of attempted export to Iran, and conspiracy to do the same, in violation of the Iran Trade Embargo (formerly known as the Iranian Transactions and Sanctions Regulations); smuggling goods from the United States, and conspiracy to the same; and aiding and abetting the transfer of money from Dubai, United Arab Emirates (UAE), to the United States, in support of an illegal export activity, and conspiracy to do the same. The case involved a seven-day jury trial, beginning on April 13, 2015, and ending on April 23, 2015, when the jury returned a guilty verdict on seven counts of a nine-count superseding indictment after one day of deliberation. The jury was unable to reach a verdict on two of the counts involving the attempted exportation and smuggling of a fiber optic gyrocompass, used in both military and civilian marine navigation applications.
“The defendants used a front company to illegally send U.S. goods and technologies – including those used in military applications – to Iran,” said Assistant Attorney General Carlin. “These violations of the Iran Trade Embargo have the potential to harm U.S. national security objectives, and we will continue to hold accountable those who seek to circumvent its restrictions. I would like to thank the agents and prosecutors for their hard work in obtaining this conviction.”
The evidence presented at trial showed that Ghahreman acted an agent of an Iranian procurement network which used a front company in Dubai to acquire U.S. goods and technologies for illegal transshipment to, and end-use in, Iran. Co-defendant Koorush Taherkhani, 43, an Iranian national and resident, was the managing director and founder of that front company, co-defendant TIG Marine Engineering Services. Because of his German nationality, co-defendant Ergun Yildiz, 35, a resident of UAE, was hired by Taherkhani to be the “face” of the front company, as the president/CEO of TIG Marine. Before Ghahreman immigrated to the United States in 2007, Ghahreman and Taherkhani had been friends and dorm mates at an Iranian university, where each received a degree in marine engineering. Upon graduation, both Ghahreman and Taherkhani worked as engineers for various Iranian shipping companies, including the Islamic Republic of Iran Shipping Lines and its subsidiaries. After immigrating to the United States, Ghahreman was employed by various shipyards in the United States, and became a naturalized U.S. citizen. Because of his employment and citizenship status, Ghahreman was well placed to act as an agent of the illegal procurement network.
From December 2012 through June 17, 2013, Ghahreman and his co-defendants negotiated via email, text, telephone and meetings with U.S. Immigration Customs and Enforcement’s Homeland Security Investigations (ICE-HSI) and the Defense Criminal Investigative Service (DCIS) undercover agents to purchase marine navigation components (fiber optic gyrocompasses), military electronic components (electron tubes) and other U.S. technology for illegal export to, and/or end-use in, Iran. The undercover agents were posing as brokers of U.S. goods and technology, willing to sell U.S. goods to the defendants for end-use in Iran. Ultimately, as a result of these negotiations, Ghahreman and his co-defendants agreed to purchase four Navigat-2100 fiber optic gyrocompasses and 50 Y-690 units (electron tubes). Pursuant to that agreement, Ghahreman and his co-defendants wired approximately $60,000 in partial payment for the gyrocompasses and electron tubes from a bank in Dubai to the undercover agents’ bank account. Ultimately, on June 17, 2013, ICE-HSI agents arrested Ghahreman and Yildiz after they traveled to the United States and took partial delivery of one gyrocompass and two electron tubes and attempted to ship the items indirectly to Iran, via third countries.
Ghahreman is scheduled to be sentenced on July 17, 2015, before U.S. District Judge Dana M. Sabraw of the Southern District of California. Yildiz pleaded guilty to conspiracy to export to Iran on Oct. 9, 2014, and is scheduled to be sentenced on May 8, 2015, before Judge Sabraw. Co-defendant Taherkhani, an Iranian national and resident, remains a fugitive. Co-defendant TIG Marine is a Dubai company.
The case was investigated by ICE-HSI and DCIS. The case was prosecuted by Assistant U.S. Attorneys Shane P. Harrigan and Timothy D. Coughlin of the Southern District of California, with assistance provided by the Justice Department’s National Security Division.
Medtronic Corporation and Executives Agree to Consent Decree to Resolve Allegations of Food, Drug and Cosmetic Act ViolationsRead the Press Release
Medical device manufacturer Medtronic Corporation and two of its top executives have agreed to resolve allegations that they violated various provisions of the federal Food, Drug and Cosmetic Act (FDCA) with regard to the company’s SynchroMed infusion pump. At the request of the U.S. Food and Drug Administration (FDA), the Justice Department today filed a complaint and a proposed consent decree in the U.S. District Court for the District of Minnesota. The complaint alleges that Medtronic, its chief executive officer, S. Omar Ishrak, and its senior vice president, Thomas M. Tefft, have been distributing medical devices in interstate commerce that are adulterated because they were not manufactured in accordance with current good manufacturing processes.
“The proposed consent decree will require Medtronic and its leadership to commit to making changes in their process that will benefit the American public by ensuring that their products are safe and effective for patients,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “The Department of Justice will not permit medical device manufacturers to shirk their responsibility to ensure that the devices that patients rely upon are safe.”
The defendants design, manufacture and distribute the SynchroMed II implantable infusion pump system, which is used to deliver medication to treat cancer, chronic pain and severe spasticity. Medical devices such as the Medtronic’s SynchroMed system are required to comply with FDA’s quality system (QS) regulations. The complaint alleges that Medtronic repeatedly failed to correct violations of the QS regulations with regard to the SynchroMed II.
The FDA conducted multiple inspections of Medtronic Neuromodulation’s manufacturing facilities in Columbia Heights, Minnesota, between 2006 and 2013. These inspections revealed significant violations of the QS regulations, many of which related to design controls, complaint handling, and corrective and preventive action. Those regulations ensure that when a device is found to have malfunctioned or caused serious injury to a patient, the complaint is thoroughly investigated and necessary validated design changes are implemented. The problems that the FDA observed with the SynchroMed II pump could result in an over- or under-infusion of medication for patients.
Under the terms of the agreement, which must be approved by the court, Medtronic and the two individual defendants have agreed to stop manufacturing, designing and distributing new SynchroMed II pump systems except in extraordinary cases, such as when a treating physician certifies that a SynchroMed II pump is medically necessary for an individual patient’s treatment. The proposed consent decree also requires Medtronic to retain an expert to help Medtronic correct its regulatory violations. Medtronic may not resume distributing the SynchroMed II pump system until it receives permission from the FDA.
“We will continue to work with the Food and Drug Administration and our partners at the Consumer Protection Branch of the Department of Justice to identify and remedy instances in which medical technology manufacturers in Minnesota fail to adhere to best practices,” said U.S. Attorney Andrew M. Luger of the District of Minnesota. “As an industry leader, Medtronic and its executives must adhere to the high-quality manufacturing processes required under the FDCA.”
The matter is being handled by the Civil Division’s Consumer Protection Branch, the U.S. Attorney’s Office of the District of Minnesota and the FDA’s Office of Chief Counsel.
Justice Department Settles with Private Career College for Discrimination Against Applicant with HIVRead the Press Release
The Justice Department announced today that it has reached an agreement with Compass Career Management L.L.C. (Compass Career College) of Hammond, Louisiana, to remedy violations of the Americans with Disabilities Act (ADA). Compass Career College is a private provider of vocational education and career training.
Title III of the ADA prohibits public accommodations, such as private vocational and technical colleges, from discriminating against people with disabilities, including those with HIV. Based on its investigation, the department determined that the college conditionally accepted an applicant into its Licensed Practical Nursing (LPN) program but issued a follow-up letter to the applicant after the college discovered that the applicant has HIV. The college’s letter discouraged the applicant from pursuing enrollment at the college. Despite the college’s letter, the applicant attempted to finalize enrollment at the college, but the college advised the applicant that the class was full and did not admit the applicant. The consent decree, filed today along with a complaint in the U.S. District Court for the Eastern District of Louisiana, must be approved by the court.
Under the terms of the consent decree, the college will implement a nondiscrimination policy to ensure that the college does not discriminate against persons with HIV; stop questioning applicants and students about their HIV status; train college administrators and instructors on ADA requirements and the revised policies required by the consent decree; and report to the department on its compliance with the consent decree. In addition, the college will pay $30,000 in compensatory damages to the applicant, and will pay a civil penalty of $5,000 to the United States.
“We continue to work to eradicate discriminatory and stigmatizing treatment of people with HIV based on unfounded fears and stereotypes,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “The ADA clearly protects individuals with HIV and other disabilities from exclusion or marginalization, including in vocational schools, trade schools, and career colleges.”
“This is an important step by the leadership of Compass Career College to ensure compliance with the ADA,” said U.S. Attorney Kenneth Polite Jr. of the Eastern District of Louisiana. “The agreement that we are announcing today reflects the college’s commitment, and that of the Justice Department, to ensure full accessibility and opportunity for individuals with disabilities – including those with HIV – in the private educational setting.”
To read the consent decree and complaint or for more information on the ADA and HIV discrimination, visit www.ada.gov/aids. Title III of the ADA requires public accommodations, such as private schools, to provide individuals with disabilities (including HIV), equal access to goods, services, privileges, facilities, advantages and accommodations. For more information about the ADA, call the department’s toll-free ADA Information Line at 800-514-0301 (TDD 800-514-0383) or access the ADA website at www.ada.gov.
Georgia Hospital to Pay $20 Million to Resolve False Claims Act AllegationsRead the Press Release
The Medical Center of Central Georgia (MCCG) has agreed to pay $20 million to settle allegations that the hospital violated the False Claims Act by billing Medicare for more expensive inpatient services that should have been billed as less costly outpatient or observation services, the Justice Department announced today. MCCG is located in Macon, Georgia, and is the second largest hospital in the state.
“Charging the government for higher cost inpatient services when the patient care received was outpatient or observation services causes Medicare to pay more than it should,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “This department will continue its work to stop abuses of the nation’s health care resources and to ensure patients receive the most appropriate care.”
This settlement resolves the United States’ investigation into MCCG’s inpatient admission practices. The government contends that from 2004 through 2008, MCCG violated the False Claims Act by knowingly charging Medicare for medically unnecessary inpatient admissions when the care provided should have been billed as less costly outpatient or observation services. Because hospitals generally receive significantly higher payments from Medicare for inpatient admissions as opposed to outpatient or observation services, the admission of numerous patients whose care should have been billed as outpatient or observation services, as alleged here, can result in substantial financial harm to Medicare.
“Overcharging the government for medical services wastes our country’s limited health care resources,” said Acting U.S. Attorney John Horn of the Northern District of Georgia. “When a provider inflates its billings, we will aggressively seek to recover the overcharges under the False Claims Act.”
As part of this agreement, MCCG entered into a corporate integrity agreement with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG) that requires the company to engage in significant compliance efforts over the next five years. Under the agreement, MCCG is required to retain an independent review organization to review the accuracy of the company’s claims for services furnished to federal health care program beneficiaries.
“Unnecessarily admitting patients who could have been treated in an outpatient or observation setting is not only a waste of taxpayer dollars, but a fundamental breach of trust,” said Special Agent in Charge Derrick L. Jackson of HHS-OIG in Atlanta. “Medicare beneficiaries must feel secure and know that the care selected for them is in their best interest, and not merely what will generate the most revenue for the facility.”
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.
This matter was investigated by HHS-OIG and the U.S. Attorney’s Office of the Northern District of Georgia. The claims resolved by this settlement are allegations only and there has been no determination of liability.
Florida Man and Company Sentenced for Violating the International Emergency Economic Powers Act and US Department of Commerce Denial OrderRead the Press Release
A Palm Beach County, Florida, man and company were sentenced for violating the International Emergency Economic Powers Act (IEEPA), as well as the terms of a denial order issued by the U.S. Department of Commerce.
The announcement was made by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge John F. Khin Department of Defense’s (DoD) Defense Criminal Investigative Service (DCIS), Special Agent in Charge Alysa Erichs of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) and Acting Special Agent in Charge Gordon Pomeroy of the U.S. Department of Commerce’s Office of Export Enforcement.
Russell Henderson Marshall, 53, was sentenced by U.S. District Judge Kenneth A. Marra of the Southern District of Florida to serve 41 months in prison and will be removed from the United States upon the completion of his sentence. In imposing the sentence, Judge Marra found that the order denying export privileges issued by the Department of Commerce constituted a national security control, which subjected Marshall to an enhanced sentence. Universal Industries Limited Inc. was sentenced to a term of one year probation and a special assessment of $400 upon a finding that the corporation is currently listed as inactive by the Florida Division of Corporations as a result of Marshall’s arrest.
Marshall and his company Universal Industries Limited Inc. were previously convicted in a 2011 case in the Southern District of Florida for violating the Arms Export Control Act, after which the Department of Commerce issued a denial order prohibiting Universal Industries Limited Inc. and its owners, agents and employees from participating in any transaction involving the export of any item subject to the Department of Commerce‘s Export Administration Regulations (EAR). Marshall and Universal Industries Limited Inc. violated IEEPA and the U.S. Department of Commerce’s denial order by attempting to send three temperature transmitters used on F-16 fighter jets and a saddle part for the J-69 engine used on 737 military trainer aircraft to Thailand and Pakistan, respectively.
“By repeatedly taking actions that violated export control laws and an order issued by the Department of Commerce, Marshall and Universal Industries Limited Inc. actively engaged in efforts that threatened our national security,” said Assistant Attorney General Carlin. “This sentencing serves as another reminder that we will not tolerate this activity. Protecting our national assets, including highly sensitive technologies, from falling into the hands of those who may wish to do us harm is one of our top national security priorities. The National Security Division commends the law enforcement agents, analysts, and prosecutors who took part ensuring justice was served.”
“National security controls exist to ensure that sensitive U.S. technologies are protected,” said U.S. Attorney Ferrer. “Zero tolerance will be afforded individuals who knowingly continue to violate our export control laws and jeopardize the nation’s security.”
“Today's sentencing demonstrates the continued commitment of the Defense Criminal Investigative Service and partner agencies to protect sensitive U.S. defense technology from being illegally exported,” said Special Agent in Charge Khin. “American military prowess depends on lawful, controlled exports of sensitive technology by U.S. industries, which is why DCIS will continue its present campaign to aggressively investigate and prosecute criminal violations regarding the illegal procurement or export of sensitive technology.”
“One of Homeland Security Investigation's top enforcement priorities is preventing the exportation of U.S. military products and sensitive technology, and preventing those technologies and weaponry from falling into the hands of those who might seek to harm America or its interests,” said Special Agent in Charge Erichs. “Technology used by the United States and its allies give us a strategic military advantage, which is why HSI will continue to work with its law enforcement partners to ensure such technology doesn't fall into the hands of those opposed to U.S. national security interests.”
“The Office of Export Enforcement is committed to working with our law enforcement partners to pursue individuals who violate our nation's export control laws,” said Acting Special Agent in Charge Pomeroy. “As the sentence in this case demonstrates, we will not allow our national security to be compromised by individuals who intentionally violate these laws.”
According to court documents and information presented during the sentencing hearing, the DoD Inspector General received a hotline complaint concerning Marshall and Universal Industries Limited Inc. in November 2012. The subsequent investigation revealed that the defendants brokered the sale of military aircraft parts which were subject to license controls by the Department of Commerce, and which the defendants knew were intended to be illegally exported to Thailand and Pakistan.
On Feb. 6, 2015, Marshall and Universal Industries Limited Inc. entered guilty pleas to an information that charged them with knowingly and willfully engaging in negotiations concerning selling, delivering or otherwise servicing a transaction involving an item to be exported from the United States to Thailand and subject to the EAR.
Assistant Attorney General Carlin joins U.S. Attorney Ferrer in commending the investigative efforts of the DoD, DCIS, ICE-HSI and the U.S. Department of Commerce’s Office of Export Enforcement for their outstanding efforts in investigating this matter. The case was prosecuted by Assistant U.S. Attorney Michael Walleisa of the Southern District of Florida.
Applied Materials Inc. and Tokyo Electron Ltd. Abandon Merger Plans After Justice Department Rejected Their Proposed RemedyRead the Press Release
Applied Materials Inc. and Tokyo Electron Ltd. abandoned their plans to merge after the Department of Justice informed the companies that their remedy proposal failed to resolve the department’s competitive concerns.
“The companies’ decision to abandon this merger preserves competition for semiconductor manufacturing equipment,” said Acting Assistant Attorney General Renata B. Hesse of the Justice Department’s Antitrust Division. “The semiconductor industry is critically important to the American economy, and the proposed remedy would not have replaced the competition eliminated by the merger, particularly with respect to the development of equipment for next-generation semiconductors.”
The proposed merger of Applied Materials and Tokyo Electron would have combined the two largest competitors with the necessary know-how, resources and ability to develop and supply high-volume non-lithography semiconductor manufacturing equipment.
During the investigation, the division cooperated with the Korean Fair Trade Commission, China’s Ministry of Commerce, Germany’s Federal Cartel Office and competition agencies from several other jurisdictions.
Applied Materials, based in Santa Clara, California, is the largest provider of non-lithography semiconductor manufacturing equipment with approximately $9 billion in 2014 revenue.
Tokyo Electron, based in Tokyo, is the second-largest provider of non-lithography semiconductor manufacturing equipment with approximately $6 billion in 2014 revenue.
Guatemalan Woman Extradited to the United States to Face Human Smuggling ChargesRead the Press Release
A Guatemalan national appeared in federal court in the Southern District of Texas, after being extradited to the United States from Guatemala to face criminal charges for her role in smuggling undocumented migrants to the United States for profit, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas and Director Sarah R. Saldaña of U.S. Immigration and Customs Enforcement (ICE).
Rosa Umanzor-Lopez, 35, of Guatemala, was arrested in Guatemala on Feb. 5, 2014, on a provisional arrest warrant based on a superseding indictment filed in the Southern District of Texas in December 2012. The indictment charges her with one count of conspiracy to smuggle undocumented immigrants into the United States, three counts of bringing aliens to the United States for financial gain and three corresponding counts of encouraging and inducing an alien to come to the United States. Three individuals also charged in the indictment have previously been convicted and sentenced.
The indictment alleges that Umanzor-Lopez and her co-defendants established a network to recruit individuals from India and elsewhere who wished to be smuggled into the United States. The defendants then allegedly arranged for aliens to be transported to the United States through South America and Central America by various means including by air travel, automobiles, water craft and foot.
The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.
The investigation was conducted by ICE’s Homeland Security Investigations (HSI) in McAllen and Houston, with the assistance of U.S. Customs and Border Protection’s Alien Smuggling Interdiction Unit. This case is being prosecuted by Trial Attorney Christina Giffin of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorneys Leo J. Leo III and Casey MacDonald of the Southern District of Texas. The Criminal Division’s Office of International Affairs assisted with the extradition.
The investigation was conducted under the Extraterritorial Criminal Travel Strike Force (ECT) program, a joint partnership between the Justice Department’s Criminal Division and HSI. The ECT program focuses on human smuggling networks that may present particular national security or public safety risks, or present grave humanitarian concerns. ECT has dedicated investigative, intelligence and prosecutorial resources. ECT coordinates and receives assistance from other U.S. government agencies and foreign law enforcement authorities.
Comcast Corporation Abandons Proposed Acquisition of Time Warner Cable After Justice Department and the Federal Communications Commission Informed Parties of ConcernsRead the Press Release
Comcast Corporation (Comcast) abandoned its plans to acquire Time Warner Cable Inc. (Time Warner Cable) for approximately $45.2 billion after the Department of Justice informed the companies that it had significant concerns that the merger would make Comcast an unavoidable gatekeeper for Internet-based services that rely on a broadband connection to reach consumers.
"The companies' decision to abandon this deal is the best outcome for American consumers," said Attorney General Eric Holder. "The Antitrust Division of the United States Department of Justice has demonstrated, time and again, that it can and will defend the interests of the American consumer no matter the complexity of the issue or the size of the opponent. This is a victory not only for the Department of Justice, but also for providers of content and streaming services who work to bring innovative products to consumers across America and around the world. I commend the Antitrust attorneys and investigators whose outstanding work led to this outcome, and I know that the Department of Justice will continue to fight for fair access and free competition in every industry and every market."
“I want to thank our colleagues at the Federal Communications Commission for their close and productive cooperation throughout this investigation,” said Renata Hesse, Acting Assistant Attorney General of the Department of Justice’s Antitrust Division. “The collective expertise of the career staff at both agencies enabled us to analyze the complex issues presented by this transaction and to deliver a consistent message regarding the impact of the transaction on competition and the broader public interest. We are also grateful for the close cooperation we had with teams from many State Attorneys General offices during the course of our investigation.”
Comcast is a Pennsylvania corporation headquartered in Philadelphia. With approximately 21.7 million video subscribers and 20.7 million broadband subscribers, Comcast is both the largest video and wired broadband Internet-access provider in the nation.
Time Warner Cable is a New York corporation with headquarters in New York. With approximately 11.4 million video subscribers and 11.6 million broadband subscribers, Time Warner Cable is the fourth-largest video and the third-largest wired broadband Internet-access provider in the nation.
United States Files Lawsuit Alleging that Quicken Loans Improperly Originated and Underwrote Federal Housing Administration-Insured Mortgage LoansRead the Press Release
The United States has filed a complaint in the U.S. District Court for the District of Columbia against Quicken Loans Inc. under the False Claims Act for improperly originating and underwriting mortgages insured by the Federal Housing Administration (FHA), the Justice Department announced today. Quicken is a mortgage lender headquartered in Detroit.
“Those who do business with the United States must act in good faith, including lenders that participate in the FHA mortgage insurance program,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “To protect the housing market and the FHA fund, we will continue to hold responsible lenders that knowingly violate the rules.”
Quicken participated in the FHA insurance program as a direct endorsement lender (DEL). As a DEL, Quicken had the authority to originate, underwrite and certify mortgages for FHA insurance. If a DEL such as Quicken approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to the U.S. Department of Housing and Urban Development (HUD), FHA’s parent agency, for the losses resulting from the defaulted loan. Under the DEL program, neither the FHA nor HUD reviews the underwriting of a loan before it is endorsed for FHA insurance. HUD therefore relies on DELs to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance. And, to that end, a DEL must certify that every loan endorsed for FHA insurance is underwritten according to the applicable FHA standards.
The government’s complaint alleges that, from September 2007 through December 2011, Quicken knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten FHA-insured loans. The complaint further alleges that Quicken instituted and encouraged an underwriting process that led to employees disregarding FHA rules and falsely certifying compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages. For example, Quicken allegedly had a “value appeal” process where, when Quicken received an appraised value for a home that was too low to approve a loan, Quicken often requested a specific inflated value from the appraiser with no justification for the increase– even though such a practice was prohibited by the applicable FHA requirements. Quicken also allegedly granted “management exceptions” whereby managers would allow underwriters to break an FHA rule in order to approve a loan.
The government’s complaint alleges that Quicken’s senior management was aware of these and other problems. The complaint alleges that Quicken’s Divisional Vice President for Underwriting, the second most senior executive in Quicken’s Operations Department, wrote in an email discussing the value appeal process that “I don’t think the media and any other mortgage company (FNMA, FHA, FMLC) would like the fact we have a team who is responsible to push back on appraisers questioning their appraised values.” In another email, the same Divisional Vice President for Underwriting wrote to a group of Quicken executives stating that 40 percent of the management exceptions on FHA’s early payment defaults should not have been granted, adding: “we make some really dumb decisions when it comes to client service exceptions. Example, purchase loan we pulled new credit and the client stopped paying on almost everything and the scores fell by 100 points, we [still] closed it.” In yet another email discussing an FHA loan, the Operations Director, a senior level executive, explained that the loan was approved based on “bastard income,” which he described as “trying to put some kind of income together that is plausible to the investor even though we know its creation comes from something evil and horrible.”
The government’s complaint alleges that as a result of Quicken’s knowingly deficient mortgage underwriting practices, HUD has already paid millions of dollars of insurance claims on loans improperly underwritten by Quicken, and that there are many additional loans improperly underwritten by Quicken that have become at least 60 days delinquent that could result in further insurance claims on HUD. For example, the government’s complaint identifies a borrower whose bank account statement showed overdrafts in multiple months and during the loan application process requested a refund of the $400 mortgage application fee so that the borrower would be able to feed the borrower's family. Nevertheless, Quicken allegedly approved the loan. The borrower made only five payments before becoming delinquent and as a result, HUD ultimately paid an FHA insurance claim of $93,955.19. In another example, the complaint identifies a loan where the borrower was cashing out equity through a cash-out refinance. Allegedly, Quicken originally received an appraised value of $180,000, but because the borrower wanted to receive more cash, Quicken requested the appraiser to inflate the value by $5,000. The appraiser allegedly provided Quicken’s requested value of $185,000 even though the only difference between the two appraisals was the appraised value – the comparable sales analysis, and even the date of the appraiser’s signature, remained the same. Quicken allegedly used the inflated appraisal value to approve the loan. The borrower was delinquent on his first payment and as a result, HUD ultimately paid an FHA insurance claim of $204,208.
The complaint further alleges that Quicken failed to implement an adequate quality control program to identify deficient loans, and that Quicken failed to report to HUD the loans it did identify. In particular, according to the government's complaint, despite its obligation to report to HUD all materially deficient loans, during the period from September 2007 to December 2011, Quicken concealed its deficient underwriting practices and failed to report a single underwriting deficiency to the agency.
“As the complaint alleges, Quicken violated HUD’s quality standards when obtaining HUD insurance for mortgage loans,” said U.S. Attorney John Walsh of the District of Colorado, whose office helped to lead the investigation. “Quicken issued hundreds of defective mortgage loans, and left HUD – and the taxpayer – to pay for the loans that defaulted. Quicken’s alleged fraudulent conduct affected communities nationwide. This case is the latest step in our commitment to hold accountable mortgage lenders who profit by taking advantage of HUD insurance and issuing defective loans that do not meet HUD’s standards.”
“Quicken needs to be held accountable for violations of HUD requirements in the origination of FHA loans, as alleged in the complaint,” said HUD General Counsel Helen R. Kanovsky. “HUD will continue to take action to protect the FHA and American homebuyers.”
“The complaint alleges that Quicken approved loans that should not have been approved and submitted them for FHA insurance,” said HUD Inspector General David A. Montoya. “The alleged cost to the FHA insurance fund was millions of dollars and hopefully this serves as reinforcement to Quicken that doing the wrong thing really never is worth it.”
The investigation of this matter was a coordinated effort among HUD-Office of Inspector General, HUD, the U.S. Attorney’s Office of the District of Colorado and the Civil Division’s Commercial Litigation Branch.
The action is captioned United States v. Quicken Loans, Inc. (D.D.C.). The claims asserted in the complaint are allegations only and there has been no determination of liability.
Two Northern California Real Estate Investors Agree to Plead Guilty to Bid Rigging and Fraud Conspiracies at Public Foreclosure AuctionsRead the Press Release
Two Northern California real estate investors have agreed to plead guilty for their role in bid rigging and fraud conspiracies at public real estate foreclosure auctions in Northern California, the Department of Justice announced.
Felony charges were filed today in U.S. District Court of the Northern District of California in Oakland against real estate investors Mark Roemer and Bradley Roemer. To date, 54 individuals have pleaded guilty or agreed to plead 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, 20 other real estate investors have been charged in five multi-count indictments for their roles in bid rigging and fraud schemes at foreclosure auctions in Alameda, Contra Costa, San Mateo and San Francisco counties.
“Cynical investors who rig real estate foreclosure auctions will be held accountable for their crimes,” said Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division. “Winning auctions through fraud injures consumers and mortgage lenders by circumventing the competitive process that the antitrust laws are intended to protect.”
According to court documents, beginning as early as December 2009 and continuing until about November 2010, the defendants conspired with others not to bid against one another, and instead to designate a winning bidder to obtain selected properties at public real estate foreclosure auctions in Alameda County. Both defendants were also charged with conspiring to use the mail to carry out a scheme to fraudulently acquire title to selected Alameda County properties sold at public auctions, to make and receive payoffs, and to divert money to co-conspirators that would have otherwise gone to mortgage holders and other beneficiaries by holding second, private auctions open only to members of the conspiracy. Selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions often took place at or near the courthouse steps where the public auctions were held.
“These charges demonstrate our continued commitment to investigate and prosecute individuals and organizations responsible for the corruption of the public foreclosure auction process,” said Special Agent in Charge David J. Johnson of the FBI’s San Francisco Field Office. “The FBI is committed to working these important cases and remains unwavering in our dedication to bringing the members of these illegal conspiracies to justice.”
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 the Sherman Act charges 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. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.
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 Office. 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. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
Roemer, Mark - Information
Roemer, Bradley - Information
**The fraud charge(s) referenced in this press release were subsequently dismissed on the government’s motion.**
Statement by the Attorney General on the Senate Confirmation of Loretta LynchRead the Press Release
Attorney General Eric Holder released the following statement on the Senate confirmation of Loretta Lynch:
“Loretta Lynch is a gifted attorney, a consummate professional, and a dedicated public servant. I am pleased that the United States Senate has recognized her clear qualifications and the need for her confirmation as Attorney General of the United States.
“At every stage of her career, Loretta has earned the trust and high regard of allies and adversaries alike, both in Washington and throughout the country. She is respected by law enforcement officers, civil rights leaders, and criminal justice officials of all political stripes. In every case and every circumstance, she has demonstrated an unfailing commitment to the rule of law and a steadfast fidelity to the pursuit to justice.
“I have known and worked closely with Loretta for many years, and I know that she will continue the vital work that this Administration has set in motion and leave her own innovative mark on the Department in which we have both been privileged to serve. I am confident that Loretta will be an outstanding Attorney General, a dedicated guardian of the Constitution, and a devoted champion of all those whom the law protects and empowers. I congratulate her on her confirmation, and I look forward to all that the Department of Justice will do and achieve under her exemplary leadership
San Diego Man Arrested and Charged with Making False Statements in an International Terrorism InvestigationRead the Press Release
Mohamad Saeed Kodaimati (Saeed), 24, of San Diego, was arrested and charged in a federal criminal complaint with two counts of making false statements involving international terrorism matters, announced Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Laura E. Duffy of the Southern District of California and Special Agent in Charge Eric S. Birnbaum of the FBI’s San Diego Field Office.
A criminal complaint was filed today in the U.S. District Court of the Southern District of California, charging Saeed with two counts of providing false statements involving international terrorism. In summary, the criminal complaint alleges that during interviews with agents from the FBI and the Department of State’s Diplomatic Security Service (DSS), that occurred in March 2015 at the U.S. Embassy in Ankara, Turkey, Saeed made material false statements about his recent activities and associations in Syria.
According to the complaint, Saeed falsely claimed that he had never been involved in any fighting, that he had never fired his weapon at anyone, that he did not know anyone who was a member of ISIL, that he had never told anyone else that he was involved with Al-Nusrah and that he had never worked or volunteered at a Sharia court. Evidence gathered during the investigation contradicts these and other statements Saeed made to the interviewing agents.
According to the criminal complaint, Saeed was born in Syria and became a naturalized U.S. citizen in September 2008. In December 2012, Saeed travelled from San Diego to Istanbul and was in Syria and Turkey until his return to the United States.
In March 2015, Saeed returned to the United States and was interviewed by U.S. Customs and Border Protection agents and the FBI. Saeed was arrested by FBI agents and members of the San Diego Joint Terrorism Task Force (JTTF) in Rancho Bernardo, California, without incident on April 22, 2015. Saeed is scheduled to make his initial appearance before U.S. Magistrate Judge Karen Crawford of the Southern District of California at 2 p.m. PDT on Thursday, April 23, 2015. The charges in this matter are the result of an investigation conducted by the FBI’s San Diego JTTF, with assistance provided by the FBI’s JTTF in Charlotte, North Carolina.
An arrest itself is not evidence that the defendant committed crimes charged. The defendant is presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.
Kodaimati Criminal Complaint
Louisiana Doctor Pleads Guilty to Health Care Fraud Charges for Writing False Home Health Certifications in $56 Million Fraud SchemeRead the Press Release
A Louisiana doctor pleaded guilty to federal health care fraud charges today, admitting that he wrote false home health care certifications that were used in a multi-million dollar Medicare fraud scheme.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth A. Polite of the Eastern District of Louisiana, Special Agent in Charge Michael Anderson of the FBI’s New Orleans Field Office, Special Agent in Charge Mike Fields of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Dallas Regional Office and Louisiana Attorney General James D. “Buddy” Caldwell made the announcement.
Winston Murray, M.D., 62, of Hammond, Louisiana, pleaded guilty before Chief U.S. District Judge Sarah S. Vance of the Eastern District of Louisiana to all three charges against him, including one count of conspiracy to commit health care fraud and two counts of health care fraud. He is scheduled to be sentenced on Aug. 12, 2015. Murray is the ninth defendant to plead guilty in this case. The trial for the remaining four defendants is scheduled to begin on May 6, 2015.
At his plea hearing, Murray admitted that he operated a clinic in Hammond, Louisiana, from which he wrote home health care referrals for Medicare beneficiaries he knew were not confined to their homes. Murray further admitted that his referrals were used by home health companies Interlink Health Care Services Inc. (Interlink) and Lakeland Health Care Services Inc. (Lakeland), among others, to fraudulently bill Medicare for home health services supposedly rendered to hundreds of Medicare beneficiaries living in and around Hammond and New Orleans.
Medicare records reveal that Murray’s certifications were used by Interlink and Lakeland to bill Medicare for more than $2.2 million in home health services that were not medically needed or were not provided. From 2007 through 2014, these companies and other companies involved in this scheme submitted more than $56 million in claims to Medicare, a vast majority of which were fraudulent. Medicare paid approximately $50.7 million on these claims.
This case was investigated by the FBI, HHS-OIG and the Louisiana Attorney General’s Medicaid Fraud Control Unit, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Louisiana. This case was prosecuted by Trial Attorneys William Kanellis and Antonio Pozos and Assistant Chief Ben Curtis of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,100 defendants who have collectively billed the Medicare program for more than $6.5 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 (HEAT), go to: www.stopmedicarefraud.gov.
Johnny J.S. Quenga Sentenced to 12 Months PrisonRead the Press Release
ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced that JOHNNY J.S. QUENGA, age 38, of Agat, was sentenced today to 12 months imprisonment, two years supervised release and 200 hours community service before Chief Judge Frances Tydingco-Gatewood, in the District Court of Guam.
Defendant pled guilty to an Information charging him with Conspiracy to Distribute Ice. QUENGA is a co-defendant in U.S. v. Francisco Arias, et.al. The case involved Defendant Arias and Defendant Cortez-Zelaya sending ice to various individuals in Guam. QUENGA received a reduced sentence because he cooperated with the Government.
U.S. Attorney Limtiaco stated, “Our community is not immune from the poison of methamphetamine. This case illustrates the hard work our partners in law enforcement do every day to stop the distribution of methamphetamine into Guam.” This conviction resulted from the concerted efforts of law enforcement partners in the OCDETF investigation, a focused multi- agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state and local law enforcement agencies.
This OCDETF investigation involved federal agents and local law enforcement officers of the U.S. Postal Inspection Service (USPIS), Drug Enforcement Administration (DEA), U.S. Department of Homeland Security Investigations (HSI), Guam Police Department (GPD), Guam Customs and Quarantine Agency (GCQA), Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF), U.S. National Oceanic Atmosphere Administration (NOAA), and U.S. Coast Guard Criminal Investigative Service (CGIS). The case was prosecuted by Assistant U.S. Attorney Clyde Lemons, Jr.
Hitachi Automotive Sales Executive Pleads Guilty to Participating in Auto Parts Price-Fixing ConspiracyRead the Press Release
An executive of Hitachi Automotive Systems Ltd. pleaded guilty today and was sentenced to serve 15 months in a U.S. prison for his role in a global conspiracy to suppress and eliminate competition for certain automotive parts sold in the United States, the Department of Justice announced today.
Takashi Toyokuni, a former manager and director with responsibility over alternators and starters at Hitachi Automotive Systems Ltd. pleaded guilty today in the U.S. District Court of the Eastern District of Michigan to a one count charge of bid rigging and price fixing. As part of his plea agreement, Toyokuni also agreed to cooperate with the department’s ongoing investigation and pay a $20,000 criminal fine.
On Sept. 18, 2014, a federal grand jury in Detroit, Michigan, returned an indictment against Toyokuni, charging him with conspiring to allocate the supply of, rig bids for, and fix, stabilize and maintain the prices of, various automotive parts, including starter motors, alternators, air flow meters, valve timing control devices, fuel injection systems, electronic throttle bodies, ignition coils and inverters and/or motor generators, sold to automobile manufacturers in the United States and elsewhere. The automotive manufacturers included, depending on the product, Ford Motor Co., General Motors LLC, Nissan Motor Co. Ltd., Toyota Motor Corp. and Honda Motor Co. Ltd., and certain of their subsidiaries.
According to the indictment, Toyokuni and his co-conspirators carried out the conspiracy by, among other things, agreeing during meetings and communications to coordinate bids submitted to the automobile manufacturers. The indictment charged Toyokuni with participating in the conspiracy beginning at least as early as January 2000 until at least February 2010.
“The defendant today accepted responsibility for his role in creating anticompetitive agreements in the automotive industry that undermined the marketplace and harmed U.S. businesses and consumers,” said Deputy Assistant Attorney General Brent Snyder of the Antitrust Division’s criminal enforcement program. “As a result of the many companies and individuals who have accepted responsibility during this investigation, we are transforming a critical industry into a competitive marketplace, which will greatly benefit U.S. consumers.”
Hitachi Automotive Systems Ltd. is a manufacturer of starter motors, alternators, air flow meters, valve timing control devices, fuel injection systems, electronic throttle bodies, ignition coils, inverters and motor generators and was engaged in the sale of these products in the United States and elsewhere. On Nov. 6, 2013, Hitachi Automotive Systems Ltd., pleaded guilty for its involvement in the conspiracy and was sentenced to pay a criminal fine of $195 million.
Toyokuni is charged with price fixing and bid rigging in violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million criminal fine for individuals. The maximum fine for an individual may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.
Including Toyokuni, 52 individuals have been charged in the government’s ongoing investigation into market allocation, price fixing, and bid rigging in the auto parts industry. Additionally, 34 companies pleaded guilty or agreed to plead guilty and have agreed to pay a total of more than $2.4 billion in fines.
Today’s guilty plea arose from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by each of the Antitrust Division’s criminal enforcement sections and the FBI. Today’s pleas are the result of the work of the Division’s Washington Criminal I Section, and special agents of the FBI’s Detroit Field Office. Anyone with information on price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258, visit www.justice.gov/atr/contact/newcase.html, or call the FBI’s Detroit Field Office at 313-965-2323.
Toyokuni Plea Agreement
Former Corrections Officer Pleads Guilty to Smuggling Methamphetamine to Prison InmateRead the Press Release
ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced that EUGENE JESUS MENO SUNEGA, age 33, of Sinajana, Guam pled guilty on April 23, 2015, in the U.S. District Court, before Chief Judge Frances Tydingco-Gatewood, to one count of Providing Contraband in Prison. SUNEGA was charged on March 4, 2015 by a federal grand jury in a four-count indictment with Conspiracy to Distribute Methamphetamine, Possession with Intent to Distribute Methamphetamine, Providing Contraband in Prison, and False Statement or Representation. Sentencing for SUNEGA is scheduled for July 27, 2015. The offense of Providing Contraband in Prison carries a statutory maximum sentence of 20 years in prison.
According to court documents, SUNEGA abused his position of trust as a Guam Department of Corrections Officer by attempting to smuggle contraband methamphetamine to prison inmate Gregorio Cruz. The methamphetamine weighed approximately 3.9 grams and was approximately 95.3% pure, according to forensic analysis. SUNEGA also lied to federal agents investigating the incident when he claimed to have never personally smoked methamphetamine.
This incident was discovered by Guam Department of Corrections officials. The federal case is the result of an investigation conducted by the DEA Guam Resident Office and the FBI Guam Resident Agency. Credit is also given to GPD’s Special Investigation Section and to the ATF. The prosecution was handled by Assistant U.S. Attorney Mohammad Khatib.
District Court Enters Permanent Injunction to Prevent Chicago Company and Two Individuals from Distributing Adulterated Mung Beans and Soybean SproutsRead the Press Release
The U.S. District Court for the Northern District of Illinois entered a consent decree for permanent injunction against Wholesome Soy Products Inc., Julia Trinh and Paul Trinh to prevent them from distributing adulterated mung bean and soybean sprouts, the Department of Justice announced today.
The department filed a complaint in the U.S. District Court for the Northern District of Illinois on April 3, at the request of the U.S. Food and Drug Administration (FDA). According to the complaint, Wholesome Soy received, processed, manufactured, prepared, packed, held and distributed ready-to-eat mung bean and soybean sprouts. Wholesome Soy operated at 1150 West 40th Street in Chicago.
“We must work to ensure that the food we buy from store shelves is safe and produced under sanitary conditions,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “The Department of Justice will continue to work with our partners at FDA to accomplish that goal.”
The complaint alleged that Julia Trinh is the owner and president of Wholesome Soy, and that until recently, she was responsible for purchasing supplies and equipment, managing contracts and agreements with contractors, handling customer service, hiring, firing, scheduling training, implementing procedures and maintaining quality assurance. The complaint also alleged that Paul Trinh was a manager at Wholesome Soy, and that until recently, he was responsible for production operations, sprout processing and training new hires.
The complaint alleged that the company’s food was prepared, packed and/or held under insanitary conditions and that the defendants failed to institute practices and procedures necessary to ensure that the company can receive, process, manufacture, prepare, pack, hold and distribute food under sanitary conditions.
According to the complaint, the FDA conducted inspections of the company’s facility from Aug. 12, 2014 through Sept. 3, 2014, and in October 2014. As described in the complaint, FDA found insanitary conditions and significant sanitary deficiencies in the October inspection that were repeat observations from the previous inspection. The repeated deficiencies included employee practices that allowed for potential contamination of food contact surfaces and food products; cleaning practices that were inadequate; pest control measures that were ineffective; equipment and utensils that were not properly maintained; and a sprout production environment that was not properly maintained.
In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a consent decree for permanent injunction. Under the permanent injunction, Wholesome Soy, Julia Trinh and Paul Trinh are permanently restrained from directly or indirectly receiving, processing, manufacturing, preparing, packing, holding and/or distributing at the facility at 1150 West 40th Street any article of food, unless the defendants make several changes to their facility, including remedial measures and an implementation of a Listeria monitoring program.
The government is represented by the Civil Division’s Consumer Protection Branch with the assistance of the Department of Health and Human Services’ Office of General Counsel’s Food and Drug Division.
Deutsche Bank's London Subsidiary Agrees to Plead Guilty in Connection with Long-Running Manipulation of LIBORRead the Press Release
DB Group Services (UK) Limited, a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), has agreed to plead guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world. In addition, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in both manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR. Together, Deutsche Bank and its subsidiary will pay $775 million in criminal penalties to the Justice Department.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.
DB Group Services (UK) Limited has agreed to plead guilty to one count of wire fraud, and to pay a $150 million fine, for engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating U.S. Dollar LIBOR contributions.
In addition, Deutsche Bank entered into a deferred prosecution agreement today and admitted its role in manipulating LIBOR and participating in a price-fixing conspiracy in violation of the Sherman Act by rigging Yen LIBOR contributions with other banks. The agreement requires the bank to continue cooperating with the Justice Department in its ongoing investigation, to pay a $625 million penalty beyond the fine imposed upon DB Group Services (UK) Limited and to retain a corporate monitor for the three-year term of the agreement.
Together with approximately $1.744 billion in regulatory penalties and disgorgement—$800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action, and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action—the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion.
“For years, employees at Deutsche Bank illegally manipulated interest rates around the globe – including LIBORs for U.S. Dollar, Yen, Swiss Franc and Pound Sterling, as well as EURIBOR – in the hopes of fraudulently moving the market to generate profits for their traders at the expense of the bank’s counterparties,” said Assistant Attorney General Caldwell. “Deutsche Bank is the sixth major financial institution that has admitted its misconduct in this wide-ranging criminal investigation, and today’s criminal resolution represents the largest penalty to date in the LIBOR investigation.”
“Deutsche Bank secretly conspired with its competitors to rig the benchmark interest rates at the heart of the global financial system,” said Assistant Attorney General Baer. “Deutsche Bank’s misconduct not only harmed its unsuspecting counterparties, it undermined the integrity and the competitiveness of financial markets everywhere.”
“Deutsche Bank admitted to manipulating benchmark interest rates in currencies around the globe in order to benefit trading positions,” said Assistant Director in Charge McCabe. “This wide reaching investigation represents yet another step in the FBI’s ongoing effort to find and stop those who deliberately participate in complex financial crimes to further their own bottom line.”
Deutsche Bank was a member of the panel of banks whose submissions were used to calculate the LIBORs for a number of currencies, including U.S. Dollar, Yen, Pound Sterling and Swiss Franc LIBOR, as well as EURIBOR (the Euro Interbank Offered Rate).
According to the agreements, from at least 2003 through early 2011, numerous Deutsche Bank derivatives traders—whose compensation was directly connected to their success in trading financial products tied to LIBOR—engaged in efforts to move these benchmark rates in a direction favorable to their trading positions. Specifically, the derivatives traders requested that LIBOR submitters at Deutsche Bank and other banks submit contributions favorable to trading positions, rather than rates that complied with the definition of LIBOR. Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation. Deutsche Bank admitted that the conduct affected the resulting LIBOR fix on various occasions.
Deutsche Bank further admitted that its employees engaged in this misconduct through face-to-face requests, electronic communications, which included both emails and electronic chats, and telephone calls. For example, in an electronic chat on March 22, 2005, a Deutsche Bank U.S. Dollar LIBOR submitter explained how he would manipulate the rate for a trader in New York, stating, “if you need something in particular in the libors i.e. you have an interest in a high or a low fix let me know and there’s a high chance i’ll be able to go in a different level. Just give me a shout the day before or send an email from your blackberry first thing.”
In another example described in the statement of facts, on May 17, 2006, the supervisor of LIBOR submissions in London received a request from a trader in New York asking, “If you can help we can use a high 3m fix tom.” The supervisor replied to the trader and a U.S. Dollar LIBOR submitter, “I’m off but [submitter] is your libor man [] [submitter] could you take a look at 3s libor in the morning for [trader].” The submitter agreed to accommodate the request, replying, “Will do chaps.” The following morning, after he submitted the bank’s contribution, the submitter wrote to the trader, “I went in at 19+ for the 3m libor, as you’ll see it almost manage to reach 19.”
In an example from March 2007, a trader thanked one of Deutsche Bank’s EURIBOR submitters for his help in successfully manipulating EURIBOR, saying in an electronic chat: “Great job on this [Submitter], we can do more of this stuff,” to which the submitter replied, “WE CAN MY FRIEND. WE CAN….” Later that day, the submitter bragged about Deutsche Bank’s manipulation by offices in Frankfurt and London in an email to the head of Deutsche Bank’s Global Finance Unit: “HAVE U SEEN THE 3MK FIXING TODAY? THAT WAS AN EXCELLENT CONCERTED ACTION FFT/LDN. CHEERS.”
Deutsche Bank also admitted to working with other banks to manipulate LIBOR contributions. For instance, in a May 2009 electronic chat exchange, a UBS trader asked a Deutsche Bank trader, “cld you do me a favour would you mind moving you 6m libor up a bit today, i have a gigantic fix. . .” The Deutsche Bank trader agreed. The next day, the Deutsche Bank trader confirmed that the Yen LIBOR submission had been beneficial to the UBS trader, asking “u happy with me yesterday?” The UBS trader acknowledged, “thx.”
By entering into a deferred prosecution agreement with Deutsche Bank, the Justice Department took several factors into consideration, including that Deutsche Bank’s cooperation with the government’s investigation was often helpful but also fell short in some important respects. The department also considered the extensive remedial measures undertaken by Deutsche Bank’s management and its enhanced compliance program. Deutsche Bank has agreed to continue cooperating with the government’s investigation, and the agreement does not prevent the Justice Department from prosecuting culpable individuals for related misconduct. The documents will be filed in federal court in the District of Connecticut.
The Justice Department has previously announced resolutions with five other banks for their roles in manipulation of benchmark interest rates, including Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) and Lloyds Banking Group plc. The department has also charged 12 individuals as a result of this investigation, and three of those individuals have pleaded guilty. The pending charges are merely accusations, and the defendants are considered innocent unless and until proven guilty.
This ongoing investigation is being conducted by special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office. The prosecution of Deutsche Bank is being handled by Assistant Chief Jennifer L. Saulino and Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section and Trial Attorney Richard A. Powers of the Antitrust Division’s New York Field Office. Deputy Chief Benjamin D. Singer and Assistant Chief Sandra Moser of the Criminal Division’s Fraud Section, Trial Attorney Daniel Tracer of the Antitrust Division’s New York Office, Assistant U.S. Attorneys Liam Brennan and Christopher Mattei of the District of Connecticut and the Criminal Division’s Office of International Affairs have also provided valuable assistance in this matter.
The investigation leading to these cases has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad. The Justice Department acknowledges and expresses its deep appreciation for this assistance. In particular, the CFTC’s Division of Enforcement referred this matter to the department and, along with the FCA, has played a major role in the investigation. The Securities and Exchange Commission has also played a significant role in the LIBOR series of investigations. Various agencies and enforcement authorities in the United States and from other nations, including the United Kingdom’s Serious Fraud Office, BaFIN and the European Central Bank, are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.
Deutsche Bank Group Services Statement of Facts
Deutsche Bank Group Services Plea Agreement
Deutsche Bank AG Statement of Facts
Deutsche Bank AG Deferred Prosecution Agreement
Chinese Nationals Sentenced in New Mexico for Conspiring to Violate Arms Export Control ActRead the Press Release
This afternoon, a federal judge in the District of New Mexico sentenced two Chinese nationals for conspiring to violate the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR) by scheming to illegally export defense articles with military application to the People’s Republic of China, announced Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Damon P. Martinez of the District of New Mexico.
Bo Cai, 29, of Nanjing, China, was sentenced to 24 months in prison and his cousin Wentong Cai, 30, of Chifeng, China, was sentenced to 18 months in federal prison. Both will be deported after completing their prison sentences. The two men were charged in three-count superseding indictment with a scheme to illegally export sensors primarily manufactured for sale to the U.S. Department of Defense for use in high-level applications, such as line-of-sight stabilization and precision motion control systems. The Arms Export Control Act and the ITAR prohibit the export of defense-related materials from the United States without obtaining a license or written approval from the U.S. Department of State.
Bo Cai entered a guilty plea to all three counts of the superseding indictment in July 2014, and Wentong Cai pleaded guilty to Count 3 of the superseding indictment in December 2014. In entering the guilty pleas, each admitted that from March 2012 to December 2013, they conspired with each other to illegally export sensors from the United States to China without first obtaining the required export license. Bo Cai admitted that in March 2012, while he was employed by a technology company in China, he embarked on an illegal scheme to smuggle sensors out of the United States to China for one of his customers despite knowledge that the sensors could not be exported without a license and that the United States did not issue licenses to export the sensors to China. Wentong Cai admitted that while he was in the United States on a student visa, Bo Cai enlisted him to acquire the sensors under the ruse that he planned to use the sensors at Iowa State University where he was a graduate microbiology student.
Court filings indicate that the investigation of this case began in October 2013, when an undercover U.S. Immigration and Customs Enforcement Homeland Security Investigations (HSI) agent responded to Wentong Cai’s overtures. After negotiations by telephone and email, in December 2013, Bo Cai and Wentong Cai traveled to New Mexico, where they obtained a sensor from undercover HSI agents and developed a plan for smuggling the sensor out of the United States to China. On Dec. 11, 2013, Bo Cai was arrested at an airport in Los Angeles, as he was preparing to board a flight to China, after the sensor was discovered concealed in a computer speaker in his luggage. Wentong Cai subsequently was arrested on Jan. 22, 2014, in Ames, Iowa.
The HSI Albuquerque, New Mexico, office led the investigation of this case with assistance from the U.S. Air Force Office of Special Investigations, the Defense Security Service, HSI in Iowa and Los Angeles and the FBI. Iowa State University cooperated throughout with HSI’s investigation. Assistant U.S. Attorneys Dean S. Tuckman and Fred J. Federici of the District of New Mexico prosecuted the case with assistance from Deputy Chief Deborah Curtis and Trial Attorneys David Recker and Brian Fleming of the Justice Department’s National Security Division. The U.S. Attorney’s Office of the Central District of California and the U.S. Attorney’s Office of the Southern District of Iowa also assisted in the prosecution.
Noble Energy Inc. Agrees to Make System Upgrades and Fund Projects to Reduce Air Pollution in ColoradoRead the Press Release
Today, a settlement with Houston-based Noble Energy, Inc. resolving alleged Clean Air Act violations stemming from the company’s oil and gas exploration and production activities in the Denver-Julesburg Basin, north of Denver, Colorado. The settlement resolves claims that Noble failed to adequately design, size, operate and maintain vapor control systems on its controlled condensate storage tanks, resulting in emissions of volatile organic compounds (VOCs). VOCs are a key component in the formation of smog or ground-level ozone, a pollutant that irritates the lungs, exacerbates diseases such as asthma and can increase susceptibility to respiratory illnesses, such as pneumonia and bronchitis, announced the Department of Justice’s Environment and Natural Resources Division, the Environmental Protection Agency (EPA) and the state of Colorado.
As part of the settlement, Noble will spend an estimated $60 million on system upgrades, monitoring and inspections to reduce emissions, in addition to $4.5 million to fund environmental mitigation projects, $4 million on supplemental environmental projects and a $4.95 million civil penalty.
The case arose from a joint EPA and Colorado investigation that found significant VOC emissions coming from storage tanks, primarily due to undersized vapor control systems. Noble has agreed to evaluate vapor control system designs, significantly reduce VOC emissions, and provide reports to the public. These reports will give other companies the opportunity to learn and apply this information to emissions estimates and vapor control system designs. Using advanced monitoring technologies, Noble will be better able to detect air pollution problems in real time and ensure proper operation and maintenance of pollution control equipment.
“This first-of-its-kind settlement takes a basin-wide, systematic approach to address oil and gas emissions,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division. “Our nation’s energy security and independence requires that oil and gas production be done safely, responsibly and lawfully. We look forward to continuing to work with states and the oil and gas industry to ensure that oil and gas emissions are minimized nationwide.”
“Today’s settlement shows what can happen when federal and state governments work together to find innovative solutions to today’s complex pollution challenges,” said Cynthia Giles, assistant administrator for enforcement and compliance assurance at EPA. “This agreement highlights how air pollution can be addressed from a significant sector in a commonsense way, and helps spur development of advanced pollution control technologies that will be available to the entire industry. As domestic energy development grows, we all have a stake in making sure it’s done responsibly.”
Under the settlement lodged today in Colorado, Noble will perform engineering evaluations and make modifications to ensure that its vapor control systems are properly designed and sized to capture and control VOC emissions. Noble will use an infrared camera to inspect these systems, both initially to confirm capture and control of VOCs and periodically to verify proper upkeep and operation. These activities will be audited by a third-party and Noble will develop and post reports summarizing its engineering evaluations and modifications online. Additionally, Noble will install monitors at certain storage tanks to detect tank pressure increases that may indicate possible emission releases. Noble has also committed to evaluate the condition of pressure relief valves, thief hatches and mountings and gaskets on each storage tank and address any evidence of VOC emissions from those devices.
EPA estimates that modifications to the vapor control systems will reduce VOC emissions by at least 2,400 tons per year and that significant additional reductions will be achieved with operational and maintenance improvements.
The settlement covers all of Noble’s controlled condensate storage tanks in the Denver eight-hour ozone marginal nonattainment area that have vapor control systems operating pursuant to the Colorado State Implementation Plan – more than 3,400 tank batteries, which are multiple storage tanks located together. Noble must survey all of its controlled condensate storage tanks in the area and implement any needed design changes to minimize emissions and ensure compliance with state regulations. Noble already has begun this work, having focused first on its largest storage tank batteries.
In addition to system upgrades, monitoring and inspections, Noble will spend at least $4.5 million on mitigation projects to reduce and prevent harmful emissions. These projects include: offloading condensate from storage tanks into tanker trucks in a closed system to prevent vapors from being emitted to the atmosphere, retrofitting diesel engines on drilling rigs and pumps used in fracturing operations to lower emissions of nitrogen oxide or ozone precursors and replacing high-emitting two-stroke gas-fired lawnmowers being used by residents with electric lawnmowers. These projects are expected to reduce VOC and nitrogen oxide emissions by a combined 800 tons or more per year. Additionally, Noble will require its tank truck contractors to implement an alternative oil measurement standard once it is approved by relevant authorities. This would substantially reduce or eliminate VOC emissions associated with opening storage tanks’ thief hatches.
Noble will also complete supplemental environmental projects costing a total of $4 million. One of the projects will provide financial incentives to residents in the ozone non-attainment area to replace or retrofit inefficient, higher-polluting wood-burning or coal appliances with cleaner burning, more efficient heating appliances and technologies. This project is expected to achieve emission reductions of 450 tons per year of carbon monoxide, 130 tons per year of VOCs, 60 tons per year of fine particulates known as PM2.5 and 10 tons per year of hazardous air pollutants. A second project will consist of a study – portions of which will be reported publicly – evaluating the reliability of various pressurized hydrocarbon liquids sampling and laboratory analysis techniques. The study is expected to result in more accurate data to estimate emissions associated with condensate storage tanks. Noble will spend $2 million on additional State-approved supplemental environmental projects. Noble will propose projects for state approval after the court concludes its review of the settlement.
This settlement is part of EPA’s national enforcement initiative to reduce public health and environmental impacts from energy extraction activities. For more information about EPA’s enforcement initiative, click here: http://www2.epa.gov/enforcement/national-enforcement-initiative-ensuring-energy-extraction-activities-comply
The state of Colorado will receive $1.475 million of the total $4.95 million civil penalty in this case.
The proposed consent decree is subject to a 30-day public comment period and court review and approval. A copy of the consent decree is available on the Department of Justice website at http://www.justice.gov/enrd/Consent_Decrees.html.
Justice Department Sues San Francisco Enrolled Agent to Bar Promotion of Abusive Tax Avoidance Schemes and from Preparing Tax Returns for OthersRead the Press Release
The United States filed a complaint to bar a San Francisco enrolled agent and tax return preparer from implementing, facilitating and promoting allegedly abusive tax shelters and tax avoidance schemes, the Justice Department announced today.
According to the complaint, which was filed in the U.S. District Court for the Northern District of California, one of the abusive tax avoidance schemes that Timothy Conn Vu promoted was a scheme that illegally avoided corporate income taxes on gains received from the sale of corporate assets, a so-called intermediary transaction tax shelter. Additionally, Vu promoted a scheme that illegally avoided taxes on the gains from selling transferrable state tax credits (the State Tax Credit tax shelter), which real estate project owners typically sell to raise money to develop real estate projects, according to the suit.
According to the complaint, in many instances Vu served as the sole officer, director and/or manager of the five companies that were used to carry out these schemes and he signed many of the documents on behalf of those companies.
In one version of the intermediary transaction described in the complaint, a company that Vu managed allegedly bought all of the stock of a closely held corporation shortly after that corporation had sold its assets to a third party. The asset sale generated capital gains tax. The complaint alleges that, once it owned the stock, the company that Vu managed allegedly offset the tax liability from the asset sale using a purported bad debt deduction based on bogus losses from a distressed asset debt (DAD) and/or distressed asset trust (DAT) tax shelter.
According to the suit, Vu, as an officer of the companies perpetrating these schemes, also signed and then filed with the Internal Revenue Service (IRS) many of the corporate income tax returns that claimed bogus losses to offset the income on which the corporations should have paid substantial federal taxes.
The complaint alleges that Vu’s participation in these abusive tax schemes has generated more than $515 million in bogus tax deductions that have led to federal income tax deficiencies of at least $129 million. For his role in the abusive transactions, Vu allegedly earned $3 million in compensation, according to the complaint. The lawsuit seeks to stop Vu from promoting these schemes in the future and to permanently bar him from preparing tax returns for others.
The promotion of tax schemes 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 this page. If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax Division with details.
Justice Department Sues Fort Worth, Texas, for Disability DiscriminationRead the Press Release
The Justice Department today filed a lawsuit against the city of Fort Worth, Texas, alleging violations of the Fair Housing Act and the Americans with Disabilities Act. The lawsuit, filed in U.S. District Court for the Northern District of Texas, charges that Fort Worth discriminated against persons with disabilities based on its treatment of a group home for persons recovering from drug and alcohol addiction, including the city’s failure to grant a reasonable accommodation to the owner of the group home.
The suit seeks a court order prohibiting future discrimination by Fort Worth and requiring Fort Worth to make a reasonable accommodation to permit the continued operation of “Ebby’s Place” as a group home for up to eight individuals with disabilities. It also seeks monetary damages to compensate victims, as well as payment of a civil penalty.
This lawsuit arose as a result of a complaint filed with the U.S. Department of Housing and Urban Development (HUD) by Ben Patterson, who through Ebby’s Place LLC, owns and operates the group home known as Ebby’s Place.
“The Fair Housing Act and the Americans with Disabilities Act seek to ensure that individuals with disabilities can live in communities of their choice without facing discrimination,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “We will continue our vigorous enforcement efforts to make certain that persons with disabilities are granted their rights under federal law.”
“While we appreciate the City’s cooperation with this investigation, its refusal, as a governmental entity, to consider those recovering from drug or alcohol addiction as persons with disabilities is at odds with federal law,” said Acting U.S. Attorney John Parker of the Northern District of Texas. “Simply put, the residents of Ebby’s Place are deserving of the same protections as persons with any other disability.”
“Through our Office of Fair Housing and Equal Opportunity, HUD is working to ensure that housing options for persons with disabilities are not limited by restrictive zoning rules,” said Assistant Secretary Gustavo Velasquez of HUD’s Fair Housing and Equal Opportunity Office.
Fighting illegal housing discrimination is a top priority of the Justice Department. The Federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin and disability. Title II of the Americans with Disabilities Act prohibits discrimination on the basis of disability by public entities. Visit www.usdoj.gov/crt for more information about the Civil Rights Division and the laws it enforces. Additional information about the Fair Housing Act is available at www.HUD.gov. Additional information about the Americans with Disabilities Act is available at www.ADA.gov.
Justice Department Returned over $4 Billion to Victims of Crime Through the Asset Forfeiture Program Between 2002 and 2015Read the Press Release
Marking National Crime Victims’ Rights Week this week, Attorney General Eric Holder and Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division announced that the Justice Department’s Asset Forfeiture Program has returned more than $4 billion in civilly and criminally forfeited funds to crime victims since fiscal year 2002, with $723 million paid to over 150,000 crime victims in the last three years alone. The funds were distributed through the victim compensation program managed by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS).
“The Justice Department’s victim compensation program is an integral part of the asset forfeiture program and our efforts to take the profits out of crime, to restore assets to their rightful owners, and to provide real and meaningful justice to the victims of wrongdoing,” said Attorney General Holder. “The scale and scope of the returns made to victims under the program in recent years have been especially impressive. And going forward, as we continue our ongoing review of our asset forfeiture practices, we are committed to taking all appropriate measures to use this tool fairly, effectively, and with the greatest possible benefit to the American people.”
“The return of forfeited funds to crime victims is a priority of the civil and criminal forfeiture actions brought under the Asset Forfeiture Program,” said Assistant Attorney General Caldwell. “Success such as this would not be achievable without the efforts of prosecutors in the Criminal Division and U.S. Attorneys’ Offices around the country, as well as the many federal, state and local law enforcement agents contributing time and resources to these investigations. Make no mistake: forfeiture not only takes the money out of crime, but it’s among our most powerful tools to make victims whole.”
AFMLS partners with U.S. Attorneys’ Offices, federal law enforcement agencies, federal regulatory agencies, court-appointed receivers, private claim administrators, and private class action attorneys to return forfeited assets to crime victims.
Recent noteworthy cases in which victims were compensated for their losses with forfeited assets include:
$62.2 Million to Victims of MoneyGram Fraud
United States v. MoneyGram International Inc. (Middle District of Pennsylvania)
On Nov. 9, 2012, MoneyGram International Inc., a global money services business, entered into a deferred prosecution agreement (DPA) with the Justice Department. In doing so, MoneyGram admitted that corrupt MoneyGram agents across the country engaged in various consumer fraud schemes, including “grandparent” schemes in which a caller pretended to be the victim’s grandchild requesting money, and “advance fee” schemes requiring payment of fees to receive purported lottery winnings. These schemes resulted in victims sending over $100 million via MoneyGram to the criminals, and that amount was administratively forfeited as part of the DPA by the U.S. Postal Inspection Service. Over 22,000 victims who were fraudulently enticed to send money through corrupt agents have received a total of $62.2 million and been fully compensated for their losses.
$25.5 Million to Victims of Scott W. Rothstein
United States v. Scott W. Rothstein (Southern District of Florida)
From 2005 through 2009, attorney Scott W. Rothstein operated a massive Ponzi scheme through his now-defunct Fort Lauderdale law firm. Over 400 victims attempted to invest more than $1 billion in purported confidential civil settlement agreements upon Rothstein’s promise of substantial future payouts. In reality, the settlement agreements did not exist, but were part of an elaborate scam in which Rothstein either retained the funds or used them to pay earlier investors. Prosecutors forfeited more than $28 million in bank accounts, real property, vehicles, jewelry and investment accounts as proceeds of the fraud. Through a combination of the forfeiture proceeds, and other legal efforts, qualifying victims have received over $500 million in recoveries to date.
$14.6 Million to Victims of Allen Hilly
United States v. $7,599,358.09 (District of New Jersey)
In 2007, Allen Hilly was indicted on charges that he fraudulently obtained more than $18 million in federal tax and workers’ compensation withholdings. When Hilly died before his case could proceed to trial, prosecutors initiated civil forfeiture proceedings to pursue the fraud proceeds. As a result of the successful civil forfeiture, in 2014, over $14.6 million was returned to nine victims, including the Internal Revenue Service and the Illinois Department of Insurance, which paid out claims to injured employees who otherwise would not have received payments due to Hilly’s fraud.
$11.7 Million to the Centers for Medicare and Medicaid Services
United States v. One Helicopter and United States v. One Parcel (Southern District of Florida)
Brothers Luis, Carlos and Jose Benitez were indicted in May 2008 for their alleged involvement in a $110 million scheme to defraud Medicare through the use of 11 South Florida clinics they owned and operated. According to papers filed in court, the Benitez Brothers filed false claims and caused others to pay kickbacks to Medicare recipients who fraudulently claimed they received HIV infusion services at the clinics in order to obtain Medicare benefits in excess of $84 million. After being charged with health care fraud and money laundering, the brothers fled to Cuba and remain fugitives. The department filed three civil forfeiture actions that, to date, have resulted in the recovery of property, including a helicopter, hotel, a water park, 30 vehicles, a car rental agency, houses, condos, and apartments. Thus far, $11.7 million is available to return to Medicare as compensation for losses resulting from the fraud.
$10 Million to Victims of Traders International Return Network Fraud
United States v. David Merrick (Middle District of Florida)
Between 2008 and 2009, David Merrick operated a Panamanian-based corporation called Traders International Return Network (TIRN), which claimed to be a legitimate private investment club with offices located in Dubai, Kuala Lumpur, Malaysia and Switzerland. Court filings detail how Merrick created shell corporations, disseminated false monthly dividend reports, and recruited investors through a website and in person. Over 770 victims suffered $12 million in losses as a result of Merrick’s scheme. Approximately $10 million in forfeited funds have been returned to date to the victims.
$9.2 Million to the City of Dixon, Illinois
United States v. Rita A. Crundwell (Northern District of Illinois); United States v. Have Faith in Money, et al. (Northern District of Illinois)
For over 20 years, Rita Crundwell used her position as comptroller for the City of Dixon, Illinois to embezzle more than $53 million from the city. An investigation revealed that Crundwell used the embezzled funds to pay for numerous personal and business expenses, including the establishment of a large horse farming and showing operation. Crundwell was convicted of wire fraud and forfeited over 500 assets, including more than 300 horses and associated show items. The U.S. Marshals Service assumed responsibility for the care of the horses seized in 13 states, which included overseeing the births of more than 80 foals. Ultimately, liquidation of the forfeited assets generated $9.2 million, which has been paid to the City of Dixon.
$8.8 Million to Victims of Zaveri Oil and Gas Fraud
United States v. Ashvin Zaveri (Western District of New York)
Ashvin Zaveri was charged with orchestrating a Ponzi scheme that enticed investors to invest in sham oil and natural gas explorations in Tennessee and Kentucky. Due to his untimely death, the criminal case against Zaveri was dismissed. However, the U.S. Attorney’s Office commenced a civil forfeiture action against the proceeds of Zaveri’s life insurance policy. Approximately $8.8 million obtained through civil forfeiture was returned to more than 100 victims of the scheme.
$4.5 Million to Victims of Xybernaut Fraud
United States v. Zev Saltsman (Eastern District New York)
Xybernaut Corporation, headquartered in Northern Virginia, was a provider of wearable mobile computing hardware, software and services. In October 2007, Xybernaut’s founders were indicted for securities fraud and money laundering in connection with a kickback scheme. Hundreds of millions of Xybernaut shares were issued at below market prices to several purchasers in exchange for kickbacks paid to the founders. Approximately $4.5 million in assets forfeited from various defendants has been distributed to over 12,000 victims.
$4.5 Million to South Dakota Health Care Provider
United States v. Gerald Lloyd Larson (District of South Dakota)
Gerald Larson was convicted of embezzling funds from his employer, a South Dakota health care provider. During the course of his scheme, he embezzled almost $5 million. Shortly after his conviction in January 2015, the U.S. Attorney for the District of South Dakota requested a transfer of approximately $4.5 million in forfeited assets to the Clerk of Court to compensate the victim.
Priceless Artifact Returned to Harvard
United States v. One Qing Dynasty Jadeite Lobed Censer & Cover (District of Massachusetts)
In 1979, an 18th Century Qing Dynasty jade incense holder was stolen from the Harvard Art Museums. In 2009, the artifact resurfaced at a Hong Kong auction house, which ran a search in the Art Loss Register database and discovered that the jade censer being offered for sale matched the censer stolen from Harvard. The Art Loss Register then notified U.S. Immigration and Customs Enforcement officials of the censer’s reappearance. Thereafter, the U.S. Attorney’s Office commenced a civil forfeiture action and obtained a civil warrant to seize the artifact. After successful civil proceedings, the United States returned the stolen artifact to the Harvard Art Museums in January 2014, over 30 years after the original theft.
For additional information about the Department of Justice’s victim compensation program, please visit http://www.justice.gov/criminal/afmls/victims/.
Justice Department Reaches Agreement with Madison County, New York, to Make Government Documents AccessibleRead the Press Release
The Department of Justice today announced an agreement with Madison County, New York, to remedy accessibility issues that violate the Americans with Disabilities Act (ADA). This year marks the 25th anniversary of the ADA, which the Civil Rights Division plays a critical role in enforcing.
Madison County and the department reached an agreement under Project Civic Access (PCA), the department’s wide-ranging initiative to ensure that cities, towns and counties throughout the country comply with the ADA. Under the agreement, Madison County is required to, among other things, ensure its communications with people with disabilities are as effective as its communications with people without disabilities. This includes making documents available in alternate accessible formats such as Braille, large print, recordings and accessible electronic format. Under the agreement, Madison County is also required to reasonably modify its policies, practices and procedures to ensure equal access to its programs, services and activities. County employees will also receive training on the requirements of the ADA and appropriate ways of serving people with disabilities.
“No one should be in fear of going hungry and or being unable to take their child to the doctor because their disability prevented them from applying for benefits for which they may be eligible,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “Many people with disabilities are low-income and are eligible for public benefits. The ADA requires state and local governments to make their communications and services accessible to all people, including those with disabilities.”
The agreement with Madison County will provide people with disabilities with accessible documents they need to complete to receive benefits. Chris Rifendifer, who is legally blind, is one of the people who will benefit from this agreement. Rifendifer relies on Medicaid and food stamps to help take care of himself and his family. However, the county provided him with forms he could neither read nor complete in order to receive his benefits. When he asked county staff for help filling out the forms, Rifendifer was denied any assistance and told to ask someone else to do it for him.
Experiences like Rifendifer’s, however, will become a thing of the past over the next three years under the PCA agreement. Rifendifer shared his story on the Justice Department blog today, where each month of 2015, the department is highlighting how PCA agreements have an impact on the everyday lives of people with disabilities.
In addition to addressing the issues faced by Rifendifer, the settlement agreement entered into by the department and Madison County requires the county to comply with the ADA’s architectural accessibility requirements by remediating existing buildings, when it builds new buildings and when it alters its buildings. Additionally, it requires the county to publish and distribute ADA information, use the New York telephone relay service as a key means of communicating with individuals who are deaf, hard-of-hearing or have speech impairments, conduct ADA training and submit to monitoring of its compliance with the agreement by the department.
For more information about the ADA, today’s agreement, the PCA initiative, individuals may access the ADA web page at http://www.ada.gov/civicac.htm or call the toll-free ADA Information Line at (800) 514-0301 or (800) 514-0383 (TTY).
Justice Department Asks Federal Court to Permanently Shut Down Liberty Tax Service Franchise OwnerRead the Press Release
The United States filed a complaint asking a federal court in Detroit to bar a Liberty Tax Service franchise owner and his companies based in Illinois and Michigan from preparing federal tax returns for others, the Justice Department announced today.
The civil complaint against Syed N. Ahmed and his businesses, Nasah Inc., Millinium [sic] Financial Solutions Inc., Mars Inc.-Hamtramck, and Mahad Inc., was filed in the U.S. District Court for the Eastern District of Michigan. The complaint alleges that Ahmed operates at least 10 Liberty Tax Service franchise locations.
According to the suit, the defendants improperly obtain inflated tax refunds and refundable credits for customers by preparing tax returns that include, among other things, false or inflated Schedule C (Profit or Loss From Business) income and expenses, bogus dependents, false filing statuses, improper education credits and false itemized deductions.
For example, the complaint alleges that one of defendants’ tax return preparers fabricated a driving business without the customer’s knowledge and reported thousands of dollars of expenses for that business that the customer did not incur. The false expenses enabled the customer to receive an earned income tax credit that she was not otherwise entitled to receive, according to the suit.
The lawsuit states that the defendants prepared more than 17,000 federal income tax returns between 2010 and 2013. Based on audit adjustments the Internal Revenue Service (IRS) has made to tax returns prepared and filed by the defendants between 2010 and 2013, the defendants’ conduct has cost the U.S. Treasury approximately $2.8 million, according to the suit.
Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2015. The IRS has some tips on its website for choosing a tax preparer, and has launched a free directory of federal tax preparers. In the past decade, the Tax Division has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters. Information about these cases is available on the Justice Department’s website. 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.
Justice Department Applauds Settlement to Improve Juvenile Right to Counsel in GeorgiaRead the Press Release
The Superior Court of Fulton County, Georgia, signed a consent decree today in N.P. et al. v. State of Georgia, et al., a class action suit asserting that the public defense system in the Cordele Judicial Circuit is so underfunded and poorly staffed that indigent adults and juveniles accused of committing criminal acts are routinely denied their right to legal representation. In March 2015, the Justice Department filed a statement of interest in the case, reaffirming the department’s commitment to enforcing the due process rights of children generally and, in particular, the need for children to consult with an attorney prior to waiving their Constitutional right to counsel. One month after the department’s filing, the parties, with the assistance of U.S. Attorney Michael Moore of the Middle District of Georgia, who served as mediator, resolved the case and submitted a joint consent decree to the court.
The proposed settlement, if implemented, would mark a major step forward in the safeguarding the right to counsel for both juveniles and adults. Specifically, the settlement would, among other things, require:
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the representation of children in juvenile court in the circuit to be by a lawyer who specializes in juvenile law and childhood and adolescent development;
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on notice from the court, a public defender from the juvenile division shall speak to any indigent juvenile who seeks to waive counsel and describe services of counsel available to the juvenile and the benefits of representation;
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all people, including children, arrested in the circuit and detained in its jails to consult with a lawyer in no more than three business days;
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the size of the Cordele Circuit Public Defender Office to nearly double, increasing from two full-time assistant public defenders to four, and from one full-time investigator to two; and
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significant and relevant training requirements for public defenders.
“This settlement recognizes that independent, ethical, and zealous counsel are essential to protecting the due process rights of juveniles,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “The Civil Rights Division will continue to ensure that juveniles across the nation are provided the vital protection of counsel.”
“I am pleased to have played some small part in bringing this matter to a resolution that will benefit the people of the Cordele Judicial Circuit for years to come,” said U.S. Attorney Moore. “As lawyers, all of us, including the named defendants in this case, understand the importance of providing representation to those who have been charged with a criminal or delinquent act. This agreement puts meat on the bones of that process, and guarantees that individuals who are facing criminal cases in the Cordele Circuit will not only have representation, but truly meaningful representation as they navigate the judicial system. This resolution is good for the accused, it is good for the court system, and it is good for the people of the state of Georgia. I want to thank my friends, Attorney General Sam Olens and Solicitor General Britt Grant, for helping all involved reach a consensus in this matter, and I want to acknowledge the courageous filing on behalf of the plaintiffs that brought this to our attention by Steve Bright.”
“We congratulate the parties on coming together and taking the steps necessary to improve justice for both adults and juveniles in the Cordele Judicial Circuit,” said Director Lisa Foster of the Office for Access to Justice. “The agreement upholds the core principles of the Sixth and Fourteenth Amendments and represents a model for the rest of Georgia and for the country.”
In N.P., the plaintiffs alleged that the public defense system in the Cordele Judicial Circuit had been so underfunded and poorly staffed that indigent adults and juveniles accused of committing criminal acts were routinely denied their right to legal representation. In its statement of interest, the department focused solely on the due process rights of children accused of delinquency. The department applied In re Gault and other case law to identify procedural safeguards that must be provided to children who appear before the court. The Civil Rights Division has worked to expand access to counsel in juvenile delinquency proceedings. For example, the division is currently enforcing an agreement in Shelby County (Memphis), Tennessee, that, among other remedies, requires the county and the local juvenile court to develop and support a juvenile public defense system. The division is also engaged in a federal suit against the City of Meridian, Lauderdale County, Mississippi, two youth court judges in Lauderdale County, and the state of Mississippi, alleging that they are violating the due process rights of juveniles in Meridian who are referred for law enforcement action by public schools.
In its statement of interest, the department asserted that children are denied their right to counsel not only when an attorney is entirely absent, but also when an attorney is available in name only. It provided the court with a framework to assess the plaintiffs’ claim that the defendants are depriving young people accused of delinquency of their right to counsel. As the department summarized in the statement of interest, “due process requires that every child who faces the loss of liberty should be represented from their first appearance through, at least, the disposition of their case by an attorney with the training, resources and time to effectively advocate the child’s interest. If a child decides to waive the right to an attorney, courts must ensure that the waiver is knowing, intelligent, and voluntary by requiring consultation with counsel before the court accepts the waiver.”
The case was filed in 2014 and brought by indigent adults and juveniles who faced criminal and delinquency charges in the Cordele Judicial Circuit.
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Former Loan Officer at Export-Import Bank Pleads Guilty to Accepting over $78,000 in BribesRead the Press Release
A former loan officer at the Export-Import Bank of the United States (Ex-Im Bank) pleaded guilty in federal court today for accepting more than $78,000 in bribes in return for recommending the approval of unqualified loan applications to the bank, among other misconduct.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting Inspector General Michael T. McCarthy of the Export-Import Bank of the United States and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement.
Johnny Gutierrez, 50, of Stafford, Virginia, pleaded guilty before U.S. District Judge Gladys Kessler of the District of Columbia to one count of bribery of a public official. A sentencing hearing is scheduled for July 20, 2015.
“Gutierrez risked both taxpayer dollars and the integrity of the Ex-Im Bank for his personal financial gain,” said Assistant Attorney General Caldwell. “Those charged with serving the public will be held accountable when they seek personal enrichment at the public’s expense.”
“Gutierrez betrayed the trust and confidence of the hardworking Ex-Im Bank employees and the U.S. taxpayers,” said Acting Inspector General McCarthy. “The Office of Inspector General will continue to aggressively and diligently investigate all allegations of waste, fraud, and abuse related to Ex-Im Bank programs.”
“In his role as a loan officer, Gutierrez betrayed the trust that was placed in him by fellow citizens and took bribes in exchange for providing favorable action on loan applicants,” said Assistant Director in Charge McCabe. “The FBI, with our partners, will continue to investigate and expose fraudulent schemes that tarnish the good and ethical work of the U.S. government.”
According to his plea agreement, Gutierrez was a loan officer for the Ex-Im Bank based in Washington, D.C. The Ex-Im Bank is the federal agency responsible for promoting the export of U.S. goods to foreign countries through the guarantee of domestic loans to foreign buyers. As an Ex-Im Bank loan officer, Gutierrez was responsible for conducting credit underwriting reviews for companies and lenders submitting financing applications to the Ex-Im Bank.
As part of his guilty plea, Gutierrez admitted that on 19 separate occasions between June 2006 and December 2013, he accepted bribes totaling more than $78,000 in return for recommending the approval of unqualified loan applications and improperly expediting other applications.
Specifically, Gutierrez admitted that he intentionally ignored the fact that one company had previously defaulted in 10 previous transactions guaranteed by the bank, causing the Ex-Im Bank to lose almost $20 million. Despite these defaults, Gutierrez accepted bribes to continue to recommend the approval of the company’s loan applications. Additionally, Gutierrez admitted that he accepted bribes from a financing broker to expedite applications submitted by the broker, and that he privately assisted the broker to improve its applications before submission to the bank. In exchange, Gutierrez was to receive half of the broker’s profit on the transactions financed by the bank. Further, Gutierrez disclosed to the broker inside information about financing applications submitted to the Ex-Im Bank, so that the broker could solicit the applicants as clients.
The case was investigated by the Inspector General of the Export-Import Bank of the United States and the FBI, with significant assistance provided by the Internal Revenue Service-Criminal Investigation’s (IRS-CI) Washington Field Office. The case is being prosecuted by Senior Litigation Counsel Patrick M. Donley and Trial Attorney William H. Bowne of the Criminal Division’s Fraud Section.
ExxonMobil to Pay $5 Million to Settle U.S. and Arkansas Claims for 2013 Mayflower Oil SpillRead the Press Release
ExxonMobil Pipeline Company and Mobil Pipe Line Company (ExxonMobil) have agreed to pay civil penalties, fund an environmental project and implement corrective measures to resolve alleged violations of the Clean Water Act and state environmental laws stemming from a 2013 crude oil spill from the Pegasus Pipeline in Mayflower, Arkansas, the Department of Justice and the Environmental Protection Agency (EPA) announced today.
Under a consent decree lodged today in federal court, ExxonMobil will pay $3.19 million in federal civil penalties and take steps to address pipeline safety issues and oil spill response capability. In addition, ExxonMobil will pay $1 million in state civil penalties, $600,000 for a project to improve water quality at Lake Conway, and $280,000 to the Arkansas Attorney General’s Office for the state’s litigation costs.
The oil spill occurred on March 29, 2013, after the Pegasus Pipeline, carrying Canadian heavy crude oil from Illinois to Texas, ruptured in the Northwoods neighborhood of Mayflower, Arkansas. Oil flowed through the neighborhood, contaminating homes and yards, before entering a nearby creek, wetlands and a cove of Lake Conway. Some residents were ordered to evacuate their homes after the spill and remained displaced for an extended period of time. The spill volume has been estimated at approximately 3,190 barrels, or 134,000 gallons.
“This settlement holds ExxonMobil accountable for this very serious oil spill and its disastrous impact on the Mayflower community and environment,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division. “This agreement is also an excellent example of federal and state cooperation that will benefit public health and the environment for years to come and most importantly prevent future disasters by requiring better pipeline safety and response measures.”
“Oil spills like this one in Mayflower, Arkansas have real and lasting impacts on clean water for communities,” said Assistant Administrator Cynthia Giles for EPA’s Office of Enforcement and Compliance Assurance. “Companies need to take the necessary precautions to make sure oil is transported safely and responsibly. This settlement puts in place essential pipeline safety and response measures that are important to make this industry safer for communities.”
“The U.S. and the state of Arkansas have worked together since the first barrel of oil was spilled in 2013 to provide relief and assistance to the residents of Mayflower and Faulkner County and to hold ExxonMobil accountable for this serious spill,” said U.S. Attorney Christopher R. Thyer for the Eastern District of Arkansas. “This settlement does both. In addition to paying significant civil penalties, ExxonMobil will provide money for safety and water-quality projects to help ensure that the residents of the affected area never have to go through an ordeal like this again. This resolution to a terrible disaster is a testament to the partnership between our federal and state governments to protect the citizens of Arkansas.”
“Pipeline companies have the responsibility to protect both our water resources and people from oil spills,” said Regional Administrator Ron Curry for EPA. “Today’s settlement will help protect the environment by preventing the high economic and environmental costs of future oil spills.”
The penalties owed by ExxonMobil under the consent decree are in addition to the money that the company has already paid to reimburse federal and state response efforts and comply with orders and directives issued by the Pipeline and Hazardous Materials Safety Administration (PHMSA). The segment of the Pegasus Pipeline that includes the rupture site has not been used since the March 2013 spill, and under the terms of the settlement agreement, ExxonMobil must comply with all PHMSA corrective action requirements before returning the pipeline to operation. The consent decree also requires ExxonMobil to take other important pipeline safety corrective action to help prevent future ruptures and improve its spill response capabilities by providing additional training to its oil spill first responders. In addition, ExxonMobil is required to establish caches of spill response equipment and supplies at three strategically-chosen sites along the pipeline, including one location near Mayflower in Faulkner County, Arkansas.
The Clean Water Act makes it unlawful to discharge oil or hazardous substances into or upon the navigable waters of the U.S. or adjoining shorelines in quantities that may be harmful to the environment or public health. The penalty paid to the U.S. for this spill will be deposited in the federal Oil Spill Liability Trust Fund managed by the National Pollution Funds Center. Those funds will be available to pay for federal response activities and to compensate for damages when there is a discharge or substantial threat of discharge of oil or hazardous substances to waters of the U.S. or adjoining shorelines.
The joint federal and state complaint in the case, filed June 13, 2013, in the U.S. District Court for the Eastern District of Arkansas, alleges that ExxonMobil discharged crude oil in violation of the Clean Water Act. The complaint also asserts state claims for civil penalties for improper storage of hazardous waste generated during the cleanup and for water and air pollution violations pursuant to the Arkansas Water and Air Pollution Control Act and the Arkansas Hazardous Waste Management Act.
The proposed consent decree, lodged in the Eastern District of Arkansas, is subject to a 30-day public comment period and court review and approval. A copy of the consent decree is available on the Department of Justice website at http://www.justice.gov/enrd/Consent_Decrees.html.
Court Approves Consent Order to Further Desegregate and Address Racial Inequalities in Huntsville City SchoolsRead the Press Release
The U.S. District Court for the Northern District of Alabama has approved a consent order filed by the U.S. Department of Justice and the Huntsville City Schools to reconfigure school attendance zones, improve access to quality course offerings and address racial discrimination in student discipline, among other areas.
In a 29-page opinion approving the consent order, U.S. District Judge Madeleine Hughes Haikala of the Northern District of Alabama called the plan a “game-changer” in the effort to finally eliminate the effects of state-mandated racial segregation in Huntsville. As the court noted, “the record demonstrates that full and faithful execution of the proposed consent order will enable the district to eliminate the effects of segregation “root and branch” and will pave the way toward a declaration of unitary status…. Now it is up to the district to act.”
The consent order, which amends the longstanding desegregation order in Hereford v. Huntsville Board of Education, resolves the parties’ dispute over the district’s 2014 plan to redraw student attendance zones. The department objected to the plan because it did not further desegregation or remedy racial inequalities in students’ access to quality academic offerings. The consent order was approved by the court after a far-reaching investigation by the department and months of mediation. It will require the district to provide equal educational opportunities to African-American students by:
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revising attendance zones and growing and strengthening magnet programs to improve diversity at many of its schools;
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expanding access for African-American students to pre-kindergarten, gifted programs, advanced course offerings such as Advanced Placement and International Baccalaureate, academic after-school programs, and college counseling;
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implementing measures to promote faculty and administrator diversity;
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ensuring that all students are aware of and can equally participate in extracurricular activities;
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creating positive, inclusive school climates, and ensuring that student discipline is fair, non-discriminatory and does not unnecessarily remove students from classrooms;
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establishing a desegregation advisory committee of students and parents to advise the district and inform the court about implementation of the consent order;
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providing professional development for teachers on such topics as strategies for teaching students from diverse backgrounds, understanding implicit bias and supporting positive student behavior; and
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continuously monitoring racial disparities to ensure meaningful and sustained improvement in student performance, students’ access to courses and rates of student discipline and other areas.
Judge Haikala’s opinion approving the consent order spoke directly to the students saying, “The consent order begins and ends with the district’s students – all of its students…The district believes in you and in your potential for success. We all do…. Think about how much the City of Huntsville will benefit from the contributions that you will make in the years ahead as teachers and engineers, as doctors and lawyers, as artists and musicians. You are an integral part of your community and have so much to offer.”
“This agreement provides for comprehensive remedies that are long overdue for African-American students in Huntsville,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “We at the Civil Rights Division look forward to working with the district, the students and the community to implement the consent decree, instill equity and fairness in Huntsville schools, and strengthen the education provided to all students.”
“All of our children deserve the best possible educational opportunities,” said U.S. Attorney Joyce White Vance of the Northern District of Alabama. “Our communities and our future are strengthened and improved when parties come together, as the Justice Department and Huntsville City Schools did here, to ensure that all children have equal access to quality education.”
The department will monitor and enforce the district’s compliance. The school district may seek a declaration of unitary status and dismissal of the case when it can demonstrate sustained compliance with the terms of the consent order.
The enforcement of Title IV of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race and other factors in public schools, is a top priority of the department’s Civil Rights Division. Additional information about the Civil Rights Division of the department is available on its web site at www.justice.gov/crt.
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United States Files Suit against Michaels Stores Inc. for Failing to Report Serious Safety Hazard in Shattering Glass VasesRead the Press Release
Permanent Injuries Suffered by Consumers
The Department of Justice and the Consumer Product Safety Commission (CPSC) jointly announced today the filing of a complaint against Michaels Stores Inc. and its subsidiary Michaels Stores Procurement Co. Inc. in the U.S. District Court for the Northern District of Texas.
Michaels is a publicly held corporation headquartered in Irving, Texas. In 2013, Michaels had more than $4.5 billion in sales and 50,600 employees. It is the largest arts and crafts specialty retailer in North America.
The complaint charges that Michaels knowingly violated the reporting requirements of the Consumer Product Safety Act with respect to glass vases that shattered in consumers’ hands, sometimes as the consumer lifted the vase from the Michaels Stores shelf. As set forth in the complaint, Michaels imported and sold the vases, which caused serious injuries to consumers, including lacerations requiring stitches, permanent nerve damage and surgery to repair severed tendons. The complaint, filed by the Department of Justice on behalf of the CPSC, seeks civil penalties and permanent injunctive relief.
“Michaels allegedly failed to report critical information about the safety of one of its products,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “The Department of Justice will continue to protect the public against companies that put profits over safety.”
In addition to failing to notify the CPSC “immediately” as required by law, the government also alleges that when Michaels finally notified the CPSC, it did so in a misleading way. Michaels’ report conveyed the false impression that Michaels did not import the vases, even though Michaels should have known it was the importer. The complaint asserts that Michaels’ misrepresentation allowed Michaels to avoid legal responsibility for the recall of the vases as well as any obligation to pay costs and expenses associated with a recall.
“We believe that Michaels chose to profit from selling defective vases that put people at risk, instead of following the law and immediately reporting that their vases were shattering and causing great harm to consumers,” said CPSC Chairman Elliot F. Kaye. “To protect the public, companies are required to report potential product hazards and risks to CPSC on a timely basis. That means within 24 hours, not more than a year as in Michaels’ case.”
Michaels sold the vases in its stores from 2006 to 2010. According to the complaint, the vases pose a safety hazard because their walls are too thin to withstand the pressure of normal handling and, as a result, they shatter in consumers’ hands. The complaint alleges that beginning as early as November 2007 and continuing for more than two years, Michaels received numerous consumer complaints that the vases were unsafe because they shattered during normal use and caused serious injuries. The vases were recalled in September 2010.
The matter is being handled by Trial Attorney Kerala Thie Cowart of the Civil Division’s Consumer Protection Branch, Assistant U.S. Attorney Lisa Hasday of the Northern District of Texas and Patricia Vieira of the CPSC’s Office of the General Counsel.
The claims made in the complaint are allegations only, and there has been no determination of liability.
Texas-Based Citizens Medical Center Agrees to Pay United States $21.75 Million to Settle Alleged False Claims Act ViolationsRead the Press Release
Citizens Medical Center, a county-owned hospital in Victoria, Texas, has agreed to pay the United States $21,750,000 to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with referring physicians, the Justice Department announced today.
“The Department of Justice has longstanding concerns about improper financial relationships between health care providers and their referral sources, because those relationships can alter a physician’s judgment about the patient’s true health care needs and drive up health care costs for everybody,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”
“Any type of false claim or improper behavior under our health care fraud laws are serious allegations that will not be taken lightly,” said U.S. Attorney Kenneth Magidson of the Southern District of Texas. “The settlement announced today represents the effectiveness of our continuing efforts and an example of our priorities in this arena.”
The settlement announced today resolved allegations that the hospital provided compensation to several cardiologists that exceeded the fair market value of their services. The settlement also resolved allegations that the hospital paid bonuses to emergency room physicians that improperly took into account the value of their cardiology referrals. The United States contended that these agreements violated the Stark Statute and the False Claims Act. The Stark Statute restricts the financial relationships that hospitals may have with doctors who refer patients to them.
The allegations settled today arose from a lawsuit filed by three whistleblowers, Dakshesh “Kumar” Parikh, Harish Chandna and Ajay Gaalla, under the qui tam provisions of the False Claims Act. Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery. The whistleblowers will collectively receive $5,981,250 from the recoveries announced today.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.
The case, United States ex rel. Parikh, et al. v. Citizens Medical Center, et al., Case No. 6:10-cv-64 (S.D. Tex.), was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Texas and the U.S. Department of Health and Human Services’ Office of Inspector General. The claims settled by this agreement are allegations only, and there has been no determination of liability.
Operator of Detroit Adult Day Care Center and Two Home Health Care Company Owners Sentenced in $29 Million Medicare Fraud ConspiracyRead the Press Release
The former operator of a Detroit adult day care center and two former owners of Detroit-area home health care companies were sentenced to prison today for their roles in a $29 million Medicare fraud scheme.
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 Special Agent in Charge Jarod Koopman of Internal Revenue Service Criminal Investigation (IRS-CI) made the announcement.
Felicar Williams, 51, of Dearborn, Michigan, was sentenced to five years in prison and ordered to pay $2,431,018 in restitution, representing the amount paid by Medicare for Williams’ fraudulent claims. Abdul Malik Al-Jumail, 54, and Jamella Al-Jumail, 25, both of Brownstown, Michigan, were sentenced to 10 years in prison and four years in prison respectively. Both were also ordered to pay $8,389,541 and $589,516 in restitution, respectively, the amounts paid by Medicare for their fraudulent claims. The sentences were imposed by U.S. District Judge Denise Page Hood of the Eastern District of Michigan in Detroit.
All three defendants were convicted on Sept. 30, 2014, after a 12-week jury trial in the Eastern District of Michigan. Williams was convicted of conspiracy to commit health care fraud and conspiracy to receive health care kickbacks. Abdul Malik Al-Jumail and Jamella Al-Jumail were each found guilty of conspiracy to commit health care fraud. Abdul Malik Al-Jumail was also found guilty of conspiracy to pay and receive health care kickbacks. Jamella Al-Jumail was also found guilty of destroying documents in connection with a federal investigation.
According to the evidence at trial, Williams billed Medicare, through her company, Haven Adult Day Care Center LLC, for psychotherapy services that were not actually provided. The evidence demonstrated that, in some instances, Williams billed Medicare for services purportedly provided to patients who were already deceased. Williams also sold the private medical information of her patients to Abdul Malik Al-Jumail so that he could use it to submit fraudulent claims to Medicare.
The evidence further showed that Abdul Malik Al-Jumail obtained patients by paying unlawful kickbacks to Williams and others, and caused claims to be submitted to Medicare for home health services, including physical therapy, that were never delivered. Like her father, the evidence demonstrated that Jamella Al-Jumail billed Medicare for home health services and physical therapy that were not actually provided. The evidence at trial also showed that, the day her father was arrested, Jamella Al-Jumail told an employee to retrieve falsified patient medical records from their company, which she and others later burned.
The case was investigated by the FBI, HHS-OIG and the IRS, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan. The case was prosecuted by Trial Attorneys Christopher Cestaro, Brooke Harper and William Kanellis of the Criminal Division’s Fraud Section, and Assistant U.S. Attorney Patrick Hurford 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 nearly 2,100 defendants who have collectively billed the Medicare program for more than $6.5 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 (HEAT), go to: www.stopmedicarefraud.gov.
Justice Department Honors 12 Individuals and Teams for Advancing Rights and Services for Crime VictimsRead the Press Release
Attorney General Eric Holder will preside over the National Crime Victims’ Rights Service Awards ceremony at 2:00 p.m. on Tuesday, April 21. The event honors 12 individuals and programs for their extraordinary actions to bring positive and lasting changes in the lives of crime victims.
“The Department of Justice is proud to recognize the tremendous contributions of dedicated colleagues, passionate advocates and extraordinary partners in the field of victim services,” said Attorney General Eric Holder. “From safeguarding survivors of sexual violence to assisting victims of mass marketing fraud, the recipients of today’s awards have been instrumental in our nationwide effort to protect the most vulnerable among us, to prevent and combat crime, and to help victims find hope and seek justice.”
The department’s Office for Victims of Crime leads communities across the country in observing National Crime Victims’ Rights Week and hosts an award ceremony each year. President Reagan proclaimed the first Victims’ Rights Week in 1981, calling for greater sensitivity to the rights and needs of victims. For 2015, the week is observed from April 19 through 25, with the theme Engaging Communities. Empowering Victims.
Following is a list of the award recipients, who were nominated by their colleagues in the field and selected by the Attorney General:
The Allied Professional Award recognizes an individual or organization outside the victim assistance field for services or contributions to the victims’ field. Recipients: Mary Kay Inc. of Addison, Texas, and Assistant District Attorney Norman A. Gahnof the Milwaukee County District Attorney’s Office.
The Crime Victims Financial Restoration Award recognizes individuals, programs, organizations or teams that developed innovative ways of funding services for crime victims or instituted innovative approaches for securing financial restoration for crime victims. Recipient: A team of representatives from the U.S. Attorney’s Office of the Middle District of Pennsylvania, the department’s Asset Forfeiture Money Laundering Section and U.S. Postal Inspection Service for Harrisburg, Pennsylvania.
The National Crime Victim Service Award honors extraordinary efforts in direct service to crime victims. Recipients: Karen Kalergis, a victim advocate from Austin, Texas, and Executive Director Alecia “Lisa” Thompson-Heth of Wiconia Wawokiya Inc., of the Crow Creek Sioux Indian Reservation, Fort Thompson, South Dakota.
The Crime Victims’ Rights Award honors those whose efforts to advance or enforce crime victims’ rights have benefited crime victims at the state, tribal or national level. Recipient: Laurel Wemhoff, a survivor and advocate from Washington, D.C.
The Ronald Wilson Reagan Public Policy Award honors leadership, innovation and vision that leads to noteworthy changes in public policy that benefit crime victims. Recipients: Dr. Marcus Smith and attorney Matthew Smith, of Little Rock, Arkansas, and Director of Victim Services Suzanne Breedlove of the District Attorneys Council in Oklahoma City.
The Professional Innovation in Victim Service Award recognizes a program, organization or individual who has helped to expand the reach of victims’ rights and services. Recipient: Judge Paul M. Herbert of the Franklin County Municipal Court in Columbus, Ohio.
The Special Courage Award recognizes extraordinary bravery in the aftermath of a crime or courageous act on behalf of a victim or potential victim. Recipients: Ronald Cotton and Jennifer Thompson, of Chapel Hill, North Carolina.
The Vision 21 Crime Victims Research Award recognizes individual researchers or research teams that make a significant contribution to the nation’s understanding of crime victims’ issues. Recipient: Rebecca Campbell, of Michigan State University in East Lansing, Michigan.
The Volunteer for Victims Award honors individuals for their extraordinary and selfless efforts resulting in positive and lasting changes in the lives of crime victims. Recipient: LaWanda Hawkins, of San Pedro, California.
Descriptive narratives and videos of the contributions of recipients are available at Office for Victims of Crime’s Gallery.
About the Office of Justice Programs (OJP)
OJP, headed by Assistant Attorney General Karol V. Mason, provides federal leadership in developing the nation’s capacity to prevent and control crime, administer justice and assist victims. OJP has six components: the Bureau of Justice Assistance, the Bureau of Justice Statistics, the National Institute of Justice, the Office of Juvenile Justice and Delinquency Prevention, the Office for Victims of Crime and the Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering and Tracking. More information about OJP can be found at www.ojp.gov.
Justice Department Announces Investigations of the Ville Platte, Louisiana, Police Department and the Evangeline Parish Sheriff's OfficeRead the Press Release
The Justice Department announced today that it has opened pattern or practice investigations into the use of investigative holds by the Ville Platte Police Department (VPPD) and the Evangeline Parish Sheriff’s Office (EPSO). The investigations will focus on allegations that VPPD and EPSO officers use “investigative holds” to detain individuals without proper cause, and on the adequacy of VPPD and EPSO’s training, supervision and accountability mechanisms to prevent unlawful seizures. The Justice Department’s investigations will determine whether VPPD and EPSO officers engage in a pattern or practice of using investigative holds in violation of the Constitution and federal law.
“No individual should be detained without proper cause or arrested in violation of his or her civil rights,” said Attorney General Eric Holder.” As these investigations move forward, the Department of Justice will work to ensure that the actions of the Ville Platte Police Department and the Evangeline Parish Sheriff's Office are in service of our shared mission, consistent with our common values, and in accordance with the Constitution that we are sworn to uphold.”
The Justice Department has contacted officials at VPPD, EPSO, the city of Ville Platte and Evangeline Parish, and will continue to work closely with these law enforcement agencies and municipalities as the investigations progress.
“Police officers across the country are called upon regularly to use their law enforcement authority to protect and safeguard members of their communities by investigating criminal activity,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “It is imperative that officers use their authority within the boundaries of the law and the Constitution. We are eager to work together with the Ville Platte Police Department, Evangeline Parish Sheriff’s Office and the local municipalities to help ensure that their officers are engaged in law enforcement practices that are consistent with the Constitution.”
“All of us who work in law enforcement should be focused on due process every day,” said U.S. Attorney Stephanie A. Finley of the Western District of Louisiana. “Each citizen deserves to be treated with respect and in accordance with the Constitution. We will continue to work with all of our local partners to ensure that arrests and detentions are proper and legal, with the goal of having safeguards in place to make sure that similar violations do not occur in the future.”
The Violent Crime Control and Law Enforcement Act of 1994 prohibits state and local governments from engaging in a pattern or practice of misconduct by law enforcement officers that deprives individuals of federally-protected rights. The act also allows the Justice Department to remedy such misconduct through civil litigation. The Justice Department has conducted similar investigations and has obtained important reforms in police departments and law enforcement agencies across the country.
The Special Litigation Section of the Justice Department’s Civil Rights Division in Washington, D.C. is conducting the investigations. Individuals with relevant information are encouraged to contact the Justice Department by phone at 1-877-218-5228.
Additional information about the Civil Rights Division is available on its website at www.justice.gov/crt.
Government Sues Skilled Nursing Chain HCR Manorcare for Allegedly Providing Medically Unnecessary TherapyRead the Press Release
The government has intervened in three False Claims Act lawsuits and filed a consolidated complaint against HCR ManorCare alleging that ManorCare knowingly and routinely submitted false claims to Medicare and Tricare for rehabilitation therapy services that were not medically reasonable and necessary, the Department of Justice announced today. ManorCare is one of the nation’s largest healthcare providers, operating approximately 281 skilled nursing facilities (SNFs) in 30 states.
“The Department of Justice is committed to ensuring that healthcare providers who pressure their employees to provide medically unnecessary services to Medicare beneficiaries and Tricare recipients solely to increase their own profits are held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “We will not relent in our efforts to stop these false billing schemes and recover funds for federal healthcare programs.”
The government’s complaint alleges that ManorCare, which is owned by The Carlyle Group, exerted pressure on SNF administrators and rehabilitation therapists to meet unrealistic financial goals that resulted in the provision of medically unreasonable and unnecessary services to Medicare and Tricare patients. ManorCare allegedly set prospective billing goals designed to significantly increase revenues without regard to patients’ actual clinical needs and threatened to terminate SNF managers and therapists if they did not administer the additional treatments necessary to qualify for the highest Medicare payments. ManorCare also allegedly increased its Medicare payments by keeping patients in its facilities even though they were medically ready to be discharged.
“We strive for a system whereby health care providers provide reasonable and necessary services without overbilling Medicare for unreasonable and unnecessary services” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia. “We will continue our robust investigations of the companies operating in this important sector of our economy.”
“We want to ensure that taxpayer dollars are used to pay for health care for Americans that need it, not to unjustly enrich health care companies,” said U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan. “Medical providers will be held accountable when they exploit patients for profit by subjecting them to therapies they don’t need and then billing Medicare for reimbursement.”
“Today’s action is the result of a robust investigation into alleged false billings submitted to Medicare and Tricare for rehabilitation therapy services that were not necessary for patients,” said Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington, D.C., Field Office. “Healthcare fraud is a top priority for the FBI and we will continue to work closely with federal, state and local law enforcement partners to address vulnerabilities, fraud and abuse in the healthcare industry.”
The three consolidated lawsuits were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The False Claims Act permits the government to intervene in such lawsuits, as it has done in these cases. A defendant that violates the False Claims Act is liable for three times the government’s losses plus civil penalties.
The government’s intervention in these matters illustrates its emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement, including the conduct described in the United States’ complaint, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).
These matters were investigated by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Offices for the Northern and Southern Districts of Iowa, Eastern and Western Districts of Michigan, Northern and Southern Districts of Ohio, Eastern District of Pennsylvania and Eastern District of Virginia; the Department of Health and Human Services’ Office of Inspector General; the Department of Defense’s Office of Inspector General; the Defense Health Agency; the Medicaid Fraud Control Units of the California Attorney General’s Office, Delaware Department of Justice, the Florida Attorney General’s Office, Illinois State Police, Iowa Department of Inspections and Appeals, the Maryland Attorney General’s Office, the Michigan Attorney General’s Office, the Ohio Attorney General’s Office and the Virginia Attorney General’s Office; the National Association of Medicaid Fraud Control Units; and the FBI.
The cases are captioned United States ex rel. Ribik v. ManorCare, Inc., et al., Case No. 1:09cv13-CMH-HCB (E.D. Va.); United States ex rel. Slough v. HCR ManorCare, et al., Case No. 1:14cv1228 (E.D. Va.); and United States ex rel. Carson v. HCR ManorCare, et al., Case No. 1:11cv1054 (E.D. Va.).
The claims asserted against ManorCare are allegations only, and there has been no determination of liability.
Futures Trader Charged with Illegally Manipulating Stock Market, Contributing to the May 2010 Market ‘Flash Crash’Read the Press Release
A futures trader was arrested in the United Kingdom today on U.S. wire fraud and commodities fraud and manipulation charges in connection with his alleged role in the May 2010 “Flash Crash,” when the Dow Jones Industrial Average plunged 600 points in five minutes, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Special Agent in Charge Robert J. Holley of the FBI’s Chicago Division.
Navinder Singh Sarao, 36, of Hounslow, United Kingdom, was arrested today in the United Kingdom, and the United States is requesting his extradition. Sarao was charged in a federal criminal complaint in the Northern District of Illinois on Feb. 11, 2015, with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of “spoofing,” a practice of bidding or offering with the intent to cancel the bid or offer before execution.
According to allegations in the complaint, which was unsealed today, Sarao allegedly used an automated trading program to manipulate the market for E-Mini S&P 500 futures contracts (E-Minis) on the Chicago Mercantile Exchange (CME). E-Minis are stock market index futures contracts based on the Standard & Poor’s 500 Index. Sarao’s alleged manipulation earned him significant profits and contributed to a major drop in the U.S. stock market on May 6, 2010, that came to be known as the “Flash Crash.” On that date, the Dow Jones Industrial Average fell by approximately 600 points in a five-minute span, following a drop in the price of E-Minis.
According to the complaint, Sarao allegedly employed a “dynamic layering” scheme to affect the price of E-Minis. By allegedly placing multiple, simultaneous, large-volume sell orders at different price points—a technique known as “layering”—Sarao created the appearance of substantial supply in the market. As part of the scheme, Sarao allegedly modified these orders frequently so that they remained close to the market price, and typically canceled the orders without executing them. When prices fell as a result of this activity, Sarao allegedly sold futures contracts only to buy them back at a lower price. Conversely, when the market moved back upward as the market activity ceased, Sarao allegedly bought contracts only to sell them at a higher price.
The charges contained in the complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
This case is being investigated by the FBI’s Chicago Division. The case is being prosecuted by Assistant Chief Brent S. Wible and Trial Attorney Michael T. O’Neill of the Criminal Division’s Fraud Section, with assistance provided by the U.S. Attorney’s Office for the Northern District of Illinois, the Criminal Division’s Office of International Affairs and the International Assistance Unit of the Metropolitan Police Service of London, United Kingdom. The Department of Justice appreciates the substantial assistance of the Commodity Futures Trading Commission’s Division of Enforcement, which referred this matter to the department.
Sarao Criminal Complaint
Family Dermatology PcC Agrees to Pay United States More Than $3.2 Million to Settle Alleged False Claims Act ViolationsRead the Press Release
Family Dermatology P.C. which owns and operates a dermatopathology laboratory in Georgia and a number of dermatology practices throughout the Eastern United States, has agreed to pay the United States $3,247,835 plus interest to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with a number of its employed physicians, the Justice Department announced today.
“The Department of Justice has had longstanding concerns about improper financial relationships between health care providers and their referral sources, because such relationships can alter a physician's judgment about the patient's true health care needs and drive up health care costs for everybody,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Department’s Civil Division. “In addition to yielding a recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”
The settlement announced today resolved allegations that financial relationships that Family Dermatology and its affiliates had with a number of their employed physicians violated the Stark Statute and the False Claims Act. The Stark Statute restricts the financial relationships that health care providers may have with doctors who refer patients to them. Family Dermatology employs a number of dermatologists as independent contractors and it has routinely required them to use Family Dermatology’s in-house pathology lab, which operated under the name Nelson Dermatopathology, for their pathology services. The government alleged that Family Dermatology’s financial relationships with a number of these physicians did not comply with the requirements of the Stark Statute, and that Family Dermatology improperly billed Medicare for dermatopathology analyses performed by Nelson Dermatopathology on specimens that were sent to the laboratory by these employed physicians.
“The defendants financed the expansion of their business across the Eastern United States with improper financial arrangements that resulted in illegal referrals and, ultimately, inflated payments from Medicare,” said Acting U.S. Attorney John Horn of the Northern District of Georgia. “We expect providers to follow the law and will pursue those who do not.”
“Physician self-referrals that violate the Stark Statute undermine medical decision making, jeopardize patient care and cost the taxpayers money,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida. “Patients need to have confidence that the advice they receive from their physicians is based on sound medical practice, not illegal financial relationships between providers. We will continue to investigate and pursue these types of violations in our district.”
“This settlement not only demonstrates the need for oversight involving such matters under the False Claims Act, but also the FBI’s commitment toward enforcing this as well as other health care fraud based violations,” said Special Agent in Charge J. Britt Johnson of the FBI’s Atlanta Field Office.
“Health care companies that make sweetheart deals with physicians to boost profits undercut both the financial integrity of Medicare and the public’s trust in the medical profession,” said Special Agent in Charge Derrick L. Jackson of the Department of Health and Human Services’ Office of Inspector General (HHS-OIG). “Our agency will continue to hold those who engage in such improper financial schemes accountable.”
The allegations settled today arose from three separate lawsuits filed by three whistleblowers, Scott M. Ross MD, Mark F. Baucom and Harold Milstein MD under the qui tam provisions of the False Claims Act. Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery. The whistleblowers will collectively receive more than $584,000 from the recovery announced today.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.
The cases, United States ex rel. Ross v. Family Dermatology of Pennsylvania, P.C., et al., Case No. 1:11-cv-2413 (N.D. Ga.); United States ex rel. Baucom v. Family Dermatology of Pennsylvania, P.C., et al., Case No. 1:11-cv-4260 (N.D. Ga.); and United States ex rel. Milstein v. Family Dermatology, P.C., et al., Case No. 1:13-cv-1027 (N.D. Ga.), were handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Offices of the Northern District of Georgia and the Middle District of Florida, and HHS-OIG.
U.S. ex rel. Milstein was originally filed in the Middle District of Florida and subsequently transferred to the Northern District of Georgia. The claims settled by this agreement are allegations only, and there has been no determination of liability.
Convicted Bank Robber, Drug Dealer and Two Others Sentenced to Prison for $1 Million Stolen Identity Tax Refund Fraud SchemeRead the Press Release
Four Portland, Oregon, residents were sentenced today in the U.S. District Court in Portland for a multi-year stolen identity tax refund scheme to defraud the United States of more than $1 million in tax refunds, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Acting U.S. Attorney Billy J. Williams of the District of Oregon.
Jheraun Dunlap, Ernest Bagsby, Jermaine Moore and Brandi McCall were collectively sentenced to serve more than 14 years in prison by U.S. District Judge Robert E. Jones. Dunlap, 32, who was previously convicted of bank robbery, was sentenced to serve five years and five months in prison. Bagsby, 37, who was previously convicted of delivery of heroin in Clackamas County, Oregon, was sentenced to serve four years and three months in prison. Moore, 34, was sentenced to serve three years and nine months in prison, and McCall, 27, was sentenced to serve 12 months and one day in prison. All four defendants were ordered to pay restitution to the Internal Revenue Service (IRS) in the amount of $427,896.
According to the plea agreements and court documents, the scheme involved the filing of 208 false federal income tax returns that included fraudulent claims for tax refunds between $3,000 and $9,000 per return. Dunlap electronically filed the false tax returns using stolen identities or identities obtained by Bagsby and Moore. McCall opened stored-value debit cards in her own name to receive the refunds. The defendants directed the IRS to deposit the tax refunds onto stored-value debit cards and then the proceeds were shared among the participants in the scheme. In total, as part of the scheme, the defendants requested more than $1 million in tax refunds.
All four defendants were captured on ATM footage withdrawing cash from stored-value debit cards that held the tax refund proceeds. As part of the investigation, a search warrant was executed on the Facebook accounts of multiple co-conspirators, from which federal agents obtained photographs of stacks of cash, among other things. The United States seized and forfeited assets traced to proceeds of the scheme, including a two-carat diamond engagement ring, a Mercedes Benz 500 and a 1971 Pontiac Firebird, both of which were purchased with $20 bills.
Acting Assistant Attorney General Ciraolo and Acting U.S. Attorney Williams commended the special agents of IRS-Criminal Investigation, who investigated the case as part of the Stolen Identity Refund Fraud Task Force, and Trial Attorneys Leslie A. Goemaat and Lori A. Hendrickson of the Tax Division, who are prosecuting the case. Ciraolo also thanked the U.S. Attorney’s Office in the District of Oregon for their substantial assistance.
Attorney General Statement on Retirement of Michele LeonhartRead the Press Release
Attorney General Eric Holder released the following statement on the retirement of Drug Enforcement Administration Administrator Michele Leonhart:
“Michele Leonhart, the Administrator of the Drug Enforcement Administration, informed me today of her decision to retire. She will depart the agency in mid-May.
“I want to express my appreciation to Michele, not only for her leadership of the DEA since 2007, but also for her 35 years of extraordinary service to the DEA, to the Department of Justice and to the American people. As a Baltimore City Police Officer shortly after her college graduation, she stood on the front lines of our nation’s fight against crime. As a career DEA Special Agent, she initiated and contributed to law enforcement actions from major drug investigations to international conspiracy cases. And as the first woman ever to reach the rank of Special Agent in Charge, she was a trailblazer for equality and an inspiration to countless others. She has devoted her life and her professional career to the defense of our nation and the protection of our citizens, and for that, I am deeply grateful.
“The agents and employees of the DEA are some of the finest law enforcement officers in the world. They are committed to upholding American rights and liberties, dedicated to the rule of law, and devoted to the cause of justice. Every day, these remarkable men and women put their lives on the line – in communities across the United States and around the world – to safeguard our way of life. And they do so at a time of increasingly complex challenges and constantly evolving threats.
“Michele has led this distinguished agency with honor, and I have been proud to call her my partner in the work of safeguarding our national security and protecting our citizens from crime, exploitation and abuse. Over the past decade, under her leadership, there have been innumerable instances of the DEA dismantling the most violent and most significant drug trafficking organizations and holding accountable the largest drug kingpins around the world. Going forward, I have no doubt that the women and men of the DEA will continue to perform their duties with the utmost integrity, professionalism and skill – and I wish my good friend Michele all the best as she embarks on this next chapter in what is a remarkable life.”