District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
California Financier Charged in Alleged Ponzi SchemeRead the Press Release
Former CEO and Corporate Counsel of Financial Services Marketing Company Previously Pleaded Guilty
A California man and purported billionaire financier was taken into federal custody today for his role in an alleged Ponzi scheme in which investors lost $2.5 million, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Inspector in Charge Gary Barksdale of the U.S. Postal Inspection Service’s Criminal Investigations Group.
Kenneth Brewington, 50, of Corona, California, was indicted on Feb. 24, 2015, by a federal grand jury in the District of Colorado for conspiracy to commit wire and mail fraud, mail fraud and six counts of wire fraud.
According to allegations in the indictment, from September 2009 until 2011, Brewington and his co-conspirators sold promissory notes to investors through a financial services marketing company based in Denver called Compass Financial Solutions (CFS). The indictment alleges that Brewington and his co-conspirators falsely represented to investors that Brewington held millions of Euros in overseas bank accounts, and that the proceeds raised from investors would be used to obtain the release of his overseas funds. To conceal the scheme, Brewington and his co-conspirators allegedly had investors wire their funds to an attorney trust account. The funds from that account, however, were then allegedly sent to Brewington and his co-conspirators. Brewington and his co-conspirators allegedly used the investors’ money for their own personal benefit.
The former corporate counsel for CFS, William E. Dawn, 77, of Denver, and the former CEO of CFS, Brian G. Elrod, 58, of Lakewood, Colorado, previously pleaded guilty for their roles in the scheme. Sentencing hearings are scheduled for May 29, 2015, and May 22, 2015, respectively.
The charges contained in an indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
The case was investigated by the U.S. Postal Inspection Service, and is being prosecuted by Trial Attorneys Henry P. Van Dyck and Jennifer G. Ballantyne of the Criminal Division’s Fraud Section. The Securities and Exchange Commission has provided substantial assistance in this matter.
Three Brooklyn, New York, Residents Charged with Attempt and Conspiracy to Provide Material Support to ISILRead the Press Release
Two Defendants Allegedly Planned to Travel to Syria in Order to Join ISIL;
One Defendant Arrested While Boarding a Flight to Turkey
Earlier today, a criminal complaint was unsealed in federal court in Brooklyn charging Abdurasul Hasanovich Juraboev, Akhror Saidakhmetov, and Abror Habibov with attempt and conspiracy to provide material support to the Islamic State of Iraq and the Levant (ISIL), a foreign terrorist organization. The initial appearances of Juraboev and Saidakhmetov are scheduled for later today before United States Magistrate Judge Lois Bloom at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York. Habibov’s initial appearance will be held later today at the U.S. Courthouse, 300 North Hogan Street, Jacksonville, Florida.
The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; John P. Carlin, Assistant Attorney General for National Security; Diego G. Rodriguez, Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), New York Field Office; and William J. Bratton, Commissioner, New York City Police Department (NYPD).
As alleged in the complaint, Juraboev first came to the attention of law enforcement in August 2014 after he made a posting on an Uzbek-language website that propagates ISIL’s ideology. The investigation subsequently revealed that Juraboev and Saidakhmetov devised a plan to travel to Turkey and then to Syria for the purpose of waging jihad on behalf of ISIL. Saidakhmetov, a resident of Brooklyn and a citizen of Kazakhstan, was arrested early this morning at John F. Kennedy International Airport, where he was attempting to board a flight to Istanbul, Turkey. Juraboev, a resident of Brooklyn and a citizen of Uzbekistan, had previously purchased a plane ticket to travel from New York to Istanbul and was scheduled to leave the United States next month. Habibov, a resident of Brooklyn and a citizen of Uzbekistan, helped fund Saidakhmetov’s efforts to join ISIL.
As alleged in the complaint, Juraboev was also prepared to engage in an act of terrorism in the United States if ordered to do so by ISIL, and Saidakhmetov intended to commit such an act if unable to travel abroad to join ISIL. In the August 2014 posting on the website that propagates ISIL’s ideology, Juraboev offered to kill the President of the United States if ordered to do so by ISIL. More recently, Saidakhmetov expressed his intent to buy a machine gun and shoot police officers and FBI agents if thwarted in his plan to join ISIL in Syria.
“The flow of foreign fighters to Syria represents an evolving threat to our country and to our allies,” stated United States Attorney Lynch. “As alleged in the complaint, two of the defendants in this case sought to travel to Syria to join ISIL but were also prepared to wage violent jihad here in the United States. A third defendant allegedly provided financial assistance and encouragement. We will vigorously prosecute those who attempt to travel to Syria to wage violent jihad on behalf of ISIL and those who support them. Anyone who threatens our citizens and our allies, here or abroad, will face the full force of American justice.” Ms. Lynch extended her grateful appreciation to the FBI’s Joint Terrorism Task Force, which comprises a large number of federal, state, and local agencies from the region.
“The charges against Juraboev, Saidakhmetov and Habibov reflect our commitment to finding those who wish to provide material support to ISIL, as well as those committed to fighting on behalf of ISIL, either at home or abroad, and preventing them from doing so,” said Assistant Attorney General Carlin. “The National Security Division will continue to work to stem the flow of foreign fighters and financial resources to terrorist organizations operating in Iraq and Syria. I would like to commend all those whose tireless efforts helped bring these charges.”
“As alleged, the defendants looked to join the Islamic State of Iraq and the Levant by flying to Turkey in a vain attempt to evade detection. And one of the defendants was prepared to commit acts of terror here—in America—if he could not travel, to include killing FBI agents. The defendants violated the true tenets of their faith in pursuit of their radical, violent agenda. We rely on help from the community, the public, and religious leaders to be mindful of those who could be radicalized. We cannot do this alone,” said FBI Assistant Director-in-Charge Rodriguez.
“ISIL calls on its followers to come fight for the terrorist organization in Syria,” said Police Commissioner Bratton, “and in messages to followers outside Syria, ISIL has called on them to attack police, intelligence officers, or the military in their home countries including the United States. By pledging allegiance to ISIL, these defendants allegedly conspired to fight for a designated foreign terrorist organization, either in Syria or even New York.” Commissioner Bratton commended the work of the detectives and agents of the JTTF and the guidance of the U.S. Attorney for the Eastern District of New York throughout the investigation.
If convicted, each defendant faces a maximum sentence of 15 years in prison. The charges in the complaint are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The government’s case is being prosecuted by Assistant United States Attorneys Alexander Solomon, Douglas M. Pravda, and Amanda Hector, with assistance provided by Trial Attorney Danya Atiyeh of the Justice Department’s Counterterrorism Section and the United States Attorney’s Office for the Middle District of Florida.
The Defendants:
ABDURASUL HASANOVICH JURABOEV
Age: 24
Nationality: Uzbeki
AKHROR SAIDAKHMETOV
Age: 19
Nationality: Kazakh
ABROR HABIBOV
Age: 30
Nationality: Uzbeki
E.D.N.Y. Docket No. 15-M-0172
Three Brandon, Mississippi, Men Sentenced for Their Roles in the Racially Motivated Assault and Murder of an African-American ManRead the Press Release
Victim Died After Being Run Over by Truck
The Justice Department announced today that William Kirk Montgomery, 25, of Puckett, Mississippi, Jonathan Kyle Gaskamp, 22, and Joseph Paul Dominick, 23, both of Brandon, Mississippi, were sentenced today in U.S. District Court in Jackson for their roles in a federal hate crime conspiracy involving multiple racially motivated assaults, culminating in the death of James Craig Anderson, an African-American man, in the summer of 2011. Montgomery was sentenced to 234 months; Gaskamp was sentenced to 48 months; and Dominick was sentenced to 48 months.
Montgomery had previously pleaded guilty to one count of conspiracy and one count of violating the Matthew Shepard and James Byrd Jr. Hate Crimes Prevention Act for his role in the death-resulting assault of Anderson, 47, of Jackson, Mississippi. Gaskamp previously pleaded guilty to one count of conspiracy and one count of violating the Matthew Shepard and James Byrd, Jr. Hate Crimes Prevention Act for his role in the conspiracy and in a violent assault of an unidentified African-American man near a golf course in the spring of 2011. Dominick pleaded guilty to one count of conspiracy for his role. A restitution hearing will be set for a later date.
“The Justice Department will always fight to hold accountable those who commit racially motivated assaults,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division. “We hope that the prosecution of those responsible for this horrific crime will help provide some closure to the victim’s family and to the larger community affected by this heinous crime.”
“Violence fueled by hate spreads fear and intimidation throughout our community,” said U.S. Attorney Gregory K. Davis of the Southern District of Mississippi. “The prison sentences today make clear that our community will not tolerate hate, and individuals who commit such despicable crimes will be brought to justice.”
“The guilty pleas and resulting sentences handed down today are the result of the tremendous efforts by men and women in law enforcement who worked on this case,” said Special Agent in Charge Donald Alway of the FBI in Mississippi. “The FBI takes very seriously its responsibility to protect the civil rights of all Americans, and remains committed to its pursuit of justice for anyone who is deprived of those rights."
In prior court hearings, the defendants had admitted that beginning in the spring of 2011, they and others conspired with one another to harass and assault African Americans in and around Jackson. On numerous occasions, the co-conspirators used dangerous weapons, including beer bottles, sling shots and motor vehicles, to cause, and attempt to cause, bodily injury to African Americans. They would specifically target African Americans they believed to be homeless or under the influence of alcohol because they believed that such individuals would be less likely to report an assault. The co-conspirators would often boast about these racially motivated assaults.
Montgomery admitted his presence and participation in numerous racially motivated assaults, including the beating and killing of James Craig Anderson. Specifically, Montgomery admitted that in the early morning hours of June 26, 2011, he and six other co-conspirators agreed to carry out their plan to find, harass and assault African Americans. At around 4:15 a.m., Montgomery and three co-conspirators drove to west Jackson in Montgomery’s white Jeep with the understanding that the other three co-conspirators would join them a short time later. Montgomery and the three other occupants of the Jeep then drove around west Jackson and threw beer bottles from the moving vehicle at African-American pedestrians they encountered.
At approximately 5:00 a.m., Montgomery and the three other two occupants of the Jeep spotted Anderson in a motel parking lot off Ellis Avenue. The occupants of the Jeep decided that Anderson would be a good target for an assault because he was African-American and appeared to be intoxicated. Two of the co-conspirators got out of the Jeep to distract Anderson while they waited for the other three co-conspirators to arrive. After the other three co-conspirators arrived in a Ford F250 truck, two of the co-conspirators physically assaulted Anderson. After the assault, Montgomery and three co-conspirators left the motel parking lot in the Jeep. The driver of the Ford F250 then deliberately used his truck to run over Anderson, causing injuries which resulted in Anderson’s death. After Anderson’s death, a number of the co-conspirators including Montgomery agreed to, and did, give false statements to law enforcement officials about the nature of their interactions with Anderson.
Gaskamp admitted to participating in an assault-filled evening during which he and five co-conspirators drove to Jackson armed with Gaskamp’s handgun, struck multiple victims with large glass beer bottles hurled from the moving vehicle. Gaskamp further admitted that they located a homeless African-American man near a golf course and that he and two of his co-defendants punched and kicked the man until he begged for his life. Dominick admitted to participating in different assault-filled evening during which he and four co-conspirators also struck multiple victims with large glass beer bottles thrown from their moving vehicle, and to shooting multiple victims with metal ball bearings fired from a slingshot.
Three other defendants in related cases, Deryl Paul Dedmon, 22, John Aaron Rice, 22, and Dylan Wade Butler, 23, all of Brandon, Mississippi, were previously sentenced to 600 months, 220 months, and 78 months, respectively for their roles in the conspiracy. Four other defendants involved in related cases, Sarah Adelia Graves, 21, of Crystal Springs, Mississippi, Shelby Brooke Richards, 21, of Pearl, Mississippi, John Louis Blalack, 20, and Robert Henry Rice, 24, both of Brandon, Mississippi, are awaiting sentencing.
This case was the result of a cooperative effort among the Justice Department’s Civil Rights Division, the U.S. Attorney’s Office for the Southern District of Mississippi and the Hinds County, Mississippi, District Attorney’s Office. This case was investigated by the Jackson Division of the FBI and the Jackson Police Department. It is being prosecuted by Trial Attorney Sheldon L. Beer and Deputy Chief Paige M. Fitzgerald of the Justice Department’s Civil Rights Division, and Glenda R. Haynes of the U.S. Attorney’s Office for the Southern District of Mississippi.
MetLife Home Loans LLC, Successor to MetLife Bank N.A., to Pay $123.5 Million to Resolve Alleged Federal Housing Administration Mortgage Lending ViolationsRead the Press Release
MetLife Home Loans LLC has agreed to pay the United States $123.5 million to resolve allegations that MetLife Bank N.A. (MetLife Bank) violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today.
MetLife Bank was a banking services company headquartered in Bridgewater, New Jersey. In June 2013, MetLife Bank merged into MetLife Home Loans LLC, a mortgage finance company headquartered in Irving, Texas. MetLife Bank was, and MetLife Home Loans LLC is, a wholly owned subsidiary of MetLife Inc., a holding company headquartered in New York City.
“MetLife Bank’s improper FHA lending practices not only wasted taxpayer funds, but also inflicted harm on homeowners and the housing market that lasts to this day,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division. “As this settlement shows, we will continue to hold accountable financial institutions that elected to ignore the rules and to pursue their own financial interests at the expense of hardworking Americans.”
“MetLife Bank took advantage of the FHA insurance program by knowingly turning a blind eye to mortgage loans that did not meet basic underwriting requirements, and stuck the FHA and taxpayers with the bill when those mortgages defaulted,” said U.S. Attorney John Walsh of the District of Colorado. “This settlement is part of our systematic, national effort to hold lenders accountable for irresponsible lending practices that not only harmed FHA, but also contributed to a catastrophic wave of home foreclosures across the country.”
During the time period covered by the settlement, MetLife Bank participated as a Direct Endorsement Lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite and certify mortgages for FHA insurance. If a loan certified for FHA insurance later defaults, the holder of the loan may submit an insurance claim to the FHA for the losses resulting from the defaulted loan. Because the FHA does not review the underwriting of a loan before it is endorsed for FHA insurance, the FHA depends on a DEL to follow program rules to ensure that only eligible loans are submitted for FHA insurance.
As part of the settlement, MetLife Home Loans LLC admitted to the following facts: From September 2008 through March 2012, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. MetLife Bank was aware that a substantial percentage of these loans were not eligible for FHA mortgage insurance due to its own internal quality control findings. According to these findings, between January 2009 and August 2010, the portion of MetLife Bank loans containing the most serious category of deficiencies, which MetLife Bank called “material/significant,” ranged from 25 percent to more than 60 percent. These quality control findings were routinely shared with MetLife Bank’s senior managers, including the chief executive officer and board of directors. While the overall “significant” error rate identified by MetLife Bank decreased in 2010 and 2011, during the same time period, MetLife Bank more frequently downgraded FHA loans from “significant” to “moderate.” In one instance, a quality control employee wrote in an email discussing MetLife Bank’s practice of downgrading its quality control findings: “Why say Significant when it feels so Good to say MODERATE.” Overall, between January 2009 and December 2011, MetLife Bank identified 1,097 FHA mortgage loans underwritten by MetLife Bank with a “significant” finding, but despite an obligation to self-report findings of material violations of FHA requirements, MetLife Bank only self-reported 321 mortgages to HUD. MetLife Bank’s conduct caused FHA to insure hundreds of loans that were not eligible for insurance and, as a result, FHA suffered substantial losses when it later paid insurance claims on those loans.
“The settlement announced today is the culmination of two years of work by HUD OIG and our continued efforts to identify and properly respond to instances of fraud against HUD’s mortgage insurance program,” said Inspector General David Montoya of HUD.
“We appreciate that MetLife Bank has accepted responsibility for its actions and is settling with the government,” said General Counsel Helen Kanovsky of HUD. “We want to thank the Department of Justice and HUD’s Office of Inspector General for all of their efforts in helping us make this settlement a reality. This settlement with MetLife Bank underscores our consistent message that HUD takes compliance with its requirements seriously.”
The settlement was the result of a joint investigation conducted by HUD, HUD OIG, the Civil Division and the U.S. Attorney’s Office for the District of Colorado.
Justice Department Settles Second Pregnancy Discrimination Lawsuit Against the Davie, Florida, Fire DepartmentRead the Press Release
The Justice Department today announced that it has reached a consent decree with the town of Davie, Florida, to resolve allegations that the Davie Fire Department discriminated against firefighter/paramedic Lori Davis because of her pregnancy and retaliated against firefighter/paramedic Monica Santana because she complained about gender discrimination. Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment on the basis of race, color, sex, national origin and religion.
According to the Justice Department, the consent decree resolves allegations of disparate treatment based on pregnancy that resulted from light duty policies implemented by the Davie Fire Department. In 2012, the Department of Justice challenged those discriminatory light duty policies in a related pattern or a practice Title VII case resulting in the filing of a complaint and consent decree to resolve the case. The consent decree entered by the U.S. District Court for the Southern District of Florida required that the fire department abandon its existing discriminatory light duty policies and adopt new, non-discriminatory policies. This new complaint is the result of individual charges of discrimination referred to the Justice Department by the Equal Employment Opportunity Commission.
As alleged by the Justice Department in this complaint, Davis worked for the Davie Fire Department under its prior policies and was adversely affected by those policies which were implemented in violation of Title VII. Under Title VII, discrimination based on sex includes discrimination due to pregnancy, and requires that women affected by pregnancy be treated the same as other employees who are similar in their ability or inability to work. Under federal law, an employer may not retaliate against employees because they complain about discrimination based on sex.
As alleged in the complaint, Davis’s doctor wanted Davis on light duty during her pregnancy. The fire department’s policy, however, would not allow her light duty during her first trimester. Davis continued to work and eventually was required to fight a fire while pregnant. She suffered a miscarriage after doing so. The complaint also alleges that Santana complained about other policies and practices at the fire department that she reasonably believed discriminated against female firefighters. After she complained about the discriminatory treatment, the fire department responded to her complaints by taking adverse actions against her designed to discourage similar complaints.
The consent decree, filed simultaneously with the complaint in U.S. District Court for the Southern District of Florida must still be approved by the federal court. Under the terms of the agreement, the fire department must review and adopt appropriate anti-retaliation policies to protect its employees from further violations of Title VII and conduct training of its personnel to ensure that they properly handle future complaints under Title VII. The fire department must also pay monetary awards to compensate Davis, Santana, and two other similarly-situated, pregnant firefighters. The total monetary awards to all four women will exceed $400,000.
“Every day, expectant mothers after consulting with their doctors make difficult decisions about how and, more importantly, when to restrict their work duties due to pregnancy,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division. “The Civil Rights Division is firmly committed to vigorous enforcement of Title VII’s prohibitions against pregnancy discrimination and retaliation so that women can make decisions regarding their pregnancies and try to remedy discriminatory treatment without fear of unwarranted repercussions in the work place after doing so.”
“Firefighters are dedicated public servants who put their lives at risk every day to protect the citizens of our community,” said U.S. Attorney Wilfredo A. Ferrer of the Southern District of Florida. “We are committed to enforcing the federal laws that protect expectant mothers against discrimination so that they will not be forced to choose between their job and their decision to have a family.”
The continued enforcement of Title VII has been a priority of the Justice Department’s Civil Rights Division. Additional information about the Civil Rights Division of the Justice Department is available on its website at www.usdoj.gov/crt/.
Justice Department Reaches Settlement with Santander Consumer USA to Resolve Allegations Concerning over 1,100 Illegal Car Repossessions Against Service MembersRead the Press Release
Santander Consumer USA Inc. has agreed to pay at least $9.35 million to resolve a lawsuit by the Department of Justice alleging that the motor vehicle lender violated the Servicemembers Civil Relief Act (SCRA), the Justice Department announced today. The complaint and the settlement, which is subject to court approval, were filed today in the U.S. District Court for the Northern District of Texas.
The settlement covers the improper repossessions of 1,112 motor vehicles between January 2008 and February 2013. The proposed consent order represents the largest settlement for illegal automobile repossessions ever obtained by the United States under the SCRA.
“This is a just resolution that will provide service members with financial relief and help repair their bad credit caused by Santander’s improper repossessions and fee collections with respect to more than 1,100 cars,” said Acting Associate Attorney General Stuart Delery. “The Department of Justice will continue devoting time and resources to protect our service members and their families from such unjust actions and hold bad actors accountable."
“Those who answer this nation’s call to duty understandably have much on their minds while they are in military service,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division. “Whether their car will be seized and sold at auction should not be an additional worry. We will continue to vigorously pursue lenders who fail to take the simple steps necessary to determine, before repossessing a car, whether it is owned by a service member.”
The SCRA protects service members against certain civil proceedings that could affect their legal rights while they are in military service. It requires a court to review and approve any repossession if the service member took out the loan, and made a payment, before entering military service. The court may delay the repossession or require the lender to refund prior payments before repossessing. The court may also appoint an attorney to represent the service member, require the lender to post a bond with the court and issue any other orders it deems necessary to protect the service member. By failing to obtain court orders before repossessing motor vehicles owned by protected service members, Santander prevented service members from obtaining a court’s review of whether their repossessions should be delayed or adjusted in light of their military service.
The lawsuit alleges that Santander initiated and completed 760 repossessions, without court orders, of motor vehicles owned by SCRA-protected service members. The agreement requires Santander to pay $10,000 plus compensation for any lost equity (with interest) to each of these service members. The lawsuit also alleges that Santander sought to collect fees arising from an additional 352 repossessions that unrelated motor vehicle lenders had conducted in violation of the SCRA before Santander acquired the loans. The agreement requires Santander to pay $5,000 to each of these service members. Santander also must repair the credit of all affected service members.
“The SCRA is an important protection for the men and women serving our country in the armed forces, and this settlement not only will rectify the past improper repossessions of service members’ vehicles, but will work to prevent such improper repossessions in the future,” said Acting U.S. Attorney John Parker of the Northern District of Texas.
For future repossessions, the settlement requires Santander to check the Defense Department’s automated database to see if a car’s owner is in military service prior to conducting a repossession.
The Department of Justice first learned of Santander’s repossession practices through a referral from the U.S. Army’s Legal Assistance Program. The referral involved a claim that Santander illegally repossessed the car of a service member, U.S. Army Specialist Joshua Davis, in the middle of the night, after having been informed that he was at basic training. The department also opened its investigation after learning that Santander used an arbitration clause included in its loan documents to prevent a second service member from pursuing systematic relief through a class action lawsuit he filed alleging that Santander had repossessed service members’ vehicles in violation of the SCRA.
As part of its investigation, the United States has already identified Santander’s illegal repossessions, and efforts to collect unlawful repossession fees, occurring between January 2008 and February 2013. Service members identified based on that investigation will be contacted by an independent settlement administrator later this year. The settlement also requires Santander to conduct a review and provide compensation for any additional unlawful repossessions that may have occurred since February 2013. All service members who are eligible for compensation from the settlement will be contacted by the administrator, and do not need to contact the Department of Justice.
The Justice Department’s enforcement of fair lending laws is conducted by the Fair Lending Unit of the Housing and Civil Enforcement Section in the Civil Right Division. Since the Fair Lending Unit was established in February 2010, it has filed or resolved 37 lending matters under the Fair Housing Act, the Equal Credit Opportunity Act, and the Servicemembers Civil Relief Act. The settlements in these matters provide for over $1.2 billion in monetary relief for impacted communities and individual borrowers. The Attorney General’s annual reports to Congress on ECOA highlight the department’s accomplishments in fair lending and are available at www.justice.gov/crt/publications.
The Civil Rights Division is a member of the Financial Fraud Enforcement Task Force. President Obama established this task force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.
The Civil Rights Division is the component within the Department of Justice authorized to enforce the SCRA. This federal law provides protections for active duty service members in areas such as evictions, rental agreements, security deposits, prepaid rent, civil judicial proceedings, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosures, automobile leases, life insurance, health insurance and income tax payments. For more information about SCRA enforcement by the Justice Department, please visit www.servicemembers.gov or call 1-800-896-7743, Mailbox 91.
Former Mayor of Río Grande, Puerto Rico, Sentenced to 64 Months in Prison for BriberyRead the Press Release
The former mayor of the municipality of Río Grande, Puerto Rico, was sentenced today to 64 months in prison and ordered to forfeit $39,000 for soliciting and receiving cash bribes from a contractor who sought construction inspection contracts with the municipality.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Rosa Emilia Rodríguez-Vélez of the District of Puerto Rico and Special Agent in Charge Carlos Cases of the FBI’s San Juan Division made the announcement. U.S. District Judge Carmen C. Cerezo of the District of Puerto Rico imposed the sentence.
Eduard Rivera-Correa, 61, pleaded guilty on Oct. 24, 2014, to one count of bribery. According to the plea agreement and statement of facts, while mayor of Río Grande in early 2010, Rivera-Correa requested that a contractor make regular kickback payments in exchange for the award of three construction inspection contracts worth a total of $329,000. After the contracts were awarded and while payments were being disbursed by the municipality, the contractor delivered envelopes containing approximately $39,000 in cash to Rivera-Correa’s office and placed them in his drawer.
In his plea agreement, Rivera-Correa also admitted to obstructing justice by threatening the contractor who paid the bribes. On or about April 16, 2012, in a recorded conversation, Rivera-Correa threatened the contractor in an effort to intimidate him and dissuade him from cooperating with law enforcement.
This case was investigated by the FBI and prosecuted by Trial Attorney Charles R. Walsh of the Criminal Division’s Public Integrity Section and Criminal Chief Jose Ruíz of the District of Puerto Rico. The Puerto Rico Office of Government Ethics provided assistance in the investigation.
Former Connecticut Resident Pleads Guilty to Attempting to Send Sensitive Military Documents to IranRead the Press Release
Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Deirdre M. Daly for the District of Connecticut announced that Mozaffar Khazaee, 60, formerly of Manchester, Connecticut, pleaded guilty today before U.S. District Judge Vanessa L. Bryant in Hartford to violating the Arms Export Control Act, in connection with his efforts to send to Iran sensitive, proprietary, trade secret and export controlled material relating to military jet engines for the U.S. Air Force’s F35 Joint Strike Fighter program and the F-22 Raptor program, which he had stolen from defense contractors where he had previously been employed.
“While employed with U.S. defense contractors, Mozaffar Khazaee stole sensitive, proprietary and controlled technology to send it to Iran,” said U.S. Attorney Daly. “The illegal export of our military technology compromises U.S. national security and reduces the advantages our armed forces currently possess. As today’s case demonstrates, we will aggressively investigate and hold accountable those who attempt to steal trade secrets and sensitive military technology from U.S. industries, whether for their own personal gain or for the benefit of foreign actors.”
“Today’s guilty plea demonstrates the ongoing cooperation with our federal law enforcement partners to prevent U.S. technology from falling into the wrong hands,” said Special Agent in Charge Bruce Foucart of HSI Boston. “Across the globe, the magnitude and scope of threats facing the United States has never been greater, and that's why one of Homeland Security Investigations highest priorities is to prevent illicit procurement networks, terrorist groups and hostile nations from illegally obtaining U.S. military products and sensitive dual-use technologies. Homeland Security Investigations takes pride in protecting our country, and today’s guilty plea is the latest example of our effective investigative efforts.”
“This joint investigation has emphasized the need for American companies to remain vigilant against the theft of valuable and sensitive technologies,” said Special Agent in Charge Patricia M. Ferrick of the FBI’s New Haven Division. “As our nation continues to lead the way in research and development, we are constantly reminded that there are those who seek to advance their own causes by stealing the hard work of others, and we owe it to ourselves and to the American public to guard against it. The FBI vigorously investigates these matters in cooperation with our law enforcement partners, both domestic and abroad.”
“This investigation demonstrates the dedication of the Department of Defense, Office of the Inspector General, Defense Criminal Investigative Service and our federal and military partners to ensure that critical technology is not exploited by criminals acting on behalf of governments hostile to the U.S.,” said Special Agent in Charge Craig W. Rupert of the Defense Criminal Investigative Service’s Northeast Field Office. “Foreign governments continue to actively seek U.S. military technology in an effort to advance their own military development. Today’s plea represents our continuing efforts to safeguard sensitive technology and to shield America’s investment in national defense by thwarting those who try to illegally acquire our national security assets.”
According to court documents and statements made in court, at different times between 2001 and 2013, Khazaee was employed by three separate defense contractors. From at least 2009 through and including late 2013, Khazaee attempted to use trade secret, proprietary and export controlled material that he had obtained from his employers to gain employment in Iran.
In November and December 2009, Khazaee corresponded by email with an individual in Iran to whom he attempted to send, and in some cases did send, documents containing trade secret, proprietary and export controlled material relating to the Joint Strike Fighter Program. In one email Khazaee wrote “some of these are very controlled . . . and I am taking [a] big risk. Again please after downloading these two Power Point files delete everything immediately.”
Analysis of Khazaee’s computer media revealed not only additional documents containing proprietary, trade secret and export controlled material belonging to the U.S. defense contractors at which he had been employed, but also cover letters and application documents, dating from in or about 2009 through in or about 2013, in which Khazaee sought employment with multiple state-controlled technical universities in Iran. In multiple letters Khazaee described the knowledge and skills he had obtained while working for the U.S. defense contractors and wrote: “[a]s lead engineer in these projects I have learned some of the key technique[s] that could be transferred to our own industry and universities.” Khazaee stated that he was “looking for an opportunity to work in Iran, and . . . transferring my skill and knowledge to my nation.”
In or about November 2013, while residing in Connecticut, Khazaee caused a shipment to be sent by truck from Connecticut to a freight forwarder located in Long Beach, California, which was intended for shipment to Iran. The shipment included numerous boxes and digital media containing thousands of documents consisting of sensitive technical manuals, specification sheets, technical drawings and data, and other proprietary material relating to military jet engines and the United States Air Force’s F35 Joint Strike Fighter (JSF) program and the F-22 Raptor. Many documents were labeled as “Export-Controlled,” as well as stamped with “ITAR-controlled” warnings. Khazaee did not apply for nor did he obtain any export license or written authorization to export any of the documents, and the export or attempted export of such material to Iran is illegal.
On Jan. 9, 2014, Khazaee was arrested at the Newark Liberty International Airport before boarding a flight with a final destination of Iran. Search warrants executed on Khazaee’s checked and carry-on luggage revealed additional sensitive, proprietary, trade secret and export controlled documents relating to military jet engines, in both hard copy and in electronic form on Khazaee’s computer media. Khazaee has been detained since that time.
Judge Bryan scheduled sentencing proceedings for May 20, 2015, at which time Khazaee faces up to 20 years in prison and a $1,000,000 fine.
This investigation is being led by the United States Department of Homeland Security’s Homeland Security Investigations in New Haven, in coordination with the New Haven Division of the Federal Bureau of Investigation, the Defense Criminal Investigative Service in New Haven and the Department of Commerce’s Boston Office of Export Enforcement.
Assistant Attorney General Carlin joins U.S. Attorney Daly in commending the efforts of the many other agencies and offices that were involved in this investigation, including U.S. Attorney’s Offices for the Central District of California, the Southern District of Indiana and the District of New Jersey, Homeland Security Investigations in Los Angeles, the U.S. Customs and Border Protection Service in Los Angeles, the U.S. Air Force’s Office of Special Investigations in Los Angeles and Boston, as well as HSI, CBP, and FBI in New Jersey, and HSI, FBI and DCIS in Indianapolis.
This case is being prosecuted by Assistant U.S. Attorneys Stephen Reynolds and Krishna Patel of the National Security and Major Crimes Unit of the District of Connecticut, and Trial Attorney Brian Fleming of the Justice Department’s National Security Division.
Detroit Area Patient Recruiter and Physical Therapist Convicted in $1.6 Million Medicare Fraud SchemeRead the Press Release
A federal jury in Detroit today convicted a patient recruiter and a physical therapist for their roles in a $1.6 million Medicare fraud scheme, announced 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 and Special Agent in Charge Lamont Pugh III of the Department of Health and Human Services Office of Inspector General (HHS-OIG) Chicago Regional Office.
Reginald Smith, 54, of Flint, Michigan, a patient recruiter, was found guilty of one count of conspiracy to commit health care fraud and one count of conspiracy to solicit and receive health care kickbacks. Rajan Patel, 30, of Clinton Township, Michigan, a physical therapist, was found guilty of one count of conspiracy to commit health care fraud, three counts of health care fraud, and three counts of making false statements relating to health care matters. Sentencing hearings are scheduled for April 16, 2015, and April 15, 2015, respectively, before U.S. District Judge Arthur J. Tarnow of the Eastern District of Michigan.
According to evidence presented at trial, Smith worked as a patient recruiter for Angle’s Touch Home Health Care LLC (Angle’s Touch) in 2011 and 2012. In that role, he solicited patients for foot care services at adult foster care homes. Smith then referred the patients to Angle’s Touch for medically unnecessary home health care services in exchange for kickbacks. The kickbacks were disguised as payments to Smith’s nonprofit Medicare provider, People Helping People of Detroit.
Patel worked as a physical therapist at Angle’s Touch. According to the evidence presented at trial, Patel and others recruited patients from an adult daycare center in Flint, Michigan. Patel then fabricated patient medical records to make it appear that the recruited patients qualified for and received the home health care services, when they did not.
Evidence presented at trial showed that Medicare paid Angle’s Touch over $1.6 million in the course of the conspiracy.
Four other individuals charged in this case pleaded guilty to conspiracy to commit health care fraud in connection with their roles in the fraud scheme.
The investigation was led by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and U.S. Attorney’s Office for the Eastern District of Michigan. This case was prosecuted by Trial Attorneys Niall M. O’Donnell, Aisling O’Shea and Allan Medina of the 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, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with 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.
Superseding Indictment Charges Two Brothers with Filing 30 Fraudulent Tax Returns Seeking Refunds of More Than $200 MillionRead the Press Release
A federal grand jury has returned a superseding indictment against two brothers late yesterday, adding conspiracy to commit wire fraud, mail fraud, aggravated identity theft and money laundering charges arising from a scheme in which they filed 30 fraudulent tax returns seeking refunds of more than $204 million, announced U.S. Attorney Rod J. Rosenstein of the District of Maryland, Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation (IRS-CI) Washington, D.C., Field Office.
“As millions of U.S. taxpayers prepare to honestly file their returns, the Tax Division, working with its law enforcement partners, remains committed to prosecuting those individuals who seek to abuse and manipulate our nation’s tax system for personal gain,” said Principal Deputy Assistant Attorney General Ciraolo.
“The IRS allegedly sent $16 million to two criminals who filed bogus tax returns claiming ‘refunds’ that were not owed,” said U.S. Attorney Rosenstein. “Federal agents and prosecutors have a duty to pursue perpetrators of such fraud schemes and try to recover money stolen from the United States Treasury.”
“The American tax system is designed to fund vital government services to people in this country,” said Special Agent in Charge Kelly. “It is not a slush fund for thieves and fraudsters. Those who illegally target our nation’s tax dollars for personal financial gain could face criminal prosecution and lengthy prison sentences."
The six-count superseding indictment alleges that Sean Aude Gallman, 38, of Upper Marlboro, Maryland, and Eric Maurice Gallman, 41, of Huntersville, North Carolina, established trusts and business entities, and used mailboxes at numerous private commercial postal carrier stores in Maryland and North Carolina as the addresses for the trusts and business entities. The defendants, acting as trustees and agents, mailed fraudulent tax returns to the IRS in the names of the trusts and businesses requesting refunds.
The indictment alleges that in January 2013, Sean Gallman mailed to the IRS a fraudulent 2012 tax return in the name of the Gallman Charitable Trust, requesting a refund of $8,218,930. Also around this time, the defendants mailed to the IRS a fraudulent 2012 tax return in the name of LEA Group Holdings Trust, requesting a refund of $8,293,562. The defendants knew that the trusts were not entitled to the tax refunds. After receiving refund checks in these amounts, on Feb. 15 and March 11, 2013, the defendants deposited the two refunds in bank accounts they controlled. To hide their receipt of these refunds, the defendants used cashier’s checks and other financial instruments to transfer a portion of the money to third parties and other bank accounts.
The indictment further alleges that from January 2013 to March 23, 2014, Sean Gallman filed an additional 19 fraudulent tax returns for 2012 or 2013, in the name of numerous purported trusts and business entities, seeking $200,924,949 in refunds. On March 16, 2014, Eric Gallman filed a fraudulent tax return for 2013 in the name of a business entity, seeking a refund of $275,548. And from February 2013 to March 2014, the defendants together filed eight fraudulent tax returns for 2012 or 2013 in the name of purported trusts and business entities, seeking $42,091,389 in refunds.
Altogether, the defendants are alleged to have filed a total of 30 fraudulent tax returns seeking refunds totaling $204,971,904, for which the IRS paid two refunds totaling $16,512,492.
The indictment seeks forfeiture of the two refunds paid by the IRS; $11,529,954 seized from numerous bank accounts; foreign currency and gold and silver coins seized from a residence in Upper Marlboro; nine residential properties located in Upper Marlboro and Laurel, Maryland, North Carolina and South Carolina; and two Mercedes-Benz vehicles and one Hyundai vehicle.
The defendants each face a statutory maximum sentence of 20 years in prison for each count of conspiring to commit mail and wire fraud, conspiring to commit money laundering, and mail fraud. Sean Gallman also faces a statutory maximum sentence of 20 years in prison for an additional count for mail fraud and for money laundering, and a statutory mandatory minimum sentence of two years in prison consecutive to any other sentence imposed for aggravated identity theft.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
U.S. Attorney Rosenstein praised the Tax Division and IRS-Criminal Investigation for its work in the investigation. Mr. Rosenstein thanked Assistant U.S. Attorney Thomas P. Windom and Trial Attorney Erin Pulice of the Department of Justice Tax Division, who are prosecuting the case.
Reward Announced for Cyber FugitiveRead the Press Release
The Justice Department, in partnership with the U.S. Department of State’s Transnational Organized Crime (TOC) Rewards Program, announced today a reward of up to $3 million for information leading to the arrest and/or conviction of a prolific cyber criminal. Evgeniy Mikhailovich Bogachev was charged with numerous violations for his role as an administrator of the GameOver Zeus botnet.
The software was used to capture bank account numbers, passwords, personal identification numbers and other information necessary to log into online banking accounts. It is believed GameOver Zeus is responsible for more than 1 million computer infections, resulting in financial losses of more than $100 million.
Bogachev is on the FBI’s Cyber’s Most Wanted and is believed to be at large in Russia.
The TOC reward offer reaffirms the commitment of the U.S. government to bring those who participate in organized crime to justice, whether they hide online or overseas.
Bogachev was charged in 2014 in Pittsburgh, Pennsylvania, with conspiracy, computer hacking, wire fraud, bank fraud, and money laundering in connection with his alleged role as an administrator of the GameOver Zeus botnet. Bogachev was also indicted by criminal complaint in Omaha, Nebraska, in 2012 and charged with conspiracy to commit bank fraud related to his alleged involvement in the operation of a prior variant of Zeus malware known as Jabber Zeus.
Anyone with information on Bogachev should contact the FBI via the Major Case Contact Center, 1-800-CALL-FBI (225-5324), or the nearest U.S. Embassy or Consulate. You may also submit a tip online via tips.fbi.gov. All information will be kept strictly confidential.
Los Angeles-Area Executive Arrested in $9 Million Bank Fraud SchemeRead the Press Release
A Los Angeles-area executive was arrested today in connection with a $9 million scheme to defraud United Commercial Bank and East West Bank, 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, Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP), Assistant Director in Charge David L. Bowdich of the FBI’s Los Angeles Field Office and Special Agent in Charge Erick Martinez of the IRS-Criminal Investigation’s (IRS-CI) Los Angeles Field Office.
Chung Yu “Louis” Yeung, 37, of San Dimas, California, was indicted on Oct. 22, 2014, in the Central District of California for one count of conspiracy to commit bank fraud and five counts of bank fraud. The indictment was under seal until his arrest today. Guo Xiang “David” Fan, 52, was also indicted for conspiracy to commit bank fraud and bank fraud, as well as money laundering, and remains at large.
According to the indictment, Yeung was Vice President and Fan was President of Eastern Tools and Equipment, an Ontario, California company that sold portable generators and other equipment. The indictment charges Yeung and Fan with defrauding United Commercial Bank (UCB) and East West Bank, which took over UCB’s accounts, of more than $9 million.
Specifically, the indictment alleges that Yeung, Fan, and others overstated Eastern Tools’ accounts receivable to increase its line of credit with UCB and later East West. To support the inflated accounts receivable submitted to the banks, Yeung, Fan, and others allegedly opened approximately 20 shell companies, backstopped with fictitious business name statements, post office boxes, bank accounts, and telephone numbers. They then allegedly moved money from Eastern Tools’ bank accounts into the shell companies’ bank accounts to create the false appearance of substantial commercial activity. Finally, Yeung, Fan, and others allegedly siphoned those funds into their own personal accounts.
East West Bank allegedly sustained a loss of approximately $9,157,172 as a result of the fraud scheme.
In November 2008, UCBH Holdings, Inc., UCB’s parent company, received $298.7 million in federal taxpayer funds through the U.S. Department of the Treasury Troubled Asset Relief Program (TARP). On Nov. 6, 2009, UCB failed and was taken over by state and federal regulators. As a result of the bank’s failure, none of the TARP funds were repaid, and the $298.7 million TARP investment has been written-off.
The charges contained in an indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
The case is being investigated by SIGTARP, the FBI and IRS-CI, and prosecuted by Trial Attorney Fred Medick of the Criminal Division’s Fraud Section.
Yeung Indictment
Former Owner of Durable Medical Equipment Company Pleads Guilty in $5 Million Health Care Fraud SchemeRead the Press Release
A Miami man pleaded guilty today to health care fraud charges in connection with a $5 million scheme to defraud Medicare.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge Derrick Jackson of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Field Office, Special Agent in Charge Mike Fields of HHS-OIG’s Dallas Field Office, Special Agent in Charge Paul Wysopal of the FBI’s Tampa Field Office, and Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office made the announcement.
Angel M. Mirabal, 62, of Miami, Florida, pleaded guilty to one count of conspiracy to commit wire fraud and health care fraud before U.S. District Judge Marcia G. Cooke of the Southern District of Florida. A sentencing hearing is scheduled for May 6, 2015.
In connection with his guilty plea, Mirabal admitted that he was the owner, president and manager of Quick Solutions Medical Supplies Inc. (Quick Solutions), a durable medical equipment (DME) supply company located in Houston, Texas. Mirabel further admitted that from April 2010 through July 2013, he and his co-conspirators operated Quick Solutions for the purpose of billing the Medicare program for, among other things, expensive DME that was medically unnecessary and in many instances not provided to the Medicare beneficiaries. Indeed, many of the beneficiaries who purportedly received the DME resided hundreds of miles away in Miami.
From June 2011 through February 2012, Quick Solutions submitted approximately $5 million in fraudulent claims, and Medicare paid approximately $587,900 for these claims.
This case was investigated by the FBI, HHS-OIG and Texas Attorney General’s Medicaid Fraud Control Unit, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and U.S. Attorney’s Office for the Southern District of Florida. This case is being prosecuted by Trial Attorney Timothy P. Loper 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.
Former Bank of America Vice President in Las Vegas Pleads Guilty to Misapplication of Bank FundsRead the Press Release
A former senior vice president of Bank of America (BOA) in Las Vegas pleaded guilty today to misapplication of bank funds in a scheme that led to over $6.4 million in losses to BOA on two business-related loans.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada, Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Office and Special Inspector General Christy L. Romero of the Troubled Asset Relief Program made the announcement.
Justin T. Brough, 39, of North Las Vegas, Nevada, pleaded guilty to one count of misapplication of bank funds before U.S. District Judge Andrew P. Gordon of the District of Nevada. A sentencing hearing is scheduled for May 28, 2015.
According to his plea documents, Brough was a senior vice president at BOA in Las Vegas, serving as a business banking market executive. Brough provided financial services to high-net-worth clients.
Brough admitted to misapplying bank funds in connection with two business loans: a $6.3 million short-term construction loan, and a $600,000 line of credit in connection with the acquisition of a business. Brough admitted that neither borrower qualified for the loans, because they did not meet the bank’s underwriting requirements. Brough further admitted that he falsified documents in order to help both borrowers get the loans, including forging signatures on loan papers.
According to Brough’s admissions, when the borrowers had difficulty making payments on the loans, Brough misused the bank’s general ledger fund to make a total of $436,676 in payments on the loans for the borrowers. Brough admitted that he disguised those payments, among other ways, as “goodwill,” “miscellaneous adjustments” and refunds of various fees. He also admitted that he kept each of the individual payments under $10,000 so he would not need additional approval within BOA.
Both borrowers ultimately defaulted on the loans. According to Brough’s plea agreement, the aggregate loss to BOA was $6,468,767: $5,291,000 on the first loan, and $1,177,167 on the second loan.
BOA received a total of $45 billion in taxpayer funds from the Troubled Asset Relief Program (TARP) of the U.S. Department of the Treasury, which BOA repaid in full in December 2009.
The case was investigated by the FBI and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). This case is being prosecuted by Senior Trial Attorney Nicholas Acker of the Criminal Division’s Fraud Section.
Federal Officials Close Investigation into Death of Trayvon MartinRead the Press Release
The Justice Department announced today that the independent federal investigation found insufficient evidence to pursue federal criminal civil rights charges against George Zimmerman for the fatal shooting of Trayvon Martin on Feb. 26, 2012, in Sanford, Florida. Prosecutors from the Justice Department’s Civil Rights Division, officials from the FBI, and the Justice Department’s Community Relations Service met today with Martin’s family and their representatives to inform them of the findings of the investigation and the decision.
“The death of Trayvon Martin was a devastating tragedy. It shook an entire community, drew the attention of millions across the nation, and sparked a painful but necessary dialogue throughout the country,” said Attorney General Eric Holder. “Though a comprehensive investigation found that the high standard for a federal hate crime prosecution cannot be met under the circumstances here, this young man’s premature death necessitates that we continue the dialogue and be unafraid of confronting the issues and tensions his passing brought to the surface. We, as a nation, must take concrete steps to ensure that such incidents do not occur in the future.”
Following the shooting, a team of some of the department’s most experienced civil rights prosecutors and FBI agents conducted a comprehensive, independent investigation of the events of Feb. 26, 2012. The federal investigation was opened and conducted separately from the state of Florida’s investigation of the shooting under local laws. Once the state initiated the second-degree murder prosecution, federal investigators began monitoring the state’s case and halted active investigation in order not to interfere with the state’s trial. Federal investigators provided reports of interviews and other evidence they obtained to the state’s prosecution team.
Shortly after Zimmerman’s acquittal in state court on July 13, 2013, federal investigators resumed active investigation. Federal investigators reviewed all of the material and evidence generated by the state of Florida in connection with its investigation and prosecution of Zimmerman, including witness statements, crime scene evidence, cell phone data, ballistics reports, reconstruction analysis, medical and autopsy reports, depositions, and the trial record. Federal investigators also independently conducted 75 witness interviews and obtained and reviewed the contents of relevant electronic devices. The investigation included an examination of police reports and additional evidence that was generated related to encounters Zimmerman has had with law enforcement in Florida since the state trial acquittal. In addition, federal authorities retained an independent biomechanical expert who assessed Zimmerman’s descriptions of the struggle and the shooting.
The federal investigation sought to determine whether the evidence of the events that led to Martin’s death were sufficient to prove beyond a reasonable doubt that Zimmerman’s actions violated the federal criminal civil rights statutes, specifically Section 3631 of Title 42 of the U.S. Code or Section 249 of Title 18 of the U.S. Code, as well as other relevant federal criminal statutes. Section 3631 criminalizes willfully using force or threat of force to interfere with a person’s federally protected housing rights on account of that person’s race or color. Section 249 criminalizes willfully causing bodily injury to a person because of that person’s actual or perceived race. Courts define “willfully” to require proof that a defendant knew his acts were unlawful, and committed those acts in open defiance of the law. It is one of the highest standards of intent imposed by law.
The federal investigation examined whether Zimmerman violated civil rights statutes at any point during his interaction with Martin, from their initial encounter through the fatal shooting. This included investigating whether there is evidence beyond a reasonable doubt that Zimmerman violated Section 3631 by approaching Martin in a threatening manner before the fatal shooting because of Martin’s race and because he was using the residential neighborhood. Investigators also looked at whether there is evidence beyond a reasonable doubt that Zimmerman violated Section 3631 or Section 249, by using force against Martin either during their struggle or when shooting Martin, because of Martin’s race.
“Although the department has determined that this matter cannot be prosecuted federally, it is important to remember that this incident resulted in the tragic loss of a teenager’s life,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division. “Our decision not to pursue federal charges does not condone the shooting that resulted in the death of Trayvon Martin and is based solely on the high legal standard applicable to these cases.”
After a thorough and independent investigation into the facts surrounding the shooting, federal investigators determined that there is insufficient evidence to prove beyond a reasonable doubt a violation of these statutes. Accordingly, the investigation into this incident has been closed. This decision is limited strictly to the department’s inability to meet the high legal standard required to prosecute the case under the federal civil rights statutes; it does not reflect an assessment of any other aspect of the shooting.
The Justice Department is committed to investigations of allegations of bias-motivated violence and will continue to devote the resources required to ensure that allegations of civil rights violations are fully and completely investigated. The department aggressively prosecutes criminal civil rights violations whenever there is sufficient evidence to do so.
Federal Court Shuts Down Hawaii Tax Return PreparerRead the Press Release
On Feb. 20, a federal court permanently barred a Kahului, Hawaii, man from preparing federal tax returns for others, the Justice Department announced today.
The U.S. District Court for the District of Hawaii issued the injunction finding that James A. Ericson knowingly and repeatedly violated the Internal Revenue Code by preparing returns that understated his customers’ tax liabilities and by taking unreasonable positions in filing his customers’ returns. The court found that an injunction permanently barring him from preparing federal tax returns for others was necessary to prevent further recurrence of Ericson’s practices. The court’s order applies to Ericson and “all those in active concert or participation with him.”
The complaint alleged that Ericson prepared roughly more than 1,000 tax returns per year. According to the complaint, Ericson improperly understated his customers’ federal tax liabilities by fabricating business schedules, expenses and business income for non-existent businesses; claiming false or inflated credits; and deducting personal expenses that were not legally deductible. The suit also alleged that Ericson falsely claimed to some of his customers that he was a former Internal Revenue Service (IRS) employee. In total, the government’s complaint alleged that the loss to the U.S. Treasury from Ericson’s activities may have exceeded $31 million for tax years 2007 through 2012.
The court’s order requires Ericson to produce to the government counsel a list of all persons for whom he has prepared federal tax returns or claims for a refund since Jan. 1, 2008, and to notify all such persons of the injunction entered against him.
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 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.
Two Men Who Provided Material Support to Terrorists and Plotted to Kill American Targets in Afghanistan Receive 25-Year Prison TermsRead the Press Release
Assistant Attorney General for National Security John P. Carlin, 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 announced today that two men with ties to the Inland Empire region of California were each sentenced today to 300 months in federal prison for participating in plots to provide material support to terrorists and to kill American personnel.
The two men sentenced today by U.S. District Judge Virginia A. Phillips are Sohiel Omar Kabir, 37, a naturalized U.S. citizen who was born in Afghanistan and who until late 2011, resided in Pomona, California; and Ralph Deleon, 26, of Ontario, a lawful permanent resident and citizen of the Philippines.
Last summer, Kabir and Deleon were convicted by a federal jury for their role in a plot to travel overseas to fight against U.S. and allied forces in Afghanistan and elsewhere. Specifically, the jury convicted Kabir and Deleon of conspiring to provide material support to terrorists and conspiring to murder United States military and government personnel. The jury also found Kabir guilty of conspiring to provide material support to a designated foreign terrorist organization, namely Al-Qa’ida, and conspiring to receive military-type training from Al-Qa’ida. In addition, the jury convicted defendant Deleon of conspiring to murder, maim, or kindap overseas.
Two other defendants who were indicted in the case in 2012 – Miguel Alejandro Santana Vidriales and Arifeen David Gojali – previously pleaded guilty and are scheduled to be sentenced by Judge Phillips on March 16, 2015.
“This case demonstrates the need for vigilance and swift action to counter the false allure of violent extremism,” said U.S. Attorney Yonekura. “When confronted with young Americans who succumbed to the empty promises of violent extremism and sought to assist a terrorist group in killing American soldiers abroad, law enforcement acted swiftly to eliminate the threat.”
“The defendants betrayed the citizens of the United States by supporting terror and conspiring to murder military members serving overseas” said Assistant Director in Charge Bowdich. “The lengthy prison sentences handed to Mr. Kabir and Mr. DeLeon should send a clear message to those who support terror groups that the FBI and our partners are committed to preventing deadly plots hatched either at home or abroad targeting the United States.”
The evidence presented during last year’s trial showed Kabir introduced Deleon and Santana to radical Islamic ideology in 2010. Kabir left the United States in the final days of 2011, arriving in Afghanistan in July 2012. While in Afghanistan, Kabir continued to communicate with Deleon and others, encouraging them to join him in Afghanistan. Kabir told the group that he had contacts with terrorist organizations and that, when they arrived, he and the group would join “the Students” – referring to the Taliban – and later “the Professors” – referring to Al-Qa’ida.
Deleon, Kabir, and others involved in the plot were heavily influenced by the doctrine of now-deceased Al-Qa’ida in the Arabian Peninsula spokesman Anwar Al-Awlaki and other advocates of violent jihad, whose teachings they frequently invoked during their planning and preparation in this case.
In September 2012, Deleon recruited Gojali to join the plot to travel overseas to engage in violent jihad. As part of their planning and preparation, Deleon led Santana and Gojali in training activities in southern California, including participating in paintball activities and traveling to firearms ranges to fire AK-47s and other assault weapons, which they expected to use in future fighting.
The men made plans to rejoin Kabir, who had relocated to Kabul, Afghanistan. In effort to avoid detection by law enforcement, Deleon and the others planned to cross the border into Mexico by land and from there to travel to the Middle East by air. In November 2012, Deleon purchased airline tickets for the group. On Nov. 16, 2012, the FBI arrested Deleon, Santana, and Gojali as they departed a Chino apartment in a car driven by one of Deleon’s associates intending to drive to Mexico. Kabir was taken into custody by American military personnel in Afghanistan.
The investigation into this terrorism scheme was conducted by the Joint Terrorism Task Force (JTTF) in Riverside, California. The Riverside JTTF is comprised of members from the following agencies: Riverside County Sheriff’s Office; Riverside Police Department; San Bernardino Sheriff’s Department; Beaumont Police Department; Ontario Police Department; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the U.S. Attorney’s Office; and the FBI.
The case was prosecuted by Assistant U.S. Attorneys Allen W. Chiu, Christopher D. Grigg and Susan J. DeWitt of the Central District of California, and Trial Attorneys Annamartine Salick and Josh Parecki of the Justice Department’s National Security Division.
Two Florida Couples Agree to Pay $1.13 Million to Resolve Allegations that They Accepted Kickbacks in Exchange for Home Health Care ReferralsRead the Press Release
Two South Florida medical doctors and their wives have agreed to settle allegations that they violated the False Claims Act when their wives accepted sham marketer salaries in exchange for their husbands’ referrals to a home health care company called A Plus Home Health Care Inc., the Justice Department announced today. Under the settlements, Dr. Alan and Lynn Buhler will pay to the United States $1.047 million and Dr. Craig and Cynthia Prokos will pay $90,000. Dr. Buhler practices in Plantation, Florida, and Dr. Prokos practices in Jupiter, Florida.
“Kickbacks can corrupt the judgment of physicians and cause them to make decisions for their own financial benefit rather than for the benefit of their patients,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division. “We will not tolerate these conflicts of interest where Medicare patients and dollars are concerned.”
“The settlement announced today is another example of the Justice Department’s unrelenting efforts to hold accountable those who engage in kickback schemes,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida. “Health care providers should generate business by offering their patients superior care. Financial relationships that put profits over patients undermine the quality and care given to patients and ultimately, the integrity of our public health care program upon which millions of Americans depend.”
The United States alleged that, beginning in 2006, A Plus and its owner, Tracy Nemerofsky, engaged in a scheme to increase Medicare referrals in the heavily saturated home health care market in South Florida. Specifically, the United States alleged that A Plus paid spouses of referring physicians for sham marketing positions in order to induce patient referrals. Among the spouses allegedly paid by A Plus as part of this scheme were Lynn Buhler and Cynthia Prokos. The United States alleged that the spouses were required to perform few, if any, of the job duties they were allegedly hired for and instead, the spouses’ salaries were intended as an inducement for the husband physicians to refer their Medicare patients to A Plus. The United States also alleged that Alan Buhler received medical director payments as part of A Plus’s scheme to obtain his referrals and he attempted to hide those payments from the United States.
The United States previously settled with A Plus, Tracy Nemerofsky and five other couples that allegedly accepted payments from A Plus.
The settlements announced today resolve allegations that were brought by William Guthrie, a former director of development at A Plus, under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to sue on behalf of the United States for the submission of false claims and to receive a share of any recovery. On Jan. 6, Judge William P. Dimitrouleas dismissed Mr. Guthrie’s suit without prejudice to the United States’ right to proceed. The lawsuit was captioned U.S. ex rel. Guthrie v. A Plus Home Health Care, Inc., 12 CV 60629 (S.D. Fla.).
“Being a physician in the Medicare program is a privilege, not a right,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Physicians who engage in such in-your-face kickback schemes to refer Medicare patients to certain home health companies in exchange for money will be held accountable for their behavior. Our agency will continue to crack down on kickbacks, which undermine impartial medical judgment, corrode the public’s trust in the health care system and waste scarce Medicare funding.”
These settlements illustrate the government’s emphasis on combating health care fraud and mark another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $23.7 billion through False Claims Act cases, with more than $15.2 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation of this matter reflects a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Florida, HHS-OIG and the FBI.
The claims resolved by the settlements are allegations only and there has been no determination of liability.
North Carolina Man Charged for Making $2.3 Million Fraudulent Claim to Deepwater Horizon Spill Compensation FundRead the Press Release
A North Carolina resident was arrested today for allegedly making a fraudulent claim on the fund set up to compensate victims of the 2010 Deepwater Horizon oil spill, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.
Michael R. Rosella, 45, of Wilmington, North Carolina, was arrested in connection with an indictment returned last week and unsealed following his arrest. The indictment by a grand jury in the District of Columbia charges Rosella with one count of mail fraud, three counts of wire fraud and two counts of money laundering.
According to allegations in the indictment, Rosella, who lived in the District of Columbia in 2010, submitted a claim for compensation in the amount of $2.3 million to the Gulf Coast Claims Facility (GCCF), the entity that formerly handled claims for persons and businesses injured by the Deepwater Horizon oil spill. Rosella allegedly submitted the claim on behalf of a fictitious entity called the Bayou Barataria Sportsmen’s Resort, which Rosella allegedly represented to have been a successful hotel and sport fishing business in Louisiana immediately before the spill, and to have suffered lost profits due to the spill’s impact on the Gulf of Mexico. The documents submitted by Rosella allegedly included false affidavits of the Resort’s “owners,” federal tax filings, state sales tax records, financial statements, and invoices.
The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.
The case is being investigated by the U.S. Secret Service and is being prosecuted by Trial Attorney Gary A. Winters of the Criminal Division’s Fraud Section.
Rosella Indictment
Attorney General Holder Statement on the Departure of Anne Tompkins as the United States Attorney of the Western District of North CarolinaRead the Press Release
Attorney General Eric Holder released the following statement on the departure of U.S. Attorney Anne Tompkins:
“As United States Attorney for the Western District of North Carolina, Anne Tompkins has pursued the cause of justice with passion, with integrity, and with results,” said Attorney General Holder. “In her outstanding work on matters involving health care and financial fraud, she helped safeguard the well-being of the American people and bring wrongdoers to justice. Through her service on the Attorney General’s Advisory Committee, she proved herself to be an indispensable advisor on a range of vital issues. And with her efforts to protect civil rights and combat human trafficking, she stood up for innumerable men, women, and children who are too frequently overlooked and too often underserved. Over the course of her extraordinary career, Anne has never lost sight of the most vulnerable in her own community, and has spearheaded trailblazing projects to engage young people in the work of building a more just society, from anti-bullying efforts to leadership development. Through her work at all levels, she has served as an inspiring example to public servants throughout the country – including me. And while I will miss her distinguished leadership and wise counsel, I look forward to all that she will achieve in the next stage of her already remarkable career.”
Two Long Beach, California, Men Sentenced for Participation in a Sex Trafficking ConspiracyRead the Press Release
Defendants Used Deception, Threats, Violence and Coercion to Compel Young Women into Prostitution in Orange County, California
Roshaun Nakia Porter, 39, was sentenced today by U.S. District Judge Josephine L. Staton to a sentence of 240 months in prison and 10 years of supervised release for his role in a sex trafficking conspiracy, announced the Civil Rights Division and the U.S. Attorney’s Office for the Central District of California. Porter’s co-conspirator, Marquis Monte Horn, 40, was sentenced on Oct. 24, 2014, to serve 78 months in prison and five years of supervised release for his role in the conspiracy. Two other defendants have entered guilty pleas in connection with the case.
The judge ordered Porter to pay $866,244.68 in restitution to 10 victims of the conspiracy.
On July 11, 2014, Porter and Horn each pleaded guilty to one count of conspiring to engage in sex trafficking by force, fraud and coercion. According to documents filed in court and admissions in court in connection with Porter’s guilty plea, between 2010 and April 2012, Porter masterminded a scheme in which he exploited young women, including foreign nationals and U.S. citizens, in his prostitution operation in Orange County, California. Using various deceptive means, including false online personal advertisements and fraudulent promises of legitimate employment, Porter reaped substantial illicit profit by luring his victims into personal relationships with him and, thereafter, compelling them to prostitute and provide him the proceeds from their commercial sex acts. To compel the victims into compliance, Porter used physical violence, psychological abuse, threats to harm the victims’ family members and other coercive means. In connection with his guilty plea, Horn admitted that between December 2010 and April 2012, he conspired to recruit and entice victims into Porter’s prostitution ring.
“The Department of Justice is steadfast in its commitment to prosecuting those who seek to profit from enslaving and exploiting others.” said Acting Assistant Attorney General Vanita Gupta of the Justice Department’s Civil Rights Division. “We will continue our unrelenting work to end the scourge of human trafficking and obtain justice on behalf of victims of these heinous crimes.”
“Porter masterminded a reprehensible sex trafficking enterprise that caused extreme trauma and lasting injury to victims,” said Acting U.S. Attorney Stephanie Yonekura of the Central District of California. “Over the course of nearly two years, Porter victimized young women with flagrant lies, bogus romantic overtures and acts of violence as he forced them to give up their bodies for his profit. This conduct is intolerable and warrants the lengthy sentenced issued today by the court.”
“The defendant recruited unsuspecting victims as sex slaves through fraudulent promises of wealth and a better life,” said Assistant Director in Charge David Bowdich of the FBI Los Angeles Office. “He then held them hostage by imposing physical beatings and issuing death threats while he cashed in on their suffering. The FBI is committed to protecting the civil rights of trafficking victims by identifying violent sexual offenders and pimps operating in our communities, and building federal cases to ensure they go to prison."
This matter was investigated by the FBI. It is being prosecuted by Trial Attorney Daniel Weiss of the Civil Rights Division’s Human Trafficking Prosecution Unit and Assistant U.S. Attorney Sandy Leal of the U.S. Attorney’s Office in the Central District of California.
The National President, Vice President, Warlord and Three Other Members of the Devils Diciples Motorcycle Gang Convicted of Racketeering and Drug-Trafficking ChargesRead the Press Release
After a four-month trial, a federal jury in the Eastern District of Michigan convicted six members of the Devils Diciples Motorcycle Gang today, including the national president, national vice president and national warlord, for their participation in various criminal acts, including violent crimes in aid of racketeering, methamphetamine production and trafficking, illegal firearms offenses, obstruction of justice, illegal gambling and other federal 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 and Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office made the announcement.
“For too many years the Devils Diciples spread fear and violence throughout Michigan and the country,” said Assistant Attorney General Caldwell. “This outlaw motorcycle gang thrived on intimidation and its ability to avoid prosecution – but no longer. Through these convictions, we have decimated the gang and its leadership and helped secure justice for the communities they harmed.”
"These defendants were responsible for violence and trafficking in methamphetamine in Macomb County and across the country,” said U.S. Attorney McQuade. “We are grateful for the work of the investigating agencies and the jury to bring them to justice."
“The defendants in this case perpetrated a broad range of violent criminal activities in support of their illegal enterprise,” said Special Agent in Charge Abbate. “Today’s convictions, which targeted the leadership of this criminal organization, reflect the hard work and dedication of federal, state and local law enforcement, the Department of Justice Criminal Division’s Organized Crime and Gang Section and the U.S. Attorney’s Office for the Eastern District of Michigan.”
Devils Diciples national President Jeff Garvin Smith, aka “Fat Dog,” 60, of Mt. Clemens, Michigan; National Vice President Paul Anthony Darrah, aka “Pauli,” 50, of Macomb Township, Michigan; and National Warlord Cary Dale Vandiver, aka “Gun Control,” 56, of Sand Mountain, Alabama, were all found guilty by a jury of engaging in a RICO conspiracy, methamphetamine trafficking conspiracy, conspiracy to obstruct justice, violent crimes in aid of racketeering and various substantive charges. Another prominent leader, Vincent John Witort, aka “Holiday,” 64, of Fontana, California, and a methamphetamine cook, Patrick Michael McKeoun, aka “Magoo,” 60, of Birmingham, Alabama, were found guilty of engaging in a RICO conspiracy and methamphetamine trafficking conspiracy. David Randy Drozdowski, aka “D,” 38 of Fair Haven, Michigan, was found guilty by a jury of committing violent crimes in aid of racketeering and being a felon in possession of a firearm. Scott William Sutherland, aka “Scotty Z,” 49, of Redford, Michigan, was acquitted by the jury of various charges, but previously pleaded guilty to being a felon in possession of a firearm. Sentencing hearings will be scheduled at a later date before U.S. District Judge Robert H. Cleland of the Eastern District of Michigan.
According to evidence presented at trial, the Devils Diciples (which is intentionally misspelled) is a motorcycle gang with its national headquarters in Clinton Township, Michigan. The Devils Diciples operated regional chapters in cities throughout Michigan, Alabama, Arizona, California, Illinois, Indiana, Ohio and elsewhere, and engaged in criminal activities for financial gain.
Evidence presented at trial demonstrated that membership in the Devils Diciples is based in part on successful completion of a probationary period, followed by formal approval by one or more members or leaders. Members, commonly referred to as “full patched members,” are required to own Harley Davidson motorcycles and are required to follow orders from the gang’s leadership, including orders to assault, threaten and intimidate others, to transport and distribute drugs, to lie to law enforcement and to hide or destroy evidence. Members are also required to follow the Devils Diciples by-laws and attend regular meetings referred to as “church.”
According to evidence presented at trial, Smith was the National President and Darrah was the National Vice President of the gang. In those roles, they were responsible for overall management of the activities of the other Devils Diciples members and chapters, including giving final approval to any activity generally affecting the gang as a whole. Vandiver was the National Warlord – or enforcer – of the gang. With other gang members, the leaders also participated directly in criminal activities both for financial gain on behalf of the Devils Diciples, and to protect the gang and its members.
Specifically, the evidence showed that in late 2007, Smith and Darrah were involved in the shooting of a Devils Diciples member who failed to abide by the gang’s rules. And, in August 2008, Smith violently assaulted the girlfriend of another Devils Diciples member because he believed she disrespected him and the gang.
Additionally, the evidence showed that Smith possessed state and federal law enforcement manuals regarding outlaw motorcycle gangs marked “For Official Use Only” and “Law Enforcement Sensitive,” and numerous documents related to criminal matters involving members of the Devils Diciples, including police reports, search warrants, affidavits, indictments and witness interview transcripts. The evidence showed that the documents were used for the purposes of counter-surveillance and to identify suspected informants.
The other defendants were also full patched members of the gang, who committed several other acts of violence.
For example, in August 2003, Witort and other gang members robbed, kidnapped and attempted to murder members of the gang’s Arizona Chapter for violating the gang’s rules. Inside the Arizona clubhouse, the victims were bound with duct tape and zip ties, and severely beaten with firearms, tasers, knives, and other weapons. The victims were then loaded into the bed of a pick-up truck, driven out into the desert, dumped into ravines, and left to die. The evidence showed that Witort and Smith helped to plan the beatings and that Smith later congratulated one of the participants, telling him in a letter that the Devils Diciples were “all proud of you.”
Additionally, the evidence demonstrated that in 2012, at a bar in Chesterfield Township, Michigan, Drozdowski and another Devils Diciples member assaulted a perceived rival motorcycle gang member for being present in Devils Diciples territory. The victim was knocked unconscious and suffered multiple fractures to his face and jaw. Drozdowski and the other Devils Diciples member then ripped the leather vest off of the unconscious victim.
In addition to the defendants convicted today, 21 members and associates of the Devil’s Diciples have been pleaded guilty to various crimes as result of this investigation. The investigation further resulted in the seizure of more than 60 firearms and more than 6,000 rounds of ammunition and the dismantling of eight methamphetamine manufacturing laboratories across the country.
The case was investigated by the FBI, the Michigan State Police, the Macomb County Sheriff’s Office and the County of Macomb Enforcement Team (COMET), with assistance from the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the St. Clair County Sheriff’s Office. The case is being prosecuted by the Criminal Division’s Organized Crime and Gang Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Tax Fraud Promoters Convicted in Conspiracy to Defraud the Internal Revenue ServiceRead the Press Release
A Midvale, Utah, man and a Henderson, Nevada, woman were convicted by a jury yesterday in the U.S. District Court in Salt Lake City of tax crimes, announced U.S. Attorney Carlie Christensen of the District of Utah and Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.
Gerrit Timmerman, of Midvale, and Carol Jean Sing, of Henderson, were convicted of conspiracy to defraud the United States related to their promotion of a tax fraud scheme.
According to the evidence introduced at trial, between April 23, 2004, and March 5, 2007, Timmerman and Sing conspired to defraud the United States by marketing “corporations sole” as part of their scheme to evade the assessment and payment of federal income taxes. Timmerman and Sing falsely told their clients that corporations sole were exempt from United States income tax laws, had no obligation to file tax returns and had no obligation to apply for tax exempt status. They further claimed that individuals could render their own income non-taxable by assigning it to the corporation sole, could draw a tax-free stipend from their corporation sole, and could render property immune from Internal Revenue Service (IRS) collection activity by transferring property to the corporation sole.
According to evidence presented at trial, Sing used Trioid International Group Inc. as a resident agent for corporations sole and other business entities for their clients. Sing and Timmerman also utilized a website to list the tax benefits of corporations sole and to post articles about the supposed tax benefits of corporations sole. At the same time, Timmerman was actively assisting others in evading their state and federal income tax liabilities, and recommended the corporation sole to his clients as another way to impair the IRS. Both defendants referred customers to one another and paid each other referral fees.
A corporation sole is a form of incorporation allowed by some states, primarily for use by religious leaders to hold title to property. Several states, including Utah in 2004 and Nevada in 2009, have disallowed the creation of new corporations sole. The IRS has publicized the fact that corporations sole have been abused by promoters in Revenue Ruling 2004-27, and even included corporations sole on their “dirty dozen” tax scams in 2004.
“Individuals who enrich themselves by promoting tax avoidance schemes and assist others in evading state and federal taxes are defrauding American taxpayers,” said U.S. Attorney Christensen. “They should expect to be prosecuted and convicted for this conduct, as yesterday’s verdict demonstrates.”
“Yesterday’s convictions send a clear message that individuals who willfully violate our nation’s tax laws through the promotion of abusive tax schemes and the creation of sham entities will be investigated and prosecuted to the fullest extent of the law,” said Principal Deputy Acting Assistant Attorney General Ciraolo. “The Tax Division is committed to working with its law enforcement partners to disrupt and dismantle these criminal enterprises.”
“Designing tax shelter transactions intended to conceal the true facts from the IRS isn't tax planning; it's criminal activity,” said Special Agent in Charge John G. Collins of IRS-Criminal Investigation in Utah. “Yesterday's verdict reinforces our commitment to every American taxpayer to identify and prosecute those who devise illegal tax shelters under the guise of religion or charities to assist their clients in evading their tax obligations.”
Sentencing is scheduled for May 20. Sing and Timmerman each face a statutory maximum sentence of five years in prison and a fine of $250,000.
Principal Deputy Assistant Attorney General Ciraolo and U.S. Attorney Christensen commended the special agents of IRS–Criminal Investigation who investigated this case, as well as Trial Attorneys Dennis R. Kihm and Andrea A. Kafka of the Tax Division, who are prosecuting the case.
Secretary General Presents on Foreign Terrorist Fighters at White House, Visits Interpol WashingtonRead the Press Release
WASHINGTON, DC – On February 19, 2015, newly elected Interpol Secretary General Jürgen Stock visited the Interpol Washington office. While at the agency, Dr. Stock addressed Interpol Washington staff, highlighting the role effective information sharing can play via the world police body’s tools and resources and underscoring that the key to the organization’s strength lies in collaboration with Interpol’s 189 other member countries. Dr. Stock also emphasized the importance of defining Interpol’s core capabilities. After his remarks, the Secretary General toured the office, visiting with analysts in Interpol Washington’s 24/7 Interpol Operations and Command Center (IOCC) and meeting with Interpol Washington’s senior staff.
Prior to his visit at Interpol Washington, the Secretary General presented at a ministerial session during the White House Summit on Countering Violent Extremism. The meeting was organized by the U.S. Department of State and attended by Secretary of State John Kerry, Attorney General Eric Holder and Assistant Attorney General John Carlin. In his address, Dr. Stock underlined the effectiveness of Interpol’s Foreign Terrorist Fighter program to deter the movements of foreign fighters. The program represents the third pillar of President Barack Obama’s National Security Strategy and was lauded as a critical component in the fight against transnational crime in the United Nations’ Security Council Resolution 2178. The program has over 40 participating countries which share information on more than 1,500 suspected and confirmed fighters linked to Syria and Iraq. Foreign fighters may seek to travel with revoked passports, stolen or lost passports, or simply their own valid travel documents. In the first two cases, Interpol’s Stolen and Lost Travel Document database can make this information available at the frontlines. In cases where the individual’s valid passport information has been shared, Interpol global tools will generate hit alarms.
For more information on Secretary General Stock’s trip to Washington, DC, read Interpol’s press release at http://www.interpol.int/News-and-media/News/2015/N2015-015.
Nebraska “Sovereign Citizen” Sentenced for Obstructing Internal Revenue Service and Filing False Property Liens Against Federal OfficialsRead the Press Release
A La Vista, Nebraska, woman was sentenced today in U.S. District Court for the District of Nebraska in Omaha to serve 36 months in prison and three years of supervised release for tax obstruction, filing a false claim and filing false retaliatory property liens, Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced.
Donna Marie Kozak, a former college instructor, was convicted by a jury on Aug. 1, 2014, on all nine counts charged in the superseding indictment. At trial, the evidence showed that in 1997, Kozak stopped filing income tax returns, and from 1997 through 2012, she obstructed the Internal Revenue Service (IRS) by hiding assets, applying for tax-exempt status for a sham entity, filing a false claim for a tax refund, sending harassing correspondence to IRS agents, and filing false liens against an IRS-Criminal Investigation special agent and others.
In about 2009, Kozak joined the “Republic for the united States of America,” a sovereign citizen group, and was the group’s designated “governor of Nebraska.” In 2012 and 2013, Kozak and Georgia resident Randall Due conspired to file false liens in retaliation for the federal criminal tax prosecution and trial convictions of associates David and Bernita Kleensang. In furtherance of the conspiracy, Kozak and Due filed a false lien for $19 million on property located in Boyd County, Nebraska, that was owned by the federal U.S. District Court judge who presided over the Kleensang trial. After Kozak was indicted by a federal grand jury for the criminal tax charges and while on pre-trial release, she filed five more false liens on properties owned by another federal U.S. District Court judge, the U.S. Attorney for the District of Nebraska, two Assistant U.S. Attorneys and an IRS-Criminal Investigation special agent. Due was tried and convicted in the District of Nebraska on related charges on Sept. 4, 2014.
Principal Deputy Assistant Attorney General Ciraolo commended the special agents of the FBI and IRS-Criminal Investigation who investigated the case and Trial Attorneys Brian Bailey and Matthew Hoffman of the Tax Division, who prosecuted the case.
Georgia Couple Found Guilty of Tax FraudRead the Press Release
A Milledgeville, Georgia, couple were found guilty of tax fraud following a three-day jury trial for skimming more than $1.5 million in cash from their business without disclosing the income, the Department of Justice announced.
Kenneth Horner, 58, and Kimberly Horner, 53, were charged with filing false corporate and personal tax returns for the years 2007 and 2008. They were convicted of all four counts charged. Their sentencing is scheduled for May 6 at 10:00 a.m. before U.S. District Judge Timothy C. Batten Sr.
“This jury recognized the defendants’ handling of cash for what it really was: a ploy to avoid disclosing income and paying taxes,” said Acting U.S. Attorney John Horn of the Northern District of Georgia.
“In willfully failing to report their total business income to the IRS, the Horners cheated the system and dodged the same basic responsibility that millions of other business owners comply with every year: fairly and honestly reporting their earnings,” said Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Today’s verdict establishes that those who engage in such criminal conduct will be held accountable. The Tax Division is committed to working with its law enforcement partners to identify, investigate and vigorously prosecute these offenders.”
“At this time of year, when hard-working citizens are sitting down to prepare their tax returns, it is especially disappointing to see the overt steps some individuals will take to hide their taxable funds from the government,” said Special Agent in Charge Veronica F. Hyman-Pillot of the Internal Revenue Service (IRS)-Criminal Investigation. “Taxpayers deserve our vigilance in the investigation and prosecution of individuals who willfully underreport their income and evade the payment of their fair share of taxes.”
According to Acting U.S. Attorney Horn, the charges and other information presented in court: Kenneth and Kimberly Horner owned Topcat Towing and Recovery Inc. (Topcat Towing), a towing business in Lithonia, Georgia. Between 2005 and 2008, Topcat Towing had an exclusive contract with DeKalb County, Georgia, for all county car tows needed from the south precinct of the county. Between 2005 and 2008, the defendants skimmed more than $1.5 million in cash receipts from their towing business and deposited those cash receipts into their personal bank account without disclosing the income to their tax return preparer or on corporate and personal tax returns filed with the IRS. The defendants tried to conceal their cash deposits from the government by “structuring” their deposits, which is the act of splitting up cash deposits that exceed $10,000 for the purpose of evading a Currency Transaction Report (CTR) from being filed.
Most financial institutions, including banks, are generally required to file CTRs for cash transactions that exceed $10,000. CTRs are submitted to the U.S. Department of Treasury. In 2007 and 2008, the defendants used their unreported cash, in part, to build a custom home in Conyers, Georgia, that was appraised at more than $900,000. The defendants owe approximately $400,000 in taxes to the IRS for their unreported income.
This case is being investigated by the IRS-Criminal Investigation. Trial Attorney Christopher J. Maietta of the Tax Division and Assistant U.S. Attorney Steven D. Grimberg of the Northern District of Georgia are prosecuting the case.
Former Military Contractor Pleads Guilty for Paying Bribe to Army Officer During Iraq WarRead the Press Release
A former military contractor who ran two Kuwaiti companies during the Iraq War pleaded guilty today for paying a $15,000 bribe to an Army National Guard officer in exchange for the award of a contract to provide buses to the United States Army, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania.
George H. Lee, 71, of Philadelphia, pleaded guilty today before U.S. District Judge Joel H. Slomsky in the Eastern District of Pennsylvania to one count of bribery of a public official. Sentencing has been scheduled for July 7, 2015.
During his guilty plea, Lee admitted that as the president and chief executive officer of American Logistics Services (ALS), a Kuwaiti company providing supplies to the U.S. military in Iraq, he paid a $15,000 bribe to Lieutenant Markus E. McClain in exchange for McClain’s agreement to award an extension of a lucrative bus contract to ALS. Specifically, Lee admitted that in August 2004 several of his employees met with McClain at Camp Arifjan, Kuwait and offered McClain $15,000 and a Rolex watch in exchange for McClain’s agreement to award the contract extension to ALS. Lieutenant McClain initially declined, but one month later Lee renewed the offer, and McClain accepted $15,000 to use his official position to award the contract extension to ALS.
McClain previously pleaded guilty to one count of accepting a gratuity and is awaiting sentencing.
The case is being investigated by the U.S. Army Criminal Investigation Command, the Defense Criminal Investigative Service and the U.S. Department of Homeland Security – Immigration and Customs Enforcement, and was previously investigated by the Office of the Special Inspector General for Iraq Reconstruction. The case is being prosecuted by Trial Attorneys John Keller and Richard Evans of the Criminal Division’s Public Integrity Section.
Former Arizona Army National Guard Sergeant Sentenced to 52 Months in Prison for Participating in Scheme to Protect Purported Drug TraffickersRead the Press Release
Fifty-Seven Individuals Previously Convicted and Sentenced as Part of This Investigation
A former member of the Arizona Army National Guard was sentenced today to 52 months in prison for his role in a scheme to accept bribes from purported drug traffickers in exchange for using his military position to protect shipments of cocaine during transportation, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division.
Raul Portillo, 42, of Phoenix, Arizona, pleaded guilty on Nov. 21, 2014, to one count of conspiracy to commit bribery and interfere with commerce by attempted extortion. U.S. District Judge James A. Soto of the District of Arizona imposed the sentence.
According to admissions made in connection with his guilty plea, Portillo, a sergeant in the Arizona Army National Guard, conspired with others from the Arizona Army National Guard to accept cash bribes to protect narcotics traffickers who were purportedly transporting and distributing cocaine from Arizona to other locations in the southwestern United States. Unbeknownst to Portillo and the other co-conspirators, however, the supposed narcotics traffickers were actually undercover FBI agents.
Specifically, Portillo admitted that he wore his official uniform, carried official forms of identification, used official vehicles and used his official authority, where necessary, to prevent police stops and searches as he drove cocaine shipments through checkpoints manned by the U.S. Border Patrol, the Arizona Department of Public Safety, and Nevada law enforcement officers. Portillo admitted that he took bribe payments totaling $12,000 for transporting cocaine on two separate occasions. Portillo also admitted that he accepted a $2,000 cash payment in exchange for recruiting an Immigration and Customs Enforcement inspector into the conspiracy.
In 2006, an arrest warrant was issued for Portillo, and Portillo was arrested in May 2011, arraigned and released on personal recognizance. Portillo admitted that in or around July 2011, he fled to avoid prosecution.
To date, 58 defendants have been convicted and sentenced for charges stemming from this investigation.
This case is part of a joint investigation conducted by the Southern Arizona Corruption Task Force (SACTF), which is comprised of the FBI, the Drug Enforcement Administration, the Bureau of Immigration and Customs Enforcement, and the Tucson Police Department. Though not part of the SACTF, the Arizona National Guard, Air Force Office of Special Investigations, Defense Criminal Investigative Service and Internal Revenue Service’s Criminal Investigation Division also participated in the investigation. The case is being prosecuted by Trial Attorneys Monique T. Abrishami and Peter N. Halpern of the Criminal Division’s Public Integrity Section.
Washington, D.C., Man Pleads Guilty to Federal Charges in Massive Identity Theft and Tax Fraud SchemeRead the Press Release
Admits Working with Others to Seek More Than $1.1 Million in Fraudulent Refunds
A Washington, D.C., man pleaded guilty to various crimes committed in a far-reaching identity theft and tax fraud scheme in which he and others filed fraudulent federal income tax returns seeking more than $1.1 million in refunds, the Justice Department announced today.
James Nelson, 31, is among approximately a dozen people who have pleaded guilty in the U.S. District Court for the District of Columbia to charges in one of the largest prosecutions to date involving the use of stolen identifying information. The overall case involves the filing of at least 12,000 fraudulent federal income tax returns that sought refunds of at least $40 million.
The guilty plea, unsealed today, was announced by U.S. Attorney Ronald C. Machen Jr. of the District of Columbia, Principal Deputy Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service-Criminal Investigation (IRS-CI) Washington Field Office, Acting Inspector in Charge David M. McGinnis of the U.S. Postal Inspection Service’s (USPIS) Washington Division, Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of Treasury, and Special Agent in Charge Kathy A. Michalko of the U.S. Secret Service’s Washington Field Office.
Nelson pleaded guilty to conspiracy to defraud the United States with respect to claims, aiding and abetting in the making of false claims for refund, and aiding and abetting in fraud and related activity involving identification information. Under federal sentencing guidelines, Nelson faces an estimated range of 41 to 51 months in prison and a fine of up to $75,000 at his sentencing before the Honorable U.S. District Judge Ellen S. Huvelle of the District of Columbia. In addition, as part of his plea agreement, Nelson must pay $636,026 in restitution to the IRS.
“James Nelson now joins numerous others who have pleaded guilty in this prosecution of a D.C.–based scheme involving at least 12,000 fake income tax returns,” said U.S. Attorney Machen. “Honest taxpayers – like those filing their returns this week – are victimized by these scammers who use stolen identities to generate fraudulent tax refunds and drain money from the U.S. Treasury. This prosecution is not over. We will remain aggressive in our efforts to investigate and prosecute tax refund fraud involving identity theft.”
“One of the Tax Division’s highest priorities is prosecuting individuals such as James Nelson and his co-conspirators, who use stolen identities to file fictitious income tax returns and claim fraudulent refunds,” said Principal Deputy Acting Assistant Attorney General Ciraolo. “This street crime threatens the very fabric of tax administration and often victimizes the most vulnerable members of our communities. The Tax Division is committed to working with our partners in law enforcement to identify these schemes, dismantle the criminal operations, and punish the offenders who view the Federal Treasury as their own personal bank account.”
“Perpetrators of identity theft schemes are motivated by greed, acting as if they are above the law and with total disregard for the consequences to the victims,” said Special Agent in Charge Kelly. “The actions of criminals, such as Mr. Nelson, create distressing hardships for many innocent taxpayers and have a devastating impact on the entire community.”
“Postal Inspectors are proud to join our federal law enforcement partners to bring this case to a successful resolution,” said Acting Inspector in Charge McGinnis. “By joining forces, we are able to bring justice to those who would misuse the U.S. mail in order to defraud innocent citizens and the U.S. government.”
“I am proud of the work done by our Office of Investigations, cooperating with other law enforcement organizations in detecting and deterring this fraud and protecting the integrity of the nation’s tax system,” said Assistant Inspector General Phillips.
“Our success in this case and similar investigations is a result of our close work with law enforcement partners,” said Special Agent in Charge Michalko. “The Secret Service worked closely with the Internal Revenue Service and the Department of Justice to share information and resources that ultimately brought James Nelson to justice. This case demonstrates there is no such thing as anonymity for those engaging in identity theft and fraudulent schemes.”
According to the government’s evidence, Nelson was among participants in a massive and sophisticated identity theft and false tax refund scheme involving an extensive network of more than 130 people, many of whom were receiving public assistance. The refunds were sought since 2006, often in the names of people whose identities had been stolen, including the elderly, people in assisted living facilities, drug addicts and incarcerated prisoners. In other cases, the refunds were sent to people who were willing participants in the scheme. The refunds listed more than 400 “taxpayer” addresses in the District of Columbia.
From December 2007 through January 2012, according to the government’s evidence, Nelson used his residential addresses, then in the District of Columbia, for the receipt of some of the fraudulently obtained tax refunds. He also recruited others to receive fraudulent refunds at their addresses. For example, Nelson paid one woman about $150 per check for each refund check delivered to her residential address in the District of Columbia.
Approximately 360 fraudulent federal income tax returns were filed with the IRS listing the addresses that were under Nelson’s control. The returns sought refunds of approximately $908,500. As a result, the IRS sent out 238 checks, totaling about $524,795, and 184 of those checks, totaling $432,804, were ultimately cashed.
Nelson also recruited others to negotiate at least 86 other refund checks, totaling approximately $203,222, causing a total intended loss to the U.S. Treasury of more than $1.1 million.
In announcing the plea, U.S. Attorney Machen, Principal Deputy Acting Assistant Attorney General Ciraolo, Special Agent in Charge Kelly, Acting Inspector in Charge McGinnis, Assistant Inspector General Phillips and Special Agent in Charge Michalko commended those who investigated the case. They also acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office, including former Assistant U.S. Attorney Sherri L. Schornstein and Paralegal Specialist Donna Galindo. Finally, they expressed appreciation for the work of Assistant U.S. Attorney Ellen Chubin Epstein of the District of Columbia’s Fraud and Public Corruption Section and Trial Attorneys Jessica N. Moran and Jeffrey B. Bender of the Tax Division, who are prosecuting the case.
U.S. District Court Rules that American Express Violated Antitrust LawsRead the Press Release
Attorney General Eric Holder today praised the decision by a judge in the United States District Court in the Eastern District of New York who found in favor of the Justice Department’s lawsuit claiming that American Express’ rules for merchants violate antitrust laws.
“Today’s decision is a triumph for fair competition and for American consumers,” said Attorney General Holder. “By recognizing that American Express’s rules harm competition, the court vindicates the promise of robust marketplaces that is enshrined in our antitrust laws. I salute the hardworking men and women who led the lengthy investigation and trial with uncommon skill and unwavering dedication. With this achievement, we are sending an unambiguous message that the Department of Justice is prepared to litigate any case, no matter how complex, in its pursuit of justice and protection for the American people.”
The United States Department of Justice and 17 state attorneys general sued American Express, Visa Inc. and MasterCard International Inc., in 2010 to eliminate restrictions that the three credit card networks imposed on merchants. Over the course of a seven week trial during the summer of 2014, the department argued that these restrictions obstruct merchants from using competition to try to keep credit card fees from increasing. The civil case, brought under Section 1 of the Sherman Antitrust Act, sought to end the violation and to restore competition.
The trial focused on credit card “swipe fees” which generate over $50 billion annually for credit card networks. Millions of merchants of all sizes and in scores of industries pay those fees. Despite these large fee revenues, the Justice Department argued that price competition over merchant swipe fees has been almost non-existent and for decades the credit card networks have not competed on price. Today’s decision was rendered by Judge Nicholas G. Garaufis.
“Merchants pay over $50 billion in credit card swipe fees each year. The department and the attorneys general of 17 states brought this case because competition over those fees was being suppressed,” said Deputy Assistant Attorney General for the Antitrust Division Leslie C. Overton. “The Court’s ruling establishes that the American Express anti-steering rules block merchants from using competition to keep credit card swipe fees down, which means higher costs to those merchants’ customers. I am proud of the outstanding work done by the investigative and trial teams. As today’s decision reaffirms, the Antitrust Division remains committed to ensuring that competition is not restricted in this important sector of the economy.”
Settlements with Visa and MasterCard were filed at the same time the case against American Express was begun; the settlements prohibit the two networks from continuing their rules and practices that had obstructed competition. The court approved the settlements on July 20, 2011, and they applied immediately to Visa and MasterCard. American Express was not a party to the settlements, and the litigation against American Express continued.
The department argued that the principal reason for an absence of price competition among credit card companies has been rules imposed by each of the networks that limit merchants’ ability to take advantage of a basic tool to keep prices competitive. That tool – commonly used elsewhere in the economy – is merchants’ freedom to “steer” transactions to a network willing to lower its price. Each network has long prohibited such steering to lower-cost cards. Now that Visa and MasterCard have reformed their anti-steering rules, American Express rules stood as the last barrier to competition.
At trial, an array of merchants came forward to explain both the substantial costs they incur when their customers pay with credit cards and their inability to ignite competition among the networks to reduce those costs. In fact, the rules not only prevent merchants from offering their customers lower prices or other incentives for choosing a less costly card, they even block merchants from providing consumers with truthful price information about the cost of swipe fees of different credit cards.
Examples, used as trial exhibits, of what the Amex rule prohibits can be found at http://www.justice.gov/atr/cases/amex/amex-te.html.
Closing arguments in the trial took place on Oct. 9, 2014. Craig Conrath was the lead trial attorney for the United States. The 17 plaintiff states were Arizona, Connecticut, Idaho, Illinois, Iowa, Maryland, Michigan, Missouri, Montana, Nebraska, New Hampshire, Ohio, Rhode Island, Tennessee, Texas, Utah and Vermont. The court also entered a scheduling order instructing the parties to submit, within 30 days, a joint proposed remedial order.
Hamza Naj Ahmed Indicted for Conspiring to Provide Material Support to the Islamic State of Iraq and the LevantRead the Press Release
Ahmed Stopped in New York While Attempting to Fly Overseas to Join Terror Organization
Defendant Also Charged with Lying to Federal Agents during Terrorism Investigation
Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Andrew M. Luger for the District of Minnesota announced today the indictment of Hamza Naj Ahmed, 19, for conspiring to provide material support to the Islamic State of Iraq and the Levant (ISIL). Ahmed is also charged with attempting to provide material support to ISIL and for making a false statement in a terrorism investigation. Ahmed was previously charged by criminal complaint for lying to FBI agents. The defendant was detained on Feb. 5, 2015, after making an initial appearance before Magistrate Judge Steven Rau in U.S. District Court in St. Paul, Minnesota.
“Hamza Ahmed is at least the fourth person from the Twin Cities charged as a result of an ongoing investigation into individuals who have traveled or are attempting to travel to Syria in order to join a foreign terrorist organization,” said U.S. Attorney Luger. “Since 2007, dozens of people from the Twin Cities have traveled or attempted to travel overseas in support of terror. While my office will continue to prosecute those who attempt to provide material support to ISIL or any other terrorist organization, we remain committed to working with dedicated community members to bring this cycle to an end.”
According to the indictment and documents filed in court, Ahmed and three companions, M.F., H.M.M. and Z.A., travelled by bus from Minneapolis to New York City’s John F. Kennedy International Airport (JFK). The four men were each booked on international flights scheduled to depart JFK on Nov. 8, 2014. Ahmed and M.F. were booked on the same flight from JFK to Istanbul, Turkey. M.F., H.M.M. and Z.A. were each prevented from boarding their flights. Ahmed successfully boarded, but was escorted from the aircraft by U.S. Customs and Border Protection agents before it left the boarding gate.
According to the indictment and documents filed in court, Ahmed was subsequently interviewed by FBI agents. He made multiple false statements during the interview, including telling agents that he was traveling alone, and that he did not know M.F. or H.M.M. When Ahmed arrived back in Minnesota on Nov. 9, 2014, FBI agents conducted a second voluntary interview, during which Ahmed again lied to agents.
This case is the result of an investigation conducted by the FBI-led Joint Terrorism Task Force.
This case is being prosecuted by Attorney Andrew Sigler of the Justice Department’s National Security Division, and Assistant U.S. Attorneys Andrew Winter and John Docherty of the District of Minnesota.
Defendant Information:
HAMZA NAJ AHMED, 19
Minneapolis, Minnesota
Charges:
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Conspiracy to Provide Material Support to a Designated Foreign Terrorist Organization, 1 count
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Attempting to Provide Material Support to a Designated Foreign Terrorist Organization, 1 count
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Making a False Statement in a Terrorism Investigation, 1 count
Hamza Ahmed Indictment
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Granite City Man Sentenced for Methamphetamine OffensesRead the Press Release
The United States Attorney for the Southern District of Illinois, Stephen R. Wigginton, announced today that Ronald J. Wiggins, 35, of Granite City, was sentenced on Wednesday, February 18, 2015 to 151 months in federal prison for offenses relating to the distribution of methamphetamine.
Wiggins pled guilty in U.S. District Court in East St. Louis on September 3, 2014 to three federal charges: Maintaining Drug-Related Premises; Distribution of Methamphetamine; and Possession With Intent to Distribute Methamphetamine.
Upon release from prison, Wiggins will also be required to serve a term of three years on supervised release.
At his change of plea hearing in September, Wiggins admitted that he had used his residence in Granite City, Illinois to distribute methamphetamine throughout 2013. Wiggins also admitted that he had sold methamphetamine to a police informant on June 13, and again on June 19, 2013, in Granite City.
The investigation which resulted in Wiggins’ arrest and conviction was conducted by the Granite City Police Department and by the U.S. Drug Enforcement Administration (DEA).
The case was assigned to Assistant United States Attorney Robert L. Garrison.
Florida Man Pleads Guilty in Prescription Drug Diversion SchemeRead the Press Release
Yusef Yassin Gomez (Yassin), 49, of Fort Myers, Florida, pleaded guilty today in U.S. District Court in the Southern District of Ohio to one count of conspiracy to commit an offense against the United States in the distribution of prescription drugs without a license.
Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division, U.S. Attorney Carter M. Stewart of the Southern District of Ohio, Special Agent in Charge Antoinette Henry of the U.S. Food and Drug Administration’s (FDA) Metro Washington Field Office and Assistant Inspector in Charge Christopher White of the U.S. Postal Inspection Service (USPIS) announced the plea entered into today before U.S. District Judge Timothy S. Black in Cincinnati.
According to court documents, Yassin and others conspired to distribute diverted prescription drugs throughout the United States, including in the Southern District of Ohio, while concealing the true illicit sources of the drugs. The conspirators falsely represented on required pedigree documents that the source of the drugs was one of two Puerto Rico companies, including Yassin’s former company, B&Y Wholesale. The false pedigrees covered up the illegitimate sources of the drugs – various illicit, unlicensed suppliers – and falsely stated that B&Y was an authorized distributor of the prescription drugs.
“American consumers expect that prescription drugs will be safe and effective and should not face the risk that counterfeit, adulterated, misbranded, sub-potent or expired drugs will be sold to them,” said Acting Assistant Attorney General Branda. “The Department of Justice will prosecute those who engage in prescription drug diversion.”
For more than four years, Yassin allowed the drugs to pass through B&Y Wholesale in Puerto Rico before shipment out to a Minnesota company owned by a co-conspirator. The Minnesota company acquired the drugs from various illegitimate suppliers, and sold the diverted drugs to purchasers nationwide, including to pharmacies in Cincinnati. In addition to letting the diverted drugs ship through his company in Puerto Rico, Yassin made wire payments to the illicit suppliers in exchange for a commission. The illegally-sourced drugs were purchased by the Minnesota company at a significantly deeper discount than is offered on legitimately-sourced drugs, thereby generating higher revenues and profits.
“Once a prescription drug is diverted outside of the regulated distribution channels, it becomes difficult, if not impossible, for regulators, law enforcement and end-users to know whether the prescription drug package actually contains the correct drug or the correct dose,” said U.S. Attorney Stewart. “Patients purchased what they believed were FDA-approved prescription drugs that had remained in regulated distribution channels intended to protect against misbranded, adulterated, sub-potent, improperly handled, counterfeit and stolen products. Instead, these customers received drugs of unknown quality and origin.”
Yassin faces a statutory maximum sentence of five years in prison and a $250,000 fine. As part of his plea agreement, he will pay a money judgment of $750,000 representing proceeds from the scheme.
This matter is being investigated by the FDA and USPIS. Assistant U.S. Attorneys Anne L. Porter and Christy Muncy of the Southern District of Ohio and Trial Attorney John W. Burke of the Civil Division’s Consumer Protection Branch are representing the United States in this case.
Detroit Real Estate Businessman Pleads Guilty to Tax and Bank FraudRead the Press Release
On Feb. 18, a Detroit man pleaded guilty in the U.S. District Court for the Eastern District of Michigan to obstructing and impeding the Internal Revenue Service (IRS) and conspiring to commit bank fraud, Principal Deputy Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced.
According to the information and other court documents, Richard Pierce failed to report over $9 million in gross business receipts during 2007 through 2013, derived from the various Detroit-area businesses that he operated and controlled, including Phoenix Real Estate Company, Phoenix Preferred Properties LLC, Detroit Matrix, First Metro Properties LLC, First Metro Real Estate Services LLC, Phoenix Office Plaza-II LLC, Rosedale/Grandmont Properties LLC, and RFP Ventures LLC. In addition, on Nov. 26, 2007, Pierce participated in a bank fraud scheme wherein he caused the submission of a false loan application to a mortgage lender on which he falsely reported that the buyer was paying $77,900 for a residential property without disclosing that the buyer received a $46,340 “kickback” from the seller.
Sentencing is scheduled for July 8 before U.S. District Court Judge Arthur J. Tarnow of the Eastern District of Michigan. Pierce faces a statutory maximum sentence of three years in prison for filing a false tax return and a statutory maximum sentence of 30 years in prison for conspiring to commit bank fraud, with maximum potential fines totaling $1.25 million.
Principal Deputy Assistant Attorney General Ciraolo commended special agents of IRS – Criminal Investigation, who investigated the case, and Trial Attorneys Mark McDonald and Christopher O’Donnell of the Tax Division, who are prosecuting the case. She also thanked the U.S. Attorney’s Office in the Eastern District of Michigan for their assistance.
Colombian National Sentenced to 360 Months in Prison for the Kidnapping and Murder of DEA Special Agent James “Terry” WatsonRead the Press Release
Second Colombian National Sentenced To 40 Months In Prison For Obstructing The Investigation
Two Colombian nationals were sentenced to prison yesterday in the Eastern District of Virginia for the kidnapping and murder of Drug Enforcement Administration (DEA) Special Agent James “Terry” Watson in Bogotá, Colombia, on June 20, 2013, and subsequent concealment of those crimes.
Attorney General Eric Holder, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office, DEA Administrator Michele M. Leonhart and Bill A. Miller, Director, U.S. State Department’s Diplomatic Security Service made the announcement.
“These two defendants bear responsibility for the kidnapping and murder of a courageous federal agent,” said Attorney General Eric Holder. “With this sentencing, they face justice for their involvement in this brutal crime. Our nation owes a great debt to Special Agent Terry Watson and his loved ones. We will never rest in our determination to honor his profound sacrifices, to pursue all who would threaten our brave men and women in law enforcement, and to carry on the vital work for which he gave his life.”
“Yesterday’s sentencing is another important step in bringing justice to those responsible for the murder of Special Agent Terry Watson,” said DEA Administrator Michele M. Leonhart. “Terry was a respected and dedicated DEA Special Agent and we will not rest until all those involved in this heinous act are sentenced. Our thoughts and prayers continue to go out to the Watson family as this case moves towards a final resolution.”
Edwin Gerardo Figueroa Sepúlveda, 39, of Bogotá, previously pleaded guilty to aiding and abetting the murder of an internationally protected person and conspiracy to kidnap an internationally protected person. Yesterday, U.S. District Judge Gerald Bruce Lee of the Eastern District of Virginia sentenced Figueroa Sepúlveda to 360 months. Wilson Daniel Peralta-Bocachica, 31, also of Bogotá, previously pleaded guilty to obstruction of justice, and was sentenced to 40 months yesterday.
In the statement of facts filed with his plea agreement, Figueroa Sepúlveda admitted that he conspired to conduct “paseo milionarios” or “millionaire’s rides” in which he and his co-conspirators lured victims into taxi cabs, then kidnapped and robbed them. He admitted that on the evening of June 20, 2013, he was part of a six-person robbery crew that targeted Special Agent Watson. One of the members of the crew picked up Special Agent Watson in his taxi, while another drove a second taxi carrying the assailants. Figueroa Sepúlveda entered the taxi carrying Special Agent Watson and shocked him with a stun gun several times while another defendant stabbed him. Special Agent Watson was able to escape from the taxi, but he later collapsed and died from his injuries.
In a statement of facts filed with his plea agreement, Peralta-Bocachica admitted that in the days following the kidnapping and murder, he washed the taxi in which Special Agent Watson was stabbed, removing the victim’s blood from the back seat then discarding the cleaning rags, before turning the taxi over to the Colombian National Police.
A total of six defendants were charged for their involvement in the murder and kidnapping of Special Agent Watson, in addition to Peralta-Bocachica who was charged with obstruction of justice. Héctor Leonardo López, 34; Julio Estiven Gracia Ramírez, 32; Andrés Álvaro Oviedo García, 22; Omar Fabián Valdes Gualtero, 28; and Édgar Javier Bello Murillo, 28, previously pleaded guilty to conspiracy to kidnap and aiding and abetting the murder of an internationally protected person. On Dec. 12, 2014, López was sentenced to 25 years in prison, Gracia Ramírez was sentenced to 27 years in prison, and Oviedo García was sentenced to 20 years in prison. Omar Fabián Valdes Gualtero and Édgar Javier Bello Murillo are scheduled to be sentenced on April 15, 2015.
This case was investigated by the FBI, DEA and the Diplomatic Security Service, in close cooperation with Colombian authorities and with assistance from INTERPOL and the Justice Department’s Office of International Affairs. The case is being prosecuted by Special Counsel Stacey Luck of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Michael P. Ben’Ary of the U.S. Attorney’s Office for the Eastern District of Virginia.
The Department of Justice gratefully acknowledges the Colombian Attorney General’s Office, Colombian National Police, Colombian Directorate of Criminal Investigation and Interpol (DIJIN), DIJIN Special Investigative Unit, Bogotá Metropolitan Police, Bogotá Police Intelligence Body (CIPOL) Unit and Colombian Technical Investigation Team for their extraordinary efforts, support and professionalism in responding to this incident.
Arlington Heights, Illinois, Company and its Owner and Employee Charged with Illegal Export and Import of Military ArticlesRead the Press Release
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 Gary Hartwig of Homeland Security Investigations Chicago, Special Agent in Charge James C. Lee of the Internal Revenue Service’s (IRS) Chicago Office and Special Agent in Charge Brian Reihms of the Department of Defense Criminal Investigative Service in Chicago announced today that an Arlington Heights, Illinois, company, its president and a former employee were indicted on federal charges for unlawfully exporting and importing military articles, including components used in night vision systems and an M1A1 Abrams tank, which is the main battle tank used by the U.S. Armed Forces. The defendants were charged in an indictment returned by a federal grand jury in January and made public this week.
Vibgyor Optical Systems Inc., a company located in Arlington Heights, purported to manufacture optics and optical systems, including items that were to be supplied to the U.S. Department of Defense (DOD). Instead of manufacturing the items in Illinois, as it claimed, Vibgyor illegally sent the technical data for, and samples of, the military articles to manufacturers in China, then imported the items from China to sell to its customers—including DOD prime contractors. Bharat “Victor” Verma, 74, of Arlington Heights, Vibgyor’s president, and Urvashi “Sonia” Verma, 40, of Chicago, a former Vibgyor employee and owner of a now-defunct company that operated as a subcontractor for Vibgyor, were also charged in the indictment.
According to the indictment, between November 2006 and March 2014, the defendants conspired to defraud the United States and violate the Arms Export Control Act (AECA) and International Traffic in Arms Regulations. The AECA prohibits the export or import of defense articles and defense services without first obtaining a license from the U.S. Department of State and is one of the principal export control laws in the United States. Under the International Traffic in Arms Regulations, any person seeking to import items designated as defense articles on the United States Munitions Import List is required to obtain a permit to do so from the Bureau of Alcohol, Tobacco, Firearms and Explosives. Vibgyor won subcontracts to supply optical components and systems to DOD prime contractors by misrepresenting the location of manufacture of the items it supplied. Bharat Verma falsely claimed that the items Vibgyor supplied were manufactured in domestically, when they actually had been manufactured in China, based on information illegally exported to Chinese manufacturers. In addition to illegally providing technical data for a military item to China, Urvashi Verma attempted to ship an example of one of the military items to the Chinese manufacturer.
“The Arms Export Control Act and the International Traffic in Arms Regulations are vital to preventing embargoed countries from gaining access to our sensitive military technology, and to ensuring that our armed forces are not issued substandard equipment,” said U.S. Attorney Fardon. “Where companies and individuals seek to violate the AECA and the International Traffic in Arms Regulations, we will not hesitate to act."
Vibgyor, Bharat Verma and Urvashi Verma are charged with one count of conspiracy to violate both the AECA and the International Traffic in Arms Regulations; one count of conspiracy to defraud the United States—each offense is punishable by up to five years’ imprisonment—and one count of violating the AECA, with a maximum possible penalty of 20 years in prison and a fine up to $1,000,000. Vibgyor and Bharat Verma were also charged with international money laundering, an offense with a maximum possible sentence of 20 years’ imprisonment and a fine up to $500,000. The defendants are scheduled to be arraigned Friday, Feb. 20, 2015, before U.S. Magistrate Judge Sidney I. Schenkier.
The case is being prosecuted by Trial Attorney Casey Arrowood of the Justice Department’s National Security Division, and Assistant U.S. Attorneys Diane MacArthur, Bolling W. Haxall and Shoba Pillay of the Northern District of Illinois.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
New York Man Residing in the Hamptons Pleads Guilty to Obstructing Internal Revenue Service for Concealing Swiss Bank AccountsRead the Press Release
A Montauk, New York, resident pleaded guilty today in the U.S. District Court in the Eastern District of New York to corruptly endeavoring to obstruct and impede the Internal Revenue Service (IRS), Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division announced today.
According to court documents and statements, Georges Briguet, a naturalized U.S. citizen, had Swiss financial accounts at UBS AG and at Clariden Leu Ltd., which was a wholly owned subsidiary of Credit Suisse AG. He opened the UBS account in Switzerland in or around 1992, with approximately 7 million Swiss francs. In 2008, he transferred the UBS funds to a numbered account at Clariden Leu in Switzerland, which he maintained until at least 2011. For tax years 2001 through 2010, Briguet filed false federal income tax returns on which he failed to report his foreign financial accounts, failed to report any income earned thereon and failed to pay any taxes on such foreign income.
In addition, Briguet was interviewed by an IRS revenue agent who was conducting a civil audit. During the interview, Briguet falsely stated that he had no foreign income and no foreign financial accounts. He then later repeated those false statements to an IRS special agent who interviewed Briguet as part of a criminal investigation.
At sentencing, Briguet faces a statutory maximum sentence of three years in prison and a $250,000 fine. As part of his plea agreement, Briguet has agreed to pay the IRS restitution in the amount of $169,935.
Principal Deputy Assistant Attorney General Ciraolo commended special agents of IRS - Criminal Investigation who investigated the case, and Trial Attorneys Mark Kotila and Jeffrey Bender and Senior Litigation Counsel Mark Daly of the Tax Division, who are prosecuting the case. She also thanked the U.S. Attorney’s Office in the Eastern District of New York for their assistance.
Justice Department Reaches Settlement with Washington County, Missouri, to Ensure Accessibility of Public FacilitiesRead the Press Release
The Department of Justice announced today an agreement with Washington County, Missouri, to resolve issues of accessibility of buildings that offer county services and programs. This year marks the 25th anniversary of the Americans with Disabilities Act (ADA), which the Civil Rights Division plays a critical role in enforcing.
Washington County and the U.S. Department of Justice reached an agreement under Project Civic Access (PCA), the department’s wide-ranging initiative to ensure that cities, towns and counties throughout the country comply with the ADA. Under the agreement the county is required to ensure that people with disabilities can get inside buildings that offer county services and programs, and take full advantage of those services and programs.
The agreement with Washington County will allow people with disabilities to access county services and programs, such as Randy Barron, who attempted to apply for a marriage license. Barron was met with barriers after he got through the front door of the county building and found that the ramp going to the Recorder of Deeds office was too steep for him to safely get his wheelchair down. In addition, there was no room for him to maneuver his wheelchair to a flat surface and reach the door. Experiences like this, however, will become a thing of the past over the next three years thanks to the PCA agreement. You can learn more about Barron’s story by checking out the Justice Department blog, where each month of 2015, the department is highlighting how PCA agreements have an impact on the everyday lives of people with disabilities.
Under the agreement, Washington County will ensure that people with disabilities can get inside buildings that offer county services and programs, and take full advantage of those services and programs. The county is required to remove architectural barriers in its buildings, including making entrances accessible. Washington County has already installed an elevator to provide access to the upper and lower levels of the courthouse.
“Access to a county government’s programs, services and activities is a fundamental civil right guaranteed to community members,” said Acting Assistant Attorney General Vanita Gupta of the Civil Rights Division. “Through this agreement, Mr. Barron and other individuals with disabilities will have the opportunity not only to get in the front door of county buildings, but have access to all aspects of civic life provided by the county.”
For more information about the ADA, today’s agreement and the PCA initiative, individuals may access the ADA Web page at http://www.ada.gov/civicac.htm or call the toll-free ADA Information Line at (800) 514-0301 or (800) 514-0383 (TTY).
Former Miami-Dade County, Florida, Vendor Involved in Kickback Scheme Pleads Guilty to Filing False Tax ReturnRead the Press Release
A resident of Great Neck, New York, pleaded guilty today in the U.S. District Court for the Southern District of Florida to a one-count information charging him with filing a false federal income tax return, Principal Deputy Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division announced today.
According to the Information and court filings, Paul Raifaizen was an owner of Data Industries Inc., a computer consulting company located in the state of New York, which provided information technology services to public and private sector entities. Between 1998 and 2012, Data Industries provided information technology services to Miami-Dade County. Jesus Pons was a Computer Services Manager at the General Services Administration of Miami-Dade County. Pons was responsible for managing and allocating resources to information technology projects for Miami-Dade County, as well as supervising work performed by county vendors. From 2007 to 2011, Raifaizen and Pons engaged in an illegal kickback scheme in which Raifaizen made kickback payments to Pons in exchange for Pons approving payments from Miami-Dade County to Raifaizen’s company for consulting work that was never performed. Raifaizen did not report the payments he received from this kickback scheme on his 2011 individual income tax return. According to the plea agreement, the tax due and owing to the Internal Revenue Service (IRS) as a result of this scheme is between $200,000 and $400,000.
Raifaizen is scheduled to be sentenced on May 1. He faces a statutory maximum sentence of three years in prison and a $250,000 fine for filing a false tax return.
Principal Deputy Assistant Attorney General Ciraolo commended special agents of IRS – Criminal Investigation, who investigated the case, and thanked the U.S. Attorney’s Office for the Southern District of Florida for their assistance, as well as Trial Attorneys Jeffrey McLellan and Erin Pulice 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.
Florida Man Sentenced to 110 Months in Prison for Conspiring to Murder a Foreign National; Sale and Smuggling of Deadly ToxinsRead the Press Release
Assistant Attorney General of National Security John P. Carlin, U.S. Attorney Paul J. Fishman of the District of New Jersey, Special Agent in Charge John P. Woods of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Newark, New Jersey, and Special Agent in Charge Richard M. Frankel of the FBI’s Newark Division announced that a Florida man was sentenced today to 110 months in prison for producing and selling potentially deadly toxins ricin and abrin for use as weapons, and conspiring to kill a woman in the United Kingdom.
Jesse William Korff, 20, of Labelle, Florida, pleaded guilty before U.S. District Judge Peter G. Sheridan on Aug. 12, 2014, to an information charging him with five counts of developing, producing, transferring and possessing toxins, five counts of smuggling toxins and one count of conspiring to kill a person in a foreign country.
Korff was arrested in Florida on Jan. 18, 2014, following a joint investigation by HSI and the FBI of Korff’s sales of toxins through an underground, Internet-based marketplace known as “Black Market Reloaded” (BMR).
“Jesse Korff peddled his poison in a shadowy, online network favored by cybercriminals,” said U.S. Attorney Fishman. “He also offered guidance on its effective use, and his sentence today appropriately took account of his participation with an overseas customer in an attempted murder plot. Fortunately, law enforcement was able to intercede before Korff could conclude his deadly transaction.”
“This sentence should serve as a warning to those who capitalize from the use of underground websites such as BMR,” said Special Agent in Charge Woods. “HSI will maintain its unrelenting commitment to protecting our land borders as well as virtual borders from individuals like Korff. Anyone who mistakenly thinks that they can get away with these types of crimes by hiding in the endless depths of the internet must know that HSI will seek them out and bring them to justice.”
“Jesse Korff acquired abrin and ricin, potentially lethal toxins, through an underground internet-based marketplace, so they could be used for deadly purposes,” said Special Agent in Charge Frankel. “Thankfully, with the coordinated efforts of our law enforcement partners, and the tactical and technical expertise of the FBI’s Joint Terrorism Task Force, he was intercepted and his potentially deadly threats did not become a reality.”
According to documents filed in this case and statements made in court:
Beginning in April 2013, HSI special agents in Newark launched an investigation of illicit sales activity on BMR. The website provided a platform for vendors and buyers to conduct anonymous online transactions involving the sale of a variety of illegal goods, including biological agents, toxins, firearms, ammunition, explosives, narcotics and counterfeit items.
From August 2013 through January 2014, Korff maintained a seller’s profile on BMR under the moniker “Snowman840.” Korff advertised the sale of deadly toxins and provided his prospective purchasers with information about quantities necessary to kill a person of a given weight, along with instructions on how to secretly administer the toxin so as to avoid suspicion by law enforcement officials. Korff sold various quantities of ricin and abrin to international purchasers located in India, Austria, Denmark and England. Korff smuggled the toxins from Florida to the international purchasers by concealing the toxins in packages sent through the U.S. Postal Service.
On at least one occasion in December 2013, Korff agreed to produce, and ultimately provided, a quantity of abrin to a purchaser in London who intended to poison and kill an individual she claimed was her mother. After the purchaser’s receipt and administration of the initial dose, which was ineffective, Korff agreed to provide a second quantity of the toxin in order to assist the purchaser in the implementation of the murder plot.
Before Korff had an opportunity to smuggle the second dose of abrin to the London purchaser, an undercover agent contacted Korff through BMR and commenced negotiations for the sale of two liquid doses of abrin. During their online conversations, Korff told the agent about his delivery methods – concealing vials in a carved-out and re-melted candle – and discussed how much abrin was needed to kill a person of a particular weight and how best to administer the toxin. Korff also assured the agent that a victim’s poisoning symptoms would mimic a bad case of the flu, subsequently resulting in death. Korff claimed that the toxin would not ordinarily be detected in an autopsy.
Korff and the agent agreed on a total purchase price of $2,500 for two doses of the poison, which was intended to be smuggled from Florida, through New Jersey, en route to a destination in Canada. Korff designated a prearranged location for the transfer of the toxins, and e-mailed the agent pictures of a specific spot at a rest stop approximately 10 miles outside Fort Myers, Florida, where he planned to leave a package containing the abrin.
On the arranged day, Korff dropped off a fast food bag containing two wax candles at the location. Another undercover agent collected the bag and left behind the required payment. Law enforcement had Korff under surveillance throughout the transaction.
Subsequent forensic analysis by the FBI of the liquid contained within the vials revealed the presence of active abrin. Even a small dose of the toxin is potentially lethal to humans if ingested, inhaled or injected – causing death within 36 to 72 hours from the time of exposure.
Following Korff’s arrest, law enforcement agents conducted an exhaustive, three-day search of Korff’s property. As a result of those efforts, agents recovered several computers, castor beans, rosary peas, capsules, vials, jars, syringes, filters, respirators and other items commonly utilized in the manufacture, production, sale, packaging and shipping of toxins and chemical substances, as well as numerous firearms. Among the items recovered was the second liquid dose of abrin that Korff had intended to ship to the London purchaser. Significantly, information and evidence obtained by U.S. law enforcement agents in this case was shared with, and successfully used by, authorities in England, Denmark and Austria to disrupt related criminal activities in those nations.
In addition to the prison term, U.S. District Judge Anne E. Thompson sentenced Korff to five years of supervised release and fined him $1,000.
Assistant Attorney General Carlin joins U.S. Attorney Fishman in thanking the special agents of HSI offices in Newark and Ft. Myers, Florida, and the FBI offices in Newark and Tampa, Florida, for their efforts with the investigation that led to today’s sentence. He also thanked the FBI’s Joint Terrorism Task Force, including the U.S. Postal Inspection Service and the Glades County, Henry County and Lee County, Florida, sheriff’s offices for their assistance. Vital support was provided by the FBI WMD Directorate in Washington, D.C., the FBI Laboratory Division, the DHS National Bioforensic Analysis Center, the U.S. Attorney’s Office for the Middle District of Florida, and the London Metropolitan Police Service (MPS), SO15 Counter Terrorism Command, under the direction of Commander Duncan Ball.
The government is represented by Attorney Joseph N. Kaster of the Justice Department’s National Security Division and Assistant U.S. Attorney Dennis C. Carletta of the District of New Jersey.
Father and Son Pizza Store Owners Sentenced for Tax FraudRead the Press Release
The father and son owners and operators of pizza stores in the Raleigh, North Carolina, area were sentenced today in the U.S. District Court for the Eastern District of North Carolina for willfully filing false tax returns, the Justice Department announced.
Thair Alwan was sentenced to serve one year and one day in prison to be followed by one year of supervised release, and was required to pay a $10,000 fine. Saill Fadhil, Alwan’s son, was sentenced to serve 30 days in prison to be served during three years of probation and was required to pay a $5,000 fine. The defendants pleaded guilty to these tax crimes on July 15, 2014.
According to court documents and statements made in court, Alwan and Fadhil own and operate I Love NY Pizza stores in the Raleigh area. During tax years 2008 and 2009, Alwan and Fadhil skimmed approximately $1.34 million from the company’s various stores and willfully filed false federal income tax returns that failed to report the income, resulting in substantial tax underpayments. The skimmed cash receipts were used for personal expenditures and deposited into their personal bank accounts. When making cash deposits, Alwan structured the transactions to be under $10,000 and avoided the filing of Currency Transaction Reports.
This case was investigated by special agents of IRS – Criminal Investigation and prosecuted by Trial Attorney Todd Ellinwood of the Justice Department's Tax Division and Assistant U.S. Attorney Adam Hulbig of the Eastern District of North Carolina.
Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.
Department of Justice and Federal Trade Commission Announce Agenda for Public Workshop on Examining U.S. Health Care CompetitionRead the Press Release
The Department of Justice and the Federal Trade Commission (FTC) have issued the agenda for their joint public workshop, Examining Health Care Competition, which will be held on Feb. 24 and 25, 2015, at the Constitution Center Auditorium located at 400 7th Street S.W., Washington, D.C., 20024.
The workshop will study recent developments related to health care provider organization and payment models, with an emphasis on how they may affect competition in the provision of health care services. Specific discussion topics will include early observations regarding accountable care organizations; alternatives to traditional fee-for-service payment models; trends in provider consolidation; trends in provider network and benefit design strategies, as well as contracting practices and regulatory activity that may enhance or undermine these strategies; and early observations regarding health insurance exchanges.
The workshop will be webcast live on the FTC’s website. Registration information and directions to the FTC Conference Center are available on the event web page. Advance registration is not required, but is strongly encouraged.
Public comments can be submitted through April 30, 2015. Suggested comment topics, and instructions on how to submit comments online and by mail, can be found in the Federal Register notice.
Reasonable accommodations for people with disabilities who wish to attend the workshop in person are available upon request. Requests should be submitted via email to [email protected] or by calling Lara Kittelson at 202-326-3388. Requests should be made in advance. Please include a detailed description of the accommodation needed and provide contact information.
Press contacts:
Department of Justice
Office of Public Affairs
Emily Pierce
202-514-2007Federal Trade Commission
Office of Public Affairs
Betsy Lordan
202-326-3707Staff contacts:
Department of Justice
Antitrust Division, Office of Legal Policy
Patrick M. Kuhlmann
202-305-4639Federal Trade Commission
Office of Policy Planning
Stephanie A. Wilkinson
202-326-2084Attorney General Holder Statement on the Departure of Brendan Johnson as the United States Attorney of the District of South DakotaRead the Press Release
Attorney General Eric Holder released the following statement on the departure of U.S. Attorney Brendan Johnson:
“During Brendan Johnson's tenure as United States Attorney for South Dakota, he has distinguished himself as an exemplary leader, a passionate advocate for his fellow citizens, and an extraordinarily dedicated public servant," said Attorney General Holder. "As a lawyer and as a leader, Brendan has set a standard of excellence that will not soon be surpassed. Particularly with regard to public safety challenges on tribal lands, he has served as a key advisor to senior Justice Department officials - including me. As past Chair of the Native American Issues Subcommittee, he is not only a respected champion for tribal justice in his own right, but a critical national leader - offering sound guidance, wise counsel, and candid advice on a host of pressing issues. In standing against violent crime, fraud, drug trafficking, violence against women, and countless other threats, Brendan's fierce and determined service, on behalf of the people of South Dakota, has been without equal. Although he will be greatly missed, his many contributions will endure. I thank him for his outstanding service - to South Dakota, and to our nation - and wish him all the best as he takes on new challenges and opportunities.”
Russian National Charged in Largest Known Data Breach Prosecution Extradited to United StatesRead the Press Release
Defendant Brought From Netherlands
After Fighting Extradition for Over Two Years
A Russian national appeared in federal court in Newark today after being extradited from the Netherlands to face charges that he conspired in the largest international hacking and data breach scheme ever prosecuted in the United States, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Secretary Jeh Johnson of the Department of Homeland Security, U.S. Attorney Paul J. Fishman of the District of New Jersey and Acting Director Joseph P. Clancy of the U.S. Secret Service.
Vladimir Drinkman, 34, of Syktyykar and Moscow, Russia, was charged for his alleged role in a data theft conspiracy that targeted major corporate networks, stole more than 160 million credit card numbers, and caused hundreds of millions of dollars in losses. Prior to his extradition, he had been detained by the Dutch authorities since his arrest in the Netherlands on June 28, 2012.
Drinkman appeared today before U.S. Magistrate Judge James B. Clark and entered a plea of not guilty to all 11 counts charged in the indictment and was ordered detained without bail. Trial before U.S. District Judge Jerome B. Simandle was scheduled for April 27, 2015.
“Cyber criminals conceal themselves in one country and steal information located in another country, impacting victims around the world,” said Assistant Attorney General Caldwell. “Hackers often take advantage of international borders and differences in legal systems, hoping to evade extradition to face justice. This case and today's extradition demonstrates that through international cooperation, and through great teamwork between the Department of Justice and the Department of Homeland Security, we are able to bring cyber thieves to justice in the United States, wherever they may commit their crimes.”
“Drinkman’s extradition on the indictment this office brought more than a year and a half ago shows how relentlessly we will pursue those who are charged with these serious crimes,” said U.S. Attorney Fishman. “The incredibly sophisticated work with our partners at the U.S. Secret Service to uncover this enormous, far-reaching scheme demanded an equal effort by our colleagues at the Department of Justice Criminal Division in Washington and our law enforcement partners overseas to bring the defendant back to face these charges.”
“This case demonstrates our commitment to fulfilling an important part of our integrated mission; that of protecting our Nation’s critical financial infrastructure,” said Acting Director Clancy. “Our success in this investigation and other similar investigations is a credit to our skilled and relentless cyber investigators. Our determination, coupled with our network of foreign law enforcement partners, ensures that our investigative reach can expand beyond the borders of the United States.”
According to the second superseding indictment, unsealed on July 25, 2013, and other court filings, Drinkman and four co-defendants each served particular roles in the scheme. Drinkman and Alexandr Kalinin, 28, of St. Petersburg, Russia, each allegedly specialized in penetrating network security and gaining access to the corporate victims’ systems. Roman Kotov, 33, of Moscow, allegedly specialized in mining the networks Drinkman and Kalinin compromised to steal valuable data. According to allegations in the indictment, the hackers hid their activities using anonymous web-hosting services provided by Mikhail Rytikov, 27, of Odessa, Ukraine. Dmitriy Smilianets, 31, of Moscow, then allegedly sold the stolen information and distributed the proceeds of the scheme to the participants.
Drinkman and his co-defendants are charged with attacks on NASDAQ, 7-Eleven, Carrefour, JCP, Hannaford, Heartland, Wet Seal, Commidea, Dexia, JetBlue, Dow Jones, Euronet, Visa Jordan, Global Payment, Diners Singapore and Ingenicard. It is not alleged that the NASDAQ hack affected its trading platform.
Drinkman and Kalinin were previously charged in New Jersey as “Hacker 1” and “Hacker 2” in a 2009 indictment charging Albert Gonzalez, 33, of Miami, in connection with five corporate data breaches, including the breach of Heartland Payment Systems Inc., which at the time was the largest ever reported. Gonzalez is currently serving 20 years in federal prison for those offenses. Kalinin is also charged in two federal indictments in the Southern District of New York: one charges Kalinin in connection with hacking certain computer servers used by NASDAQ and the second charges him and another Russian hacker, Nikolay Nasenkov, with an international scheme to steal bank account information from U.S.-based financial institutions. Rytikov was previously charged in the Eastern District of Virginia with an unrelated scheme.
Drinkman and Smilianets were arrested at the request of the United States while traveling in the Netherlands on June 28, 2012. Smilianets was extradited on Sept. 7, 2012, and remains in federal custody. Kalinin, Kotov and Rytikov remain at large. All of the defendants are Russian nationals except for Rytikov, who is a citizen of Ukraine.
The Attacks
According to allegations in the indictment, the five defendants conspired with others to penetrate the computer networks of several of the largest payment processing companies, retailers and financial institutions in the world, stealing the personal identifying information of individuals. They allegedly took user names and passwords, means of identification, credit and debit card numbers and other corresponding personal identification information of cardholders. The conspirators allegedly acquired at least 160 million card numbers through hacking.
The initial entry was often gained using a “SQL injection attack.” SQL, or Structured Query Language, is a type of programming language designed to manage data held in particular types of databases. The hackers allegedly identified vulnerabilities in SQL databases and used those vulnerabilities to infiltrate a computer network. Once the network was infiltrated, the defendants allegedly placed malicious code, or malware, on the system. This malware created a “back door,” leaving the system vulnerable and helping the defendants maintain access to the network. In some cases, the defendants lost access to the system due to companies’ security efforts, but were allegedly able to regain access through persistent attacks.
Instant message chats obtained by law enforcement reveal that the defendants allegedly targeted the victim companies for many months, waiting patiently as their efforts to bypass security were underway, sometimes leaving malware implanted for more than a year.
The defendants allegedly used their access to the networks to install “sniffers,” which were programs designed to identify, collect and steal data from the victims’ computer networks. The defendants then allegedly used an array of computers located around the world to store the stolen data and ultimately sell it to others.
Selling the Data
After acquiring the card numbers and associated data—which they referred to as “dumps”—the conspirators allegedly sold it to resellers around the world. The buyers then sold the dumps through online forums or directly to individuals and organizations. Smilianets was allegedly in charge of sales, selling the data only to trusted identity theft wholesalers. He allegedly charged approximately $10 for each stolen American credit card number and associated data, approximately $50 for each European credit card number and associated data and approximately $15 for each Canadian credit card number and associated data, offering discounted pricing to bulk and repeat customers. Ultimately, the end users encoded each dump onto the magnetic strip of a blank plastic card and cashed out the value of the dump by either withdrawing money from ATMs or making purchases with the cards.
Covering Their Tracks
The defendants allegedly used a number of methods to conceal the scheme. Rytikov allegedly allowed his clients to hack with the knowledge he would never keep records of their online activities or share information with law enforcement.
Over the course of the conspiracy, the defendants allegedly communicated through private and encrypted communications channels to avoid detection. Fearing law enforcement would intercept even those communications, some of the conspirators allegedly attempted to meet in person.
To protect against detection by the victim companies, the defendants allegedly altered the settings on victim company networks to disable security mechanisms from logging their actions. The defendants also allegedly worked to evade existing protections by security software.
As a result of the scheme, financial institutions, credit card companies and consumers suffered hundreds of millions in losses—including more than $300 million in losses reported by just three of the corporate victims—and immeasurable losses to the identity theft victims in costs associated with stolen identities and false charges.
The charges and allegations contained indictments are merely accusations and the defendants are presumed innocent unless and until proven guilty.
The ongoing investigation is being conducted by the U.S. Secret Service. The case is being prosecuted by Trial Attorney Rick Green of the Criminal Division’s Computer Crime and Intellectual Property Section, Chief Gurbir S. Grewal of the District of New Jersey’s Economic Crimes Unit, and Assistant U.S. Attorney Andrew S. Pak of the Computer Hacking and Intellectual Property Section of the District of New Jersey’s Economic Crimes Unit.
The Criminal Division’s Office of International Affairs assisted with the case, as did public prosecutors with the Dutch Ministry of Security and Justice and the National High Tech Crime Unit of the Dutch National Police.
Drinkman et al Indictment
Owner of Miami Home Health Company Pleads Guilty for Lead Role in $13 Million Medicare Fraud SchemeRead the Press Release
An owner of a Miami home health care company pleaded guilty today in connection with a $13 million Medicare fraud scheme that involved paying kickbacks and bribes to Medicare beneficiaries, doctors’ offices, medical clinics and others in exchange for patient referrals and fraudulent prescriptions to support fraudulent billings to Medicare.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Special Agent in Charge George L. Piro of the FBI’s Miami Field Office and Special Agent in Charge Derrick Jackson of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office made the announcement.
Alexander Lara, 46, of Hollywood, Florida, pleaded guilty to one count of conspiracy to commit health care fraud before U.S. Magistrate Judge Chris M. McAliley of the Southern District of Florida. A sentencing hearing is scheduled for May 14, 2015.
According to his plea documents, Lara was an owner and operator of Longcare Home Health Corporation (Longcare Home Health), a Miami home health care agency that purported to provide home health and therapy services to Medicare beneficiaries. In connection with his guilty plea, Lara admitted that he and his co-conspirators actually operated Longcare Home Health for the purpose of billing the Medicare program for, among other things, expensive physical therapy and home health care services that were not medically necessary or not provided at all.
As an organizer and leader of the schemes at Longcare Home Health, Lara admitted that he personally paid kickbacks and bribes to patient recruiters and Medicare beneficiaries in exchange for patient referrals. Lara also admitted that he paid kickbacks and bribes to doctors’ offices and clinics in exchange for fraudulent prescriptions for medically unnecessary therapy and home health services for Medicare beneficiaries. These false prescriptions and recruited patients were used to fraudulently bill the Medicare program for home health care services, and Lara admitted that he personally oversaw the submission of these fraudulent claims. From approximately January 2009 through November 2014, Medicare paid approximately $13.7 million for the fraudulent claims submitted by Longcare Home Health.
The case was investigated by the FBI and HHS-OIG, 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 Florida. This case is being prosecuted by Trial Attorney Anne P. McNamara of the Criminal Division’s Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 2,100 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.
In Milestone for Sentencing Reform, Attorney General Holder Announces Record Reduction in Mandatory Minimums Against Nonviolent Drug OffendersRead the Press Release
New Data Revealed by Justice Department Shows Rate at Which Feds Pursued Mandatory Minimum Penalties in Drug Trafficking Cases Has Hit Record Low
In One of His Final Speeches Before Stepping Down, Holder Lauds Progress In Sentencing Reform Initiative He Launched in ‘13
In a major advance for the sentencing reform project that has been one of his signature initiatives, Attorney General Eric Holder on Tuesday announced that federal drug prosecutors have shifted away from seeking mandatory minimums at record rates, while reserving stricter sentences for more serious offenders.
Speaking at the National Press Club, Attorney General Holder revealed that in the first full year since he imposed reforms to the Justice Department’s charging policies in nonviolent drug trafficking cases, federal prosecutors not only prosecuted fewer such cases overall, but also pursued mandatory minimum sentences at a dramatically lower rate than the year prior. In fact, according to the U.S. Sentencing Commission, in FY2014, federal drug prosecutors pursued mandatory minimums at the lowest rate on record.
“For years prior to this administration, federal prosecutors were not only encouraged – but required – to always seek the most severe prison sentence possible for all drug cases, no matter the relative risk they posed to public safety. I have made a break from that philosophy,” said Attorney General Holder. “While old habits are hard to break, these numbers show that a dramatic shift is underway in the mindset of prosecutors handling nonviolent drug offenses. I believe we have taken steps to institutionalize this fairer, more practical approach such that it will endure for years to come.”
The figures announced Tuesday were compiled by the U.S. Sentencing Commission at the request of the Justice Department to measure the impact of several reforms implemented in 2013 through Attorney General Holder’s “Smart on Crime” initiative. Those reforms—aimed at restoring fairness to the criminal justice system and at confronting the problem of America’s overcrowded prison system—instructed federal prosecutors to exercise greater discretion in selecting drug cases to bring to federal court. The data suggests prosecutors heeded that call, as the overall number of federal drug trafficking cases dropped by six percent in FY2014.
While the sheer number of drug cases went down, the data also showed that federal prosecutors have prioritized more serious cases. Holder pointed to a rise in the average guideline minimum sentence, from 96 months in FY2013 to 98 months this past year. That suggests the severity of offenses prosecuted in FY2014 was slightly higher.
Most important of all, Holder said, was the trend observed with respect to mandatory minimums. After several years in a row that saw federal prosecutors pursue such mandatory sentences in roughly two-thirds of drug cases, last year’s rate dropped to one-in-two. The Attorney General said this showed that the department was succeeding in reserving these strict sentences for the worst types of offenders rather than imposing indiscriminately.
“This figure, perhaps more than any other, shows the significant impact that our policy reforms are having,” said Attorney General Holder. “These are extremely encouraging results.”
Holder also presented statistics rebutting past criticisms of the “Smart on Crime” initiative. For instance, though some warned that the reduced application of mandatory minimums would remove the incentive for defendants to act as government witnesses, the Sentencing Commission’s data showed that defendants provided cooperation at the same rate as in years past.
Attorney General Holder Delivers Remarks at the National Press ClubRead the Press Release
Remarks as prepared for delivery
Thank you, President [John] Hughes, for that kind introduction – and for your leadership, and stewardship, of this venerable institution. I’d also like to thank past President Donna Leinwand Leger, of USA Today, for inviting me to be here this afternoon; the National Press Club’s officers, and your entire Board of Governors, for their critical work; and all of the journalists, both in and beyond this crowd, who contribute so much to our national discourse.
It is a pleasure to stand today among so many distinguished members of the Fourth Estate. And I am humbled to follow in the footsteps of the remarkable men and women who have addressed this organization since its founding, over a century ago. Before we open the floor for questions this afternoon, I’d like to take a few minutes to discuss the latest developments in the Justice Department’s ongoing efforts in the field of criminal justice reform – as well as the significant and extremely promising results we’re beginning to see just 18 months after the launch of our Smart on Crime initiative.
When I took office as Attorney General, a little over six years ago, I came to the job having seen America’s justice system from a number of angles – primarily as a prosecutor, but also as a judge, and as an attorney in private practice. I’d had the great honor of serving alongside – and learning from – countless dedicated lawyers, brave men and women in law enforcement, and leading criminal justice experts of all stripes. I’d served under Administrations led by presidents of both political parties. I knew that, despite the laudable progress we’d brought about – over the past two decades – in lowering the overall crime rate, real and daunting challenges remained before us. And I understood that few of these challenges were more pressing than the need to strengthen the federal criminal justice system – and reduce America’s overreliance on incarceration.
After all, although the United States comprises just five percent of the world’s population, we incarcerate almost a quarter of its prisoners. While the entire U.S. population has increased by about a third since 1980, the federal prison population has grown by almost 800 percent over the same period. And on the day I took office, as a result of often well-intentioned policies designed to be “tough” on drugs, nearly half of all federal inmates were serving time for drug-related offenses.
As many of you have so thoroughly reported, this state of affairs not only had serious financial ramifications for our country – occupying roughly a third of the Justice Department’s budget in recent years; it exacted a human and moral toll that’s impossible to calculate. Studies showed that the policies that imposed these costs had not had a significant impact in making our communities measurably safer. And the persistence of this status quo demanded that national criminal justice leaders closely examine our institutions and reorient our practices to create the more perfect Union that our founders imagined – and the more just society that all Americans deserve.
With these aims in mind, under President Obama’s leadership, we began to push for serious changes. In 2010, as the result of our efforts – and the close partnership of leaders from both parties on Capitol Hill – the President was able to sign the Fair Sentencing Act, which reduced the inappropriate and unjust 100-to-1 sentencing disparity between crack and powder cocaine. Over the years, we’ve also worked to strengthen reentry policies aimed at reducing recidivism – and to advance a host of other targeted improvements like drug courts. In early 2013, I took these efforts to a new level by initiating an unprecedented, exhaustive and targeted Justice Department review of the federal criminal justice system as a whole – to identify obstacles, inefficiencies, and inequities, and to address ineffective policies.
This review culminated, about 18 months ago, with the launch of our groundbreaking criminal justice reform initiative known as Smart on Crime. Smart on Crime was a catch-all term for a range of reforms we implemented simultaneously in the summer of 2013, each significant in its own right. Among other steps, we made major changes to the department’s charging policies related to nonviolent drug offenses; we put sensible limits on when it was appropriate to seek stiffer sentences based on a defendant’s prior criminal record; and we took steps to improve reentry processes in order to reduce the chances that incarcerated individuals reoffend after they exit prison. Taken together, these reforms reflect the department’s age-old commitment to a criminal justice system that is fair; that deters serious criminal conduct; that holds people accountable for their crimes; and that utilizes incarceration wisely – to punish, deter, and rehabilitate - not merely to confine and forget.
Over the last year and a half – as my colleagues and I have implemented new crime prevention efforts, more effective community policing policies, and promising diversion and reentry strategies – I’ve spoken extensively about the changes we’ve made and the vision that is driving us forward. I’ve pointed to the favorable results we’ve seen on the state level – in places like Kentucky, Texas, Ohio and Pennsylvania – where governors and legislatures of both parties have provided a model for others to emulate by directing funding away from prison construction and toward programs designed to reduce recidivism. And I have placed particular emphasis on two of the most vital reforms at the heart of our Smart on Crime initiative: the prioritization of cases within each U.S. Attorney’s Office and a critical change to the Justice Department’s charging policies.
Late last year, we began compiling data to help us measure the impact of our criminal justice reforms. This data is preliminary. But it shows that the Smart on Crime initiative is working exactly as intended. It is having a real and measurable impact on the decisions made by federal prosecutors from coast to coast. The changes we’ve implemented are firmly taking hold. And our key reforms appear to be successful by every measure we’ve seen so far.
The numbers are particularly encouraging in three areas.
First, among the central components of Smart on Crime is an effort to reduce unnecessary incarceration by asking federal prosecutors to exercise discretion – and make smart and targeted decisions – about which cases warrant federal prosecution. As I said in a speech to the American Bar Association, in August of 2013, not every drug case should be brought in a federal court. Accordingly, I directed our United States Attorneys to develop specific, locally-tailored guidelines – consistent with national priorities – for determining when federal charges should be filed, and when cases should be handled at the state or local level. Today, I am pleased to report that our federal prosecutors are heeding that call. And they are being more selective in bringing certain drug prosecutions. Between 2013 and 2014, the number of defendants charged with drug trafficking offenses declined by nearly 1,400 individuals – a reduction of more than six percent.
Second, I instructed our prosecutors that, in the course of weighing which types of drug cases merit federal prosecution, they should focus on the worst offenders and offenses. The data from last year proves that, as a result of this shift, today, our prosecutors are focusing their attention – and their resources – on the most serious cases. In 2013, before Smart on Crime was implemented, the average guideline minimum for federal drug prosecutions – in other words, the average suggested minimum prison term for an individual being charged for a drug crime – was 96 months. A year later, while the number of drug trafficking prosecutions has dropped, the average guideline minimum has actually risen to 98 months. This demonstrates that the most serious drug crimes are now attracting the highest scrutiny – and that our limited resources are being used in ways that provide the greatest possible benefit to public safety.
Third, in August 2013, I also ordered a modification of the Justice Department’s charging policies to ensure that people accused of certain low-level, nonviolent federal drug crimes will face sentences appropriate to their individual conduct – rather than excessive mandatory minimum sentences that may be better suited to violent criminals or drug kingpins. This change was founded on the belief that, by reserving mandatory minimums for cases where they are warranted, we could better promote public safety, deterrence and rehabilitation, while making our expenditures smarter and more productive. Today, it’s clear that we are making significant progress toward this goal. In the year before our Smart on Crime charging policy took effect, roughly 64 percent of federally-charged drug trafficking offenses carried a mandatory minimum sentence. Last year, the new policy brought that number down to approximately 51 percent – a reduction of 20 percent relative to the prior year. Put another way, we have gone from seeking a mandatory minimum penalty in two out of every three drug trafficking cases, to doing so in one out of two. That’s a major reduction. In fact, it is historic. The Sentencing Commission confirms that these numbers show that federal prosecutors sought mandatory minimum penalties at a lower rate in 2014 than in any other year on record.
This figure, perhaps more than any other, shows the significant impact that our policy reforms are having. While other factors may play a role in the drop we are seeing in the overall number of drug cases, a decline this pronounced in the rate at which our prosecutors pursue mandatory minimum sentences can only be attributed to the changes we announced in 2013.
These are extremely encouraging results. And they demonstrate that, since we launched the Smart on Crime initiative, the federal criminal justice system has begun to operate more efficiently, by reducing its involvement in low-level criminal activity; more effectively, by targeting the most serious crimes, and more fairly – by ensuring that those who are convicted of crimes receive sentences that are commensurate with their conduct.
Now, some have suggested – since I announced these important reforms – that reducing our reliance on mandatory minimums might negatively impact the ability of our prosecutors to elicit cooperation from federal defendants. They asserted that, without the threat of a mandatory minimum sentence, a defendant in a drug case would have substantially less incentive to provide information or testimony about others who might be engaged in criminal enterprise. Some critics even worried that prosecutors would be less able to obtain guilty pleas, and that court dockets would overflow with defendants who might previously have pleaded guilty to avoid a mandatory minimum sentence but suddenly had less incentive to shorten the process.
I never considered these concerns persuasive. Like anyone who served as a prosecutor in the days before sentencing guidelines existed and mandatory minimums took effect, I knew from experience that defendant cooperation depends on the certainty of swift and fair punishment, not on the disproportionate length of a mandatory minimum sentence. With or without the threat of a mandatory minimum, it will always be in the interest of defendants to cooperate with the government. And I am gratified – but by no means surprised – to announce today that our Smart on Crime approach has been vindicated by the data we’ve gathered.
Even though mandatory minimums have been charged significantly less frequently under our new policies, the percentage of cases in which we receive substantial cooperation from defendants has remained exactly the same. This also holds true of the ability of our prosecutors to secure guilty pleas in these cases. In the year before Smart on Crime took effect, our prosecutors won guilty pleas in approximately 97 percent of drug trafficking cases. A year later, despite significant reductions in our uses of mandatory minimums, this percentage stands at 97.5. So the notion that the Smart on Crime initiative has somehow robbed us of an essential tool is contradicted not only by our history – but by clear and objective facts.
This newly unveiled data shows we can confront over-incarceration at the same time that we continue to promote public safety. Already, in Fiscal Year 2014, we saw the first reduction in the federal prison population in 32 years. Meanwhile, since President Obama took office, we’ve presided over a continued decline in the overall crime rate. This marks the first time that any administration has achieved side-by-side reductions in both crime and incarceration in more than 40 years.
All of this progress is remarkable, and all of it is noteworthy. These concrete results illustrate the tremendous – and very real – promise of the work that Smart on Crime is making possible. They signal a potential paradigm shift in the way our nation approaches vital questions of fairness and justice. And in the preliminary data we’ve seen – and the growing, bipartisan consensus surrounding the work that’s underway – they prove unequivocally that criminal justice reform is an idea whose time has finally come.
Remember: for years prior to this administration, federal prosecutors were not only encouraged – but required – to always seek the most severe prison sentence possible for all drug cases, no matter the relative risk they posed to public safety. I have made a break from that philosophy. While old habits are hard to break, these numbers show that a dramatic shift is underway in the mindset of prosecutors handling nonviolent drug offenses. I believe we have taken steps to institutionalize this fairer, more practical approach such that it will endure for years to come.
We can all be proud of these efforts, and encouraged by the steps that we’re taking every day to strengthen America’s justice system across the board. Thanks to the work of my dedicated colleagues; the valor of our brave men and women in law enforcement; the thoughtful leadership of bodies like the Judicial Conference of the United States and the United States Sentencing Commission; and the partnership of Republicans and Democrats in Congress and in so many state governments, the goals and the values of the Smart on Crime initiative have been codified and put into practice at every stage of the criminal justice process – from prosecution, to sentencing, to rehabilitation and reentry.
The work we have done is nothing short of groundbreaking. But this is no time to rest on our laurels. Significant challenges remain before us. And a great deal of work remains to be done.
Our prisons are still overcrowded. Across the country, far too many people remain trapped in cycles of poverty, criminality, and incarceration. Unwarranted disparities are far too common. Law enforcement is distrusted in far too many places and cops are not appreciated for the tough job they do so well. And if we hope to build on the record we’ve established so far – and to make the Smart on Crime initiative not only successful, but permanent – it will be incumbent upon all Americans—most especially our Congress—to work together to ensure that all of this is just the beginning. From critical improvements to the juvenile justice system, to a range of back-end criminal justice reforms, we must continue to advance promising, bipartisan legislation to make our communities safer, treat individuals more justly and allow more efficient use of law enforcement resources.
Our efforts over the last six years have laid a strong foundation for a new era of American justice. Congress can help us build on this foundation by passing important, bipartisan legislation like the Smarter Sentencing Act, which would give judges more discretion in determining sentences for people convicted of certain federal drug crimes. And going forward – with measures like this one, and with the tireless work of our United States Attorneys and their colleagues, the strong leadership of our outstanding new Attorney General and Deputy Attorney General, and the robust engagement of the American people – I believe there’s good reason for confidence in where this work will lead us.
In the coming weeks, as you know, my time in the Obama Administration – and my formal career in public service – will draw to a close. But even now, as I prepare to open a new chapter in my life – with pride in all that my colleagues and I have accomplished, and deep gratitude for the opportunities I’ve been afforded – I know that, for me, this effort will continue. Whatever I do next, and wherever my own journey may take me, I will keep seeking new ways to contribute, to remain engaged in the effort to improve our institutions, and to build trust in those who serve them. And although I will soon leave the Justice Department, I will never leave the work that has become the mission – and the single greatest honor – of my professional life: advancing the cause of justice and building a brighter future for the country I love.
I want to thank you all, once again, for the opportunity to speak with you this afternoon – and for the work you do every day to strengthen our democracy and inform our national dialogue. I look forward to your questions.
Three MS-13 Members Sentenced to Prison for a Gang-Related Murder and Shooting in the Atlanta AreaRead the Press Release
Three MS-13 gang members were sentenced today to federal prison for violent crimes that they committed on behalf of the gang, including the 2006 murder of a rival gang member and 2008 shooting of a teenage boy, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney John A. Horn of the Northern District of Georgia.
Miguel Guevara, aka Blacky, 31, of Fort Walton Beach, Florida; Irvin Mejia Cruz, aka Triste, Lil Triste, 24, of Duluth, Georgia; and Walter Aldana, aka Goofy, 24, of Norcross, Georgia, were sentenced to 30 years in prison, nine years in prison, and 10 years in prison, respectively. U.S. District Judge Richard W. Story of the Northern District of Georgia imposed the sentences. The defendants each pleaded guilty in October 2013 to RICO conspiracy, and Guevara also pleaded guilty to using a firearm in relation to the commission of a crime of violence.
According to admissions made in connection with the defendants’ guilty pleas, the charges and other information presented in court, Mara Salvatrucha 13, or MS-13, is an international gang that originated in El Salvador and Honduras and spread to the United States. MS-13 members are organized into regional “cliques” within the larger gang. Each clique has a leader, often referred to as “the first word,” who conducts weekly meetings. At these meetings, members discuss their crimes and their plans to retaliate against rival gang members. The clique leaders collect dues from the gang members, which they use to buy guns and post bail for jailed gang members. Clique leaders often send money back to MS-13 leaders in their home countries, and report back to the same leaders about the clique’s activities on behalf of the gang.
MS-13 has operated in the greater Atlanta area since at least 2005. The gang staked out Gwinnett and DeKalb Counties as their home territory, where they committed murders, attempted murders and armed robberies, among other crimes.
According to admissions in connection with his guilty plea, Guevara was a member of MS-13, but in 2006, he decided to become less active in the gang and sought permission to “calm down” from the leader of his clique, Miguel Alvarado-Linares, aka Joker. Alvarado-Linares discussed this with other members at a meeting of the clique on Dec. 23, 2006, and the other gang members agreed that Guevara would have to shoot at a suspected rival gang member before he could become inactive. Guevara admitted that he and other gang members went to a nightclub in the early morning hours of Dec. 24, 2006 to hunt for rival gang members. Guevara admitted that he saw two rival gang members walk out of the night club and get into a car. Guevara and the other MS-13 members then followed the rival gang members. As the rival gang members exited the freeway, the MS-13 gang members pulled alongside, and Guevara fired multiple shots at the rival gang members. Guevara killed one of the gang members and wounded the other.
In connection with their guilty pleas, Cruz and Aldana admitted that they belonged to the same MS-13 clique. They further admitted that Mejia Cruz advised Aldana to shoot someone if he wanted to earn more respect within MS-13, and, on Aug. 21, 2008, Mejia Cruz gave Aldana a gun for the task. Aldana admitted that he left Mejia Cruz’s house with the gun, and encountered a group of teenagers, some of whom were playing basketball. Aldana challenged the teenagers, “Who do you claim,” asking to which gang they claimed allegiance. He then started firing into the crowd and struck a 14 year-old boy in the back. Aldana called out “Mara Salvatrucha” as he fled on foot. He later returned the firearm to Mejia Cruz.
This case was investigated by the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, FBI, Gwinnett County Police Department and DeKalb County Police Department. The case was prosecuted by Trial Attorney Joseph K. Wheatley of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Paul R. Jones of the Northern District of Georgia.
Statement by Attorney General Holder on Murders in Chapel Hill, North CarolinaRead the Press Release
Attorney General Eric Holder released the following statement Friday regarding the tragic killings of three university students this week in Chapel Hill, North Carolina:
“Like all Americans, I was shocked and saddened by this week’s heinous murders of three young people in Chapel Hill, North Carolina. I join President Obama in offering my deep sympathies to the friends and loved ones of Yusor Mohammad Abu-Salha, Deah Shaddy Barakat, and Razan Mohammad Abu-Salha.
“In addition to the ongoing local investigation, I have made available the full resources of the Department of Justice to help ensure that justice will be served in this case. The Department’s Civil Rights Division and the FBI, along with the U.S. Attorney’s Office for the Middle District of North Carolina, have opened a parallel preliminary inquiry to determine whether any federal laws, including hate crime laws, were violated.
“Protecting the safety and securing the civil rights of everyone in this country is, and must always remain, a top priority for today’s Department of Justice. We will never waver in this commitment. And going forward, we pledge to stand with the families of these three remarkable young people – and with all whose lives were touched by this tragedy – as they begin the long road to healing.”
Oregon Resident Pleads Guilty to Accessory After the Fact in Connection with 2009 Suicide Bombing of ISI Headquarters in PakistanRead the Press Release
Assistant Attorney General John P. Carlin of the National Security Division and U.S. Attorney S. Amanda Marshall of the District of Oregon announced today that Reaz Qadir Khan, 50, a naturalized U.S. citizen residing in Portland, Oregon, pleaded guilty to the crime of accessory after the fact for providing assistance to individuals connected to the 2009 suicide bomb attack at the headquarters of Pakistan’s intelligence service that killed approximately 30 individuals and injured 300 more.
In his plea entered before U. S. District Court Judge Michael Mosman, Khan admitted to providing advice and financial assistance to suicide bomber Ali Jaleel’s wives after the bombing knowing that such assistance would hinder and prevent the apprehension of Jaleel’s wives and others in the Maldives who may have been involved with Jaleel.
On May 27, 2009, Jaleel and two others conducted the suicide attack at the ISI headquarters in Lahore, Pakistan. In a video released by the media outlet of al-Qaeda shortly after the attack, Jaleel made a statement taking responsibility for the attack and was shown preparing for the attack at a training camp in what is believed to be the Federally Administered Tribal Area of Pakistan.
In the plea agreement, the defense and government jointly recommended a prison sentence of 87 months. Sentencing is scheduled for June 8, 2015.
This case was investigated by the FBI. The prosecution is being handled by Assistant U.S. Attorneys Ethan D. Knight and Charles F. Gorder Jr. of the District of Oregon, with assistance from Trial Attorney David P. Cora of the National Security Division.