District Not Recorded

Defendant, a Former Avionics Specialist, Travelled from Egypt to Turkey in an Attempt to Cross the Border to Syria to Join ISIL

U.S. Attorney Loretta E. Lynch of the Eastern District of New York, Assistant Attorney General for National Security John P. Carlin, Assistant Director in Charge Diego G. Rodriguez of the FBI’s New York Field Office and Commissioner William J. Bratton of the New York City Police Department announced that yesterday, a federal grand jury in New York City returned a two-count indictment charging Tairod Nathan Webster Pugh, an American citizen and veteran of the U.S. Air Force, with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a foreign terrorist organization, and obstruction and attempted obstruction of justice.  The defendant will be arraigned on the indictment tomorrow, March 18, at 11 a.m. before U.S. District Judge Nicholas G. Garaufis of the Eastern District of New York.

“Born and raised in the United States, Pugh allegedly turned his back on his country and attempted to travel to Syria in order to join a terrorist organization,” said U.S. Attorney Lynch.  “We will continue to vigorously prosecute extremists, whether based here or abroad, to stop them before they are able to threaten the United States and its allies.”  U.S. Attorney Lynch extended her grateful appreciation to the FBI’s Joint Terrorism Task Force (JTTF), which comprises a large number of federal, state, and local agencies from the region.  U.S. Lynch also thanked U.S. Customs and Border Protection, the U.S. Attorney’s Office of the District of New Jersey, the Asbury Park, New Jersey Police Department and the Neptune, New Jersey, Police Department for their assistance.

“Pugh, an American citizen and former member of our military, allegedly abandoned his allegiance to the United States and sought to provide material support to ISIL,” said Assistant Attorney General Carlin.  “Identifying and bringing to justice individuals who provide or attempt to provide material support to terrorists is a key priority of the National Security Division.” 

“As alleged, Pugh, an American citizen, was willing to travel overseas and fight jihad alongside terrorists seeking to do us harm,” said Assistant Director in Charge Rodriguez.  “U.S. citizens who offer support to terrorist organizations pose a grave threat to our national security and will face serious consequences for their actions.  We will continue to work with our partners, both here and abroad, to prevent acts of terrorism.  This investigation demonstrates the importance of law enforcement coordination and collaboration here and around the world.”

“We thank the members of the NYPD Joint Terrorism Task Force and our Federal law enforcement partners for their work in this case and for their tireless efforts to identify threats of terrorism here and abroad,” said Commissioner Bratton.  “It is this type of collaboration that results in swift investigative work to stop individuals such as this from making any further contribution to terrorist organizations such as ISIL.”

As alleged in the complaint, indictment and other court filings, the defendant served in the Air Force as an avionics instrument system specialist and received training in the installation and maintenance of aircraft engine, navigation and weapons systems.  After leaving the Air Force, the defendant worked for a number of companies in the United States and Middle East as an avionics specialist and airplane mechanic.  The defendant lived abroad for over a year before his arrest in this case.

Earlier this year, weeks after being fired from his last job as an airplane mechanic based in the Middle East, the defendant attempted to join ISIL.  On Jan. 10, 2015, the defendant traveled from Egypt to Turkey in an effort to cross the border into Syria to join ISIL and fight violent jihad.  Turkish authorities denied the defendant entry, however, and sent him on a return flight to Egypt.  Upon his arrival in Egypt, the defendant was carrying multiple electronic devices, including four USB thumb drives that had been stripped of their plastic casings and an iPod that had been wiped clean of data.  The defendant also had a cellular telephone that contained, among other things, a photograph of a machinegun.  The defendant was soon thereafter deported to the United States.

On Jan. 14, 2015, JTTF agents obtained a search warrant for the defendant’s electronic devices, including his laptop computer.  Subsequent exploitation of the laptop revealed, among other things, the following:

• recent internet searches for “borders controlled by Islamic state”,

• recent internet searches for “who controls kobani,” “kobani border crossing,” and “jarablus border crossing,” all references to Syrian cities under ISIL’s control near the Turkish border,

• a chart of crossing points between Turkey and Syria indicating the areas on the Syrian side of the border controlled by ISIL and other groups, and

• internet searches for “Flames of War,” an ISIL propaganda video, as well as downloaded videos, including one showing ISIL members executing prisoners.

The defendant was arrested pursuant to a federal complaint on Jan. 16, 2015, in Asbury Park, New Jersey, and he has been in custody ever since.  After the defendant’s arrest, JTTF agents seized and later obtained warrants to search two backpacks that the defendant had when he was overseas.  Agents recovered from the backpacks, among other things: two compasses, a solar-powered flashlight, a solar-powered power source, shards of broken USB thumb drives, a fatigue jacket and camping clothes.

If convicted, the defendant faces a maximum sentence of 35 years in prison.  The charges in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty.

The government’s case is being prosecuted by Assistant U.S. Attorneys Samuel P. Nitze and Tiana A. Demas, with assistance provided by Trial Attorneys Larry Schneider and Andrew Sigler of the National Security Division.

Pugh Indictment

SAIPAN, CNMI – ALICIA A.G. LIMTIACO, United States Attorney for the Districts of Guam and the Northern Mariana Islands, announced that on Tuesday, March 17, 2015, U.S. District Chief Judge Ramona V. Manglona sentenced Wei Lin, age 32, of the People’s Republic of China, to 235 months in prison followed by five years of supervised release for conspiracy to commit sex trafficking.  Judge Manglona also ordered Lin to pay $7,172.39 in restitution to each of the three victims.

     Lin pleaded guilty to the offense on June 8, 2012.  At today’s sentencing hearing, Judge Manglona found the United States had also proven by clear and convincing evidence that Lin was the leader of the sex trafficking organization.

     United States Attorney for the Districts of Guam and the Northern Mariana Islands, Alicia A.G. Limtiaco, stated, “Those who traffic women will find no refuge from law enforcement.   We will aggressively prosecute anyone who tries to profit off the sexual exploitation of women.  Human trafficking is a modern form of slavery, and today’s sentence reflects the seriousness of this heinous crime.  It also sends a clear message that trafficking in persons will not be tolerated in the C.N.M.I.”

     The case was investigated by the Federal Bureau of Investigation, with assistance of the Department  of  Homeland  Security/Homeland  Security  Investigations,  and  prosecuted  by Assistant U.S. Attorney Garth R. Backe.

COPS Office Releases 40 Recommendations to Implement Best Practices at San Diego Police Department

The U.S. Department of Justice’s Office of Community Oriented Policing Services today announced the completion of an assessment of the San Diego Police Department’s policies and practices for preventing, detecting and investigating misconduct.  The San Diego Police Department volunteered to undergo the review by the COPS Office following a series of misconduct incidents over the course of five years.

“Our goal with this report began with identifying deficiencies in policies, practices, or organizational culture that allowed misconduct to occur and to go undetected for years in San Diego,” said COPS Office Director Ronald Davis.  “We see this report as a blueprint for reforms, and for building on the reform efforts already undertaken by former Chief William Lansdowne and Chief Shelley Zimmerman.”

The COPS Office first announced the beginning of the Critical Response Technical Assistance review in March 2014.  The report focuses on 17 cases of misconduct over five years and includes a review of how the cases were handled, and of the department’s policies and accountability system.  During the assessment, the COPS Office’s training and technical assistance provider for the assessment, the Police Executive Research Forum, conducted focus groups and interviews with city and department stakeholders, community outreach and observed operations.

The report identifies a number of deficiencies in recruiting practices, supervision and training of officers, accountability systems, and mechanisms for reviewing citizen complaints and leadership.  The assessment recommends a comprehensive approach to all aspects of policing that can help prevent misconduct.  This includes the training and supervision of officers, the recruitment and selection of new officers, accountability mechanisms, internal investigations and disciplinary practices.

“We requested and welcomed this assessment from the Department of Justice COPS Office," said San Diego Police Chief Shelley Zimmerman.  “The numerous recommendations they have made will only help us improve our department and the proud service we provide to our community.”

The report, Critical Response Technical Assistance Review—Police Accountability: Findings and National Implications of an Assessment of the San Diego Police Department can be found here: https://cops.usdoj.gov/RIC/ric.php?page=detail&id=COPS-W0756.

The assessment was administered as part of the COPS Office’s Critical Response Technical Assistance initiative, designed to provide technical assistance to agencies facing significant law enforcement-related issues.  Using subject matter experts, interviews and direct observations, as well as conducting extensive research and analysis, the COPS Office assists law enforcement agencies with enhancing and improving their policies and procedures, operating systems and professional culture.

The COPS Office, headed by Director Ronald Davis, is a federal agency responsible for advancing community policing nationwide.  Since 1995, COPS has awarded over $14 billion to advance community policing, including grants awarded to more than 13,000 state, local, and tribal law enforcement agencies to fund the hiring and redeployment of more than 126,000 officers and provide a variety of knowledge resource products including publications, training, and technical assistance.  For additional information about COPS, please visit www.cops.usdoj.gov.

The United States filed a complaint seeking to permanently bar an Indianapolis woman from preparing federal tax returns for others, the Justice Department announced today.

The civil injunction complaint against Jennifer Carolina Gonzalez, doing business as Jenny’s Tax Services, which was filed in the U.S. District Court for the Southern District of Indiana, alleges that Gonzales fraudulently adjusted customers’ income claimed on Schedule C (Profit or Loss From Business) to either increase an Earned Income Tax Credit the customer was not entitled to, or to reduce the customer’s tax liability.  Gonzalez, according to the suit, also frequently prepared returns claiming head of household filing status for customers who were ineligible.  The complaint alleges that Gonzalez frequently prepared returns claiming child tax credits for customers’ relatives who lived in Mexico and had never lived in the United States, even though Gonzalez knew that children living in Mexico cannot be used to support child tax credits and additional child tax credits.

Tax return preparers must provide their Preparer Tax Identification Number (PTIN) on returns they prepare.  As alleged in the complaint, as part of a pattern of non-compliance, Gonzalez failed to provide her own PTIN on returns she prepared until January 2013.  Instead, the complaint alleges that Gonzalez used a PTIN assigned to a person living in New Jersey, who has no connection to Gonzalez and has never authorized Gonzalez or anyone else to use the PTIN. 

The complaint further alleges that, in 2012, Gonzalez sold the use of the third-party PTIN she had appropriated, her own Electronic Filing Identification Number (EFIN) and Jenny’s Tax Services’ Employer Identification Number (EIN) to another tax preparation business, which agreed to pay Gonzalez $20 per return filed containing Gonzalez’s identification numbers.  Despite selling the use of the identification numbers, Gonzalez continued to use the identification numbers when preparing returns for the 2011 tax year, as did the purchaser.

According to the complaint, the Internal Revenue Service (IRS) estimates that Gonzalez, through Jenny’s Tax Service, has prepared more than 2,000 tax returns since 2011.  The suit alleges that the false information she included on her customers’ tax returns generated larger refunds or reduced tax liabilities for Gonzalez’s customers, and that the losses to the U.S. Treasury could exceed $3.9 million.  

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

Assistant Attorney General for National Security John P. Carlin; U.S. Attorney Zachary T. Fardon of the Northern District of Illinois; Special Agent in Charge Robert J. Holley of the FBI’s Chicago Office; Special Agent in Charge Gary Hartwig of U.S. Immigration and Customs Enforcement, Homeland Security Investigations (ICE-HSI) in Chicago; and Acting Special Agent in Charge David Nardella of the U.S. Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement of the Chicago Field Office announced today that a former resident of Taiwan, who the United States has linked to the supply of weapons manufacturing machinery to North Korea, was sentenced today to serve 24 months in federal prison by U.S. District Court Judge Charles R. Norgle of the Northern District of Illinois. 

The defendant, Hsien Tai Tsai, 69, pleaded guilty in October 2014, admitting that he conspired with others to interfere with and obstruct U.S. regulations that seek to disrupt the proliferation of weapons of mass destruction.  When imposing sentence, Judge Norgle credited Tsai for the substantial assistance he provided, and would continue to provide, to the government in its investigation of weapons of mass destruction proliferators.  Tsai, also known as Alex Tsai, was arrested in May 2013 in Tallinn, Estonia, and was later extradited to the United States, where he remains in federal custody.

“Hsien Tai Tsai violated a critical sanctions regime and undermined and interfered with U.S. efforts to disrupt North Korea's weapons of mass destruction and advanced weapons programs,” said Assistant Attorney General Carlin.  “These sanctions are meant to raise the cost for WMD proliferators to do business and deter others from proliferating by denying them access to our financial and commercial systems.  This prosecution makes clear that we will use all of our tools to identify and arrest WMD proliferators and to disrupt their efforts to undermine our country's security.  I’d like to thank all who helped with this investigation and prosecution.”

“Aggressive enforcement of U.S. laws targeting those who supply goods, services or other support to proliferators of weapons of mass destruction is vital to ensuring global safety,” said U.S. Attorney Fardon.  “As this case demonstrates, companies and individuals who seek to evade these laws will confront an international law enforcement community working cooperatively and effectively to stem these threats.”

According to court documents, Tsai was associated with at least three companies based in Taiwan – Global Interface Company Inc., Trans Merits Co. Ltd., and Trans Multi Mechanics Co. Ltd. – that purchased and then exported, and attempted to purchase and then export, from the United States and other countries machinery used to fabricate metals and other materials with a high degree of precision.

In January 2009, under Executive Order 13382, which sanctions proliferators of weapons of mass destruction and their supporters, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated Tsai, Global Interface and Trans Merits as proliferators of weapons of mass destruction, isolating them from the U.S. financial and commercial systems and prohibiting any person or company in the United States from knowingly engaging in any transaction or dealing with them.  At that time, the Treasury Department said that Tsai was designated because he provided, or attempted to provide, financial, technological, or other support for, or goods or services in support of, the Korea Mining Development Trading Corporation, which the Treasury Department has stated is North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons.  Additionally, Tsai he had been involved in shipping items to North Korea that could be used to support North Korea’s advanced weapons program.  After the OFAC designations, Tsai and others continued to conduct business together, but attempted to hide Tsai’s and Trans Merit’s involvement in those transactions by conducting business under different company names, including Trans Multi Mechanics.  Later, in 2013, Trans Multi Mechanics was also designated by OFAC.

In pleading guilty, Tsai admitted that he was involved in multiple commercial and financial transactions to undermine the sanctions against WMD proliferations, including the purchase of a Bryant center hole grinder from a U.S. company based in suburban Chicago, and exported it to Taiwan in 2009 using the company Trans Multi Mechanics.  A Bryant center hole grinder is a machine tool used to grind a center hole, with precisely smooth sides, through the length of a material.  Tsai also admitted having a role in Trans Merits’ transactions involving LED road lights and an oil pump, and using third parties to wire transfer funds to the United States.

The case was investigated by the FBI, ICE-HSI and the U.S. Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement, with assistance provided by the Justice Department’s Office of International Affairs.  Assistant Attorney General Carlin would like to give special thanks to the Estonian Internal Security Service and the Estonian Prosecutor’s Office who cooperated with the United States.  The case is being prosecuted by Assistant U.S. Attorney Brian Hayes of the Northern District of Illinois and Trial Attorney Brandon L. Van Grack of the Justice Department’s National Security Division.

Attorney General Eric Holder released the following statement on the departure of U.S. Attorney Ronald C. Machen Jr. of the District of Columbia:

“During more than five years as U.S. Attorney of the District of Columbia, Ron Machen Jr. has distinguished himself as a skilled leader, a devoted public servant and a forceful champion of justice on behalf of the American people.  Throughout his remarkable tenure, Ron has applied his boundless talent and consummate judgment to protect the safety and security of all Americans in cases involving violent crime, national security threats and public corruption.  As one of Ron’s predecessors as U.S. Attorney in Washington, I know firsthand the unique demands of leading the nation’s largest U.S. Attorney’s Office.  But Ron has never been deterred by a difficult challenge, nor slowed in his pursuit of a safer, stronger Washington.  I was fortunate to be able to hire Ron as an Assistant U.S. Attorney in the Office in 1997, and I see in him now the exceptional qualities that I saw in him then: unassailable integrity, relentless determination and a passion for law and justice.  I congratulate him on the outstanding results he has achieved as U.S. Attorney of the District of Columbia.  I thank him for his inspiring service.  And I look forward to all that he will accomplish in the next stage of his already extraordinary career.”

Today, a federal jury in Detroit convicted six leaders and members of the violent Phantom Outlaw Motorcycle Club, many of whom were also leaders and members of the Vice Lords street gang, of conspiracy to commit murder and other violent racketeering-related offenses.

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 Steve Bogdalek of the Bureau of Alcohol, Tobacco, Firearms and Explosives’s (ATF) Detroit Field Division and Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Division made the announcement.

“The Phantom Motorcycle Club used violence and plotted murder in an effort to prevail in a gang war against rival motorcycle clubs in Michigan and throughout the country, and its leaders and members attempted to kill anyone who stood in their way,” said Assistant Attorney General Caldwell.  “The trial convictions of the gang’s National President, National Enforcer and four other members bring to a close this dangerous organization’s violent reign.  I am thankful for the courageous and diligent efforts of our prosecutors and law enforcement partners who successfully brought this criminal enterprise to justice.”

“The Detroit One partnership has focused on dismantling violent street gangs like this one because they cause intolerable harm to public safety in our neighborhoods,” said U.S. Attorney McQuade.  “We will continue to target and disrupt violent gangs in hopes of restoring peace for residents in our community.”

“The amount of pain, suffering and fear that violent gangs bring to our communities is immeasurable,” said Special Agent in Charge Bogdalek.  “Our goal was to disable the group by targeting its leadership, the convictions today of leaders and members of these illegal motorcycle gangs is an excellent example of success that comes from effective law enforcement cooperation.”

“As part of the Detroit One Initiative, this joint investigation effectively targeted and neutralized violent criminal offenders of the Phantom Outlaw Motorcycle Club,” said Special Agent in Charge Abbate.  “Our efforts to combat violent crime continue to be waged each and every day in cooperation with our local, state, and federal law enforcement partners.  Protecting our communities from offenders such as these is among our highest priorities, and we will continue this fight on behalf of the citizens we serve and protect.”

The jury convicted the defendants of the following offenses:

• Antonio Johnson, aka, “Mister Tony,” “MT,” and “Big Bro,” 40, of Detroit, the National President of the Phantoms and the “Three-Star General” over the Vice Lords street gang in Michigan, was convicted of engaging in a RICO conspiracy, conspiracy to commit murder in aid of racketeering, assault with a dangerous weapon in aid of racketeering, conspiracy to assault with a dangerous weapon in aid of racketeering, using and carrying firearms during and in relation to a crime of violence and being a felon in possession of firearms.

• Marvin Nicholson, aka, “Chosen One,” 46, of Detroit, the National Enforcer of the Phantoms and a Vice Lords member, was convicted of engaging in a RICO conspiracy, conspiracy to commit murder in aid of racketeering, assault with a dangerous weapon in aid of racketeering, conspiracy to assault with a dangerous weapon in aid of racketeering, assault on federal officers, using and carrying firearms during and in relation to a crime of violence and being a felon in possession of firearms.

• Brian Sorrell, 28, aka, “PC,” of Detroit, a member of the Detroit Chapter of the Phantoms and the Vice Lords, was convicted of engaging in a RICO conspiracy, conspiracy to commit murder in aid of racketeering, assault with a dangerous weapon in aid of racketeering, conspiracy to assault with a dangerous weapon in aid of racketeering and using and carrying firearms during and in relation to a crime of violence.

• Sherman Brown, aka, “Tank,” 43, of Detroit, the Sergeant-at-Arms of the Detroit Chapter of the Phantoms and a Vice Lords member, was convicted of conspiracy to commit murder in aid of racketeering.

• Brian Jackson, aka, “Wood,” 48, of Detroit, the Master Sergeant of the Inkster, Michigan Chapter of the Phantoms, was convicted of conspiracy to commit murder in aid of racketeering.

• Matthew Schamante, aka, “Arsenal,” 32, of Waterford, Michigan, the President of the Pontiac, Michigan Chapter of the Phantoms, was convicted of engaging in a RICO conspiracy and possessing an unregistered short-barrel shotgun.

At trial, evidence showed that the Phantom Outlaw Motorcycle Club is headquartered in northwest Detroit and has chapters throughout Michigan, Ohio, Kentucky, Illinois, New York, New Jersey, Texas, Georgia, Missouri and Tennessee, as well as a chapter of “Nomads” that travel at will.  The evidence showed that the club and its members were involved in a range of criminal activity including conspiracy to commit murder, shootings, robbery, extortion and the possession and sale of stolen vehicles and motorcycles.  

Evidence also showed that the leadership of the Phantoms was heavily involved in the Vice Lords street gang, including Johnson, who was both the National President of the Phantoms and the “Three-Star General” over the Vice Lords street gang in Michigan.  The Vice Lords is a well-known street gang originating from Chicago.  Specifically, the evidence showed that Johnson used the Vice Lords to assist the Phantoms in various criminal endeavors, including to search for and violently attack rivals of the Phantoms.

The evidence specifically demonstrated that, on Sept. 8, 2013, Johnson ordered numerous Phantoms, including Nicholson and Sorrell, to take the vests or “rags” of the Satan Sidekicks Motorcycle Club, a rival motorcycle club.  During the attempted robbery, Sorrell shot the victim in the face. 

Additionally, according to the evidence, Johnson blamed the Hell Lovers Outlaw Motorcycle Club for the murder of a Phantoms member in late September 2013, and ordered a three-phase murder plot against the Hell Lovers in retaliation.  In the first phase, the Phantoms were to murder at least three members of the Hell Lovers in Detroit in order to lure additional Hell Lovers to Michigan for the funeral.  In the second phase, the Phantoms were to murder all members of the Hell Lovers who would be at the Hell Lovers’ Detroit, Michigan clubhouse following the funeral of the three members murdered in the first phase.  In the third phase, the Phantoms were to kill Hell Lovers in other cities throughout the country where the Phantoms had chapters.  The mass murder plot was interrupted before it came to fruition by search warrants executed by the ATF and FBI in October 2013.  At trial, evidence showed that the Phantoms were preparing for the first phase of the murder plot at the time of the search warrants, including stockpiling firearms, hiring a thief to steal a van to be used in the murders, conducting research and surveillance of their intended victims, and assigning Phantom members and Vice Lords members to stalk and murder the intended victims.  Johnson, Nicholson, Sorrell, Brown and Jackson were all convicted of the murder plot. 

Finally, the evidence demonstrated that, on Oct. 4, 2013, while the ATF and FBI attempted to execute a search warrant at his residence in Detroit, Nicholson shot at ATF agents four times as they attempted to enter his residence.  A wall prevented the bullets from hitting the agents.  The firearm that Nicholson used to shoot at the ATF agents was registered to Schamante.

Sentencing hearings will be scheduled at a later date before U.S. District Judge Paul D. Borman of the Eastern District of Michigan.  Five defendants have previously pleaded guilty in the case to charges including RICO conspiracy and assault with a dangerous weapon in aid of racketeering, and await sentencing.

The arrests in this case were made as part of the Detroit One Initiative, a collaborative effort between law enforcement and the community to reduce homicide and other violent crime in Detroit, and through the lead efforts of the Comprehensive Violence Reduction Partnership Task Force, which consists of representatives of the ATF, Detroit Police Department, Michigan State Police, Michigan Department of Corrections and the FBI.  By working collaboratively, local, state and federal law enforcement are striving to maximize their ability to identify and arrest the persons and groups initiating the violence in Detroit.  These convictions are a tangible and significant result of this joint effort.

The case is being prosecuted by Trial Attorney Joseph Wheatley of the Criminal Division’s Organized Crime and Gang Section, and Assistant U.S. Attorneys Christopher Graveline and Louis Gabel of the Eastern District of Michigan.

A federal grand jury in the Eastern District of North Carolina has returned an indictment against a Raleigh, North Carolina, resident for one count of conspiracy to defraud the United States, 17 counts of presenting false claims to the Internal Revenue Service (IRS), three counts of wire fraud and two counts of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Thomas G. Walker of the Eastern District of North Carolina.

Christian Rhodes, of Raleigh, was arrested earlier today on the indictment, which alleges that Rhodes and others solicited individuals in order to prepare their federal tax returns that used false information to claim tax refunds that the individuals were not entitled to receive.  The tax returns that Rhodes prepared and filed contained false wages, tax withholdings and deductions.  Rhodes directed the IRS to deposit refunds electronically into bank accounts in his own name and in the names of third-party taxpayers.  Rhodes also used stolen identities in order to file false claims for tax refunds.

If convicted, Rhodes faces a statutory maximum sentence of 10 years in prison for the conspiracy count, five years in prison for each false claims count, 20 years in prison for each wire fraud count, and a maximum fine of $250,000 for each count.  Rhodes also faces a statutory mandatory minimum sentence of two years in prison for the aggravated identity theft count.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Walker commended the special agents of IRS-Criminal Investigation, who investigated the case, and Assistant U.S. Attorney Susan Menzer of the U.S. Attorney’s Office for the Eastern District of North Carolina, and Trial Attorneys Lauren Castaldi and Rebecca Perlmutter of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.  Additional information about tax fraud schemes to watch out for may be found on the IRS-Criminal Investigation website.

An indictment is merely a formal charge by the grand jury.  The defendant is presumed innocent unless and until proven guilty in a U.S. District Court.

A pharmacist who owned and operated a pharmacy in Los Angeles pleaded guilty today in connection with a Medicare fraud scheme, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Stephanie Yonekura of the Central District of California and Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Field Office.

Rouzbeh Javaherian, 34, of Beverly Grove, California, pleaded guilty to health care fraud in connection with a scheme to defraud the Medicare Part D program through a pharmacy called Emoonah Inc., doing business as Westaid Pharmacy and Medical Supply (Westaid).  According to admissions in the plea agreement, Javaherian was a licensed pharmacist and owner of Westaid, which was located in Los Angeles.  From January 2008 to November 2014, Javaherian devised and executed a scheme to defraud the Medicare Part D program by paying illegal cash kickbacks to Medicare beneficiaries to induce them to submit their prescriptions to Westaid.  Javaherian then filled some of those prescriptions, but also submitted false and fraudulent claims to Medicare Part D plan sponsors for prescriptions that he did not actually fill.

From January 2008 to November 2014, Javaherian received approximately $644,060 in overpayments from Medicare as the result of the fraud scheme.

Sentencing is scheduled for June 1, 2015, before U.S. District Judge Stephen V. Wilson of the Central District of California. 

The case was investigated by the FBI, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.  The case is being prosecuted by Trial Attorney Alexander F. Porter 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 Action Team (HEAT), go to: www.stopmedicarefraud.gov.

The Department of Justice and New York State Attorney General today announced that they have reached a settlement with Coach USA Inc., City Sights LLC and their joint venture, Twin America LLC, to remedy competitive concerns in the New York City hop-on, hop-off bus tour market.  The settlement requires the defendants to relinquish all of City Sights’ Manhattan bus stop authorizations and disgorge $7.5 million in ill-gotten profits that the defendants obtained by operating Twin America in violation of the antitrust laws.

The settlement resolves a lawsuit filed on Dec. 11, 2012, in the U.S. District Court of the Southern District of New York alleging that the March 2009 formation of Twin America violated the antitrust laws and resulted in higher prices for hop-on, hop-off bus tours in New York City.  Trial had been set for Feb. 23, 2015 before the parties adjourned the trial date to facilitate settlement discussions.  Today’s settlement, if approved by the court, would resolve the claims alleged in the complaint filed in this case.

“The formation of Twin America gave Coach and City Sights an unlawful monopoly over the New York City hop-on, hop-off bus tour market and allowed them to immediately increase prices to consumers,” said Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division.  “As a result of the joint efforts of the Antitrust Division and the New York Attorney General, Coach and City Sights will forfeit key bus stop authorizations throughout Manhattan to restore competition and surrender illegal profits they obtained from violating the antitrust laws.”

“By eliminating the competition between them, the largest operators of New York City’s iconic double-decker tour buses were able to raise prices and deprive city visitors of the benefits of a free and fair market,” said New York Attorney General Eric T. Schneiderman.  “This settlement allows competition to thrive once again, and ensures that these companies did not profit from operating an unlawful and anticompetitive joint venture.  I thank the Justice Department’s Antitrust Division for partnering with my office to achieve this resolution for consumers in New York.”

As alleged in the complaint, prior to the formation of Twin America, Coach, the long-standing market leader through its “Gray Line New York” brand, and City Sights, a firm that launched the “CitySights NY” brand in 2005, accounted for approximately 99 percent of the hop-on, hop-off bus tour market in New York City.  Between 2005 and early 2009, the two companies engaged in vigorous head-to-head competition on price and product offerings that directly benefited consumers. 

The formation of Twin America ended competition between Coach and City Sights and enabled them to increase hop-on, hop-off bus tour prices by approximately 10 percent.  According to the complaint, Coach and its corporate parent, Stagecoach Group PLC, had long assumed that combining with Coach’s only meaningful competitor would allow the merged firm to raise prices and communicated this assumption to City Sights during joint venture negotiations.  In early 2009, over a period of approximately two months, Coach and City Sights implemented the price increases and executed the joint venture.  The joint venture continues to operate both the Gray Line New York and CitySights NY brands today.

For more than three years following Twin America’s formation, there was no new entry or expansion in the market, and Coach and City Sights sustained the 2009 price increases.  Although some firms have entered since 2012, they have been unable to obtain bus stop authorizations from the New York City Department of Transportation (NYCDOT) at or sufficiently close to top attractions and neighborhoods to meaningfully compete with Twin America.  NYCDOT is the city agency in charge of managing bus stop authorizations, which are required for hop-on, hop-off operators to load and unload passengers.  Both Coach and City Sights hold large portfolios of bus stop authorizations covering virtually all of Manhattan’s key attractions that the firms received from the NYCDOT years ago before many locations were at capacity.  The formation of Twin America gave them a dominant share of the competitively-meaningful bus stop authorizations in Manhattan.

The proposed settlement requires Twin America to divest all of City Sights’ Manhattan bus stop authorizations by relinquishing them to the NYCDOT.  The relinquished bus stop authorizations include highly-coveted locations such as the areas surrounding Times Square, the Empire State Building and Battery Park, where rival firms have been chronically unable to obtain competitive bus stop authorizations.  By increasing the NYCDOT’s inventory of bus stops and freeing up capacity at approximately 50 locations throughout Manhattan, the settlement will significantly ease the most intractable barrier to rivals being able to meaningfully compete with Twin America.  The defendants will continue to hold Gray Line New York’s bus stop authorizations for their own hop-on, hop-off service.

The settlement also requires the defendants to disgorge $7.5 million in profits they obtained from the operation of their illegal joint venture.  This amount is in addition to $19 million that the defendants had already agreed to pay to a class of consumers to settle related private litigation brought after the filing of the government’s complaint.  The United States and the New York Attorney General determined that the defendants earned profits in excess of $19 million from their unlawful monopoly and that disgorgement was particularly appropriate on the facts of this case – a consummated merger involving an anticompetitive price increase and deliberate attempts to evade antitrust enforcement.  The payment of $7.5 million in disgorgement will deprive the defendants of ill-gotten profits they retained even after the class settlement and deter future antitrust law violations.

In a separate but related filing, Coach USA has further agreed to reimburse the United States $250,000 in attorney’s fees and costs to resolve claims that the Coach defendants spoliated evidence and failed to meet their document preservation obligations.

The settlement of the lawsuit also requires Coach and Twin America to establish antitrust training programs and that the defendants provide the government with advance notice of any future acquisition in the New York City hop-on hop-off bus tour market that is not otherwise reportable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act).

Coach USA is a Delaware corporation with its principal place of business in Paramus, New Jersey.  Coach offers scheduled bus routes, motorcoach tours, charters and city sightseeing tours in the United States and Canada.  Coach is a wholly-owned subsidiary of Stagecoach Group PLC, a leading international public transport company based in the United Kingdom.

City Sights is a New York limited liability company with its principal place of business in New York City.  City Sights is part of the New York Airport Service group of companies, one of New York City’s largest operators of ground transportation, tour and sightseeing services for leisure and corporate markets.

Twin America is a Delaware limited liability company with its principal place of business in New York City.

As required by the Tunney Act, the proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to William H. Stallings, Chief, Transportation, Energy and Agriculture Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, N.W., Suite 8000, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the U.S. District Court of the Southern District of New York may enter the proposed final judgment upon finding that it is in the public interest.

BACKGROUND

The transaction forming Twin America was not required to be reported under the HSR Act, and the department did not learn about the joint venture until after its consummation.  The State of New York was similarly unaware of Twin America at the time of its formation, but began to investigate shortly thereafter and issued subpoenas in the summer of 2009.

After receiving the subpoenas, the defendants delayed the State of New York’s antitrust investigation by belatedly filing the transaction with the federal Surface Transportation Board (STB) and asserting that the STB had exclusive jurisdiction.  The STB rejected the joint venture in early 2011 as not in the “public interest” and affirmed its ruling in early 2012, directing the defendants to either dissolve Twin America or terminate minimal interstate operations that provided the basis for STB jurisdiction.  The defendants chose the latter, which removed the matter from STB jurisdiction but did nothing to address the joint venture’s anticompetitive effects in New York City.  The department and New York State Attorney General’s lawsuit followed in December 2012.

Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division issued the following statement today after National CineMedia Inc. (NCM) abandoned its proposed acquisition of Screenvision LLC, which the department had filed suit to block in November:

“This result is a victory for advertisers, movie theaters and consumers.  Had this merger-to-monopoly gone forward, it would have combined the only two significant cinema advertising networks in the United States, creating an unlawful monopoly in the markets for cinema advertising and preshow services.  The Antitrust Division’s lawsuit, which sought to prevent the companies from merging and preserve their existing head-to-head competition, was filed late last year in the U.S. District Court of the Southern District of New York. 

“Nothing harms competition more than the creation of a monopoly through merger.  In recent years, NCM and Screenvision competed aggressively by offering lower prices to advertisers, a variety of attractive financial incentives to movie theaters and better products and services overall.  This scheme to eliminate competition should never have been considered, much less publicly proposed.  We sued to preserve the significant competition between these competitors, and with the parties’ abandonment, we achieved that result.  Their decision to abandon the transaction less than a month before trial is a testament to the strength of the Antitrust Division’s case and the hard work of our talented litigation team.”

FALLS CHURCH, Va. - The Executive Office for Immigration Review (EOIR) today announced the release of its Fiscal Year (FY) 2014 Statistics Yearbook.

The book is a representation of data that EOIR tracked and compiled during the previous fiscal year. As in previous years, the figures and tables contained within the book examine respondents' cases by nationality, language, and disposition, and provide detailed information surrounding asylum cases.

"The annual publication of the Statistics Yearbook is one way in which EOIR works to provide transparency into the agency's daily work," said EOIR Director Juan P. Osuna. "We believe that providing our stakeholders with this tool allows for an improved understanding about agency policies and procedures."

Hard copies of the publication are not available to the public, but a user-friendly version is available at http://www.justice.gov/eoir/statspub/fy14syb.pdf.

 

- EOIR -

The Executive Office for Immigration Review (EOIR) is an agency within the Department of Justice. Under delegated authority from the Attorney General, immigration judges and the Board of Immigration Appeals interpret and adjudicate immigration cases according to United States immigration laws. EOIR's immigration judges conduct administrative court proceedings in immigration courts located throughout the nation. They determine whether foreign-born individuals—whom the Department of Homeland Security charges with violating immigration law—should be ordered removed from the United States or should be granted relief from removal and be permitted to remain in this country. The Board of Immigration Appeals primarily reviews appeals of decisions by immigration judges. EOIR's Office of the Chief Administrative Hearing Officer adjudicates immigration-related employment cases. EOIR is committed to ensuring fairness in all of the cases it adjudicates.

The Department of Justice has filed a lawsuit to recover damages from a storage company that allegedly violated the Servicemembers Civil Relief Act (SCRA) when it sold service members’ personal property without obtaining the necessary court orders.  The defendants in this lawsuit are Daniel E. Homan and Horoy Inc., doing business as Across Town Movers—a San Diego, California, storage company.  Homan is the President and sole owner of Horoy Inc. 

The SCRA protects the rights of service members while on active duty by suspending or modifying certain civil obligations.  The law states that a storage lien may not be enforced against service members during, or 90 days subsequent to, their period of military service without a court order.  The Department of Justice’s complaint alleges that, since 2011, Across Town Movers sold the personal property of 11 service members without obtaining a required court order. 

The complaint further alleges that after illegally selling one of the service member’s personal property, Across Town Movers continued to receive regular payments from the United States for storage of the sold property.  That service member is U.S. Navy Master Chief Petty Officer Thomas E. Ward.

In 2006, Master Chief Ward, a 30-year veteran, was deployed overseas.  He placed his valuable car parts and many household items into storage, and entrusted Across Town Movers to keep his personal property safe until he returned.  Just before he returned home, he learned that Across Town Movers had auctioned all of his stored personal property, including vintage original car parts. 

“Federal law does not allow storage companies to sell the contents of a service member’s storage lot without a court order,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “Storage companies should check the Defense Department’s military database and other resources before conducting any auction to see if the customer is protected by the Servicemembers Civil Relief Act.  The Department of Justice is committed to protecting the rights of the men and women who serve in our Armed Forces and we will continue to devote time and resources to make sure that they are given the legal protections they deserve.”

“Service members, especially when deployed overseas, should be able to focus on protecting our county and shouldn’t have to worry about losing their personal property,” said U.S. Attorney Laura E. Duffy of the Southern District of California.  “Congress enacted the SCRA for this purpose, and we will pursue all appropriate remedies to ensure that our service members’ rights are protected.  Whether large or small, businesses will be held accountable for violating those rights.”

In addition to seeking damages for the value of the auctioned goods, the SCRA provides for civil monetary penalties of up to $55,000 for the first offense and $110,000 for each subsequent offense.  The Department of Justice will also seek injunctive relief.

This lawsuit was filed today in the Southern District of California.  This matter resulted from a referral to the Justice Department by the U.S. Navy. 

Service members and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office.  Office locations may be found at http://legalassistance.law.af.mil/content/locator.php.  Additional information on the Justice Department’s enforcement of the SCRA and other laws protecting service members is available at www.servicemembers.gov.

This matter is being handled by Assistant U.S. Attorneys Dylan M. Aste and Leslie M. Gardner of the Southern District of California.

A car salesman was sentenced earlier today in U.S. District Court in Los Angeles to serve one year and one day in prison on charges related to an odometer tampering scheme, the Justice Department announced. 

Jeffrey Levy, 63, of Woodland Hills, California, was also ordered to pay $115,818.80 in restitution to victims who purchased vehicles without knowing the odometers displayed incorrect mileages.  In November 2014, Levy pleaded guilty to one count of conspiracy to tamper with odometers. 

“A car salesman should know better than anyone that odometer tampering is a fraud and a crime,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “As this prosecution demonstrates, criminals with an electronic tool can easily alter electronic vehicle odometers, defrauding future car buyers.”   

Levy was a salesman at Galpin Ford in North Hills, California.  In his guilty plea, Levy admitted that he referred customers and friends to his co-conspirator, Shamai Salpeter, who rolled back odometers in the driveway of his residence in Woodland Hills.  Salpeter was also charged and pleaded guilty to odometer tampering and conspiracy to commit odometer fraud and is scheduled to be sentenced on April 13.

Levy knew that some of his customers had exceeded the maximum allowed mileage under the terms of their leases and wished to avoid fees and penalties.  He knew that other customers wanted to lower the mileage on their odometers to make their vehicles more valuable when they traded in the vehicles.  After Salpeter altered the odometers, Levy’s customers returned or traded in their vehicles with false, lower mileage readings.  Levy accepted the vehicles without alerting Galpin Ford that the odometer readings were false.  Future purchasers of the vehicles were defrauded because they purchased vehicles with false odometer readings.  Galpin Ford cooperated with the government’s investigation.

“Tampering with odometers is a crime that puts consumers’ lives and wallets at risk,” said Administrator Mark Rosekind of the National Highway Traffic Safety Administration (NHTSA).  “Not only do purchasers end up paying more for used cars, but rolling back the mileage on odometers hides necessary information that could ultimately affect a car’s safety and the costs of future repairs to consumers.”

This case is being prosecuted by Trial Attorney John W. Burke of the Civil Division’s Consumer Protection Branch.  The case was investigated by the NHTSA’s Office of Odometer Fraud Investigation and California’s Department of Motor Vehicles. 

NHTSA estimates that odometer fraud in the United States results in consumer losses of more than $1 billion annually and has established a special hotline to handle odometer fraud complaints.  Individuals who have information relating to odometer tampering should call (800) 424-9393 or (202) 366-4761.

More information on odometer fraud is available on the NHTSA website, and tips on detecting and avoiding odometer fraud are available at this page.

Attorney General Eric Holder on Monday hailed the outcome in a lawsuit challenging the lack of funding for public defender programs in five counties in New York State, calling the finalized settlement in the case a “major step forward.”

In September 2014, the Justice Department had filed a statement of interest in the case, known as Hurrell-Harring v. State of New York.  This represented the first time the department addressed the constructive denial of counsel in state courts.  After extensive negotiations, the parties reached a settlement, which Judge Gerald Connolly of the Supreme Court of the State of New York, Albany County, has now signed.  The settlement agreement, which applies to five New York counties, guarantees that indigent criminal defendants will have legal counsel at arraignment, establishes and implements caseload and workload standards for public defenders, provides for effective supervision and training of public defenders and sets new indigency standards for determining whether a defendant is entitled to public counsel.

“This settlement marks a major step forward in the safeguarding of the essential right to effective legal representation, which stands at the core of America’s criminal justice system,” said Attorney General Eric Holder.  “It is simply unacceptable that, today – more than half a century after the Supreme Court’s landmark decision in Gideon v. Wainright affirmed the right to counsel for low-income defendants – America’s indigent defense systems continue to exist in a state of crisis, and inequities remain all too common.  That’s why, especially in recent years, the Department of Justice has fought tirelessly to ensure effective representation for all who are charged with crimes.  With this settlement, we send a clear message that this fight will continue.  And we will never waver in our commitment to ensuring that all Americans receive the rights and protections to which they are entitled.”

“This important settlement agreement is a model, not just for the five counties named in the case, but for all of New York State, and for the country,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “The right to counsel is one of the core guarantees of the Bill of Rights, and yet, as countless cases and studies show, indigent defense systems across the county are facing significant challenges in meeting their Sixth Amendment obligations.”

In Hurrell-Harring the plaintiffs alleged that a lack of funding for indigent defense deprives public defenders of the time or resources to prepare cases or meaningfully represent their clients and amounts to the denial of counsel in violation of Gideon v. Wainwright and the Sixth Amendment.  In its statement of interest, the department advised the court that under resourcing public defense may force even otherwise competent and well-intentioned public defenders into a position where they are, in effect, a lawyer in name only.  The statement of interest added that if the court finds that the plaintiffs have been constructively denied the right to counsel on a systemic basis, the court has broad injunctive authority to remedy those constitutional violations. 

The Hurrell-Harring case was filed in 2007 and brought by former indigent defendants who faced criminal charges in Onondaga, Ontario, Schuyler, Suffolk and Washington counties in the state of New York.

U.S. Attorney General Eric Holder released the following statement Sunday regarding the arrest of Jeffrey Williams in the shooting of two law enforcement officers outside the Ferguson, Missouri Police Department on Thursday:

“This arrest sends a clear message that acts of violence against our law enforcement personnel will never be tolerated.  The swiftness of this action is a credit to the significant cooperation between federal authorities and the St. Louis County Police Department.  The ATF’s ballistic imaging technology has played a critical role in the ongoing investigation.  I commend both the ATF and St. Louis police for their tremendous work in identifying this suspect.

“In the days ahead, we will continue to partner with the authorities in St. Louis County to secure justice for all those affected by this heinous and cowardly crime.  And we will continue to stand vigilant in support of public safety officers and the communities they serve.”

The owner of two home health care companies pleaded guilty to Medicare fraud and tax fraud charges in connection with his role in a scheme to fraudulently bill Medicare for $12.6 million in home health services that were not provided or were obtained through illegal kickbacks.  Ten other individuals have been convicted at trial or pleaded guilty in this case.

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 the Internal Revenue Service Criminal Investigation (IRS-CI) Detroit Field Office made the announcement.  

Mohammed Sadiq, 67, of Oakland County, Michigan, pleaded guilty today before U.S. District Judge Denise Page Hood of the Eastern District of Michigan to one count of health care fraud and one count of filing a false tax return.  A sentencing hearing is scheduled for June 18, 2015. 

According to admissions in his plea agreement, Sadiq owned and directed operations at two home health care companies in Detroit.  Sadiq admitted that, working with co-conspirators, he created and operated the companies for the purpose of billing Medicare for home health services that he knew were not provided.  Sadiq also admitted to paying kickbacks to patient recruiters in order to obtain the information of Medicare beneficiaries, which he then used to bill Medicare for services that were not medically necessary or were not provided at all. 

Sadiq further admitted that he created fake patient files to fool a Medicare auditor and make it appear as though home health services were provided and medically necessary. 

Sadiq admitted that, as a result of the scheme, he received $12.6 million from Medicare.

Also according to Sadiq, he received proceeds of the fraud through bank accounts that he controlled, withdrew substantial sums for his personal use and failed to report these proceeds on his individual federal income tax return in 2008.  In total, Sadiq admitted that he currently owes approximately $1.5 million in taxes, interest and penalties for tax years 2008 through 2010.

This case was investigated by the FBI, HHS-OIG and IRS-CI, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Eastern District of Michigan.  The case is being prosecuted by Trial Attorneys William Kanellis, Christopher Cestaro, Brooke Harper and Elizabeth Young of the Criminal Division’s Fraud Section, as well as 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.

          U.S. Attorney Alicia A.G. Limtiaco, Districts of Guam and the Northern Mariana Islands (NMI), announced that the Regional Organized Crime Drug Enforcement Task Force (OCDETF) coordinators from the Pacific Region made their annual visit to Guam and the NMI and provided training to law enforcement agencies.  The training was conducted by Thomas Colthurst, OCDETF Regional Director, Steve Jensen, OCDETF Regional Coordinator of Internal Revenue Service - Criminal Investigations (IRS-CI), and Deborah Wee, OCDETF Regional Coordinator of the Federal Bureau of Investigations (FBI).  The training was held at the U.S. Attorney’s Office in Guam on March 11, 2015, and was attended by approximately 30 local and federal law enforcement officers from Guam and Saipan, NMI.

          The training topics included “Money Laundering and Financial Analysis,” “OCDETF Airport Security Initiative” and “Searches and Seizure.”

          The OCDETF Program was established in 1982 to mount a comprehensive attack against organized drug traffickers. Today, the OCDETF Program is the centerpiece of the United States Attorney General's drug strategy to reduce the availability of drugs by disrupting and dismantling major drug trafficking organizations and money laundering organizations and related criminal enterprises.

          OCDETF investigations involve 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.

          OCDETF investigations involve federal agents and local law enforcement officers of the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF), the Drug Enforcement Administration (DEA), the FBI, the IRS, the U.S. Coast Guard Criminal Investigative Service (CGIS), the U.S. Department of Homeland Security Investigations (HSI), the U.S. National Oceanic Atmosphere Administration (NOAA), the U.S. Marshal’s Service, the U.S. Postal Inspection Service (USPIS), and numerous local agencies such as the Guam Police Department (GPD), Guam Customs and Quarantine Agency (GCQA) and others.

 

Assistant U.S. Attorney Thomas Colthurst gives an Overview of Financial Investigations and Money Laundering Laws Steve Jensen, OCDETF Regional Coordinator of IRS-CI presenting on the topic of International Money Laundering U.S. Attorney Alicia Limtiaco with Assistant U.S. Attorney Thomas Colthurst at the OCDETF training for law enforcement

 

Michigan resident Lip Bor Ng, also known as Paul Wu, 52, pleaded guilty before Judge Mark A. Goldsmith to a one-count conspiracy information, which charged him with conspiring with others to knowingly submit false and misleading export information to the United States,  to fraudulently and knowingly export electronic waste in violation of United States law and to export hazardous waste without filing a notification of intent to export with the U.S. Environmental Protection Agency (EPA).

According to the charges in the information, Ng submitted fraudulent export information to the Automated Export System, an electronic database maintained by the U.S. Customs and Border Protection, on two occasions in 2011.  He falsely declared the commodities as plastic and metal scrap, when, in fact, they contained various types of used electronics and computer components, including cathode-ray tube (CRT) monitors.  CRT monitors can be considered hazardous waste under certain conditions and thus their export is regulated by EPA. 

“U.S. law strictly regulates the exportation of hazardous e-waste because we care about what happens to these materials when they leave our shores,” said John C. Cruden, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division.  “We will not allow people to profit from compromising the health and safety of people overseas.  Those who do so will be prosecuted.”

Anyone who exports unusable, hazardous CRT monitors must file a notification of intent to export CRT monitors and must also receive permission from the receiving country, in this case, China and Hong Kong, to allow import into that country.  Ng did not file the appropriate notification, or receive permission from China and Hong Kong to export the CRT monitors.

“The more technology we use, the more electronic waste is created that can seriously impact human health and the environment,” said Special Agent in Charge Randall K. Ashe of EPA’s criminal enforcement program in Michigan.  “Many old, worn-out electronics are exported overseas where people risk their health to retrieve the valuable materials left in them.  As a global leader in the manufacture and use of electronics, America has a responsibility to ensure their proper disposal.” 

“When potentially hazardous e-waste is not properly disposed of, human lives are put at risk,” said Marlon Miller, special agent in charge of Homeland Security Investigations Detroit. “The investigation confirmed that the defendant repeatedly and illegally exported used cathode ray tubes overseas. Homeland Security Investigations stands with our law enforcement partners, committed and ready, to prevent any company from ignoring U.S. laws involving the export of hazardous e-waste."

Ng faces a maximum sentence of five years imprisonment and a $250,000 fine. Sentencing was set for July 14, 2015.

The case is being investigated by the EPA, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Department of Commerce, and U.S. Postal Inspection Service.

The case is being prosecuted by the Department of Justice, Environmental Crimes Section, Trial Attorney Jennifer Leigh Blackwell, the United States Attorney’s Office for the Eastern District of Michigan, Assistant U.S. Attorney Lynn Dodge, as well as EPA Regional Criminal Enforcement Counsel Dave Taliaferro.

The Department of Justice announced today that it will require Waste Management Inc. (WMI) and Deffenbaugh Disposal Inc. (DDI) to divest small container commercial waste service routes, in the Topeka, Kansas, area and in two areas in Northwestern Arkansas – Van Buren/Fort Smith and Springdale – in order for WMI to proceed with its acquisition of DDI.  Without these divestitures, the department said, the transaction would have likely resulted in higher rates for customers in those areas.

The Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to block the proposed acquisition.  At the same time the department filed a proposed settlement that, if approved by the court, would resolve the competitive concerns alleged in the lawsuit.

“This deal threatened to weaken competition in small container commercial waste service in three cities and surrounding areas,” said Assistant Attorney General Bill Baer of the Antitrust Division.  “Competition between Waste Management and Deffenbaugh historically has resulted in lower prices and better service.  By requiring the divestiture of Deffenbaugh’s small container commercial waste service routes in these cities, today’s proposed settlement will ensure that businesses in Kansas and Arkansas will benefit from continuing competition among waste haulers.”

According to the department’s complaint, WMI’s acquisition of DDI would significantly reduce competition in three local small container commercial waste service markets.  Small container commercial waste service is the collection of municipal solid waste from commercial businesses, such as office and apartment buildings, and retail establishments, such as stores and restaurants.  In and around Topeka and in the Van Buren/Fort Smith, WMI and DDI are currently two of three major providers of these services.  In these areas the combination of WMI and DDI would have resulted in only two major competitors.  In the Springdale area, WMI and DDI are currently two of four major providers.  In this area the combination of WMI and DDI would have resulted in only three competitors.  In each of these areas, the loss of competition would likely result in higher prices and reduced quality in small container waste collection service.

The proposed divestitures address these competitive concerns.  Under the terms of the proposed consent decree, WMI must divest DDI’s small container commercial waste routes in each of these three markets. 

WMI is a Delaware corporation with its headquarters in Houston.  WMI provides collection, transfer, recycling and disposal services throughout the United States.  In 2014, WMI had estimated total revenue of $14 billion.

DDI is a Delaware corporation, with its headquarters in Kansas City, Kansas.  DDI offers collection, transfer, recycling and disposal services in Kansas, Missouri, Arkansas, Nebraska and Iowa.  DDI’s revenues for 2013 were approximately $180 million.

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to James Tierney, Chief, Networks and Technology Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 7700, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may approve the proposed settlement upon finding that it is in the public interest.

WMI Competitive Impact Statement
WMI Hold Separate
WMI Proposed Final Judgement
WMI Complaint
 

The United States has asked a federal court in Las Vegas to bar a Las Vegas man from preparing federal tax returns that contain or involve foreign earned income, and from promoting to others the exclusion of foreign earned income.

The complaint, which was filed with the U.S. District Court for the District of Nevada, alleges that Harvey L. Cage, who does business as CSN Tax Services, inappropriately attempts to exclude foreign earned income from the calculation of his customers’ federal tax liabilities.  According to the complaint, from 2009 through 2012, Cage personally prepared more than 3,200 tax returns, of which approximately 25 percent contained the foreign earned income exclusion. 

Typically, U.S. citizens may exempt some foreign earned income from the calculation of gross income if they are present in a foreign country for at least 330 full days out of 12 consecutive months.  This period can be waived when the Secretary of the Treasury determines, after consultation with the Secretary of State, that individuals were required to leave a foreign country due to war, civil unrest or other conditions that preclude the normal conduct of business, among other things.  In implementing this waiver provision, each year the Secretary of the Treasury publishes a list of countries that have been determined eligible for waiver requests.  According to the suit, Cage ignored the published list of waiver-eligible countries in filing for his customers’ exclusion of foreign earned income.  According to the government’s complaint, Cage, on behalf of some of these customers, claimed the foreign earned income exclusion for which his customers were not entitled, inappropriately reducing their tax liability. 

According to the complaint, Cage’s activities have resulted in an estimated average tax loss of more than $12,000 per examined return.  The United States alleges that the additional taxes due from Cage’s customers, excluding interest and penalties, is greater than $3.7 million and continues to grow as additional examinations are completed.  After many of his customers had been audited, Cage failed to provide his Preparer Tax Identification Number (PTIN) on the tax returns he prepared, in violation of federal law, according to the suit.

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

Colin Boone, previously employed as an officer of the Des Moines, Iowa, Police Department, was convicted today on the charge of deprivation of rights under color of law for assaulting a civilian during the course of an arrest on Feb. 19, 2013, announced Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division and U.S. Attorney Nicholas A. Klinefeldt of the Southern District of Iowa.  The evidence presented at trial showed that Boone ran up to an arrestee and kicked him in the face while he was being held on the ground, face-down, by three other officers.  The evidence also showed that Boone’s kick knocked out the victim’s front teeth and broke his nose.

“The Department of Justice is proud to stand behind the fine law enforcement officers with the Des Moines Police Department who honored their badges by providing truthful information about the defendant’s criminal actions,” said Acting Assistant Attorney General Gupta.  “We are committed to working with our law enforcement partners to hold accountable officers such as former officer Boone, who engage in willful uses of excessive force.”

“This was a violent, criminal action” stated U.S. Attorney Klinefeldt.  “Defendant Colin Boone kicked a defenseless man in the face.  He will now be held responsible in the same way as all of the defendants he has helped put in jail.  This was also a betrayal of trust: former police officer Colin Boone betrayed the trust of the public he served and of the officers with whom he served.”

The charge of deprivation of rights under color of law carries a statutory maximum sentence of ten years in prison and a maximum fine of $250,000.  The sentencing hearing will be determined at a later date and Boone remains out of custody pending sentencing.

Today’s conviction is the result of an investigation conducted by the FBI’s Des Moines Resident Office.  Prosecution of this matter was handled by the Justice Department’s Civil Rights Division and the U.S. Attorney’s Office in the Southern District of Iowa.

The Department of Justice today filed a statement of interest in the Superior Court of Fulton County, Georgia, in N.P. et al. v. The State of Georgia, et al.  The class action asserts 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.  The department’s statement of interest focuses solely on the due process rights of children accused of delinquency.  It is the first department filing in a state court action to address the due process right to counsel for children established by the U.S. Supreme Court in In re Gault.   In Gault the court recognized the critical needs of children for guidance and advocacy and the vital role counsel plays in ensuring fairness in delinquency proceedings.  More recent Supreme Court decisions have emphasized the differences between adults and children in the criminal justice system.  Applying this case law, the department’s filing identifies procedural safeguards that must be provided to children who appear before the court.  

“For too long, the Supreme Court’s promise of fairness for young people accused of delinquency has gone unfulfilled in courts across our country,” said Attorney General Eric Holder.  “Every child has the right to a competent attorney who will provide the highest level of professional guidance and advocacy.  It is time for courts to adequately fund indigent defense systems for children and meet their constitutional responsibilities.”

 “Every day, in communities across our country, under-resourced public defense systems fail to meet their constitutional obligation to provide effective representation for children,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “Children who depend on these failing systems often get the poorest representation, relegating them to second-class status in our courts. The systemic deprivation of counsel for children cannot be tolerated.”

In N.P., the plaintiffs allege that children in juvenile delinquency proceedings in the Cordele Judicial Circuit are denied their right to meaningful representation and are, at best, provided with “assembly-line justice.”  They assert that because public defense counsel are understaffed and under-resourced, they often are not appointed on behalf of children, and that children routinely waive their right to counsel without the waiver being knowing, intelligent and voluntary.  The plaintiffs claim that the denial is so total that it amounts to a systemic violation of the juveniles’ due process right to counsel, as required by Gault and the U.S. Constitution.

In its statement of interest, the department asserts 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 provides 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.”

N.P. et al. v. The State of Georgia et al. was filed in January 2014 and brought by adult defendants and juveniles accused of delinquency in the Cordele Judicial Circuit.  The plaintiffs seek reform to prevent future due process and right to counsel violations.

Two Phenix City, Alabama, women and a Columbus, Georgia, woman pleaded guilty for their roles in a stolen identity refund fraud (SIRF) conspiracy, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department's Tax Division and U.S. Attorney George L. Beck Jr. of the Middle District of Alabama announced today.

Tamaica Hoskins, a resident of Phenix City, pleaded guilty today in U.S. District Court in the Middle District of Alabama to one count of conspiracy to commit wire fraud and one count of aggravated identity theft.  Roberta Pyatt, also of Phenix City, previously pleaded guilty on Feb. 25 to one count of conspiracy to commit wire fraud.  Lashelia Alexander, of Columbus, pleaded guilty to one count of conspiracy to commit wire fraud on Nov. 18, 2014.  According to court documents, between September 2011 and June 2014, Hoskins, Pyatt and others filed more than 1,000 false federal income tax returns using stolen identities and requested more than $4 million in tax refunds.  Hoskins obtained stolen identities from various sources, including the identities of employees from a Columbus company. 

In order to file the false tax returns, Hoskins and Pyatt obtained two Electronic Filing Identification Numbers (EFINs) in the names of sham tax businesses.  The tax refunds claimed on the false returns were paid out via prepaid debit cards, U.S. Treasury checks and deposits to financial institutions connected to the business EFINs that allowed participants in the scheme to print refund checks and obtain prepaid debit cards.  Hoskins and Pyatt cashed fraudulent refund checks at several businesses located in Alabama and Georgia. 

Lashelia Alexander worked for Walmart’s money center located in Columbus.  In January 2014, Alexander was approached about cashing fraudulent tax refund checks that were issued in the names of third parties.  In return for cashing the checks, Alexander would receive payment.  Alexander cashed more than $100,000 in fraudulently obtained third-party refund checks issued based on false tax returns that were filed by Hoskins and Pyatt.

At sentencing, the defendants face a statutory maximum sentence of 20 years in prison and a fine of $250,000 for wire fraud conspiracy.  Hoskins also faces a minimum mandatory consecutive sentence of two years in prison and a statutory maximum fine of $250,000 for aggravated identity theft. 

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck Jr. commended special agents of Internal Revenue Service – Criminal Investigation, who investigated the case, and Trial Attorneys Michael C. Boteler and Gregory P. Bailey of the Tax Division and Assistant U.S. Attorney Todd Brown of the Middle District of Alabama, who are prosecuting the case.

Younger Sibling Plotted to Attack New York City with a Weapon of Mass Destruction

Assistant Attorney General for National Security John Carlin, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Director Stacia A. Hylton of the U.S. Marshals Service, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and members of the South Florida Joint Terrorism Task Force (JTTF) announced today that Raees Alam Qazi and his brother, Sheheryar Alam Qazi, pleaded guilty to terrorism violations and to assaulting two Deputy U.S. Marshals while in custody. 

During the hearing, the Qazi brothers acknowledged that Raees Alam Qazi, the younger brother, was going to initiate an attack using a weapon of mass destruction in New York City and that he had been financially and emotionally supported by his older brother, Sheheryar Alam Qazi, who encouraged him to launch the attack. 

“With today’s guilty pleas, Raees Qazi and his brother Sheheryar Qazi are being held accountable for their roles in a plot to conduct a terrorist attack using a weapon of mass destruction in New York City and their assault on two federal officers during their pretrial detention,” said Assistant Attorney General Carlin.  “This case highlights our commitment to pursue any individuals who would seek to conduct an attack on U.S. soil or to injure law enforcement officials who risk their lives to protect us.  I want to thank the many agents, analysts, and prosecutors who are responsible for this successful result.”

“The plot by Raees Qazi to perform a terrorist attack in New York City – and his older brother’s financial support of that plot – was intended to further Al Qa’ida’s message in the United States,” said U.S. Attorney Ferrer.  “The Qazi brothers later attacked federal law enforcement agents.  As today’s guilty pleas demonstrate, we will respond by holding those who plan terrorist acts on American soil accountable.  This case serves as an example of our commitment to protecting civilians from violent jihadi attacks.”

“Any attempt on the life of a law enforcement official is heinous,” said Director Hylton.  “To attempt to murder two Deputy U.S. Marshals while in a federal cellblock is a total disregard for life and the entire judicial process.”

“The Qazi brothers are a great example why the FBI’s number one priority is counterterrorism,” said Special Agent in Charge Piro.  “We remain committed in our steadfast efforts to detect, deter and disrupt every threat to the United States.” 

Raees Alam Qazi, 22, and his brother, Sheheryar Alam Qazi, 32, were living in Oakland Park, Florida, in November 2012 when they were arrested and charged with conspiracy to provide material support to terrorists and conspiracy to use a weapon of mass destruction (explosives).  In January 2015, a federal grand jury added additional terrorism charges and five counts of conspiracy, assault and attempted murder relating to an attack on two Deputy U.S. Marshals in April 2014 while the Qazis were in federal custody.

Raees Alam Qazi pleaded guilty to one count of conspiring to provide material support and resources to terrorists in preparation for the use of a weapon of mass destruction, one count of attempting to provide material support to a foreign terrorist organization and one count of conspiring to assault a federal employee.  Under the terms of the plea agreement, the parties jointly agreed to recommend a 32-year prison sentence for Raees Qazi.

Sherheyar Alam Qazi pleaded guilty to one count of conspiring to provide material support and resources to terrorists in preparation for the use of a weapon of mass destruction and one count of conspiring to assault a federal employee.  Under the terms of the plea agreement, the parties jointly agree to recommend a 17-year prison sentence for Sheryheyar. 

The sentencing hearing for both brothers is currently set before U.S. District Judge Beth Bloom of the Southern District of Florida on June 5. 

Raees Alam Qazi and Sheheryar Alam Qazi face a potential statutory maximum sentence of 35 years and 20 years, respectively.

The brothers are naturalized U.S. citizens from Pakistan.

The case was investigated by the FBI’s Miami Field Office and the South Florida JTTF.  The case is being prosecuted by Assistant U.S. Attorneys Karen E. Gilbert and Adam S. Fels of the Southern District of Florida, and Trial Attorney Jennifer E. Levy of the Justice Department’s National Security Division.

Raees Alam Qazi Plea Agreement

Sheheryar Alam Qazi Plea Agreement

Raees Alam Qazi et al Factual Proffer

A retired colonel and a former sergeant from the U.S. Army National Guard both pleaded guilty today for their roles in a recruiting fraud scheme that caused approximately $14,000 in losses to the U.S. National Guard Bureau, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.

Retired Colonel Isaac Alvarado, 75, and former Sergeant First Class Travis Nau, 41, both of Albuquerque, New Mexico, pleaded guilty today to one count of conspiracy to commit wire fraud and one count of wire fraud before Chief U.S. Magistrate Judge Karen B. Molzen of the District of New Mexico.  Sentencing hearings will be scheduled at a later date, and will take place before U.S. District Judge Judith C. Herrera of the District of New Mexico.

According to court documents, in approximately September 2005, the National Guard Bureau created the Guard Recruiting Assistance Program (G-RAP), which was designed to offer monetary incentives to soldiers who recruited others to join the National Guard.  Through this program, a participating soldier, known as a recruiting assistant, could receive bonus payments for referring another individual to join the National Guard. 

According to the plea agreements entered today, between February 2008 and February 2012, Alvarado served as a recruiting assistant in the G-RAP.  During that time, Nau, who is Alvarado’s son-in-law, worked in a National Guard recruiting office and assisted individuals who were interested in joining the military.  The defendants admitted that Nau provided Alvarado with the personal identifying information of potential soldiers, including their names and Social Security numbers.  Alvarado then used that information to falsely claim that he was responsible for referring the soldiers to join the military, and to fraudulently claim referral bonuses through the G-RAP.  In addition, Alvarado and Nau admitted that Nau advised at least two potential soldiers to falsely report that Alvarado had assisted in their recruitment even though he had not.  As a result, Alvarado received approximately $12,000 in fraudulent recruiting bonuses.

The case is being investigated by the Fort Bliss Army Criminal Investigation Command.  This case is being prosecuted by Trial Attorneys Sean F. Mulryne and Heidi Boutros Gesch of the Criminal Division’s Public Integrity Section. 

Espar Inc., a seller of parking heaters for commercial vehicles, pleaded guilty to participating in a price-fixing scheme, the Department of Justice announced today. 

Espar Inc. pleaded guilty to a one-count felony charge in the U.S. District Court for the Eastern District of New York in Brooklyn.  According to the charge, Espar conspired with others to fix prices for parking heaters in the United States and elsewhere in North America from at least as early as Oct. 1, 2007, until Dec. 31, 2012.  Parking heaters are devices that heat the interior compartment of a motor vehicle independent of the operation of the vehicle’s engine.  In addition to paying a criminal fine, Espar has agreed to cooperate in the department’s ongoing investigation.  The plea agreement is subject to court approval, and Espar is scheduled to be sentenced on June 5, 2015.

“Today’s plea demonstrates the Antitrust Division’s commitment to holding companies accountable for conspiracies that fix prices on parts used in every day products,” said Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division.  “The Antitrust Division will vigorously prosecute companies that engage in schemes that subvert normal competitive processes and defraud American consumers and businesses.”

According to the charge, Espar and its co-conspirators discussed parking heater prices for commercial vehicles, agreed to set a price floor for parking heater kits for commercial vehicles sold to aftermarket customers, and agreed to coordinate the timing and amount of price increases for parking heaters for commercial vehicles sold to aftermarket customers.  The companies carried out the agreement and exchanged information for the purpose of monitoring and enforcing adherence to the agreement.

Espar is charged with price fixing 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.        

Today’s plea is the result of an ongoing federal antitrust investigation being handled by the Antitrust Division’s New York Office, with assistance from the FBI’s New York Field Office.  Anyone with information concerning price fixing or other anticompetitive conduct in the parking heater industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit www.justice.gov/atr/contact/newcase.html.

American Pallet Recycling, L.L.C. (APR) and its former president and owner, Raymond Viola, have pleaded guilty and been sentenced in U.S. District Court in the Eastern District of New York to criminal violations related to the falsification of certificate stamps in violation of the Plant Protection Act, the Justice Department and the Department of Agriculture announced.  As part of the plea agreement, the company will pay a fine of $100,000. Viola will pay $1,000 and serve three years of probation and has relinquished the business to his son.

APR plead guilty to one felony count of falsifying stamps that certified wood pallets were heat treated to prevent pest infestation, and were suitable for use in international transportation.  Viola pleaded guilty to a similar misdemeanor count.  Viola had the false stamps affixed to wood pallets which were used to carry products from the United States to foreign countries.  The criminal conduct took place from March 2007 through January 2011.

The Department of Agriculture requires the heat treatment of wood pallets used in international transactions.  The requirement is to prevent parasites and plant diseases from potentially entering the United States in wood packaging materials.  The Department of Agriculture began requiring heat treatment of wood packaging material in September 2005.  Wood pallets that carry products transported within the United States are not required to be heat treated. 

APR sold wood pallets to multiple other companies who used the wood pallets to transport products internationally.  The purchasing companies ordered and thought they were purchasing heat treated pallets.  Instead, Viola created copies of stamp certifications utilized by legitimate wood pallet treating companies, which he and his employees applied to pallets APR sold.  The charges against APR and Viola involved the fraudulent stamp certification of hundreds of untreated wood pallets that were sold to other companies for use in product export.

This is the highest monetary penalty assessed for falsified use of a fraudulent mark related to wood packaging materials under the Plant Protection Act.

The investigation was conducted by the U.S. Department of Agriculture.  It was prosecuted by Senior Counsel Rocky Piaggione of the Justice Department’s Environmental Crimes Section.

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan and Special Agent in Charge Marlon Miller of Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Detroit Field Office announced that a naturalized U.S. citizen was sentenced today to serve 18 months in prison for her Nov. 10, 2014, conviction on immigration fraud for failing to disclose that she had been convicted of participating in a terrorist bombing. 

Rasmieh Yousef Odeh, 67, a Chicago-area resident, was found guilty by a jury of procuring her U.S. citizenship unlawfully on Nov. 10, 2014, after a five-day trial.  According to the indictment, Odeh was convicted in Israel for her role in the 1969 bombings of a supermarket and the British Consulate in Jerusalem, which were carried out on behalf of the Popular Front for the Liberation of Palestine (PFLP), a designated terrorist organization.  Odeh and others placed multiple bombs at the British Consulate and in a supermarket.  One of the bombs placed at the supermarket detonated, killing two and injuring others.  A bomb placed at the consulate caused structural damage to the facility.  Odeh was sentenced by Israeli military authorities to life imprisonment, but was released after 10 years as part of a prisoner exchange and she then returned to the West Bank.  

The evidence presented at trial established that in 1995, Odeh immigrated to the United States and was naturalized as a citizen in 2004.  In her immigration documents filed in the United States, Odeh failed to disclose her arrest, conviction and imprisonment overseas, which were material facts for the U.S. government in determining whether to grant her citizenship.

“The United States government is entitled to accurate information about people who are asking permission to enter and stay in the country,” said U.S. Attorney McQuade.  “A prior conviction for committing a terrorist bombing is a very significant fact, and failure to disclose this information is a serious fraud against the United States.”

“Today's sentencing and deportation order against the defendant underscores the severe penalties that await those who attempt to defraud the immigration system by hiding derogatory information from their past,” said Special Agent in Charge Miller.  “When individuals are less than truthful on their immigration documents, the system is severely undermined and the security of our nation is put at risk.  I applaud the HSI special agents and federal prosecutors who worked tirelessly to resolve this lengthy and complex investigation.”

As part of her sentence, the Honorable U.S. District Judge Gershwin A. Drain revoked Odeh’s U.S. citizenship and ordered her removed and deported to Jordan.  Judge Drain stayed the execution of these orders pending her appeal of the conviction.  Judge Drain also granted Odeh’s request to remain on bond pending her appeal. 

This case was investigated by special agents of ICE-HSI and prosecuted by Assistant U.S. Attorney Jonathan Tukel and Special Assistant U.S. Attorney Mark Jebson of the Eastern District of Michigan, and Trial Attorney Elisabeth Poteat of the Justice Department’s National Security Division.

The Justice Department announced today that Hencorp Becstone Capital L.C. (Hencorp) has agreed to pay $3.8 million to resolve allegations under the False Claims Act that it made false statements and claims to the Export-Import Bank of the United States (Ex-Im Bank) in order to obtain loan guarantees.  Hencorp is a Miami-based lender and financial services company that provides financing and other financial services to Latin American businesses.  

“The Ex-Im Bank provides vital support for U.S. manufacturing by enabling foreign businesses to obtain financing to purchase U.S.-made goods and equipment,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will continue to vigorously pursue those who attempt to take advantage of this important program.”  

The Ex-Im Bank guarantees loans made by approved lenders to foreign businesses for the purchase of American-made products.  The lender is responsible for performing a credit review of the transaction to ensure that it meets applicable criteria.  The government alleged that Ricardo Maza, a Peruvian-based former Hencorp business agent, created false documentation to obtain Ex-Im Bank guarantees on fictitious transactions on which no products were sold or exported, and that Hencorp acted recklessly by outsourcing key credit review functions to Maza without adequate supervision or oversight.  The government alleged that Maza then diverted the proceeds of the loans to himself and to his friends and business associates in Peru, and that the transactions resulted in losses to the Ex-Im Bank when the loans were not repaid.  In 2012, Mario Mimbella, 64, of Miami, Florida, the purported U.S.-based exporter on three of the fraudulent transactions, pled guilty to making false records for his participation in the scheme and was later sentenced to prison. 

“Lenders that use Ex-Im programs have an obligation to prevent and detect fraud,” said Acting Inspector General Michael T. McCarthy for the Ex-Im Bank.  “The Office of Inspector General will pursue accountability for all participants involved in schemes that defraud the Ex-Im Bank.”

This settlement resolves allegations made in a whistleblower lawsuit filed under the False Claims Act by Genaro Benites Caballero, the former owner of one of the purported purchasers who stated that he had no part in the scheme and that his signature was forged on key documents without his knowledge, and Patricia Doris Lee Dominguez, a former attorney for the purported purchaser.  Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery.  The whistleblowers will receive $608,000 of the settlement. 

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Columbia and the Office of Inspector General for the Ex-Im Bank. 

The lawsuit is captioned United States ex rel. Benites Caballero, et al. v. Hencorp Becstone Capital, L.C., et al., cv-13-168 (D.D.C.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability with respect to Hencorp.

The U.S. Justice Department’s Civil Rights Division announced today that a settlement has been reached with the Missouri National Guard (MNG) to resolve allegations that MNG violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by requiring its civilian National Guard dual technician employees to be separated from their civilian positions prior to entering active military duty service with the U.S. Active Guard Reserve (AGR) Program.

According to the complaint, filed in the U.S. District Court of the Western District of Missouri, MNG violated the USERRA rights of Kinata Holt, a civilian National Guard dual technician, by requiring her to give up her civilian employment as a condition of being called to active duty with the AGR.  The Justice Department alleged that MNG’s refusal to place Holt on furlough or leave of absence from her civilian job, by forcing her separation, resulted in the loss of paid military leave to which she would otherwise have been entitled.  Under the terms of the settlement agreement, which is subject to approval by the district court, MNG has agreed to rescind its current policy requiring separation in order to enter the AGR and to compensate Holt by awarding her 30 days of paid military leave.

The settlement agreement also provides that MNG will compensate 137 other civilian National Guard dual technicians who were similarly denied military leave benefits.  As a part of the agreed upon terms of settlement for those employees, each will receive a leave credit of 15 days of paid military leave for the 2014-2015 fiscal year.  Collectively, these employees will receive more than 2,000 days of paid leave for the past year, and be awarded paid military leave in the future as they continue to serve on active duty with AGR.

“This settlement will provide much deserved relief to Kinata Holt and 137 other service members who lost their military benefits because of the actions of MNG,” said Acting Associate Attorney General Stuart Delery.  “The Department of Justice is committed to protecting the rights of the men and women who serve in our Armed Forces and we will continue to devote time and resources to hold bad actors accountable.”

“The Missouri National Guard, like other state employers, has a legal obligation under USERRA to provide the full range of rights and benefits to military service members that are permitted under the statute,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “The Department of Justice will continue to vigorously enforce the rights of uniformed service members in retaining their civilian employment benefits while on an absence due to military service obligations.”

This case stems from a referral by the U.S. Department of Labor (DOL) following an investigation by the DOL’s Veterans’ Employment and Training Service.  The case was handled by the Employment Litigation Section of the Civil Rights Division with the assistance of the U.S. Attorney’s Office of the Western District of Missouri, both of whom work collaboratively with DOL to protect the jobs and benefits of National Guard and Reserve Servicemembers.

The Justice Department’s Civil Rights Division has given a high priority to the enforcement of service members’ rights under USERRA.  Additional information about USERRA can be found on the Justice Department’s websites at www.usdoj.gov/crt/emp and www.servicemembers.gov, as well as on the Labor Department’s website at www.dol.gov/vets/programs/userra/main.htm.

Attached is the motion to expedite the preliminary injunction appeal in the Fifth Circuit Court of Appeals in the case State of Texas, et al v. United States of America.

Appellants’ Motion for Expedited Appeal and for Leave to Use Appendix on Appeal

Attached is the Justice Department’s emergency motion for a stay in the Fifth Circuit Court of Appeals in the case State of Texas, et al v. United States of America.

Attachments to Appellants’ Emergency Motion for Stay Pending Appeal 

Appellants’ Emergency Motion for Stay Pending Appeal

The United States filed a complaint seeking to bar a Doral, Florida, man and his businesses from preparing federal tax returns for others, the Justice Department announced today.

The civil injunction complaint against Eleuterio Almanzar, Almanzar Tax Accounting & Consulting Corp. and Almanzar Financial Services Corp., filed in U.S. District Court in the Southern District of Florida, alleges that Almanzar prepares federal income tax returns for customers that understate the tax that is due or seek refunds larger than are appropriate. 

According to the government’s complaint, the understatements are the result of improper education credits, first time homebuyer tax credits, earned income tax credits, charitable deductions and business expense deductions that Almanzar claims for his customers without performing the required due diligence and despite the absence of any supporting documentation.  Because some of these credits are refundable credits, the improper claims often result in larger than appropriate refunds, according to the suit.  The Internal Revenue Service (IRS) interviewed several of Almanzar’s customers, who stated that the improper deductions and credits were not based on information they provided to Almanzar, and that they did not know that the improper deductions and credits had been taken on their tax return until after their return was filed.

The complaint also seeks to enjoin Almanzar from using a false or fictitious federally issued identification number — including social security numbers, Electronic Filing Identification Numbers, Employer Identification Numbers, Taxpayer Identification Numbers and Preparer Tax Identification Numbers — to file or remit federal income tax returns.  The suit also seeks to prevent Almanzar from using any federally issued identification number that belongs to another person to file or remit federal income tax returns.  The government is also asking to have Almanzar provide a list of customers that identifies by name, social security number, address, e-mail address, telephone number and tax periods all persons for whom he has prepared federal tax returns or claims for refund since Jan. 1, 2009.

According to the complaint, the average tax deficiency for the returns the IRS examined since 2009 was $3,249 per return.  Given the number of returns Almanzar has prepared since 2009, the harm to the United States caused by his practices could be in the millions of dollars.  

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

The United States filed a civil complaint in the U.S. District Court for the Central District of California today against Plaza Bank of Irvine, California, for knowingly facilitating consumer fraud by permitting a third-party payment processor to make millions of dollars of unauthorized withdrawals from consumer bank accounts on behalf of fraudulent merchants.  To resolve the case, Plaza Bank has agreed to pay $1.225 million and enter into a permanent injunction that reforms the bank’s practices to prevent such fraud in the future.  The proposed consent decree has been filed with the court, which will determine whether to enter the order. 

“Today’s complaint alleges that, in exchange for fee income, the bank ignored its responsibilities and looked the other way while a third-party payment processor and its merchants defrauded unsuspecting victims of millions of dollars,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “A part of our responsibility at the Justice Department is to stop those who knowingly facilitate consumer fraud, and those in the financial industry are no exception.”

The complaint alleges that from July 2007 to mid-2010, Plaza Bank knowingly permitted fraudulent merchants, acting through an intermediary called a third-party payment processor, to illegally withdraw millions of dollars from consumers’ bank accounts.  The complaint further alleges that these unauthorized withdrawals resulted in: abnormally high rate of rejected transactions, which hovered between 50 and 55 percent; hundreds of consumer complaints each month in which consumers stated, by sworn affidavit, that withdrawals from their accounts were unauthorized; and inquiries from other banks and law enforcement, both of which expressed their belief that the payment processor’s transactions were fraudulent. 

According to the complaint, when Plaza’s chief compliance official raised concerns about these numerous warning signs of fraud, she was brushed aside by Plaza’s chief operating officer—who, unknown to the compliance officer, was one of two corporate officials who also happened to be a part-owner of the payment processor.  Plaza thus continued to give fraudsters unfettered access to the bank accounts of tens of thousands of consumers. 

Eventually, in June 2009, Plaza was sold to a third-party equity firm, which brought in new bank management.  According to the complaint, while new management soon recognized the problematic nature of the bank’s relationship with the payment processor, it did not immediately terminate the processor’s banking capabilities.  Instead, the complaint alleges that months passed while Plaza officials debated whether the revenues generated by the payment processor relationship outweighed the possible risk to the bank.  Meanwhile, the payment-processor significantly increased the number of fraudulent withdrawals from consumers’ bank accounts, according to the complaint.  The complaint further alleges that only after more than a thousand consumer complaints about unauthorized withdrawals reached Plaza, hundreds of thousands of transactions were returned, and tens of millions of additional dollars had been withdrawn from consumer accounts did Plaza finally terminate the relationship.

“Plaza Bank turned a blind eye while consumers lost tens of millions of dollars as unscrupulous merchants reached into accounts and stole hard-earned money,” said Acting U.S. Attorney Stephanie Yonekura for the Central District of California.  “Because of its flagrant failure to protect consumers and the integrity of our banking system, Plaza Bank is now subject to a significant penalty and court oversight to ensure it behaves as a lawful corporate citizen.”

According to the terms of the proposed consent decree, Plaza Bank will be required to pay $1 million to the U.S. Treasury as a civil monetary penalty and to forfeit $225,000 to the U.S. Postal Inspection Service’s (USPIS) Consumer Fraud Fund.  Plaza will also be required to implement a strict regime of underwriting and monitoring designed to prevent future consumer fraud by third-party payment processors.  The bank must also implement and enforce policies regarding disclosure of conflicts of interest by its senior executives and board members.  The bank also will be required to cooperate fully in other civil and criminal investigations.

The Justice Department’s case is being handled by Trial Attorney Sang Lee of the Civil Division’s Consumer Protection Branch in coordination with the U.S. Attorney’s Office for the Central District of California.

A federal jury in Houston yesterday convicted the owner of two Texas medical equipment companies for his role in a $3.4 million Medicare fraud scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Mike Fields of the U.S. Department of Health & Human Services-Office of the Inspector General (HHS-OIG) Dallas Regional Office, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office and the Texas Attorney General’s Medicaid Fraud Control Unit made the announcement.

Huey P. Williams Jr., 45, who owned and operated Hermann Medical Supply of Katy, Texas, and Hermann Medical Supplies II of Houston, was convicted of one count of health care fraud, as charged in a Jan. 15, 2014, indictment.  Sentencing will be scheduled at a later date, and will take place before U.S. District Judge Melinda Harmon of the Southern District of Texas.

According to the evidence submitted at trial, Williams submitted claims to Medicare through his two companies for durable medical equipment, including orthotic devices, which were medically unnecessary or never provided to the patients.  Many of the orthotic devices were components of an “arthritis kit,” and were purported to be for the treatment of arthritis-related conditions.  The evidence demonstrated that, from December 2006 through July 2010, Williams submitted approximately $3.4 million in fraudulent claims to Medicare, and Medicare paid approximately $1.9 million on those claims.

The case was investigated by the FBI, HHS-OIG and the Medicaid Fraud Control Unit of the Texas Attorney General’s Office, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.  The case is being prosecuted by Trial Attorneys Ashlee Caligone McFarlane and Jason Knutson 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.

Assistant Attorney General for National Security John P. Carlin and U.S. Attorney James L. Santelle of the Eastern District of Wisconsin announced today that Kyle Allen Smith, 21, of Oshkosh, Wisconsin, has entered a guilty plea to possession of ricin.  At sentencing, Smith faces a maximum of 10 years imprisonment and fine of $250,000.

According to the plea agreement, Smith admitted growing castor bean plants and extracting ricin from the beans.  A substance found in Smith’s residence was sent to the Department of Homeland Security’s National Bioforensics Analysis Center at Fort Detrick, Maryland, and tested positive for the toxin ricin.  Ricin is a toxin that infects human cells and blocks their ability to synthesize their own protein.  Small doses of ricin may be lethal to human beings if ingested, inhaled or injected.  Symptoms of ricin poisoning can include difficulty breathing, nausea, vomiting and diarrhea, with possible death occurring within 36 to 72 hours.  According to information posted on the website of the Centers for Disease Control and Prevention (CDC), there are no known antidotes for ricin poisoning.

Smith admitted having homicidal thoughts and that his homicidal thoughts might have sparked his curiosity about the production of ricin.  He stated he would not use or test the ricin on any human because too many people knew what he was doing and would turn him in.

Smith was arrested on Oct. 31, 2014, after two professors at the University of Wisconsin at Oshkosh reported to campus authorities that Smith was making unusual inquiries about chemical processes, including extracting ribosomal inhibiting proteins.  Assistant Attorney General Carlin joins U.S. Attorney Santelle in praising the actions of the professors and the university administration in bringing Smith to the prompt attention of law enforcement authorities.  Assistant Attorney General Carlin is also very grateful to the Wisconsin National Guard, 54th Civil Support Team, for the critical assistance they provided in the safe recovery of the ricin.

The case was investigated by the Oshkosh Police Department and the FBI.  The case was prosecuted by Assistant U.S. Attorney Paul L. Kanter of the Eastern District of Wisconsin and the Justice Department’s National Security Division.

A former specialist with the U.S. Army has been indicted for accepting bribes from Afghan truck drivers at Forward Operating Base (FOB) in Gardez, Afghanistan, in exchange for allowing the drivers to take thousands of gallons of fuel from the base for resale on the black market.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore of the Middle District of Georgia made the announcement after the indictment was unsealed today.

Anthony Don Tran, 28, of Stockton, California, was indicted on March 10, 2015, in the Middle District of Georgia for one count of conspiracy to commit bribery of a public official and one count of bribery of a public official.  Tran was arrested in Santa Clara, California, on March 11, 2015.

According to allegations in the indictment, from December 2012 to May 2013, Tran conspired with James Norris and Seneca Hampton, both sergeants in Tran’s unit, to solicit and accept cash bribes from local Afghan truck drivers in exchange for permitting the truck drivers to take thousands of gallons of fuel from the base.  The indictment specifically alleges that on Jan. 26, 2013, Tran accepted $20,000 in exchange for permitting an Afghan driver to leave FOB Gardez with nearly 13,000 gallons of fuel purchased by the U.S. government.   

The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty. 

Norris and Hampton each pleaded guilty to one count of conspiracy to commit bribery of a public official and one count of money laundering on Feb. 11, 2015, and are scheduled to be sentenced on May 21, 2015.     

The case is being investigated by the U.S. Army Criminal Investigation Command, the Office of the Special Inspector General for Afghanistan Reconstruction, the Defense Criminal Investigative Service and the Defense Contract Audit Agency, Investigative Support Division.  The case is being prosecuted by Trial Attorney John Keller of the Criminal Division’s Public Integrity Section. 

Commerzbank AG, a global financial institution headquartered in Frankfurt, Germany, and its U.S. branch, Commerzbank AG New York Branch (Commerz New York), have agreed to forfeit $563 million, pay a $79 million fine and enter into a deferred prosecution agreement with the Justice Department for violations of the International Emergency Economic Powers Act (IEEPA) and the Bank Secrecy Act (BSA).  The bank has also entered into settlement agreements with the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Board of Governors of the Federal Reserve System. 

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Ronald C. Machen Jr. of the District of Columbia, U.S. Attorney Preet Bharara of the Southern District of New York, Assistant Director in Charge Diego Rodriguez of the FBI’s New York Field Office, Chief Richard Weber of the Internal Revenue Service Criminal Investigation (IRS-CI) and District Attorney Cyrus R. Vance Jr. of New York County made the announcement.

In entering the deferred prosecution agreement, Commerzbank admitted and accepted responsibility for its criminal conduct in violation of IEEPA, and Commerz New York admitted its criminal conduct in violation of the BSA.  Commerzbank further agreed to pay $263 million in forfeiture and a fine of $79 million for the IEEPA violations, and to pay $300 million in forfeiture in connection with the BSA violations, which will be remitted to the victims of a multi-billion dollar securities fraud scheme that was permitted to operate through Commerzbank.  Commerzbank also agreed to implement rigorous internal controls and to cooperate fully with the Justice Department, including by reporting any criminal conduct by an employee.

A four-count felony criminal information was filed today in the District of Columbia charging Commerzbank with knowingly and willfully conspiring to commit violations of IEEPA and Commerz New York with three violations of the BSA for willfully failing to have an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent accounts, and willfully failing to file suspicious activity reports.  Assuming the bank’s continued compliance with the deferred prosecution agreement, the government has agreed to defer prosecution for a period of three years, after which time, the government would seek to dismiss the charges. 

The New York County District Attorney’s Office is also announcing today that Commerzbank has entered into a deferred prosecution agreement, and in the corresponding factual statement, Commerzbank admitted that it violated New York State law by falsifying the records of New York financial institutions.  In addition, the Board of Governors of the Federal Reserve System is announcing that Commerzbank has agreed to a cease and desist order, to take certain remedial steps to ensure its compliance with U.S. law in its ongoing operations and to pay a civil monetary penalty of $200 million.  The New York State Department of Financial Services (DFS) is announcing Commerzbank has agreed to, among other things, pay a monetary penalty to DFS of $610 million.  The OFAC has also levied a fine of $258.6 million, which will be satisfied by payments made to the Justice Department.  In total, Commerzbank will pay $1.45 billion in penalties.

“Commerzbank concealed hundreds of millions of dollars in transactions prohibited by U.S. sanctions laws on behalf of Iranian and Sudanese businesses,” said Assistant Attorney General Caldwell.  “Commerzbank committed these crimes even though managers inside the bank raised red flags about its sanctions-violating practices.  Financial institutions must heed this message: banks that operate in the United States must comply with our laws, and banks that ignore the warnings of those charged with compliance will pay a very steep price.”

“Sanctions laws are designed to protect the national security of the United States and promote our foreign policy interests,” said U.S. Attorney Machen.  “Commerzbank undermined the integrity of our financial system and threatened our national security by hiding the business they were doing with entities in Iran and Sudan.  The bank tried to skirt our laws by hiding its illegal business with Iranian banks from its own employees in the United States.  Today’s resolution demonstrates that there will be consequences when global banks try to profit from the benefits of the U.S. financial system without respecting our laws.”

“Today, Commerz New York stands charged with Bank Secrecy Act criminal offenses for its acute, institutional anti-money laundering deficiencies that made it a conduit for over a billion dollars of the Olympus fraud,” said U.S. Attorney Bharara.  “These criminal charges follow a multi-year investigation and a guilty plea by a former Commerzbank Singapore employee who helped set up the structure that allowed for the Olympus fraud.  Institutions, not just individuals, have an obligation to follow the law, and anti-money laundering laws in particular are critical for financial institutions to follow.  With today’s resolution, the bank, as part of a deferred prosecution agreement, has accepted responsibility in a detailed statement of facts, agreed to continue reforming its anti-money laundering practices, and will pay $300 million that will go to victims of the Olympus fraud.”

“Today’s deferred prosecution agreement is a significant milestone – on an international stage – that reaffirms our clear message to other global financial institutions,” said Chief Weber.  “IRS-CI’s work in this investigation – as well as the prior sanction cases – has resulted in fundamental changes in the way banks operate worldwide.  IRS-CI and our partners will continue to hold financial institutions accountable for international criminal violations.”

“Today, we announce more charges against yet another bank,” said Assistant Director in Charge Rodriguez.  “Commerzbank violated the Bank Secrecy Act designed to prevent the movement of money, often with nefarious intent.  Commerzbank enabled Olympus to evade detection for years.  And worse yet, failed to create a process to prevent this criminal behavior.  Management at banks and financial institutions should heed this warming: This behavior will be investigated, vigorously.”

“We have sanctions in place to prevent rogue nations and terrorists from accessing the U.S. financial system,” said District Attorney Vance.  “In order to have teeth, sanctions need to be enforced and Manhattan financial institutions need to be protected from being unwittingly used by bad actors.  Over the course of eight settlements, my office and our partners have sent a strong message of enforcement that has led to the transformation of compliance in this area.”

IEEPA Violations

According to admissions contained in the deferred prosecution agreement, from 2002 to 2008, Commerzbank knowingly and willfully moved $263 million through the U.S. financial system on behalf of Iranian and Sudanese entities subject to U.S. economic sanctions.  Commerzbank engaged in this criminal conduct using numerous schemes designed to conceal the true nature of the illicit transactions from U.S. regulators.

For example, in the deferred prosecution agreement, Commerzbank acknowledged that it used non-transparent payment messages, known as cover payments, to conceal the involvement of sanctioned entities, and also removed information identifying sanctioned entities from payment messages, in transactions processed through Commerz New York and other financial institutions in the United States.  Specifically, in 2003, Commerzbank designated a group of employees in the Frankfurt back office to review and amend Iranian payments so that the payments would not be stopped by U.S. sanctions filters.  In doing so, Commerzbank ensured that Iranian payment messages did not mention the Iranian entity, as transactions may have otherwise been stopped pursuant to the U.S. sanctions.

Commerzbank admitted that it hid these practices from Commerz New York.  For example, in 2003, when two state-owned Iranian banks wanted to begin routing their U.S. dollar clearing business through Commerzbank, a Commerzbank back office employee emailed other Commerzbank employees directing: “If for whatever reason CB New York inquires why our turnover has increase[d] so dramatically, under no circumstances may anyone mention that there is a connection to the clearing of Iranian banks!!!!!!!!!!!!!.”  

Commerzbank admitted that this conduct continued even though its senior management was warned that the bank’s practices for Iranian clients “raised concerns.”  For example, in October 2003, the head of Commerzbank’s internal audit division stated in an email to a member of Commerzbank’s senior management that Iranian bank names in payment messages going to the United States were being “neutralized” and warned: “it raises concerns if we consciously reference the suppression of the ordering party in our work procedures in order to avoid difficulties in the processing of payments with the U.S.A.” 

In another scheme designed to avoid U.S. sanctions, Commerzbank admitted that, in 2004, it agreed with an Iranian bank client that, rather than sending direct wire payments to the United States, the Iranian bank would pay U.S. beneficiaries with Commerzbank-issued checks listing only the Iranian bank’s account number and address in London with no mention of the Iranian bank’s name. 

Additionally, Commerzbank admitted that in 2005, it created a “safe payment solution” for an Iranian shipping company client, which allowed the client to conduct transactions using the U.S. financial system.  The safe payment solution involved routing payments through special purpose entities controlled by the Iranian company, which were incorporated outside of Iran and bore no obvious connection to the Iranian client.  Commerzbank and its client switched use of such special purpose entities when Commerz New York’s sanctions compliance filters were updated to detect the use of a particular special purpose entity.  Commerzbank continued to process payments on behalf the Iranian client even after the client had been designated by OFAC as an entity subject to U.S. sanctions for its involvement in weapons of mass destruction proliferation.    

In addition, Commerzbank admitted that, from 2002 to 2007, it provided Sudanese sanctioned entities with access to the U.S. financial system by engaging in similar schemes to remove reference to Sudanese companies from the transaction records.    

Olympus Accounting Fraud

Since 2008, and continuing until at least 2013, Commerz New York violated the BSA and its implementing regulations.  Specifically, Commerz New York failed to maintain adequate policies, procedures and practices to ensure its compliance with U.S. law, including its obligation to detect and report suspicious activity.  As a result of the wilful failure of Commerz New York to comply with U.S. law, a multibillion-dollar securities fraud was operated through Commerzbank and Commerz New York.

Olympus was a Japanese-based manufacturer of medical devices and cameras.  Its common stock is listed on the Tokyo Stock Exchange, and its American Depository Receipts trade in the United States.  From at least the late 1990s through 2011, Olympus perpetrated a massive accounting fraud designed to conceal from its auditors and investors hundreds of millions of dollars in losses.  In September 2012, Olympus and three of its senior executives pleaded guilty in Japan to inflating the company’s net worth by approximately $1.7 billion.

Olympus used Commerzbank and Commerz New York to perpetrate its fraud.  Commerzbank, through its branch and affiliates in Singapore, both loaned money to off-balance-sheet entities created by or for Olympus to perpetrate its fraud, and transacted more than $1.6 billion through Commerz New York in furtherance of the fraud.

Commerzbank and Commerz New York were used in furtherance of the Olympus fraud during two different time periods.  From approximately 1999 through 2000, Olympus perpetrated its fraud primarily through Commerzbank and its Singapore branch and affiliates.  Among other things, Olympus used special purpose vehicles to facilitate the fraud, some of which were created by Commerzbank – including several executives based in Singapore – at Olympus’s direction, using funding from Commerzbank.  One of those Singapore-based executives, Chan Ming Fon, was involved in creating the Olympus structure in 1999 while at Commerzbank (Southeast Asia) Ltd., and later managed an Olympus-related entity in 2005-2010 on behalf of which he submitted false confirmations to Olympus’s auditors.  In September 2013, Chan pleaded guilty in Manhattan federal court to conspiracy to commit wire fraud.

From 1999 through 2000, Olympus executives asked Commerzbank executives to provide certain false documents to Olympus’s auditors, which would have failed to disclose that certain Olympus assets were pledged as collateral for loans from a Commerzbank affiliate.  Commerzbank obtained a legal opinion, which, in the words of one Commerzbank executive written to an Olympus executive, “ma[de] clear that our bank could be subject to both civil and criminal penalties if we are seen to be assisting or facilitating you in the non-disclosure.”  Although Commerzbank ultimately declined to provide the false documents, its executives suggested a variety of ways Olympus could nonetheless fail to disclose the pledge.

In 2000, Olympus took its business away from Commerzbank and transferred it to another bank.  In 2005, however, Olympus – and its fraud – returned to Commerzbank.  From that point until at least 2010, Commerzbank executives expressed strong suspicions about the Olympus transactions and structure.  One senior executive worried that Olympus would have to “write off [the] full amount” of the relevant transactions, and wondered about the effects on Commerzbank if “any negative news is splash[ed] on the front page.”  A senior legal and compliance officer responsible for Commerzbank’s Singapore branch and affiliates wrote at the time that he was “concerned” about fraud, asset stripping, market manipulation and tax offenses, and that “[i]f the [Olympus] structure and transactions can not [be] explained we must file Suspicious Transaction report as a matter of law and [Commerzbank] policy.”             

In March 2010, two wire transfers in the amounts of approximately $455 million and $67 million, respectively, related to the Olympus scheme were processed by Commerz New York through the correspondent account for the Singapore branch of Commerzbank.  Those wires caused Commerz New York’s automated AML monitoring software to “alert.” 

At the time, Commerz New York had conducted no due diligence on the Singapore branch and affiliates of Commerz, consistent with Commerz's policy of not conducting due diligence on its own branches.  In response to the alerts, however, Commerz New York sent a request for information to Commerz in Frankfurt and Commerz's Singapore branch, inquiring about the transactions.  The Singapore branch responded in a brief e-mail, dated April 20, 2010, referring to the Olympus-related entities involved in the wires:

GPA Investments Ltd. ist [sic] a Caymen Islands SPV, Creative Dragons SPC-Sub Fund E is a CITS administered fund both of which are part of an SPC structure to manage securities investments for an FATF country based MNC.

According to the Relationship Manager the payment reflects the proceeds from such securities investments to be reinvested.

Commerzbank’s Singapore branch did not relay any of the concerns about the Olympus-sponsored structures and transactions. 

Based on its response, Commerz New York closed the alert without taking any further action other than to note that in March 2010 alone, GPA Investments had been involved in six transactions through Commerz New York totalling more than $522 million.  In fact, between 1999 and 2010, a total of more than $1.6 billion in furtherance of the Olympus fraud was cleared through Commerz New York.  Commerz New York failed to file a SAR in the United States concerning Olympus or any of the Olympus-related entities until November 2013 – more than two years after the Olympus accounting fraud was revealed. 

Commerz New York had the same designated BSA Officer continuously from approximately 2003 until early 2014.  Over those years, she raised concerns about AML compliance, both to her superiors at Commerz New York and with Commerz Frankfurt.

Under the BSA, a financial institution is required to detect and report suspicious activity.  This is accomplished, in part, through conducting due diligence, and enhanced due diligence where appropriate, of the correspondent relationship – which Commerz New York failed to do – and by sending requests for further information to the correspondent bank when potentially suspicious transactions are detected.  Commerz New York frequently had difficulties getting responses to requests for information generated in connection with automated transaction monitoring “alerts.”  Because requests for information went unanswered for as much as eight months without SARs being filed, alerts were often closed without any response to the pending request.  As a result of these deficiencies, Commerz New York cleared numerous AML “alerts” based on its own perfunctory Internet searches and searches of public source databases but without ever receiving responses to its requests for information.

On June 24, 2010, a Commerz New York-based compliance officer who had primary responsibility for automated transaction monitoring wrote in an e‑mail to the BSA Officer and the Head of Compliance in New York (who had previously served as the Head of Compliance in Asia) that “we currently have 90 alerts a day,” with “808 alerts outstanding,” which “could lead to a possible back log.”  He continued, “I also wanted to make you aware that we have currently over 130 Frankfurt RFIs [i.e., requests for information] outstanding,” noting “a decrease in response to the RFIs” from Frankfurt.  The following day, the Head of Compliance in New York forwarded the e‑mail to Commerz’s Global Head of Compliance, adding that “things are not getting better with regards to th[ose] findings. (see below).  I will forward you the DRAFT memo on potential revision of staffing needs.”  Although the Global Head of Compliance thereafter instituted new procedures designed to increase the speed of responses to RFIs from New York, problems persisted with the timely flow of information from business units outside the United States to compliance officers in New York.

Commerzbank and Commerz New York also failed to conduct adequate due diligence or to obtain “know your customer” information with respect to correspondent bank accounts for Commerzbank’s own foreign branches and affiliates.  These systemic deficiencies reflected a failure to maintain adequate policies, procedures and controls to ensure compliance with the BSA and regulations prescribed thereunder and to guard against money laundering.

This case was investigated by the IRS-Criminal Investigation’s Washington D.C. Field Division and FBI’s New York Field Office.  This case is being prosecuted by Trial Attorney Sarah Devlin of the Criminal Division’s Asset Forfeiture and Money Laundering Section, Assistant U.S. Attorneys Matt Graves, Maia Miller, Crystal Boodoo and Zia Faruqui of the District of Columbia, and Assistant U.S. Attorney Bonnie Jonas of the Southern District of New York.

The New York County District Attorney’s Office also conducted its own investigation in conjunction with the Justice Department.  The Federal Reserve Bank of New York, DFS and OFAC provided substantial assistance with this investigation.

Commerzbank Deferred Prosecution Agreement 

Commerzbank Information

Attorney General Eric Holder released the following statement Thursday on the overnight shooting of two officers in Ferguson, Missouri:

“This heinous assault on two brave law enforcement officers was inexcusable and repugnant.  I condemn violence against any public safety officials in the strongest terms, and the Department of Justice will never accept any threats or violence directed at those who serve and protect our communities—from this cowardly action, to the killing of an officer in Philadelphia last week while he was buying a game for his son, to the tragic loss of a Deputy U.S. Marshal in the line of duty in Louisiana earlier this week.  Such senseless acts of violence threaten the very reforms that nonviolent protesters in Ferguson and around the country have been working towards for the past several months.  We wish these injured officers a full and speedy recovery.  We stand ready to offer any possible aid to an investigation into this incident, including the department's full range of investigative resources.  And we will continue to stand unequivocally against all acts of violence against cops whenever and wherever they occur.”

As part of the Department of Justice’s ongoing commitment to strengthening the relationship between law enforcement and the communities they serve and protect, Attorney General Eric Holder on Thursday announced the first six cities to host pilot sites for the National Initiative for Building Community Trust and Justice.  This $4.75 million initiative will seek to assess the police-community relationship in each of the six pilot sites, as well as develop a detailed site-specific plan that will enhance procedural justice, reduce bias and support reconciliation in communities where trust has been eroded.

The six pilot sites announced Thursday are Birmingham, Alabama; Ft. Worth, Texas; Gary, Indiana; Minneapolis, Minnesota; Pittsburgh, Pennsylvania; and Stockton, California.

“The Department of Justice is committed to using innovative strategies to enhance procedural justice, reduce bias and support reconciliation in communities where trust has been eroded,” said Attorney General Holder.  “By helping to develop programs that serve their own diverse experiences and environments, these selected cities will serve on the leading edge of our effort to confront pressing issues in communities around the country.”

Attorney General Holder also announced that the Department of Justice is providing additional training and technical assistance to police departments and communities that are not pilot sites.  Through the Office of Justice Program’s Diagnostic Center (www.OJPDiagnosticCenter.org), police departments and community groups can request training, peer mentoring, expert consultation and other types of assistance on implicit bias, procedural justice and racial reconciliation.  Additionally, the initiative launched a new online clearinghouse that includes up-to-date information about what works to build trust between citizens and law enforcement.  The clearinghouse can be found at www.trustandjustice.org.

“Restoring trust where it has eroded is one of the defining public safety challenges of our day,” said Assistant Attorney General Karol V. Mason of the Office of Justice Programs.  “Trust-building is the responsibility of the police and the community, and the National Initiative’s goal is to build the bridge that will define a new era in public safety.”

The Justice Department established the National Initiative for Building Community Trust and Justice as part President Obama’s groundbreaking launch of the My Brother’s Keeper initiative, which seeks to create opportunities for all young people in this country—regardless of their background—to improve their lives and reach their full potential.

The three-year grant has been awarded to a consortium of national law enforcement experts from John Jay College of Criminal Justice, Yale Law School, the Center for Policing Equity at UCLA and the Urban Institute.  The initiative is guided by a board of advisors which includes national leaders from law enforcement, academia and faith-based groups, as well as community stakeholders and civil rights advocates.  In a holistic approach, the initiative simultaneously addresses the tenets of procedural justice, reducing implicit bias and facilitating racial reconciliation.  The initiative complements and is advised by other Justice Department components such as the Office of Justice Programs, the Office of Community Oriented Policing Services, the Office on Violence Against Women, the Civil Rights Division and the Community Relations Service.

Attorney General Eric Holder released the following statement Wednesday regarding the fatal shooting of Deputy U.S. Marshal Josie Wells:

“Deputy Marshal Josie Wells was a dedicated law enforcement officer, a remarkable patriot and a courageous public servant.  Though he was taken from us far too suddenly and far too soon, he leaves behind an indelible legacy that will live on in the lives he touched; in the work that the U.S. Marshals Service continues to perform; and in a world that is safer because of his devoted service.  His loss is a deeply tragic reminder that the work of our law enforcement officers around the nation is extremely serious, profoundly heroic and deserving of our most emphatic support.  The thoughts and prayers of the law enforcement community will be with the family and loved ones of Deputy Marshal Wells throughout this difficult time.  And as we go forward, the Department of Justice intends to honor his service and his sacrifice by continuing to fight for the values he protected every day, and to defend the American people for whom he gave his life.”

 

Acting Assistant Attorney General for the Civil Rights Division Vanita Gupta released the following statement Wednesday regarding developments in Ferguson, Missouri:

“The results of the Civil Rights Division’s investigation into the practices of Ferguson Police Department remain a top concern and priority.  The division will continue to work with Ferguson Police and city leadership, regardless of whomever is in those positions, to reach a court enforceable agreement that will address their unconstitutional practices in a comprehensive manner.  As part of this ongoing commitment, in the coming weeks the Civil Rights Division staff will travel to Ferguson, Missouri, to discuss the findings and next steps with community members and Ferguson city leadership.”

On Feb. 27, 2015, the Director of National Intelligence declassified and disclosed publicly that the U.S. government had filed an application with the Foreign Intelligence Surveillance Court seeking renewal of the authority to collect telephony metadata in bulk, and that the FISC renewed that authority.

The FISC's Feb. 26, 2015, Primary Order renewing the collection expires on June 1, 2015.  The DNI also announced that the Administration was undertaking a declassification review of the Feb. 26, 2015, Primary Order.  Following this review by the Executive Branch, the ODNI has released in redacted form the Feb. 26, 2015, Primary Order, signed by Judge James E. Boasberg.

This order is now publicly available at the ODNI website, dni.gov, and the ODNI's public website dedicated to fostering greater public visibility into the intelligence activities of the Government, www.icontherecord.tumblr.com.

Primary Order Renewing Collection

A former Captain in the U.S. Air Force (USAF) who served in 2010 as a U.S. military contracting officer in Afghanistan, pleaded guilty yesterday to violating restrictions on post-government employment and making a false statement to law enforcement agents, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kevin W. Techau of the Northern District of Iowa.

Adam J.J. Pudenz, 35, of Carroll, Iowa, pleaded guilty to willfully violating federal conflict-of-interest laws stemming from his post-government employment with an Afghan company that contracted with the U.S. military and to making a false statement to federal law enforcement agents.  The guilty plea was entered before U.S. Magistrate Judge Leonard T. Strand of the Northern District of Iowa.  In addition to his guilty plea, Pudenz agreed in a separate civil action to surrender his Iowa residence, which he purchased with money received from his unlawful employment, to the United States. 

According to his plea agreement, Pudenz served as a contracting official at Camp Eggers, near Kabul, Afghanistan, in 2010.  In that capacity, Pudenz admitted that he administered at least three major U.S. government contracts, all held by the same Afghan company, for the purchase of clothing and footwear for Afghan National Security Forces (ANSF). 

Pudenz admitted that prior to departing Afghanistan in December 2010, he began negotiating his future employment with the same Afghan company that held the contracts he administered, a fact that he later lied about during a subsequent law enforcement investigation.  In his new position with the Afghan company, Pudenz admitted that he violated the conflict of interest laws by returning to Afghanistan and lobbying U.S. government officials on matters directly related to the same contracts he had previously administered.    

This case is being and investigated by the FBI, the Defense Criminal Investigative Service, the Special Inspector General for Afghanistan Reconstruction and U.S. Army Criminal Investigation Command (CID).  The case is being prosecuted by Trial Attorney Wade Weems of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Richard L. Murphy of the Northern District of Iowa.

Raymond A. Barnes, 44, and Christopher A. Brown, 33, the former jail superintendent and assistant jail superintendent, respectively, of the Muskogee County Jail (MCJ) were sentenced in federal court today on multiple counts of civil rights offenses related to allegations of excessive force on inmates at MCJ on or between August 2009 and May 2011.  Brown was also convicted of making material false statements to the FBI.  Barnes was sentenced to one year and one day imprisonment followed by two years supervised release, and Brown was sentenced to six months imprisonment followed by three years supervised release.

On Feb. 25, 2014, a federal jury convicted both Barnes and Brown of conspiring to violate the rights of inmates housed at MCJ by assaulting inmates themselves or by directing other jailers employed by MCJ to do so.  Specifically, the defendants did or caused the following to be done: unjustifiably strike, assault, harm and physically punish inmates at MCJ who were restrained, compliant and not posing a physical threat; organize “meet and greets,” whereby jailers would scare, punish and harm incoming inmates from neighboring counties by throwing and slamming the handcuffed inmates to the ground upon their arrival at MCJ; threaten to fire MCJ employees if they reported abusive behavior directly to the sheriff or to outside law enforcement authorities; require and encourage MCJ jailers to write incident reports that falsely justified uses of force and contained misleading or inaccurate accounts of what had occurred when force was used; and perpetuate an environment within MCJ that allowed unlawful beatings and assaults against inmates to continue indefinitely and without consequence.

Both defendants were also found guilty of violating the rights of an inmate identified as J.R. when both defendants slammed and threw J.R. head-first to the ground while he was handcuffed.  Barnes was additionally convicted of violating the rights of a second inmate, G.T., for similar conduct.  Brown was acquitted of violating the rights of G.T.

In addition, Brown was convicted of one count of making material false statements to the FBI.  Brown falsely claimed that, during meet and greets, the incoming inmate was ordered out of the transport vehicle and then “gently placed” on the ground.  But in fact, Brown knew at the time of his statement to the FBI that during these meet and greets the MCJ jailers routinely threw and slammed inmates to the ground even though the inmates were restrained and posed no physical threat.

“The Department of Justice will not hesitate to prosecute corrections officers who violate their oath and abuse those who are entrusted to their custody,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “The convictions and sentences in this case make clear that the department will vigorously enforce the civil rights laws.”

This case was investigated by the Muskogee Resident Agency of the Oklahoma City Division of the FBI and prosecuted by Trial Attorneys Fara Gold and Dana Mulhauser of the Civil Rights Division.

Court Orders More than $35 Million in Restitution

A former casino owner from Henderson, Nevada, a former businessman from Las Vegas and a former NFL punter from Upland, California, were sentenced yesterday in U.S. District Court in Las Vegas to serve prison time and ordered to pay more than $35 million in restitution for conspiracy and fraud related to their promotion of a fraudulent tax product through the now-defunct National Audit Defense Network (NADN), announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Alan Rodrigues, NADN’s former general manager and executive vice president, was sentenced to serve 72 months in prison to be followed by three years of supervised release and to pay a $2,000 special assessment by U.S. District Court Judge Miranda Du of the District of Nevada.  Rodrigues was ordered to pay restitution of more than $35 million to customers of NADN who purchased the fraudulent tax product.  Weston Coolidge, a businessman who previously served as NADN’s president, was sentenced by Judge Du to serve 70 months in prison followed by three years of supervised release, and to pay a $2,000 special assessment for his part in the fraud.  Coolidge was also ordered to pay restitution of more than $35 million to victims of the fraud.  Joseph Prokop, who previously served as the National Marketing Director for Oryan Management and Financial Services, a company affiliated with NADN, was sentenced to serve 18 months in prison to be followed by 30 months home confinement and three years of supervised release.  Prokop was also ordered to pay a $1,800 special assessment and restitution to victims of more than $35 million.  At sentencing, Judge Du found that the defendants were responsible for fraud losses of more than $36 million and an intended tax loss of more than $60 million.

On May 27, 2014, after a six-week jury trial, the three defendants were convicted of one count of conspiracy to defraud the United States, 13 counts of aiding and assisting in the preparation of false income tax returns and four counts of mail fraud.  Rodrigues and Coolidge were each convicted of an additional two counts of aiding and assisting in the preparation of false income tax returns.

“Business professionals who design, market and sell fraudulent tax products by criminally exploiting select provisions of the tax code will be prosecuted to the full extent of the law,” said Acting Assistant Attorney General Ciraolo.  “The prison sentences handed down yesterday against the defendants demonstrate that the Department of Justice is committed to holding individuals responsible for their criminal conduct.”

The evidence at trial established that through NADN, the defendants promoted and sold a product called Tax Break 2000 to customers throughout the United States.  NADN began to promote and sell Tax Break 2000 in early 2001.  Tax Break 2000 purported to be an online shopping website.  The defendants falsely and fraudulently told customers that buying the product would allow them to claim legitimate income tax credits and deductions under the Americans with Disabilities Act (ADA) by modifying the website each customer was provided to make it accessible to the disabled.  NADN charged $10,475 for the product to maximize the fraudulent income tax credits and deductions that individuals would claim on their tax returns.  Although the price of the product that was claimed on the tax returns was $10,475, the customers only paid between $2,000 and $2,695 out-of-pocket.  The remainder of the cost was covered by a promissory note that customers were not expected to repay. 

The defendants knew that the websites provided to customers made little, if any, money from sales commissions and that they did not entitle the purchaser to either a tax credit or any deductions.  The defendants nonetheless taught and directed the tax return preparers working for NADN to prepare thousands of tax returns for customers that claimed the fraudulent tax credit and deductions.  When special agents of the Internal Revenue Service (IRS) began to investigate Tax Break 2000 and NADN, the evidence showed that the defendants sought to cover up the fraud by creating false IRS Forms 1099 that reported fictitious income to make it appear that the websites were in fact earning money.

From 2001 through approximately May 2004, NADN sold the Tax Break 2000 product more than 18,000 times to thousands of customers located throughout the United States.  As a result of the defendants’ fraud, thousands of NADN customers were audited by the IRS.  On April 13, 2004, the Tax Division filed a civil complaint seeking to enjoin, among others, NADN, Rodrigues, Coolidge and Prokop from selling fraudulent tax schemes, including Tax Break 2000.  NADN ceased operations in May 2004.

“We view schemes like Tax Break 2000 as organized tax evasion” said Special Agent in Charge John Collins of IRS Criminal-Investigation (IRS-CI).  “It is a top priority for the IRS to stop promoters of these harmful schemes.  The public should remember the old saying ‘if it sounds too good to be true, it probably is.’  Instead of being a tax break this fraudulent product cost the victims much more in the end with interest and penalties.”

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-CI who investigated the case.  She also commended the substantial efforts of former Trial Attorneys Timothy J. Stockwell and Katherine L. Wong, and Paralegal Larry Garland of the Tax Division, who prosecuted the case, and Trial Attorney Mark L. Williams of the Tax Division, who assisted with sentencing.  Acting Assistant Attorney General Ciraolo thanked the U.S. Attorney’s Office of the District of Nevada in Las Vegas for their substantial assistance.

The U.S. District Court for the Western District of Texas entered a consent decree of permanent injunction against Specialty Compounding LLC, Raymond L. Solano III and William L. Swail to prevent the distribution of adulterated and misbranded drugs, the Department of Justice announced today. 

The department filed a complaint in the U.S. District Court for the Western District of Texas on Feb. 23, at the request of the U.S. Food and Drug Administration (FDA).  According to the complaint, Specialty Compounding manufactured both sterile and non-sterile drugs at a facility in Cedar Park, Texas, and distributed the company’s drugs to hospitals, surgery centers and health clinics in Texas and throughout the United States.  As noted in the complaint, Solano is Specialty Compounding’s pharmacist-in-charge and co-owner, and Swail is Specialty Compounding’s Managing Partner and co-owner. 

The complaint alleges that Specialty Compounding manufactured a sterile injectable drug product that tested positive for bacterial growth.  In addition, according to the complaint, in August 2013, FDA received reports from two Texas hospitals that 17 patients had developed bacterial infections caused by Rhodococcus equi after receiving infusions of calcium gluconate manufactured by Specialty Compounding.  Specialty Compounding ceased sterile drug manufacturing operations in August 2013, and recalled all lots of its unexpired sterile drug products distributed since Feb. 1, 2013.

“Specialty Compounding’s manufacturing practices posed a serious risk to the public health,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The American public needs to have the confidence that pharmaceutical drugs on the market are safe and effective.”

In conjunction with the filing of the complaint, the defendants agreed to settle the litigation and be bound by a permanent injunction.  As part of the settlement, the company and its owners have committed to implementing corrective actions before resuming production of sterile drugs.  Specifically, the injunction prohibits Specialty Compounding and its owners from manufacturing, holding or distributing sterile drugs until they comply with the federal Food, Drug, and Cosmetic Act and its regulations.  The permanent injunction also provides the defendants cannot resume distribution of sterile drug products until they receive written approval from the FDA that they are in compliance with the remedial provisions of the permanent injunction.  

As described in the complaint, the FDA inspected Specialty Compounding’s Cedar Park facility in August and September 2013, and found insanitary conditions and numerous violations of the current good manufacturing practice requirements for drug products.  Among other observations, the FDA found that the company was distributing some of their drugs without receiving a valid prescription for an identified individual patient and was introducing into interstate commerce unapproved new drugs and misbranded drugs.  In addition, as alleged in the complaint, analyses of samples of a drug product collected by the FDA found bacterial contamination in one of the company’s drugs.  The company initiated a recall of all injectable drugs on Aug. 9, 2013. 

The government is represented by Trial Attorney Jessica Gunder of the Civil Division’s Consumer Protection Branch, with the assistance of Associate Chief Counsel Melissa Mendoza of the Department of Health and Human Services’ Office of General Counsel’s Food and Drug Division.

A Kaysville, Utah, man was sentenced yesterday in the U.S. District Court for the District of Utah to serve 27 months in prison to be followed by three years of supervised release, and ordered to pay $174,684 in restitution.

On Sept. 19, 2014, Jon T. McBride was convicted following a jury trial of three counts of tax evasion and one count of filing a false federal income tax return, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced.

The evidence at trial established that McBride prepared and filed a false individual federal income tax return for the year 2005.  He failed to report approximately $109,785 in gross income that he received during the 2005 tax year.  McBride also willfully attempted to evade his federal income taxes for the 2006, 2007 and 2009 tax years by failing to file an individual federal income tax return, filing a false tax return where he underreported his income by more than $300,000, and filing a false tax return that reported zero income.  McBride also used several nominees to hide and conceal his ownership in property and partnerships to keep those assets out of the reach of the Internal Revenue Service (IRS).

Acting Assistant Attorney General Ciraolo commended the special agents of IRS-Criminal Investigation, who investigated the case, and Trial Attorneys Brent Ward of the Justice Department’s Criminal Division and Andrea Kafka of the Tax Division, who prosecuted the case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office for the District of Utah for their substantial assistance.

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

An employee of Japan-based Nippon Yusen Kabushiki Kaisha (NYK) pleaded guilty today and was sentenced to 15 months in a U.S. prison for his involvement in a conspiracy to fix prices, allocate customers and rig bids of international ocean shipping services for roll-on, roll-off cargo, such as cars and trucks, to and from the United States and elsewhere, the Department of Justice announced today. 

According to the one-count felony charge filed in U.S. District Court for the District of Maryland in Baltimore on Jan. 16, 2015, Susumu Tanaka, who was a manager, deputy general manager and general manager in NYK’s car carrier division, conspired to allocate customers and routes, rig bids and fix prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere, including the Port of Baltimore.  Tanaka participated in the conspiracy from at least as early as April 2004 until at least September 2012. 

Roll-on, roll-off cargo is non-containerized cargo that can be both rolled onto and off of an ocean-going vessel.  Examples of this cargo include new and used cars and trucks and construction and agricultural equipment.

“Today’s sentence is another step toward bringing to justice the perpetrators of this long-running cartel and restoring competition to the ocean shipping industry,” said Bill Baer, Assistant Attorney General for the Antitrust Division.  “But this investigation is far from over.  We are continuing our efforts to hold accountable the companies and executives who seek to maximize profits through illegal, anticompetitive means.” 

Pursuant to the plea agreement, which the court accepted today, Tanaka was sentenced to serve a 15-month prison term and pay a $20,000 criminal fine for his participation in the conspiracy.  In addition, Tanaka has agreed to assist the department in its ongoing investigation into the ocean shipping industry.

Tanaka was charged with a violation of the Sherman Act, which carries a maximum sentence of 10 years in prison and a $1 million criminal fine for an individual.  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.

Today’s sentence is the third against an individual in the division’s ocean shipping investigation, and the first against an individual from NYK.  Three corporations have agreed to plead guilty and to pay criminal fines totaling more than $136 million, including NYK, which has agreed to pay a criminal fine of $59.4 million, pending court approval. 

This plea agreement is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Field Office, along with assistance from the U.S. Customs and Border Protection Office of Internal Affairs, Washington Field Office/Special Investigations Unit.  Anyone with information in connection with this investigation is urged to call the Antitrust Division’s Washington Criminal I Section at 202-307-6694, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Baltimore Field Office at 410-265-8080.