District Not Recorded

A U.S. citizen and a Canadian citizen were arrested last week in Costa Rica in connection with the operation of a series of fraudulent business opportunities following their indictment by a federal grand jury in Miami on Nov. 29, 2011, the Justice Department and the U.S. Postal Inspection Service announced. 

 

John White, an American, and Kerry Michael Deevy, a Canadian, were arrested based on charges that they and their co-conspirators purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. The charg es in the indictment form part of the government’s continued nationwide crackdown on business opportunity fraud. Prior to these arrests, eight other individuals were charged and arrested in connection with business opportunity fraud ventures based in Costa Rica. Seven of those eight other individuals have been convicted in the United States. The eighth individual, Jeffrey Pearson, is in custody in Costa Rica.

 

Beginning in May 2005, White, Deevy and their co-conspirators are alleged to have fraudulently induced purchasers in the United States to buy business opportunities in USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., Cards-R-Us Inc., Premier Cards Inc., The Coffee Man Inc. and Nation West Distribution Company. According to the indictment, the business opportunities the defendants sold cost thousands of dollars each, and most purchasers paid at least $10,000. Each company operated for several months, and after one company closed, the next opened. The various companies used bank accounts, office space and other services in the Southern District of Florida and elsewhere, according to the indictment.

 

 

The indictment alleges that the defendants, using aliases, participated in a conspiracy that used various means to make it appear to potential purchasers that the businesses were located entirely in the United States. In reality, according to the indictment, White and Deevy operated out of Costa Rica to fraudulently induce potential purchasers in the United States to buy the purported business opportunities.

 

According to the indictment, the companies made numerous false statements to potential purchasers of the business opportunities. Among the misrepresentations alleged in the indictment are that purchasers would likely earn substantial profits; that prior purchasers of the business opportunities were earning substantial profits; that purchasers would sell a guaranteed minimum amount of merchandise, such as greeting cards and beverages; and that the business opportunity worked with locators familiar with the potential purchaser’s area who would secure or had already secured high-traffic locations for the potential purchaser’s merchandise stands. Potential purchasers also were falsely told that the profits of some of the companies were based in part on the profits of the business opportunity purchasers, thus creating the false impression that the companies had a stake in the purchasers’ success and in finding good locations, according to the indictment.

 

The indictment alleges that the companies employed various types of sales representatives, including fronters, closers, and references. A fronter spoke to potential purchasers when the prospective purchasers initially contacted the company in response to an advertisement. A closer subsequently spoke to potential purchasers to close deals. References spoke to potential purchasers about the financial success they purportedly had experienced since purchasing one of the business opportunities.

 

The indictment alleges that White, using assumed names, was a fronter and reference for USA Beverages, a fronter and reference for Twin Peaks, a fronter and reference for Cards-R-Us, a fronter, closer and reference for Premier Cards, and a fronter, closer and reference for Coffee Man.

 

The indictment alleges that Deevy, using assumed names, was a fronter and reference for Cards-R-Us, a fronter and reference for Premier Cards, a fronter for Coffee Man, and a fronter and reference for Nation West.

 

 

Each of the companies was registered as a corporation and rented office space to make it appear to potential purchasers that its operations were fully in the United States. USA Beverages was registered as a Florida and New Mexico corporation and rented office space in Las Cruces, N.M. Twin Peaks was registered as a Florida and Colorado corporation and rented office space in Fort Collins, Colo., and Cards-R-Us was registered as a Nevada corporation and rented office space in Reno, Nev. Premier Cards was registered as a Colorado and Pennsylvania corporation and rented office space in Philadelphia, and The Coffee Man was registered as a Colorado corporation and rented office space in Denver. Nation West was registered as a Colorado corporation and also rented office space in Denver.

Both defendants were charged with conspiracy to commit mail and wire fraud, and with committing their offenses via telemarketing. In addition, both defendants were charged with five counts of mail fraud and 13 counts of wire fraud. If convicted of conspiracy, White and Deevy face a maximum statutory term of 25 years in prison, a possible fine and mandatory restitution on the conspiracy count. They also face a maximum statutory term of 25 years in prison on each of the mail and wire fraud counts, a possible fine and mandatory restitution.

 

“Business opportunity fraud is a serious crime.  Fraudsters carefully construct legitimate-sounding self-employment opportunities, complete with professional-looking materials and convincing but fake research to back up their claims, then target hardworking individuals who are looking for a chance to make life better for themselves and their families,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “Often, fraudsters use a variety of techniques—U.S.-based postal addresses, reincorporated U.S. businesses that went defunct years before, or U.S.-based toll-free numbers—to make it appear as if the business opportunity they’re offering is legitimate and is based in the U.S.  In fact, these schemes are sometimes perpetrated from overseas.  That’s why the Justice Department has been vigilant in working with our overseas law enforcement partners so that borders are no barrier to justice being served.”

 

“Fraudulent business opportunity sellers must realize that all financial fraud will be prosecuted vigorously, even if the schemers operate their fraud from abroad,” said Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida .  “Increased international law enforcement cooperation eliminates safe havens for those who cheat American citizens from overseas.”

 

“This investigation, conducted both here and abroad, shows the Postal Inspection Service’s resolve to protect the American public from business opportunity scams,” said Henry Gutierrez, U. S. Postal Inspector in Charge in Miami.

 

The United States intends to seek the extradition of White and Deevy from Costa Rica.

 

Assistant Attorney General West commended the investigative efforts of the Postal Inspection Service. The case is being prosecuted by trial attorneys Jeffrey Steger and Alan Phelps with the U.S. Department of Justice Consumer Protection Branch.

 

An indictment is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.

WASHINGTON – The Department of Justice’s Antitrust Division issued the following statement today after announcing the closing of its investigations into Google Inc.’s acquisition of Motorola Mobility Holdings Inc., the acquisitions by Apple Inc., Microsoft Corp. and Research in Motion Ltd. (RIM) of certain Nortel Networks Corporation patents, and the acquisition by Apple of certain Novell Inc. patents:

 

“After a thorough review of the proposed transactions, the Antitrust Division has determined that each acquisition is unlikely to substantially lessen competition and has closed these three investigations.  In all of the transactions, the division conducted an in-depth analysis into the potential ability and incentives of the acquiring firms to use the patents they proposed acquiring to foreclose competitors.  In particular, the division focused on standard essential patents (SEPs) that Motorola Mobility and Nortel had committed to license to industry participants through their participation in standard-setting organizations (SSOs).  The division’s investigations focused on whether the acquiring firms could use these patents to raise rivals’ costs or foreclose competition.    

 

“The division concluded that the specific transactions at issue are not likely to significantly change existing market dynamics. 

 

“During the course of the division’s investigation, several of the principal competitors, including Google, Apple and Microsoft, made commitments concerning their SEP licensing policies.  The division’s concerns about the potential anticompetitive use of SEPs was lessened by the clear commitments by Apple and Microsoft to license SEPs on fair, reasonable and non-discriminatory terms, as well as their commitments not to seek injunctions in disputes involving SEPs.  Google’s commitments were more ambiguous and do not provide the same direct confirmation of its SEP licensing policies.

 

“In light of the importance of this industry to consumers and the complex issues raised by the intersection of the intellectual property rights and antitrust law at issue here, as well as uncertainty as to the exercise of the acquired rights, the division continues to monitor the use of SEPs in the wireless device industry, particularly in the smartphone and computer tablet markets.  The division will not hesitate to take appropriate enforcement action to stop any anticompetitive use of SEP rights.”

 

BACKGROUND

 

Google/ Motorola Mobility

 

On Aug. 25, 2011, Google entered into an agreement to acquire Motorola Mobility, a manufacturer of smartphones and computer tablets and the holder of a portfolio of approximately 17,000 issued patents and 6,800 applications, including hundreds of SEPs relevant to wireless devices that Motorola Mobility committed to license through its participation in SSOs. 

 

Rockstar Bidco

 

Rockstar Bidco, a partnership that includes, among others, RIM, Microsoft and Apple, was formed to acquire patents at the June 2011 Nortel bankruptcy auction, and to license and distribute them to certain partners.  Nortel’s portfolio of approximately 6,000 patents and patent applications includes many SEPs that Nortel committed to license through its participation in SSOs and that are relevant to wireless devices (the Nortel SEPs).   

 

Apple/Novell

 

Apple also proposes to acquire patents held by CPTN Holdings LLC, formerly owned by Novell, following CPTN’s acquisition in April 2011 of those patents on behalf of Apple, Oracle Corporation and EMC Corporation.  As a member of the Open Invention Network (OIN), Novell committed to cross-license its patents on a royalty-free basis for use in the open source “Linux system,” a defined term in the OIN. 

 

Competitive Landscape

 

Google, Apple, Microsoft and RIM have each developed mobile operating systems for smartphones and tablets. Apple and RIM manufacture and sell the smartphones and tablets that run on their proprietary mobile operating systems.  In contrast, Microsoft licenses its proprietary mobile operating systems, Windows Phone 7 and Windows Mobile, to non-affiliated wireless handset original equipment manufacturers (OEMs).  Google, in turn, sponsors Android, a mobile operating system that it distributes to OEMs without monetary charge under an open source license.  These operating systems provide platforms for a variety of products and services offered by competing handset and tablet manufacturers, as well as, application developers.

 

At the end of 2011, Google’s Android accounted for approximately 46 percent of the U.S. smartphone operating system platform subscribers and Apple’s iOS was used by about 30 percent of subscribers.  RIM and Microsoft accounted for approximately 15 percent and 6 percent of the share of smartphone subscribers, respectively.

 

Apple’s iPad is the leading tablet in the market, although the recently introduced Android-based tablets are rapidly gaining share.  Thus far, tablets running RIM’s and Microsoft’s operating systems have a minimal presence in the marketplace.

 

The Importance of Standard Setting in the Wireless Industry 

 

Today’s wireless device industry, which includes smartphones and tablets, relies on complex operating systems that allow seamless interaction with wireless communications technologies while providing audio, video and computer functionalities. 

 

To facilitate seamless interoperability, industry participants work through SSOs collectively to develop technical standards that establish precise specifications for essential components of the technology.  For example, wireless devices typically implement a significant number of telecommunication and computer standards, including cellular air interface standards (e.g., 3G and 4G LTE standards), wireless broadband technologies (e.g., WiFi and WiMax) and video compression technologies (e.g., H.264).  As with other industries, these standards facilitate compatibility among products and provide consumers with a wider range of products and capabilities than would otherwise be available.

 

Often, many technologies adopted by the SSOs fall within the scope of existing patents or patent applications.  Once a patent is included in a standard, it becomes essential to the implementation of that standard, thus the term “Standard Essential Patent.”  After industry participants make complementary investments,abandoning the standard can be extremely costly.  Thus, after the standard is set, the patent holder could seek to extract a higher payment than was attributable to the value of the patented technology before the standard was set.  Such behavior can distort innovation and raise prices to consumers .  A comparable harm may also arise in situations outside of the SSO context where a patent holder’s prior actions, such as open source commitments, lead others to make complementary investments (See U.S. Department of Justice and Federal Trade Commission, Antitrust Enforcement & Intellectual Property Rights:  Promoting Innovation and Competition, April 17, 2007 at 35-6). 

 

Most SSOs therefore require the owners of patents essential to the proposed standard that are participating in the SSO’s standard-setting activities to make disclosure and licensing commitments with respect to their essential patents.  These commitments are intended to reduce the subsequent inappropriate use of the patent rights at issue, and thus prevent disputes that can inhibit innovation and competition.  One com mon licensing requirement is to require SSO members to commit to license patented technologies essential to a standard on reasonable and nondiscriminatory (RAND) terms (for SSOs based in the United States) or on fair, reasonable and nondiscriminatory (FRAND) terms (for SSOs based outside the United States) (collectively F/RAND).  In practice, however, SSO F/RAND requirements have not prevented significant disputes from arising in connection with the licensing of SEPs, including actions by patent holders seeking injunctive or exclusionary relief that could alter competitive market outcomes.

 

ANALYSIS

 

The division’s investigations regarding the acquisitions of the Motorola Mobility and Nortel SEPs focused on whether the acquiring firms would have the incentive and ability to exploit ambiguities in the SSOs’ F/RAND licensing commitments to hold up rivals, thus preventing or inhibiting innovation and competition (The division’s analysis was limited to SEPs encumbered by F/RAND commitments).  Such hold up could include raising the costs to rivals by demanding supracompetitive licensing rates, compelling prospective licensees to grant the SEP holder the right to use the licensee’s differentiating intellectual property, charging licensees the entire portfolio royalty rate when licensing only a small subset of the patent holder’s SEPs in its portfolio, or seeking to prevent or exclude products practicing those SEPs from the market altogether.  In this analysis, the critical issue is whether the patent holder has the incentive and ability to hold up its competitors, particularly through the threat of an injunction or exclusion order.  The division’s analysis focused on how the proposed transactions might change that incentive and ability to do so.  

 

The division concluded that each of the transactions was unlikely to substantially lessen competition for wireless devices.  With respect to RIM’s and Microsoft’s acquisition of Nortel patents, their low market shares in mobile platforms would likely make a strategy to harm rivals either through injunctions or supracompetitive royalties based on the acquired Nortel SEPs unprofitable.  Because of their low market shares, they are unlikely to attract a sufficient number of new customers to their mobile platforms to compensate for the lost patent royalty revenues.  Moreover, Microsoft has cross-license agreements in place with the majority of its Android-based OEM competitors, making such a strategy even less plausible for it. 

 

Apple’s and Google’s substantial share of mobile platforms makes it more likely that as the owners of additional SEPs they could hold up rivals, thus harming competition and innovation.  For example, Apple would likely benefit significantly through increased sales of its devices if it could exclude Android-based phones from the market or raise the costs of such phones through IP-licenses or patent litigation.  Google could similarly benefit by raising the costs of, or excluding, Apple devices because of the revenues it derives from Android-based devices. 

 

The specific transactions at issue, however, are not likely to substantially lessen competition.  The evidence shows that Motorola Mobility has had a long and aggressive history of seeking to capitalize on its intellectual property and has been engaged in extended disputes with Apple, Microsoft and others.  As Google’s acquisition of Motorola Mobility is unlikely to materially alter that policy, the division concluded that transferring ownership of the patents would not substantially alter current market dynamics.  This conclusion is limited to the transfer of ownership rights and not the exercise of those transferred rights.

 

With respect to Apple/Novell, the division concluded that the acquisition of the patents from CPTN, formerly owned by Novell, is unlikely to harm competition.  While the patents Apple would acquire are important to the open source community and to Linux-based software in particular, the OIN, to which Novell belonged, requires its participating patent holders to offer a perpetual, royalty-free license for use in the “Linux-system.”  The division investigated whether the change in ownership would permit Apple to avoid OIN commitments and seek royalties from Linux users.  The division concluded it would not, a conclusion made easier by Apple’s commitment to honor Novell’s OIN licensing commitments. 

 

In its analysis of the transactions, the division took into account the fact that during the pendency of these investigations, Apple, Google and Microsoft each made public statements explaining their respective SEP licensing practices.  Both Apple and Microsoft made clear that they will not seek to prevent or exclude rivals’ products from the market in exercising their SEP rights.  

 

Apple outlined its view of F/RAND in a letter to the European Telecommunications Standards Institute (ETSI) on Nov. 11, 2011, stating among other things:

 

“A party who made a FRAND commitment to license its cellular standards essential patents or otherwise acquired assets/rights from a party who made the FRAND commitment must not seek injunctive relief on such patents.  Seeking an injunction would be a violation of the party’s commitment to FRAND licensing.” (emphasis supplied) 

 

Microsoft stated publicly on Feb. 8, 2012, among other things:

 

“This means that Microsoft will not seek an injunction or exclusion order against any firm on the basis of those essential patents.”

 

If adhered to in practice, these positions could significantly reduce the possibility of a hold up or use of an injunction as a threat to inhibit or preclude innovation and competition. 

 

Google’s commitments have been less clear.  In particular, Google has stated to the IEEE and others on Feb. 8, 2012, that its policy is to refrain from seeking injunctive relief for the infringement of SEPs against a counter-party, but apparently only for disputes involving future license revenues, and only if the counterparty:  forgoes certain defenses such as challenging the validity of the patent; pays the full disputed amount into escrow; and agrees to a reciprocal process regarding injunctions.  Google’s statement therefore does not directly provide the same assurance as the other companies’ statements concerning the exercise of its newly acquired patent rights.  Nonetheless, the division determined that the acquisition of the patents by Google did not substantially lessen competition, but how Google may exercise its patents in the future remains a significant concern.

 

For these reasons the division continues to have concerns about the potential inappropriate use of SEPs to disrupt competition and will continue to monitor the use of SEPs in the wireless device industry, particularly as they relate to smartphones and computer tablets.  The division’s continued monitoring of how competitors are exercising their patent rights will ensure that competition and innovation are unfettered in this important industry. 

 

All three of the transactions highlight the complex intersection of intellectual property rights and antitrust law and the need to determine the correct balance between the rightful exercise of patent rights and a patent holder’s incentive and ability to harm competition through the anticompetitive use of those rights. 

 

Agency Cooperation

 

During the course of its investigation of the Google/Motorola Mobility transaction, the Department of Justice cooperated closely with the European Commission.  In addition, the Department of Justice had discussions with the Australian Competition and Consumer Commission, Canadian Competition Bureau, Israeli Antitrust Authority and the Korean Fair Trade Commission.  In connection with the investigations relating to the Nortel patent assets, the division worked closely with states of New York and California and with the Canadian Competition Bureau. 

 

The Antitrust Division’s Closing Statement Policy

 

The division provides this statement under its policy of issuing statements concerning the closing of investigations in appropriate cases.  This statement is limited by the division’s obligation to protect the confidentiality of certain information obtained in its investigations.  As in most of its investigations, the division’s evaluation has been highly fact-specific, and many of the relevant underlying facts are not public.  Consequently, readers should not draw overly broad conclusions regarding how the division is likely in the future to analyze other collaborations or activities, or transactions involving particular firms. Enforcement decisions are made on a case-by-case basis, and the analysis and conclusions discussed in this statement do not bind the division in any future enforcement actions.  Guidance on the division’s policy regarding closing statements is available at: www.usdoj.gov/atr/public/guidelines/201888.htm.

WASHINGTON – Freedman Farms Inc. was sentenced today in federal court to five years probation and ordered to pay $1.5 million in fines, restitution and community service payments for violating the Clean Water Act when they discharged hog waste into a stream that leads to the Waccamaw River, announced the Department of Justice’s Environment and Natural Resources Division and the U.S. Attorney’s Office for the Eastern District of North Carolina.

William B. Freedman, president of Freedman Farms, was sentenced to six months in prison to be followed by six months of home confinement.

Freedman Farms was sentenced to pay a $500,000 criminal fine and $925,000 in restitution. The judge will hold a status conference in 30 days to determine the scope of restitution to compensate for or repair lost or injured resources that resulted from these violations. In addition, a community service payment of $75,000 will be paid directly to the Southern Environmental Enforcement Network (SEEN), one of four U.S. regional environmental enforcement associations established to train environmental enforcement professionals. SEEN is to use the funds for funding environmental projects designed to preserve and restore waters in the Eastern District of North Carolina.

Freedman Farms also is required to implement a comprehensive environmental compliance program and institute an annual training program.

“William Freedman and Freedman Farms will be held accountable for polluting waterways and wetlands in Columbus County and the Waccamaw River watershed,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice. “Owners and operators of concentrated animal feeding operations must comply with the nation’s Clean Water Act for the protection of America’s streams, wetlands and rivers.”

“It is vital to the well-being of our residents to protect our natural resources, including the numerous streams and marshes found in the Eastern part of North Carolina,” said Thomas G. Walker, U.S. Attorney for the Eastern District of North Carolina. “This prosecution reflects our ongoing efforts to protect the environment and resources that we all cherish.”

“Concentrated Animal Feeding Operations (CAFOs), like Freedman Farms, are an EPA enforcement priority because manure, if not properly controlled, can contaminate both surface waters and ground waters that may be used as drinking water sources and harm fish and other aquatic species,” said Maureen O'Mara, Special Agent-in-Charge of EPA's criminal enforcement office in Atlanta. “In this case, hog wastes flowed through sensitive wetlands, posing a risk to water and wildlife. Today's sentences send a clear message to CAFO's and their owners that if you disregard the law, you will be prosecuted.”

According to evidence presented in court, Freedman Farms discharged hog waste into Browder’s Branch, a tributary to the Waccamaw River that flows through the White Marsh, a large wetlands complex. Freedman Farms, located in Columbus County, N.C., is in the business of raising hogs for market, and this particular farm had some 4,800 hogs. The hog waste was supposed to be directed to two lagoons for treatment and disposal. In December 2007, hog waste was discharged from Freedman Farms directly into Browder’s Branch.

The Clean Water Act is a federal law that makes it illegal to knowingly or negligently discharge a pollutant into a water of the United States.

The case was investigated by the U.S. Environmental Protection Agency (EPA) Criminal Investigation Division and the North Carolina State Bureau of Investigation, with assistance from the EPA Science and Ecosystem Support Division. The case was prosecuted by Assistant U.S. Attorney J. Gaston B. Williams of the Eastern District of North Carolina and Trial Attorney Mary Dee Carraway of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division.

Gary Rogers, of East Meadow, N.Y., was arrested today after being charged with identity theft and tax fraud after filing more than 200 false tax returns with the Internal Revenue Service (IRS), the Justice Department and IRS announced.

 

Rogers was named in a federal criminal complaint that alleged he used stolen identification information to make false claims against the U.S. government by filing false tax returns to obtain fraudulent refunds. According to the affidavit in support of the criminal complaint filed in U.S. District Court in Brooklyn, Rogers filed approximately 200 federal income tax returns from 2004 through 2010 using the identification information of others. The complaint alleges that Rogers sought approximately $4,393,356 in fraudulent refunds over the six year period.

 

“The Justice Department will remain vigilant in protecting Americans’ identities and tax dollars from thieves,” said Principal Deputy Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division. “Those who steal identities and use them to commit tax refund fraud will be punished to the full extent of the law.”

 

“The IRS is aggressively pursuing those who steal others’ identities in order to file false returns,” said Steven Miller, IRS Deputy Commissioner for Services and Enforcement. “Our cooperative work with the U.S. Attorney’s Office and the Tax Division will help protect taxpayers in New York from being victimized by identity theft. The IRS is taking additional steps this tax season to further prevent, detect and resolve identity theft cases as soon as possible.”

 

A criminal complaint is merely an allegation and a defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. If convicted on these charges, Rogers faces a two year mandatory minimum sentence for aggravated identity theft, a potential maximum sentence of five years in prison for each count of filing a false claim against the United States and mail fraud.

 

The case was investigated by the IRS - Criminal Investigation and is being prosecuted by Trial Attorneys Mark Kotila and Andrew P. Young of the of Justice Department’s Tax Division.

 

Additional information about the Tax Division and its enforcement efforts may be found at www.justice.gov/tax.

WASHINGTON – A Massachusetts man was sentenced today in Los Angeles to 60 months in prison, followed by 20 years of supervised release, for conspiracy to distribute child pornography, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney André Birotte Jr. of the Central District of California and Assistant Director in Charge Steve Martinez of the FBI’s Los Angeles Field Office.

 

Joseph Tierney, 24, of Wellesley, Mass., was sentenced by U.S. District Judge Virginia A. Phillips. Tierney pleaded guilty in August 2011 to one count of conspiracy to distribute child pornography. 

 

Today’s sentencing is the result of an international investigation into the “Lost Boy” online bulletin board. The Lost Boy bulletin board, according to court documents and proceedings, was dedicated to men who have a sexual interest in young boys and was established to provide a forum to trade child pornography.

 

Federal authorities, working in conjunction with a coalition of international law enforcement agencies, shut down the Lost Boy bulletin board approximately three years ago. As a result of the investigation, 16 named defendants were charged in the United States and arrested for their roles in the bulletin board. To date, 15 defendants have pleaded guilty or have been convicted at trial and one defendant passed away. Six additional men have been charged with child molestation as a result of the investigation, which also led to the identification of 27 domestic victims of child abuse, some of whom were portrayed in images posted to the Lost Boy bulletin board.

 

According to court documents and proceedings, law enforcement authorities discovered the Lost Boy bulletin board after receiving information from Eurojust, the judicial cooperation arm of the European Union. Eurojust provided U.S. law enforcement with leads obtained from Norwegian and Italian authorities indicating that a North Hollywood, Calif., man was communicating with an Italian national about child pornography and how to engage in child sex tourism in Romania. Acting on the information from Europe, the FBI executed search warrants that led to the discovery of the Lost Boy network. Further investigation revealed that Lost Boy had 35 members, 16 of whom were U.S. nationals. Other members of the network were located in countries around the world, including Belgium, Brazil, Canada, France, Germany, New Zealand and the United Kingdom. 

 

According to court documents, Lost Boy had a thorough vetting process for new members, who were required to post child pornography to join the organization. Once accepted, members were required to continue posting child pornography to remain in good standing and to avoid removal from the board. According to court documents, Lost Boy members advised each other on techniques to evade detection by law enforcement, which included using screen names to mask identities and encrypting computer data.

 

International law enforcement efforts involving European law enforcement, the Brazilian Federal Police and other agencies have identified child molestation suspects in South America, Europe and New Zealand. Three suspects in Romania, one in France and another in Brazil have been charged, and offenders have been convicted in Norway and the United Kingdom. Law enforcement efforts have also identified dozens of child victims located in Norway, Romania, Brazil and other nations.

 

The investigation into the Lost Boy bulletin board was led by the FBI and the U.S. Postal Inspection Service, in conjunction with the Los Angeles-based Sexual Assault Felony Enforcement (SAFE) Team. The High Technology Investigative Unit of the Child Exploitation and Obscenity Section (CEOS) in the Justice Department’s Criminal Division, along with Eurojust, have provided invaluable assistance during the investigation. 

 

The case is being prosecuted by Assistant U.S. Attorneys Joey L. Blanch and Yvonne Garcia of the Central District of California and CEOS Trial Attorney Andrew McCormack.

WASHINGTON – The Justice Department announced today that it has reached a settlement with the city of Highland Park, Mich., to resolve allegations that the city willfully violated the Uniformed Services Employment and Reemployment Rights Act (USERRA) by failing to properly reemploy firefighter and U.S. Army reservist Paul A. Baetz in July 2009 when he returned from military service in Afghanistan in support of Operation Enduring Freedom. 

The Justice Department’s complaint, filed in the U.S. District Court for the Eastern District of Michigan in Detroit, alleges that while Mr. Baetz was overseas in military service, the city of Highland Park promoted three auxiliary firefighters with less seniority than Mr. Baetz to full-time firefighter and refused to properly re-employ Mr. Baetz as a full-time firefighter upon his return.  Subject to certain conditions, USERRA requires employers to promptly re-employ returning service members in the positions they would have held had their employment not been interrupted by military service, or in a position of like seniority, status and pay.

Under the terms of the settlement, embodied in a consent decree that was approved by the district court, the city of Highland Park must pay Baetz approximately $25,000 in compensation for lost wages, back pension contributions and other damages.  Although the city promoted Mr. Baetz after the Justice Department opened its investigation, the consent decree also requires that the city retroactively adjust the date of Mr. Baetz’s promotion back to the time he should have received it in 2009.  
 
“Uniformed service benefits our nation and should not require a service member to lose his or her chance for civilian career advancement,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.  “The Justice Department will take the steps necessary to ensure that all employers meet their obligations under USERRA.”

“The U.S. Attorney’s Office is committed to enforcing the rights of our soldiers and veterans,” said Barbara L. McQuade, the U.S. Attorney for the Eastern District of Michigan.  “We owe it to our service members to protect their civilian career opportunities while they are sacrificing so much to serve our country.” 
 
The case was litigated by Assistant U.S. Attorney Susan K. DeClercq in the U.S. Attorney’s Office for the Eastern District of Washington, in collaboration with Jodi Danis, Special Counsel, in the Civil Rights Division of the Justice Department. The case stems from a referral from the U.S. Labor Department following an investigation by its Veterans’ Employment and Training Service. 
 
The Justice Department’s Civil Rights Division and the U.S. Attorney’s Offices have given a high priority to the enforcement of service members’ rights under USERRA.  Additional information about USERRA can be found on the Justice Department’s websites at www.justice.gov/crt/emp and www.servicemembers.gov, as well as on the Labor Department’s website at www.dol.gov/vets/programs/userra/main.htm.

Attorney General Eric Holder announced today that President Obama’s FY 2013 Budget proposal totaling $27.1 billion for the Department of Justice identifies over $1 billion in efficiencies, savings and rescissions while providing resources to sustain critical national security programs, uphold the department’s traditional missions with an increased focus on financial and mortgage fraud and civil rights enforcement, invest in prisons and detention capacity, and assist our state, local and tribal law enforcement partners. The request represents a 0.4 percent decrease in budget authority from the FY 2012 enacted level.

“The President’s Budget request will provide the department with the resources necessary to continue protecting the American people from terrorism and other urgent threats to our national security.  It will enable us to safeguard citizens from violent crime and threats to the most vulnerable among us. And it will strengthen critical efforts to combat financial and mortgage fraud, while recognizing the valuable role of state, local and tribal law enforcement partners in achieving national goals,” said Attorney General Holder. “As in previous years, this budget incorporates department-wide savings and efficiencies while identifying new ways to cut costs without affecting our core missions.”

The $27.1 billion budget request includes program increases for critical administration priorities, including $55 million to investigate and prosecute financial and mortgage crimes; $31.8 million to increase funding for traditional missions, including $5 million in new money to prevent human trafficking, hate crimes and police misconduct; and $141.2 million for prisons and detention to ensure prisoners and detainees are confined in secure facilities. The budget addresses the federal prison population by allowing eligible inmates to earn sentence reductions for good behavior and participation in certain reentry programs, freeing up federal prison space and reducing long-term costs. In addition, the budget provides $4 billion to sustain the department’s critical national security mission and nearly $2 billion in funding to maintain security along the Southwest Border. Finally, the budget continues to foster valued partnerships through state, local and tribal assistance to enhance public safety, protect women and children, and reduce recidivism.

The Department of Justice’s key priorities include:

 

·          $4 billion to sustain national security;

·          $55 million increase for investigating and prosecuting financial and mortgage fraud;

·          $31.8 million increase to uphold traditional law enforcement, immigration and litigation-related missions;

·          $8.6 billion for federal prisons and detention;

·          $2 billion to maintain assistance to state, local and tribal law enforcement;

·          Over $1 billion in administrative efficiencies, programmatic savings redirections in grant programs and rescissions from balances. 

National Security

 

Defending national security from both internal and external threats remains the Department of Justice’s highest priority. The FY 2013 Budget request provides a total of $4 billion to maintain critical counterterrorism and counterintelligence programs and sustain recent increases for intelligence gathering and surveillance capabilities.

The administration supports critical national security programs within the department, including those led by the Federal Bureau of Investigation (FBI) and the National Security Division (NSD). In FY 2011, the FBI dedicated approximately 4,200 agents to investigate more than 33,000 national security cases. NSD has continued to carry out its primary functions to prevent acts of terrorism and espionage in the United States and to facilitate the collection of information regarding the activities of foreign agents and powers.

Investigating cybercrime and protecting our nation’s critical network infrastructure is a top priority of the department. The President’s FY 2013 Budget request maintains recent increases for the FBI’s cyber terrorism investigations, the National Cyber Investigative Joint Task Force (NCIJTF) and the forensic examination of digital evidence. In addition, other department components have made critical investments to protect U.S. citizens and secure our homeland, and these components will continue their efforts in FY 2013.

For more information, view the National Security Fact Sheet at http://www.justice.gov/jmd/2013factsheets/.

 

Financial and Mortgage Fraud

The administration and the Department of Justice remain committed to investigating and prosecuting financial fraud that harms the American people and the financial markets. To strengthen our efforts at combating this fraud, we propose a program increase of $55 million for financial and mortgage fraud initiatives to complement ongoing efforts to root out various forms of fraud, including health care fraud, that are supported by existing direct resources and reimbursable funding.

The department plays a crucial role in the federal financial recovery effort through criminal and civil litigation. The FY 2013 Budget requests resources that will strengthen the department’s ability to pursue large-scale financial fraud investigations so Americans’ investments are protected. The department will increase its efforts to help restore confidence in our markets, protect the federal Treasury and defend the interests of the U.S. government.

The department requests program increases for a variety of economic fraud enforcement efforts, including work being done by Department of Justice members of the President’s Financial Fraud Enforcement Task Force. This increase will support additional FBI agents, criminal prosecutors, civil litigators, investigators, forensic accountants and other support positions. The additional resources will support the department’s investigation and prosecution of the broad range of crimes that fall under the definition of financial fraud, including securities and commodities fraud, investment scams and mortgage foreclosure schemes.

For health care fraud enforcement, the department uses funding provided by the Department of Health and Human Services (HHS). The FY 2013 Budget for HHS requests an additional $71.7 million for the department to address health care fraud. This increase will strengthen and expand Department of Justice and HHS’ Medicare Fraud Strike Forces, support the expansion of the department’s civil litigation efforts, specifically in areas such as pharmaceutical fraud and off-label marketing, and provide additional resources in our efforts to eliminate abuse and substandard care in public health care facilities, Medicare and Medicaid funded nursing homes and other long-term care facilities.

For more information, view the Financial and Mortgage Fraud Fact Sheet and the Health Care Fraud Fact Sheet at http://www.justice.gov/jmd/2013factsheets/

 

Traditional Missions

The budget requests program increases for transnational enforcement of intellectual property law. In addition, it requests increases to address new emerging cyber security threats, including insider threats; provide advanced intrusion detection and response capabilities; and implement cost efficient, scalable enterprise information technology architecture. Budget increases also support operational and administrative expenses in pursuit of the department’s transnational organized crime enforcement activities, and provide additional funding for the Office of Tribal Justice, the Office of the Inspector General and the Office of the Pardon Attorney.

The department also maintains substantial responsibilities with respect to immigration, including, but not limited to, enforcement, detention, judicial functions, administrative hearings and litigation. The FY 2013 Budget requests funds for the Executive Office for Immigration Review (EOIR) to expand the Legal Orientation Program, which educates detained aliens on EOIR immigration proceedings. This allows detained aliens to make more informed decisions early in the adjudication process, reducing overall program costs for both EOIR courts and Department of Homeland Security detention programs.

Finally, the department requests additional resources to provide for the vigorous enforcement of the nation’s civil rights laws. The FY 2013 Budget requests resources for the Civil Rights Division to address areas such as human trafficking, hate crimes, voting rights enforcement and fair lending enforcement. Funds are also requested for the Community Relations Service.

For more information, view the Traditional Missions Fact Sheet at http://www.justice.gov/jmd/2013factsheets/

 

Prisons and Detention

 

The department has made strategic investments in law enforcement initiatives that have improved the nation’s security and made communities safer. The result of these important enforcement efforts has been an expansion in the need for prison and detention capacity. The department continues to prioritize the maintenance of secure, controlled detention and prison facilities, as well as investment in programs that can reduce recidivism. The FY 2013 Budget requests a total of $8.6 billion for prisons and detention. The request invests in prisons and detention capacity, providing $223.9 million in prison and detention adjustments and $141.2 million for program increases to maintain current services, improve prisoner reentry and ensure prisoners are confined in secure facilities.

For the Federal Bureau of Prisons (BOP), the budget includes resources to fully activate two prisons: Federal Corrections Institution (FCI) Aliceville, Ala., and FCI Berlin, N.H. These prisons received partial activation funding in FY 2012, which will increase federal prison capacity and alleviate overcrowding and related security issues. BOP also plans to expand the residential drug abuse treatment program (RDAP), in support of Second Chance Act objectives. The requested funding will help BOP reach the goal of providing 12-month sentence credits for completion of the RDAP program to all eligible inmates, resulting in fewer taxpayer resources directed at housing inmates.

Program increases are essential to help BOP keep pace with a growing inmate population and to ensure the secure detention of an increased number of inmates. Increases for BOP include funds to begin activation of two prisons, U.S. Penitentiary Yazoo City, Miss. and FCI Hazleton, W.Va.

For more information, view the Prisons and Detention Fact Sheet at http://www.justice.gov/jmd/2013factsheets/

State, Local and Tribal Law Enforcement

 

In total, the FY 2013 budget requests $2 billion for state, local and tribal law enforcement assistance. These funds will allow the department to continue to support our state, local and tribal partners who fight violent crime, combat violence against women and support victim programs.  The department continues to maintain key partnerships with state, local and tribal community members through programs such as the Community Oriented Policing Services (COPS) grant program. 

The FY 2013 Budget request for the Office on Violence Against Women (OVW), a total of $412.5 million ($268 million in direct funding) with the balance funded through receipts from the Crime Victims Fund (CVF), will provide communities with the opportunity to combat sexual assault and violence against women.  The request includes an increase of $3.5 million to the Rural Domestic Violence and Child Abuse Enforcement Assistance Program, which will improve the safety of children, youth and adults who are victims of domestic violence, dating violence, sexual assault and stalking by supporting projects uniquely designed to address and prevent these crimes in rural jurisdictions.  The department is requesting $1.4 billion for the Office of Justice Programs’ (OJP) grant programs ($1.18 billion in direct funding, with the balance derived through receipts from the CVF). A total of $20 million is requested for the Byrne Criminal Justice Innovation Program, $21 million for Residential Substance Abuse Treatment, $80 million for Second Chance, $70 million for Part B Juvenile Justice Formula Grants and $20 million for a new evidence-based juvenile justice competitive demonstration grant program.

The budget proposes to preserve important OVW and OJP grant programs that directly or indirectly assist victims of crime by funding them through CVF receipts, which continue to surpass historical levels, rather than with discretionary budget authority, which has been declining. Use of these funds will not interfere with formula funding for crime victims, which is fully protected under the proposal. 

For more information, view the State, Local and Tribal Law Enforcement Fact Sheet at http://www.justice.gov/jmd/2013factsheets/

 

Savings and Efficiencies

 

The FY 2013 Budget streamlines programs and redirects funding to improve the capabilities of the department. As such, the budget proposes over $1 billion in efficiencies, offsets, redirections of grant program funding and rescissions. Excluding the redirection of grant program funding, the budget includes $647 million in savings, program and management offsets and one-time rescissions of prior year balances to support our highest priority missions.

Savings and efficiencies include information technology savings, space reductions, administrative efficiencies, overhead reductions and operational efficiencies. The department also proposes to consolidate and realign components to increase efficiencies, including refocusing and realigning the National Drug Intelligence Center functions into the Drug Enforcement Administration. In addition, the budget proposes to merge the detention functions currently performed by the Office of the Federal Detention Trustee into the U.S. Marshals Service to better align detention resources with operations, simplify the financial process supporting detention housing and reduce administrative costs. In addition to department-wide initiatives, component-unique program savings have been identified, including expanding BOP’s compassionate release to inmates with medical conditions that have served at least two-thirds of their sentence (excluding those sentences for violent or sex offenses) and implementing proposed legislation to make changes in the federal inmate good conduct time credit incentives.

The department has actively pursued savings and efficiencies in other areas consistent with the President’s Campaign to Cut Waste and will continue to do so in FY 2013. We have made significant efforts to limit and reduce spending in the areas of publication, travel, supplies, fleet, advisory contracts, promotional items and information technology devices to meet or exceed a reduction target of $146 million from FY 2010 levels.

For more information, view the Savings and Efficiencies Fact Sheet at http://www.justice.gov/jmd/2013factsheets/

WASHINGTON – The co-owner of two Los Angeles-area health care companies was sentenced today to 96 months in prison for his conviction stemming from a nine-year scheme to defraud Medicare, announced the Departments of Justice and Health and Human Services (HHS).

 

U.S. District Judge Stephen V. Wilson also ordered Evans Oniha, 49, to pay $7 million in restitution and to serve three years of supervised release following his prison term. A federal jury in the Central District of California found Oniha guilty on July 7, 2011, of one count of conspiracy to commit health care fraud, four counts of health care fraud and one count of false statements relating to health care matters.

 

According to court documents, in 2002, Oniha and co-defendant Camillus Ehigie founded and began operating Prosperity Home Health Services Inc., a home health agency, and Caravan Medical Supplies Inc., a durable medical equipment (DME) company. According to testimony presented at trial, from October 2002 to February 2011, Oniha conspired with Ehigie and others to defraud Medicare by paying “marketers” for Medicare beneficiary information, fraudulent prescriptions and other documents for DME and home health services. Testimony at trial showed that the marketers were individuals who acquired patient Medicare numbers and doctors’ prescriptions and sold them to Oniha. Oniha used these fraudulent documents to submit and cause the submission of false claims to Medicare for DME and home health services that were not medically necessary and that often were not provided to Medicare beneficiaries. According to court documents, Oniha caused Prosperity to submit approximately $8 million in fraudulent claims to Medicare for home health services purportedly provided by Prosperity. Oniha caused Caravan to submit approximately $5.8 million in fraudulent claims to Medicare for DME purportedly provided by Caravan.

 

On July 5, 2011, Ehigie pleaded guilty to 11 counts of health care fraud, one count of conspiracy to commit health care fraud, one count of making false statements in a federal health care investigation and one count of obstructing a criminal health care investigation. Ehigie is scheduled to be sentenced on July 9, 2012.

 

The case is being prosecuted by Trial Attorney William G. Kanellis and Deputy Chief Charles La Bella of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS Office of Inspector General (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 Central District of California.

       

Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,190 defendants who collectively have falsely billed the Medicare program for more than $3.2 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.       

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

The Justice Department, at the request of the Food and Drug Administration’s Office of Criminal Investigations (FDA-OCI), has charged Gary D. Osborn and his corporation, ApothéCure Inc., with two misdemeanor criminal violations of the Federal Food, Drug and Cosmetic Act (FDCA) in connection with their interstate shipment of two lots of misbranded colchicine injectable solution that led to the deaths of three people in the Pacific Northwest. The United States filed the criminal information in the U.S. District Court for the Northern District of Texas. ApothéCure is a compounding pharmacy. The company, founded in 1991, is located in Dallas.

Colchicine is used to prevent gout attacks (sudden, severe pain in one or more joints caused by abnormally high levels of a substance called uric acid in the blood) in adults, and to relieve the pain of gout attacks when they occur.

The government’s charges are based on ApothéCure’s February 2007 shipment of 72 vials of compounded colchicine to a now-defunct medical center in Portland, Ore. On March 19, 2007, a patient in Yakima, Wash., received colchicine from this shipment. That patient died after receiving the infusion. The medical examiner there determined that the cause of death was multiple organ failure and acute colchicine toxicity. On March 30, 2007, colchicine from ApothéCure was administered to two other patients who were suffering from back pain. Within hours of receiving the colchicine injections, both patients became seriously ill and were taken to local hospitals. Both patients died shortly thereafter. The medical examiner in Oregon determined colchicine toxicity to be the cause of death for both patients.

FDA testing of vials selected from the lethal shipment revealed that some of the vials were super-potent, containing 640 percent of the level of colchicine declared on the label. Other vials were determined to be sub-potent, and contained less than 62 percent of the declared levels on the labels.  

“The criminal charges we are filing today allege that the drugs mixed by Mr. Osborn’s company  were misbranded which led to the tragic deaths of three people,” said Tony West, Assistant Attorney General of the Civil Division of the Department of Justice. “We can’t allow those who fail to take care that their products are safe to escape accountability, and today's enforcement action demonstrates we won’t.”

The criminal information filed today charges that ApothéCure committed two prohibited acts under the FDCA by shipping misbranded drugs in interstate commerce. Mr. Osborn, as the person with responsibility over the firm’s operations, is strictly liable under the FDCA for the firm’s failure to follow federal law. In addition to the federal government’s criminal charges, Attorneys General have pursued civil actions in Texas and Oregon against Mr. Osborn and ApothéCure.

Assistant Attorney General West acknowledged the close partnership with the FDA and OCI, which referred this matter to the Justice Department. The case is being prosecuted by Trial Attorneys John Claud and Patrick Runkle of the Civil Division’s Consumer Protection Branch.

A criminal misdemeanor information is merely an allegation, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Capmark Finance LLC in Horsham, Pa., has agreed to pay the United States $3.9 million, to settle a False Claims Act lawsuit, the Justice Department announced today. The lawsuit, filed in the Central District of California, alleges that Capmark made false statements in connection with two nursing home mortgage loans insured by the U.S. Department of Housing and Urban Development (HUD). Shortly after the United States filed its complaint in 2009, Capmark filed for bankruptcy protection.

 

The United States alleges that Capmark misrepresented material facts critical to the borrowers’ creditworthiness in the two loan applications and that Capmark’s false statements induced HUD to insure the loans, both of which defaulted, causing a loss to the government. The two nursing homes were Canoga Care Center in Canoga Park, Calif., and Hudson Valley Care Center in Ghent, N.Y.

 

The allegations arise from investigation and audit work conducted by the HUD Office of Inspector General. This case was handled by the Justice Department’s Civil Division with the assistance of HUD’s Office of General Counsel, Program Enforcement Branch.

 

“Today’s action should be a reminder to all FHA mortgage lenders. Attesting to things you know to be false is not only lying, it is against the law and there will be consequences,” said Helen Kanovsky, HUD’s General Counsel.

 

This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. It includes representatives from a broad range of federal agencies, including 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, 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 rimes.

WASHINGTON - Gregory K. Dupont, 38, of Plaquemine, La., pleaded guilty today in U.S. District Court in Baton Rouge, La., to one felony count of illegally guiding out-of-state sport hunters to unauthorized areas to hunt American alligators (Alligator mississippiensis) in violation of the Lacey Act, the U.S. Endangered Species Act and Louisiana law, the Justice Department announced. 

Sentencing in this case has been scheduled for June 20, 2012.  Dupont was also ordered to surrender custody of his firearms to pre-trial services.

Gregory K. Dupont was a licensed alligator hunter, who, in September 2006, guided his clients to an area which was unapproved, that is an area for which he did not have the required Convention on International Trade of Endangered Species (CITES) tags.  During this illegal hunt, Dupont took his clients to a property in Iberville Parish, La., where one of his clients killed an American alligator.  Dupont tagged the alligator illegally with a tag for another property.  He did not have tags permitting them to hunt in that area at all.   

In 1967, American alligators were listed as an endangered species because the total population size in the United States reached drastically low numbers due to severe poaching and overharvesting. This protected status and of the Lacey Act, the Endangered Species Act and regulations promulgated by the U.S. Fish and Wildlife Service and the state of Louisiana led to the recovery of the American alligator population, and American alligators were down-listed to threatened status in 1987.  The American alligator is currently listed on Appendix II of CITES, which is the only treaty that deals with international trade in protected species. There are 175 member countries, including the United States.  The success of the American alligator conservation program in the United States is second only to that of the Bald Eagle.

Because American alligators remain federally protected, alligator hunting is regulated by federal and state rules and regulations, which require, among other things, the tagging of all harvested alligators.  The integrity of the tagging system is crucial to Louisiana’s alligator management program because it enables the Louisiana Department of Wildlife and Fisheries to monitor harvest areas, alligator size and the number of alligators taken.  This system depends in significant part upon the honesty and self-regulation of Louisiana’s licensed hunters for its continued success.
 
In Louisiana, an allotted number of alligator hide tags are issued to licensed hunters.  Each tag may be used for one alligator only, and Louisiana law requires alligator hunters to hunt only on property for which hide tags are issued.  The areas where alligator hunting is permitted are determined on a yearly basis by wildlife biologists, whose decisions are based on the need to maintain a healthy alligator population.  If hunters poach alligators from areas for which they do not have tags, then the integrity of the entire alligator management system is undermined, thereby threatening Louisiana’s alligator population and alligator industry, which is a significant component of Louisiana’s economy.

The case was prosecuted by Shennie Patel and Susan L. Park of the Environmental Crimes Section of the Environment and Natural Resources Division of the Department of Justice.  The case was investigated by the Louisiana Department of Wildlife and Fisheries and by the U.S. Fish and Wildlife Service Office of Law Enforcement.

WASHINGTON – The Department of Justice announced today that it has entered into a settlement that, if approved by the court, will resolve the department’s allegations that the Commonwealth of Massachusetts and the Massachusetts Department of Correction (collectively Massachusetts) violated Title VII of the Civil Rights Act of 1964 by discriminating against female applicants for entry-level correction officer (CO) and correction program officer (CPO) positions at the Massachusetts Department of Correction (MDOC).

 

Title VII’s prohibitions of discrimination in employment on the basis of race, color, sex, national origin or religion proscribe not only intentional discrimination, but also the use of employment practices (e.g., physical tests) that result in disparate impact. Unless the employer can prove that such practices are job related and consistent with business necessity, employment practices that disproportionately screen out applicants based upon sex do not identify the best qualified candidates and violate the law.  The United States’s complaint, filed in the U.S. District Court for the District of Massachusetts in Boston, alleges that Massachusetts’s use of a physical abilities test to pre-screen and select applicants for CO and CPO positions with the MDOC disproportionately excluded female applicants since 2007 and was not job related and consistent with business necessity.

 

The Justice Department, along with Massachusetts, filed a joint motion today requesting that the court provisionally approve the settlement agreement executed by the parties and schedule an initial fairness hearing regarding the terms of the settlement agreement.

 

The settlement agreement requires that Massachusetts no longer use the physical abilities test challenged by the United States for pre-screening and selecting CO and CPO positions with the MDOC and requires that Massachusetts develop a new lawful selection procedure that complies with Title VII.  The settlement agreement, if approved by the court, also requires that Massachusetts pay $736,000 towards back pay to female CO and CPO applicants who were harmed by the hiring practice challenged by the United States and who are determined to be eligible for relief.  Additionally, female CO and CPO applicants determined to be eligible for relief under the settlement agreement may receive a priority offer of hire to a CO and CPO position with the MDOC.  All CO and CPO applicants must pass a physical test and other lawful selection procedures to be considered for priority hire relief.  Female CO and CPO applicants eligible for priority hire relief and those currently employed with the MDOC who are entitled to delay hire relief are also eligible for retroactive seniority relief.

 

“The Department of Justice will not tolerate discrimination in employment on the basis of sex, whether that discrimination is intentional or the result of employment practices that have discriminatory impact,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The department commends Massachusetts for working to put in place a new physical test that complies with Title VII and enables Massachusetts to choose qualified applicants for CO and CPO positions, and to provide relief to those female applicants who have been harmed by the prior employment practices challenged by the department.”

 

More information about Title VII and other federal employment laws is available on the Department of Justice website at www.usdoj.gov/crt/emp/index.html .

WASHINGTON — The Department of Justice announced today that it will require International Paper Company and Temple-Inland Inc. to divest three containerboard mills in order to proceed with their $4.3 billion merger.  The department said that the merger, as originally proposed, would have substantially lessened competition in the production and sale of containerboard, the type of paper used to make corrugated boxes, in the United States.   

 

The department’s Antitrust Division filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., to block the proposed transaction.  At the same time, the department filed a proposed settlement that, if approved by the court, will resolve the lawsuit by requiring International Paper and Temple-Inland to divest three containerboard mills to resolve the competitive concerns alleged in the lawsuit. 

 

“Corrugated boxes made from containerboard are used to ship more than 90 percent of all goods nationwide,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “With the mill divestitures, the transaction can proceed and American consumers and businesses across the country can be assured that competition is preserved in this important industry that is vital to the U.S. economy.” 

 

According to the complaint, International Paper and Temple-Inland are, respectively, the largest and third-largest producers of containerboard in North America.  The merger, as originally proposed, would have produced a single firm in control of approximately 37 percent of North American containerboard capacity. 

 

The department said that by combining the containerboard capacity of International Paper and Temple-Inland, the proposed merger would significantly expand the volume of containerboard over which International Paper would benefit from a price increase, and likely would have led International Paper to strategically reduce its output of containerboard in order to increase the market price.

 

The proposed settlement requires the divestiture of Temple-Inland’s containerboard mills in Waverly, Tenn., and Ontario, Calif., and either International Paper’s containerboard mill in Oxnard, Calif., or International Paper’s containerboard mill in Henderson, Ky., but not both of those mills.  Collectively, the divestitures account for approximately 950,000 tons of containerboard capacity.  The department’s Antitrust Division must approve the purchaser or purchasers of the divested mills. 

 

International Paper is a New York corporation headquartered in Memphis, Tenn.  International Paper owns and operates 12 containerboard mills and 133 box plants that convert containerboard into corrugated boxes in the United States.  In 2010, International Paper reported revenues of approximately $25.2 billion, with its North American Industrial Packaging Group, which produces containerboard and corrugated products, accounting for $8.4 billion.

 

Temple-Inland is a Delaware corporation headquartered in Austin, Texas.  Temple-Inland owns and operates seven containerboard mills and 53 box plants in the United States.  In 2010, Temple-Inland reported revenues of approximately $3.8 billion, with its corrugated-packing business accounting for approximately $3.2 billion.

 

The proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register, as required by the Antitrust Procedures and Penalties Act.  Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 4100, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the settlement upon a finding that it is in the public interest.

Thomas W. Richardson was sentenced Thursday by U.S. District Judge Jane J. Boyle in Dallas to 105 months in prison and ordered to pay $30,649 in restitution, following his guilty plea in August 2011 to one count of theft of government property and one count of aggravated identity theft, the Justice Department announced today. Judge Boyle ordered that Richardson surrender to the Bureau of Prisons on March 6, 2012. According to an order filed that set conditions for his release, Richardson is a resident of Mansfield, Tex.

In handing down the sentence, Judge Boyle commented that Richardson was a former IRS employee who used his inside knowledge of IRS operations to commit his crime.

According to the factual resume filed in the case, Richardson admitted that within a two-day period, April 15, 2006 to April 17, 2006, he filed or caused to be filed 29 fraudulent 2005 individual income tax returns.  Each federal income tax return claimed a refund of between $215,801 and $473,832.  Richardson admitted that the refunds claimed by all 29 tax returns totaled $7,922,657.  

He further admitted that each tax return was filed claiming the married filing jointly election and listed two taxpayers, husband and wife.  In each case, the Social Security number reported on the tax returns was assigned to individuals and in most cases, the names on the tax returns matched the names of the individuals to whom the Social Security numbers were assigned.  Richardson admitted that the tax returns were prepared without the authorization of the 58 taxpayers listed on the tax returns.  All of the returns directed that the Internal Revenue Service (IRS) pay the money to one of Richardson’s bank accounts.  According to the factual resume filed in the case, the IRS paid out seven refunds totaling $1,865,401 between May 12, 2006 and May 19, 2006.  All but $30,649 was recouped by the IRS.

The case was investigated by the IRS-Criminal Investigation. Trial Attorneys Robert A. Kemins and Jed Silversmith of the Justice Department’s Tax Division, as well as Assistant U.S. Attorney Joe Revesz, prosecuted the case.

More information about the Tax Division and its enforcement efforts can be found at http://www.justice.gov/tax/

Roanne Eye , 57, of Plantation, Fla., was found guilty of tax charges late Thursday after a four-day jury trial, the Justice Department and Internal Revenue Service (IRS) announced. Eye was convicted interference with the administration of Internal Revenue laws and of filing false individual income tax returns.

According to evidence presented at trial, Eye attempted to obstruct and interfere with the administration of the laws and regulations of the IRS by telling her employer not to comply with IRS notices and by submitting IRS forms falsely claiming she was exempt from income tax withholding. Eye failed to file timely income tax returns for tax years 1996 and 1999 -2005, even after she received notices that her taxes were due. In March 2006, Eye filed tax returns for 1996 and 1999 - 2005, all claiming refunds to which she was not entitled. She subsequently filed a fraudulent return for tax year 2006. In total, Eye falsely claimed more than $1 million in fraudulent refunds.

In addition to filing the fraudulent income tax returns, Eye flooded IRS offices throughout the United States and Puerto Rico with frivolous letters challenging the authority of the IRS to collect taxes from her.

Sentencing has been scheduled for April 26, 2012, before U.S. District Judge James I. Cohn.  At sentencing, Eye faces a statutory maximum prison sentence of up to three years in prison on the interference charge and up to five years in prison on the false claims charge. 

Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida, John A. DiCicco, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division, and Jose A. Gonzalez, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (IRS-CID), announced the conviction.

Mr. Ferrer commended the investigative efforts of the agents of the IRS for their hard work in this matter.  The case is being prosecuted by Assistant U.S. Attorney Jennifer Keene and Matthew Mueller of the Tax Division.

The Consumer Protection Working Group, formed under President Barack Obama’s Financial Fraud Enforcement Task Force (FFETF), convened its first meeting in Washington, D.C., today to address consumer fraud, which can financially cripple households and can cause extensive losses to our economy. The newly-created group will work across federal law enforcement and regulatory agencies, and with state and local partners, to strengthen efforts to address consumer-related fraud, including schemes targeting vulnerable populations, such as the unemployed, those in need of payday loans, and those suffering from the burden of high credit card and other debt. The new working group will also focus on scams that exploit prospective students, active-duty military personnel and veterans.

“The schemes we are combating are as diverse as the imaginations of those who perpetrate them, and as sophisticated as modern technology will permit. Thanks in large part to the leadership of the President’s Financial Fraud Enforcement Task Force we are tackling financial fraud, in all its forms, head on,” said Attorney General Eric Holder. “Through the extensive and coordinated partnership we start today, we will strengthen our collective efforts, enhance civil and criminal enforcement of consumer fraud and educate the public in an effort to prevent consumers from being victimized in the first place.”  

Attorney General Holder delivered remarks at today’s meeting which was convened by FFETF Executive Director Michael Bresnick along with the working group’s co-chairs: Assistant Attorney General for the Department of Justice’s Civil Division Tony West, Assistant Attorney General for the Department of Justice’s Criminal Division Lanny Breuer, U.S. Attorney for the Central District of California André Birotte and Director of the Bureau of Consumer Protection for the Federal Trade Commission (FTC) David Vladeck. Another co-chair, Director of Enforcement for the Consumer Financial Protection Bureau Kent Markus, was unable to attend the meeting.

“We know all too well how opportunistic fraudsters have adapted their schemes to take advantage of consumers facing financial hardships, using false promises of mortgage modification, debt relief, and job placement, to name a few. Since 2009, the FTC has brought over 90 cases to stop these scams,” said Director of the Bureau of Consumer Protection for the FTC David Vladeck. “This partnership will only serve to enhance our collective efforts to protect consumers.”

 

The Consumer Protection Working Group will address several areas of concern, including payday lending and other high-pressure telemarketing or Internet scams, business opportunity schemes, for-profit schools that engage in fraud or misrepresentation and fraudulent third party payment processors that facilitate payments on behalf of other fraudsters without the permission of the customer.

At today’s meeting, the Consumer Protection Working Group members set priorities and discussed taking collaborative steps to continue to seek out and prosecute consumer fraud as well as protect consumers from fraud before it happens through outreach and education. The new working group plans to establish a best-practices tool kit, legislative, regulatory and policy initiatives and an information sharing structure.   

Other members of the Consumer Protection Working Group include representatives from the Department of Treasury, FBI, Internal Revenue Service-Criminal Investigation, Federal Deposit Insurance Corporation, U.S. Secret Service, Financial Crimes Enforcement Network, Executive Office for U.S. Attorneys, Department of Education’s Office of the Inspector General, U.S. Trustee Program, the National Association of Attorneys General, U.S. Postal Inspection Service, the Office of the Comptroller of the Currency, the Federal Reserve Board and the National Credit Union Administration. The state attorneys general are represented on the working group by Attorney General Lisa Madigan from Illinois, Attorney General Greg Zoeller from Indiana and Attorney General Roy Cooper from North Carolina.  

The Consumer Protection Working Group is part of ongoing enforcement efforts by President Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.   

Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Task force members have charged a record number of  mortgage fraud cases in the past two years, trained more than 100,000 professionals responsible for awarding and overseeing Recovery Act funds and held regional summits around the country to discuss strategies, resources and initiatives, as well as to meet with communities most affected by the financial crisis.

Learn more about the Financial Fraud Enforcement Task Force at www.stopfraud.gov .

Three Northern California real estate investors have agreed to plead guilty today for their roles in conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced. To date, as a result of the ongoing investigation, 20 individuals have agreed to plead guilty.

Charges were filed today in U.S. District Court for the Northern District of California in Oakland, Calif., against Barry Heisner of Brentwood, Calif.; Dominic Leung of Alameda, Calif.; and Hilton Wong of San Ramon, Calif.

According to court documents, for various lengths of time between August 2008 and January 2011, Heisner, Leung and Wong conspired with others not to bid against one another at public real estate foreclosure auctions. Instead, the investors designated a winning bidder to obtain selected properties at public real estate foreclosure auctions in Contra Costa County.

“The Antitrust Division will continue to pursue vigorously the perpetrators of these fraudulent schemes. Those who eliminated competition from the marketplace and lined their pockets while preying on the misfortune of others will be held accountable for their actions,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The division also will aggressively seek to forfeit the proceeds earned by those who took a leading role in facilitating these conspiracies.”

“The integrity of the real estate market depends on the transparency and fairness of all participants,” said FBI Special Agent in Charge Stephanie Douglas. “When individuals take advantage of the public’s trust to enrich themselves they damage the very foundation of our economy. The FBI is committed to working with our local and federal partners to continue to bring those who engage in anticompetitive activities to justice.”

Heisner, Leung and Wong also were charged with conspiracies to use the mail to carry out a scheme to fraudulently acquire title to selected properties sold at public auctions, to make and receive payoffs, and to divert money to co-conspirators that would have gone to mortgage holders and others by holding second, private auctions open only to members of the conspiracy. The department said that the selected properties were then awarded to the conspirators who submitted the highest bids in the second, private auctions. The private auctions took place at or near the courthouse steps where the public auctions were held. According to court documents, a forfeiture allegation was also included in the charges against Heisner.

The department said that the primary purpose of the conspiracies was to suppress and restrain competition and to conceal payoffs in order to obtain selected real estate offered at Contra Costa County public foreclosure auctions at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. Each count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the $1 million statutory maximum.

Today’s charges are the latest cases filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa and Alameda Counties, Calif.

The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Field Office and the FBI’s San Francisco office. Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Field Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.

Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit www.StopFraud.gov.

**The fraud charge(s) referenced in this press release were subsequently dismissed on the government’s motion.**

WASHINGTON – The Department of Justice today announced that it filed a notice with the U.S. District Court for the District of Columbia to dismiss its antitrust lawsuit regarding the potential merger of Deutsche Börse AG and NYSE Euronext. The department said that the lawsuit and proposed settlement are no longer necessary since the parties have formally abandoned their plans to merge. 

 

Background

 

On Dec. 22, 2011, the department filed an antitrust lawsuit in U.S. District Court for the District of Columbia, alleging that the transaction as originally proposed would have substantially lessened competition for displayed equities trading services, listing services for exchange-traded products, including exchange-traded funds, and real-time proprietary equity data products in the United States. At the same time, the department filed a proposed settlement of the lawsuit that would preserve competition in the United States by requiring Deutsche Börse to direct its subsidiary, International Securities Exchange Holdings Inc., to sell its 31.5 percent stake in Direct Edge Holdings LLC, the fourth largest stock exchange operator in the United States, and agree to other restrictions.

 

The European Commission recently prohibited the transaction due to the proposed deal’s effect on European consumers. The department’s Antitrust Division and the European Commission communicated extensively throughout the course of their respective investigations, with frequent contact between the leadership and investigative staffs, aided by waivers provided by the merging parties. 

WASHINGTON — A former owner of two Illinois-based technology companies was sentenced today to serve 30 months in prison for her participation in a conspiracy to defraud the federal E-Rate program, the Department of Justice announced. Gloria Harper was sentenced by U.S. District Court Judge Carl J. Barbier.

 

Harper was charged in U.S. District Court in New Orleans on Nov. 18, 2010, with conspiring to defraud the E-Rate program by providing bribes and kickbacks to school officials in Arkansas, Florida, Illinois and Louisiana. Harper pleaded guilty on June 2, 2011.

 

Including today’s sentencing, as a result of the Antitrust Division’s ongoing investigation into fraud and anticompetitive conduct in the E-Rate program, a total of seven companies and 24 individuals have pleaded guilty, been convicted at trial or entered civil settlements. Those companies and individuals have been sentenced to pay criminal fines and restitution totaling more than $40 million. Nineteen individuals, including Harper, have been sentenced to serve prison time. In June 2011, Barrett C. White and Tyrone Pipkin, Harper’s co-conspirators, were each sentenced to serve one year and one day in prison for their roles in the conspiracy.

 

According to court documents, Harper, former co-owner of Global Networking Technologies and former owner of Computer Training Associates, acting on behalf of these companies as well as on her own behalf, participated in the conspiracy beginning on or about December 2001 through September 2005. Harper conspired to provide bribes and kickbacks to school officials and employees responsible for the procurement of Internet access services at certain schools in Arkansas, Florida, Illinois and Louisiana. The department said that in return, those individuals ceded control of the E-Rate competitive bidding process to Harper and a co-conspirator, ultimately allowing them to ensure E-Rate contracts at these schools were awarded to their companies.

 

The schools and school districts affected by the conspiracy include: in Arkansas – Gould and Holly Grove public school districts; in Florida – Innovation Child Development Center and Innovation School of Excellence; in Illinois – Antioch Center, Fairfield Center, Ingleside Center, St. Mary’s Center, Waukegan Center, Zion Center and Niles Terrace Center; and in Louisiana – All Saints School, St. Augustine High School, St. David School and St. Monica School.

 

The E-Rate program was created by Congress in the Telecommunications Act of 1996, and is administered by the Universal Service Administrative Company, under the oversight of the Federal Communications Commission (FCC). The program provides subsidies to economically disadvantaged schools and libraries. Depending on the financial needs of the applicant schools, the program pays 20 to 90 percent of the cost for Internet access and telecommunications services, as well as internal computer and communications networks.

 

Today’s sentencing resulted from an investigation by the Department of Justice Antitrust Division’s Dallas Field Office, the FBI’s Dallas Field Office and the FCC’s Office of Inspector General, with assistance from the U.S. Attorney’s Office for the Eastern District of Louisiana. Anyone with information concerning violations of the E-Rate program is urged to call the Antitrust Division’s Dallas Field Office at 214-661-8600 or visit www.justice.gov/atr/contact/newcase.htm.

The U.S. District Court for the Eastern District of Washington has entered a consent decree against Dominguez Foods of Washington Inc. to resolve a food seizure action alleging violations of the Food, Drug and Cosmetic Act (FDCA), the Justice Department announced today.

 

During an inspection in August and September 2011, investigators from the Food and Drug Administration (FDA) observed evidence of rodent and insect infestation in a facility in Zillah, Wash., where Dominguez Foods stores and processes foods. At the conclusion of the inspection, FDA investigators issued a detention order covering all food in the facility that was not in hermetically sealed containers. At the request of FDA, the United States sought a warrant of arrest for the detained products, alleging that the food was adulterated under the FDCA due to the conditions in the warehouse documented during FDA’s inspection. The court issued the warrant and, on Sept. 30, 2011, the U.S. Marshals seized various articles of food at the Dominguez facility, including spices, tea, chile pods and dried beans. After negotiations with the government, Dominguez Foods agreed to resolve the matter through a consent decree.

 

Under the consent decree, Dominguez Foods must certify that it has taken the necessary corrective actions to render its facility fit for the storage and handling of food and must also implement an ongoing sanitation control program. The consent decree also bans the firm from causing the adulteration of food by maintaining them in insanitary conditions.

 

“Public health and safety demand that food be processed and stored under sanitary conditions,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “The Court’s consent decree requires Dominguez Foods to put in place programs and procedures to ensure that the food handled in its facility is safe.”

 

The matter was handled by Department of Justice Trial Attorney Shannon Pedersen of the Civil Division’s Consumer Protection Branch and Assistant Chief Counsel Scott Kaplan of the FDA’s Office of the Chief Counsel.

WASHINGTON – U.S. Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced today that the federal government and 49 state attorneys general have reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.  The agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future. 

 

The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.  The joint federal-state group entered into the agreement with the nation’s five largest mortgage servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC).

 

“This agreement – the largest joint federal-state settlement ever obtained – is the result of unprecedented coordination among enforcement agencies throughout the government,” said Attorney General Holder.  “It holds mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers.  As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans.  The agreement also requires substantial changes in how servicers do business, which will help to ensure the abuses of the past are not repeated.” 

 

“This historic settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” said HUD Secretary Donovan. “ Banks must follow the laws.  Any bank that hasn’t done so should be held accountable and should take prompt action to correct its mistakes.  And it will not end with this settlement.  One of the most important ways this settlement helps homeowners is that it forces the banks to clean up their acts and fix the problems uncovered during our investigations.  And it does that by committing them to major reforms in how they service mortgage loans.  These new customer service standards are in keeping with the Homeowners Bill of Rights recently announced by President Obama – a single, straightforward set of commonsense rules that families can count on.”

 

“This monitored agreement holds the banks accountable, it provides badly needed relief to homeowners, and it transforms the mortgage servicing industry so now homeowners will be protected and treated fairly,” said Iowa Attorney General Miller.

 

“This settlement has broad bipartisan support from the states because the attorneys general realize that the partnership with the federal agencies made it possible to achieve favorable terms and conditions that would have been difficult for the states or the federal government to achieve on their own,” said Colorado Attorney General Suthers.

 

The joint federal-state agreement requires servicers to implement comprehensive new mortgage loan servicing standards and to commit $25 billion to resolve violations of state and federal law.  These violations include servicers’ use of “robo-signed” affidavits in foreclosure proceedings; deceptive practices in the offering of loan modifications; failures to offer non-foreclosure alternatives before foreclosing on borrowers with federally insured mortgages; and filing improper documentation in federal bankruptcy court.

 

Under the terms of the agreement, the servicers are required to collectively dedicate $20 billion toward various forms of financial relief to borrowers.  At least $10 billion will go toward reducing the principal on loans for borrowers who, as of the date of the settlement, are either delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth.  At least $3 billion will go toward refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth.  Borrowers who meet basic criteria will be eligible for the refinancing, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate mortgages are due to soon rise to much higher rates.  Up to $7 billion will go towards other forms of relief, including forbearance of principal for unemployed borrowers, anti-blight programs, short sales and transitional assistance, benefits for service members who are forced to sell their home at a loss as a result of a Permanent Change in Station order, and other programs.  Because servicers will receive only partial credit for every dollar spent on some of the required activities, the settlement will provide direct benefits to borrowers in excess of $20 billion.   

 

Mortgage servicers are required to fulfill these obligations within three years.  To encourage servicers to provide relief quickly, there are incentives for relief provided within the first 12 months.  Servicers must reach 75 percent of their targets within the first two years.  Servicers that miss settlement targets and deadlines will be required to pay substantial additional cash amounts.

 

In addition to the $20 billion in financial relief for borrowers, the agreement requires the servicers to pay $5 billion in cash to the federal and state governments.  $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria.  This program is separate from the restitution program currently being administered by federal banking regulators to compensate those who suffered direct financial harm as a result of wrongful servicer conduct.  Borrowers will not release any claims in exchange for a payment.  The remaining $3.5 billion of the $5 billion payment will go to state and federal governments to be used to repay public funds lost as a result of servicer misconduct and to fund housing counselors, legal aid and other similar public programs determined by the state attorneys general. 

 

The $5 billion includes a $1 billion resolution of a separate investigation into fraudulent and wrongful conduct by Bank of America and various Countrywide entities related to the origination and underwriting of Federal Housing Administration (FHA)-insured mortgage loans, and systematic inflation of appraisal values concerning these loans, from Jan. 1, 2003 through April 30, 2009.  Payment of $500 million of this $1 billion will be deferred to partially fund a loan modification program for Countrywide borrowers throughout the nation who are underwater on their mortgages.  This investigation was conducted by the U.S. Attorney’s Office for the Eastern District of New York, with the Civil Division’s Commercial Litigation Branch of the Department of Justice, HUD and HUD-OIG.  The settlement also resolves an investigation by the Eastern District of New York, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Housing Finance Agency-Office of the Inspector General (FHFA-OIG) into allegations that Bank of America defrauded the Home Affordable Modification Program. 

 

The joint federal-state agreement requires the mortgage servicers to implement unprecedented changes in how they service mortgage loans, handle foreclosures, and ensure the accuracy of information provided in federal bankruptcy court.  The agreement requires new servicing standards which will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create dozens of new consumer protections.  The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court. 

 

The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first.  In addition, banks will be restricted from foreclosing while the homeowner is being considered for a loan modification.  The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials.  Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.

 

The agreement will also provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA).  In addition, the four servicers that had not previously resolved certain portions of potential SCRA liability have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any servicemembers were foreclosed on in violation of SCRA since Jan. 1, 2006.  The servicers have also agreed to conduct a thorough review, overseen by the Civil Rights Division, to determine whether any servicemember, from Jan. 1, 2008, to the present, was charged interest in excess of 6% on their mortgage, after a valid request to lower the interest rate, in violation of the SCRA.  Servicers will be required to make payments to any servicemember who was a victim of a wrongful foreclosure or who was wrongfully charged a higher interest rate.  This compensation for servicemembers is in addition to the $25 billion settlement amount.

 

The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.  Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr.  Smith has served as the North Carolina Commissioner of Banks since 2002.  Smith is also the former Chairman of the Conference of State Banks Supervisors (CSBS).  The monitor will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement. 

 

The agreement resolves certain violations of civil law based on mortgage loan servicing activities.  The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers.  The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group.  The United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan.  The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.  State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.       

 

Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, SIGTARP and FHFA-OIG.  The Department of Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.

 

For more information about the mortgage servicing settlement, go to www.NationalMortgageSettlement.com.  To find your state attorney general’s website, go to www.NAAG.org and click on “The Attorneys General.” 

 

The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information about the task force, visit: www.stopfraud.gov.

~ ~

The settlement agreement with the nation’s five largest servicers announced today by Attorney General Eric Holder and the Department of Justice’s federal and state partners includes substantial financial compensation to homeowners who are servicemembers and establishes significant new protections for servicemembers in the future.  The financial compensation to servicemembers is in addition to the $25 billion settlement.

JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC) have agreed to conduct a full review, overseen by the Department of Justice’s Civil Rights Division, to determine whether any servicemembers were foreclosed on in violation of the Servicemembers Civil Relief Act (SCRA) since Jan.1, 2006.   Wells Fargo, Citigroup and Ally will be required to provide any servicemember who was a victim of a wrongful foreclosure a minimum payment of $116,785 plus the servicemember’s lost equity and interest.   The servicemember’s payment could be higher as a result of the review conducted by the banking regulators.   To ensure consistency with an earlier private settlement, JP Morgan Chase will provide any servicemember who was a victim of a wrongful foreclosure either his or her home free and clear of any debt or the cash equivalent of the full value of the home at the time of sale.   In addition, servicemebers will receive compensation for any additional harm suffered.   All compensation for servicemembers wrongfully foreclosed on is in addition to the $25 billion settlement amount.

In addition, Citigroup, Wells Fargo and Ally have also agreed to conduct a thorough review, overseen by the Department of Justice’s Civil Rights Division, to determine whether any servicemember, from January 1, 2008 to the present, was charged interest in excess of 6% on his or her mortgage, after a valid request to lower the interest rate, in violation of the SCRA.   Servicers will be required to provide any servicemember who was wrongfully charged interest in excess of 6% with a payment equal to a refund, with interest, of any amount charged in excess of 6% plus triple the amount refunded or $500, whichever is larger.   This compensation for servicemembers is in addition to the $25 billion settlement amount.   JP Morgan Chase had already compensated servicemembers charged interest in excess of 6% on their mortgage through the earlier private settlement.

“The men and women who serve our nation in the armed forces deserve, at the very least, to know that we will protect their rights while they are serving our country,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We appreciate that Wells Fargo, JP Morgan Chase, Citigroup and Ally agreed, through this settlement, to compensate servicemembers whose rights were violated.”

All four servicers agreed to numerous other measures, including SCRA training for employees and agents and developing SCRA policies and procedures to ensure compliance with the SCRA. The servicers will also repair any negative credit report entries related to the allegedly wrongful foreclosures and will not pursue any remaining amounts owed under the mortgages.

The joint federal-state agreement also includes expanded protections for servicemembers.    The SCRA prohibits foreclosures on servicemembers without court orders on mortgages that were originated before military service began. The settlement extends this protection to all servicemembers, regardless of when their mortgage was secured, if they were receiving Hostile Fire/Imminent Danger Pay and were stationed away from their home within nine months of the foreclosure.   The agreement requires all five servicers to provide certain servicemembers who are forced to move because of Permanent Change in Station (PCS) orders  access loan modifications without going into default or, in the event that they must sell their home at a loss, but are ineligible for funding from the Department of Defense’s Homeowners’ Assistance Program (HAP), with short sale agreements and mandatory deficiency waivers.   On the servicemember relief, the Department worked closely with the Delaware Attorney General’s Office, who led the servicemember negotiations on behalf of the state attorneys general.

In May 2011, the Department of Justice reached a more than $20 million settlement with Bank of America for wrongfully foreclosing on servicemembers without court orders.    That settlement only resolved allegations related to non-judicial foreclosures.    The Department did not release as part of today’s announced settlement any potential claims related to judicial foreclosures or possible 6% violations by Bank of America.

The JP Morgan Chase investigation was handled jointly by the Civil Rights Division and the United States Attorney’s Office in South Carolina.

President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.    The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.    The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.    For more information on the task force, visit www.stopfraud.gov .

Servicemembers and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance office.    Please consult the military legal assistance office locator at http://legalassistance.law.af.mil and click on the Legal Services Locator.    Additional information about the Justice Department’s enforcement of the SCRA and the other laws protecting servicemembers is available at www.servicemembers.gov.

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WASHINGTON – A federal court has permanently barred Paul E. Foster Jr. and Sheree McDade, both of Montgomery, Ala., from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Foster and McDade agreed without admitting the government’s allegations, was signed by Chief Judge W. Keith Watkins of the U.S. District Court for the Middle District of Alabama.

The government complaint alleged that Foster and McDade, through businesses called Miami Tax, Paul’s Tax Service and Advance Taxes Inc., prepared tax returns for customers that reported phony business expenses for fictitious businesses, inflated earned income and falsely claimed dependents in order to increase refunds based on the earned income tax credit. The complaint also alleged that at least 48 returns that Foster and McDade prepared for the 2008 tax year contained false claims for the first-time homebuyer tax credit. According to the complaint, Foster and McDade’s misconduct has thus far resulted in $1 million of lost tax revenue, plus resources spent by the Internal Revenue Service (IRS) to assess and collect unpaid taxes from the customers.

The court ordered Foster and McDade to send a copy of the injunction order to all customers for whom they prepared a federal tax return for tax years 2006 and later. The court also ordered the pair to provide the government with a list of those customers.

In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax-return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website.

Related Documents:

  United States v. Paul E. Foster Jr., et al.
Final Judgment

Complaint for Permanent Injunction and Other Relief

Foster Order

McDade Order

(PDF documents)

Portable Document Format (PDF) files may be viewed with a free copy of Adobe Acrobat Reader

Accessibility Information

SAN FRANCISCO – A federal grand jury in San Francisco has charged five individuals and five companies with economic espionage and theft of trade secrets for their roles in a long-running effort to obtain U.S. trade secrets for the benefit of companies controlled by the government of the People’s Republic of China (PRC), announced U.S. Attorney Melinda Haag; Lisa Monaco, Assistant Attorney General for National Security at the Department of Justice; and Stephanie Douglas, Special Agent in Charge of the FBI San Francisco Division.

According to the superseding indictment, the government of the PRC identified as a priority the development of chloride-route titanium dioxide (TiO2) production capabilities.  TiO2 is a commercially valuable white pigment with numerous uses, including coloring paint, plastics and paper.  To achieve that goal, companies controlled by the PRC government, specifically the Pangang Group companies named in the superseding indictment, and employees of those companies conspired and attempted to illegally obtain TiO2 technology that had been developed over many years of research and development by E.I. du Pont de Nemours & Company (DuPont).

According to the superseding indictment, the Pangang Group companies were aided in their efforts by individuals in the United States who had obtained TiO2 trade secrets and were willing to sell those secrets for significant sums of money.  Defendants Walter Liew, Christina Liew, Robert Maegerle and Tze Chao obtained and possessed TiO2 trade secrets belonging to DuPont.  Each of these individuals allegedly sold information containing DuPont TiO2 trade secrets to the Pangang Group companies for the purpose of helping those companies develop large-scale chloride route TiO2 production capability in the PRC, including a planned 100,000 ton TiO2 factory at Chongqing, PRC.

According to the superseding indictment, the Liews, USA Performance Technology Inc. (USAPTI), and one of its predecessor companies, Performance Group, entered into contracts worth in excess of $20 million to convey TiO2 trade secret technology to Pangang Group companies.  The Liews allegedly received millions of dollars of proceeds from these contracts.  The proceeds were wired through the United States, Singapore and ultimately back into several bank accounts in the PRC in the names of relatives of Christina Liew. 

The five individuals charged in the indictment are:

• Walter Lian-Heen Liew, aka “Liu Yuanxuan,” 54, of Orinda, Calif.  Mr. Liew is a naturalized U.S. citizen and co-owner of USAPTI.  Mr. Liew is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, possession of trade secrets, conveying trade secrets, conspiracy to obstruct justice, witness tampering, conspiracy to tamper with evidence and false statements.  Mr. Liew was charged in August 2011 with obstruction of justice and making false statements to the FBI.  He was arrested at that time and has been ordered detained pending trial based on a finding by Magistrate Judge Nathanael Cousins that he is a flight risk.  Mr. Liew’s next scheduled court appearance is before the Honorable Jeffrey S. White on Feb. 9, 2012, at 2:00 pm.
• Christina Hong Qiao Liew, aka “Qiao Hong,” 49, of Orinda.  Mrs. Liew is a naturalized U.S. citizen and co-owner with her husband, Walter Liew, of USAPTI. Mrs. Liew is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, witness tampering, conspiracy to tamper with evidence and false statements.  Mrs. Liew also was charged in August 2011 with obstruction of justice and making false statements to the FBI.  She was released by the court on conditions that include travel restrictions and electronic monitoring.   Mrs. Liew’s next scheduled court appearance is before the Honorable Jeffrey S. White on Feb. 9, 2012, at 2:00 pm.
• Hou Shengdong, 42, a citizen of the PRC.  Hou was the vice director of the Chloride Process TiO2 Project Department for the Pangang Group Titanium Industry Company Ltd.  According to the superseding indictment, Hou and other Pangang Group employees requested DuPont blueprints as a condition of working on the Pangang Group project.  Hou is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage.  A warrant has been issued for Hou’s arrest.
• Robert Maegerle, 76, of Harbeson, Del.  Maegerle was employed by DuPont as an engineer from 1956 to 1991.  According to the superseding indictment, Maegerle had access to DuPont TiO2 trade secrets, including specific information regarding DuPont’s TiO2 facility at Kwan Yin, Taiwan.  Maegerle is charged with conspiracy to commit theft of trade secrets, attempted theft of trade secrets, conveying trade secrets and conspiracy to obstruct justice.  Maegerle was arrested this morning in Harbeson.
• Tze Chao, 77, of Newark, Del.  Chao was employed by DuPont from 1966 to 2002.  Chao is charged with conspiracy to commit economic espionage.  Chao was served with a summons to appear in court in San Francisco on March 1, 2012, at 9:30 a.m. for arraignment on the superseding indictment.

The superseding indictment also names five companies as defendants:

• Pangang Group Company Ltd.  Pangang Group is a state-owned enterprise controlled by the State-Owned Assets Supervision and Administration Commission of the PRC State Council and located in Sichuan Province, PRC.
• Pangang Group Steel Vanadium & Titanium Company Ltd. (PGSVTC).  PGSVTC is a subsidiary of the Pangang Group.
• Pangang Group Titanium Industry Company Ltd.  Pangang Group Titanium is a subsidiary of PGSVTC and was the entity directly responsible for constructing the 100,000 ton chloride-route TiO2 factory at Chongqing, PRC.  Pangang Group Titanium entered into an agreement with USAPTI in 2009 under which USAPTI conveyed DuPont TiO2 technology to Pangang Group Titanium and its employees.
• Pangang Group International Economic & Trading Co. (PIETC).  PIETC is a subsidiary of PGSVTC and is responsible for financial matters related to the construction of the Chongqing TiO2 factory.  PIETC signed a 2009 agreement with USAPTI under which DuPont technology was transferred.
• USA Performance Technology Inc. (USAPTI).  USAPTI is an Oakland, Calif.-based engineering consulting company owned and operated by Walter and Christina Liew.  According to the superseding indictment, USAPTI succeeded two other companies owned by the Liews – Performance Group USA and LH Performance – which also were used in the conspiracy to convey DuPont trade secrets to PRC-based companies.

Each of the five corporate defendants named in the superseding indictment are charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage.  Summonses were issued to each corporate defendant requiring them to appear in court in San Francisco on March 1, 2012, at 9:30 a.m. for arraignment on the superseding indictment.

DuPont is a company based in Wilmington, Del., that manufactures a wide variety of products, including TiO2.  DuPont invented the chloride-route process for manufacturing TiO2 in the late-1940s and since then has invested heavily in research and development to improve that production process.  The global titanium dioxide market has been valued at roughly $12 billion, and DuPont has the largest share of that market.

The chloride-route process is more efficient and cleaner than the sulfate-route process prevalent in the PRC.  The superseding indictment alleges that the object of the defendants’ conspiracy was to convey DuPont’s secret chloride-route technology to the PRC companies for the purpose of building modern TiO2 production facilities in the PRC without investing in time-consuming and expensive research and development.

DuPont reported information to the FBI that its TiO2 trade secrets had been misappropriated.  The FBI opened an investigation in March 2011.

“As today’s case demonstrates, technology developed by U.S. companies is vulnerable to concerted efforts by competitors – both at home and abroad – to steal that technology,” said U.S. Attorney Haag.  “Fighting economic espionage and trade secret theft is one of the top priorities of this Office and we will aggressively pursue anyone, anywhere who attempts to steal valuable information from the United States.”

Assistant Attorney General Monaco said, “The theft of America’s trade secrets for the benefit of China and other nations poses a substantial and continuing threat to our economic and national security, and we are committed to holding accountable anyone who robs American businesses of their hard-earned research.  I thank the agents and prosecutors who helped bring about this important case.” 

FBI Special Agent-in-Charge Stephanie Douglas stated, “The conduct alleged in the superseding indictment reveals a methodical effort by foreign interests to misappropriate valuable U.S. technology by using individuals operating within our borders.  The goal of this scheme was to obtain the benefit of research and development investments by U.S. companies, without making the same investment of time and money.  This is not only unfair, but it does great damage to the U.S. economy and as a result undercuts on national security.  The FBI is committed to rooting out commercial espionage that puts U.S. companies at a disadvantage in the global market.”

The maximum statutory penalty for each of the charges alleged in the superseding indictment is as follows:

• Count One, conspiracy to commit economic espionage: 15 years in prison, $500,000 fine and restitution.  The fine for an organizational defendant is not more than the greatest of $10,000,000 or twice the pecuniary gain or loss.
• Count Two, conspiracy to commit theft of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.   The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
• Count Three, attempted economic espionage: 15 years in prison, $500,000 fine and restitution.   The fine for an organizational defendant is not more than the greatest of $10,000,000 or twice the pecuniary gain or loss.
• Count Four, attempted economic espionage: 15 years in prison, $500,000 fine and restitution.  The fine for an organizational defendant is not more than the greatest of $10,000,000 or twice the pecuniary gain or loss.
• Count Five, attempted theft of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.  The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
• Counts Six and Seven, possession of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.  The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
• Count Eight, conveying trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.  The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
• Count Nine, possession of trade secrets: 10 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.  The fine for an organizational defendant is not more than the greatest of $5,000,000 or twice the pecuniary gain or loss.
• Count 10, conspiracy to tamper with witnesses and evidence: 20 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.
• Counts 11 and 12, witness tampering: 20 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.
• Count 13, conspiracy to tamper with evidence: 20 years in prison, $250,000 fine or twice the gross gain or loss, and restitution.
• Count 14, false statements in a matter within the jurisdiction of the executive branch:  five years in prison, $250,000 fine, and restitution.

The case is being prosecuted by the Special Prosecutions and National Security Unit of the U.S. Attorney’s Office in San Francisco, and the Counterespionage Section of the U.S. Department of Justice.  The investigation, which is ongoing, is being conducted by the FBI.

Please note, an indictment contains only allegations and, as in all cases, the defendants must be presumed innocent unless and until proven guilty.

A federal court has permanently barred Paul E. Foster Jr. and Sheree McDade, both of Montgomery, Ala., from preparing federal tax returns for others, the Justice Department announced today. The civil injunction order, to which Foster and McDade agreed without admitting the government’s allegations, was signed by Chief Judge W. Keith Watkins of the U.S. District Court for the Middle District of Alabama.

 

The government complaint alleged that Foster and McDade, through businesses called Miami Tax, Paul’s Tax Service and Advance Taxes Inc., prepared tax returns for customers that reported phony business expenses for fictitious businesses, inflated earned income and falsely claimed dependents in order to increase refunds based on the earned income tax credit. The complaint also alleged that at least 48 returns that Foster and McDade prepared for the 2008 tax year contained false claims for the first-time homebuyer tax credit. According to the complaint, Foster and McDade’s misconduct has thus far resulted in $1 million of lost tax revenue, plus resources spent by the Internal Revenue Service (IRS) to assess and collect unpaid taxes from the customers.

 

The court ordered Foster and McDade to send a copy of the injunction order to all customers for whom they prepared a federal tax return for tax years 2006 and later. The court also ordered the pair to provide the government with a list of those customers.

 

In the past decade, the Justice Department’s Tax Division has obtained injunctions against hundreds of unscrupulous tax-return preparers and tax-fraud promoters. Information about these cases is available on the Justice Department website .

WASHINGTON - The Justice Department today announced an agreement with the city of Humboldt, Kan., to improve access to all aspects of civic life for individuals with disabilities. The agreement was reached under Project Civic Access (PCA), the department’s wide-ranging initiative to ensure that cities, towns and counties throughout the country comply with the Americans with Disabilities Act (ADA). The department has now reached 197 agreements under the PCA initiative, improving access to civic life for more than four million individuals with disabilities nationwide. According to census data, the city population is just under 2,000, and just over 21 percent of Humboldt residents have a disability.

 

“Individuals with disabilities must have the opportunity to participate in civic life in every city, town and county in the country, no matter how large or small, and this agreement represents another positive step forward,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We applaud Humboldt officials for their commitment to improving access for all residents and visitors with disabilities to the full range of city programs, activities, services and facilities.”

 

“Kansans with disabilities have much to contribute,” said Barry Grissom, U.S. Attorney for the District of Kansas. “This agreement will help remove the barriers that prevent them from participating fully in community life.  I am pleased this matter was resolved without protracted litigation.”

 

PCA was initiated to ensure that persons with disabilities have an equal opportunity to participate in civic life, a fundamental part of American society. As part of the PCA initiative, Justice Department investigators, attorneys and architects survey state and local government facilities, services and programs in communities across the country to identify the modifications needed for compliance with ADA requirements. The agreements are tailored to address the steps each community must take to improve access.

 

Under the agreement announced today, Humboldt officials will take several important steps to improve access for individuals with disabilities, such as:

• Making physical modifications to its facilities so that parking, routes into the buildings, entrances, service areas and counters, restrooms, locker rooms and drinking fountains are accessible to persons with disabilities. The agreement specifies which modifications will be made at each facility.
• Surveying other facilities and programs and making modifications wherever necessary to achieve full compliance with ADA requirements.
• Implementing a comprehensive plan to improve the accessibility of the city’s sidewalks, transportation stops and pedestrian crossings by installing accessible curb ramps throughout the city.
• Ensuring that buildings and outdoor facilities that will be built or altered by or on behalf of the city comply with the ADA’s architectural requirements.
• Officially recognizing the Kansas telephone relay service as a key means of communicating with individuals who are deaf, are hard-of-hearing, or have speech impairments and training staff in using the relay service for telephone communications.
• Posting, publishing and distributing a notice to inform members of the public of the provisions of Title II of the ADA and their applicability to the city’s programs, services and activities.
• Ensuring that the city’s official website and other web-based services are accessible to people with disabilities.
• Developing a method for providing information for interested persons with disabilities concerning the existence and location of the city’s accessible services, activities and programs.
• Undertaking the required planning and modifications to ensure equal, integrated access to emergency management for individuals with disabilities, including emergency preparedness, notification, evacuation, sheltering, response, clean up, and recovery .

Today’s agreement was reached under Title II of the ADA, which prohibits discrimination against individuals with disabilities by state and local governments. The department will actively monitor compliance with today’s agreement, which will remain in effect for three years from Feb. 8, 2012, or until the department has confirmed that all required actions have been completed, whichever is later.

 

People interested in finding out more about the ADA, today’s agreement, the PCA initiative, or the ADA Best Practices Tool Kit for State and Local Governments can access the ADA website at  www.ada.gov or call the toll-free ADA Information Line at 800-514-0301 or 800-514-0383 (TTY).

 

The agreement with the City of Humboldt is available at http://www.ada.gov/humboldt_KS_pca/humboldt_KS_sa.htm.

James Cummings, a resident of Boca Raton, Fla., has been sentenced for committing fraud in connection with a coffee machine business opportunity scheme, the Justice Department and U.S. Postal Inspection Service announced today.

 

The government alleged that the defendant sold a business package that included coffee machines, locations in which to place those machines and on-going support and assistance in the operation of the machines. Cummings sold the business opportunities for a minimum price of approximately $10,000 each.

 

In pleading guilty, Cummings admitted that, in making sales to consumers, he made a number of false claims about the profits generated by the machines. In addition, he admitted that he led potential buyers to believe that they would recoup their investment in 12 to 18 months. Cummings admitted that he misrepresented to his customers that “locating companies” would find high traffic, high profit locations in which to place the vending machines. In reality, as the government alleged, buyers suffered a total loss on their investments and some buyers did not receive their purchased machines.

 

Cummings was sentenced by U.S. District Judge William P. Dimitrouleas in Ft. Lauderdale, Fla., to a year and a day in prison and three years supervised release, and ordered to pay over $137,000 in restitution. Cummings had pleaded guilty on Nov. 29, 2011, to conspiracy to commit mail fraud for his participation at three Florida companies: M & D Gourmet Coffee Inc. of Boca Raton, Fla.; Coffee Heaven LLC of Deerfield Beach, Fla.; and Divino Trio Coffee & Vending Company of Ft. Lauderdale. The criminal information charging Cummings alleged that he served as a salesman at these companies from December 2003 to February 2008.

“This defendant took advantage of investors who wanted to make a better living for themselves, causing them to pay thousands of dollars for worthless business opportunities,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “This prosecution and the court’s sentence should send a signal to others that we will pursue those who perpetrate fraud regardless of their position in the scheme.”

 

Cummings’ co-conspirator, Manuel Rodriguez, the leader of the scheme, was convicted by a jury of one count of conspiracy and seven counts of wire fraud in September 2011. In December 2011, Rodriguez was sentenced to 120 months in federal prison.

 

“Business opportunity fraud often involves a number of perpetrators – owners, salespeople, locators, references, and others,” said U.S. Postal Inspector in Charge, Henry Gutierrez, based in Miami. “As this case and many others show, the Postal Inspection Service will vigorously pursue anyone who plays a part in bilking consumers of their hard earned money through the U.S. mails.”

 

Assistant Attorney General West commended the investigative efforts of the U.S. Postal Inspection Service. The case was prosecuted by Matthew Ebert of the Justice Department’s Consumer Protection Branch.

An eight-member jury has unanimously found that a former Jackson Hewitt tax preparer, Frances Carlson of Bradenton, Fla., prepared 27 federal tax returns that she knew would understate her customers’ tax liabilities, the Justice Department announced today. The verdict followed an eight-day trial in Tampa, Fla., before Judge Susan Bucklew of the U.S. District Court for the Middle District of Florida.

 

The jury answered 36 separate questions in favor of the government in reaching the verdict. As a consequence, based on evidence presented at the trial, Carlson is liable for penalties totaling $135,000, plus interest.

 

According to evidence presented at the trial, Carlson worked at JH Accounting, a Sarasota, Fla., accounting firm controlled by Daniel Prewett. The evidence showed that Carlson also worked as a tax preparer for a Sarasota franchise of Jackson Hewitt Tax Service Inc. that Prewett controlled. According to trial evidence, Prewett was previously convicted by a federal jury on charges related to cocaine distribution and money laundering and was sentenced to 18 years in prison in 2008.

 

In 2009, a federal court in Tampa permanently barred Prewett and Carlson from preparing federal tax returns for others.

 

Further information about the recent enforcement efforts of the Justice Department’s Tax Division against unscrupulous tax-return preparers and tax-fraud promoters is available on the Justice Department’s website .

Judgment in a Civil Case (PDF)
Verdict Form (PDF)
 

Dava Pharmaceuticals Inc. has agreed to pay the United States $11 million to settle allegations that it violated the False Claims Act by misreporting drug prices in order to reduce its Medicaid Drug Rebate obligations, the Justice Department announced today.

The settlement resolves allegations that between Oct. 1, 2005 and Sept. 30, 2009, Dava and its corporate predecessors knowingly underpaid their rebate obligations under the Medicaid Prescription Drug Rebate Program. Under that program, participating drug companies are required to pay quarterly rebates to state Medicaid programs based, in part, on whether a drug is a “generic” or “branded” product and the difference between what the health care program paid for the drug and prices paid by other purchasers.

 

The government contends that i n order to reduce its Medicaid rebate obligation, Dava incorrectly treated its version of the drugs cefdinir, clarithromycin and methotrexate as “generic” drugs rather than “branded” products, thereby lowering the overall percentage rebate payable to Medicaid.  In addition, the government further alleges Dava reduced its Medicaid rebate obligations by incorrectly calculating average manufacturer prices for its versions of the drugs cefdinir, clarithromycin, methotrexate and rheumatrex.  As a result, the government alleges that Dava underpaid drug rebates to the Medicaid program and overcharged certain public health service entities for these products.    

“Pharmaceutical companies that participate in Medicaid must accurately report drug prices and pay their fair share of rebates to the federal and statement governments,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “Settlements like this one help maintain important programs on which so many depend for needed health care.”

 

The federal government’s portion of the settlement is approximately $5.7 million. Dava will also pay over $5 million to the Medicaid participating states and approximately $200,000 to certain public health services entities who paid inflated prices for the drugs at issue.

 

The settlement resolves a lawsuit filed in federal court in the District of Maryland under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. As part of today’s resolution, the whistleblower – Jim Conrad – will receive 15 percent of the settlement proceeds. 

This resolution is part of the government’s emphasis on combating health care fraud and another success for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $6.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $8.8 billion.

The investigation was handled by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Maryland, the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General, and the National Association of Medicaid Fraud Control Units.

WASHINGTON – An assistant administrator of a Houston hospital was arrested today on charges related to his alleged participation in a $116 million Medicare fraud scheme involving false claims for mental health treatment, announced the Department of Justice, the FBI and the Department of Health and Human Services (HHS).

                                                           

An indictment filed in the Southern District of Texas and unsealed today charges Mohammed Khan, 62, of Houston, with one count of conspiracy to commit health care fraud, one count of conspiracy to pay and receive illegal health care kickbacks and five counts of paying or offering to pay health care kickbacks.  Khan is expected to make his initial appearance in federal court today in Houston. 

 

“The indictment against Mr. Kahn alleges that he used his position as a hospital assistant administrator to submit millions in false claims to the Medicare program,” said Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division. “According to the charges, he paid kickbacks to patient recruiters, owners of group homes and assisted living facilities, and beneficiaries so that he could fill his hospital with patients for whom he could bill the government for medically unnecessary services or services that were never provided. We will continue aggressively to pursue individuals who attempt to enrich themselves at the expense of the Medicare program.”

“The defendant charged in this indictment is accused of stealing precious Medicare resources by billing for services that were medically unnecessary or never provided," said Special Agent in Charge Stephen L. Morris of the FBI’s Houston Field Office. “Our health care fraud efforts have never been more collaborative and aggressive. We will continue to work with our law enforcement partners to protect patients and fight against health care fraud.”

 

According to the indictment, Khan, as the assistant administrator of a Houston hospital, allegedly operated a scheme to defraud Medicare beginning in 2008 and continuing until his arrest today.  Khan allegedly caused the submission of false and fraudulent claims for partial hospitalization program (PHP) services to Medicare through the hospital.  A PHP is a form of intensive outpatient treatment for severe mental illness.   

 

The indictment alleges that Khan paid kickbacks to owners and operators of group care homes and assisted living facilities and to patient recruiters in exchange for delivering ineligible Medicare beneficiaries to the hospital’s PHPs.  The indictment alleges that Khan also paid kickbacks to Medicare beneficiaries who attended the hospital’s PHPs. These kickbacks included cigarettes, food and coupons redeemable for items available at the hospital’s “country stores.” Khan and his co-conspirators submitted or caused to be submitted approximately $116 million in claims to Medicare for PHP services purportedly provided by the hospital to the recruited beneficiaries, when in fact, the PHP services were medically unnecessary or never provided.

  

Today’s charges were announced by Assistant Attorney General Breuer of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; Special Agent in Charge Morris of the FBI’s Houston Field Office; Special Agent in Charge Mike Fields of the Dallas Regional Office of HHS’s Office of the Inspector General (HHS-OIG); the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU Special Agent in Charge Lucy R. Cruz of the Internal Revenue Service (IRS) Houston Field Office; Joseph J. Del Favero, Special Agent in Charge of the Chicago Field Office of the Railroad Retirement Board, Office of Inspector General (RRB-OIG); and Scott Rezendes, Special Agent in Charge of Field Operations of the Office of Personnel Management, Office of Inspector General (OPM-OIG). 

  

The case is being prosecuted by Trial Attorney Laura M.K. Cordova, Attorney Allan Medina, Assistant Chief William Pericak and Deputy Chief Sam S. Sheldon of the Criminal Division’s Fraud Section.  The case was investigated by the FBI, HHS-OIG, MFCU, IRS, RRB-OIG and OPM-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 Texas.

 

Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,190 defendants who collectively have falsely billed the Medicare program for more than $3.2 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

WASHINGTON – The Department of Justice announced today that three men were sentenced for a federal hate crime stemming from an incident that took place at Beekman Junior High School in Beekman, Morehouse Parish, La. U.S. Magistrate Judge Karen Hayes sentenced James Lee Wallis Jr. to eight months in prison, Tony L. Johnson to six months in prison and Brian Wallis to five months in prison. All three defendants will also receive one year of supervised release and must attend a cultural diversity and sensitivity program.

On Aug. 12, 2011, defendant Johnson pleaded guilty to intentionally attempting to intimidate and interfere with African-American students who were attending Beekman Junior High School. Brothers Brian Wallis, 21, and James Lee Wallis Jr., 25, pleaded guilty to the same offense on Sept. 2, 2011. During their respective plea hearings, all three defendants admitted that they hung a dead raccoon in a noose from a flagpole located in front of Beekman Junior High School. They each further admitted that they were angered by the school’s new busing policy, which had increased the number of African-American children attending the school, and that they wanted to scare the African-American children into leaving the school.

“Every child, regardless of race, is entitled to an education free from intimidation or discrimination,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “Unfortunately, acts of hate such as this one are all too common in this country in 2012. The Justice Department will continue to enforce our nation’s civil rights laws in order to protect the most vulnerable in our society.”

“There is no place in our schools for this kind of intimidation,” said Stephanie A. Finley, U.S. Attorney for the Western District of Louisiana. “Every child has the right to an education and to feel safe in school. I hope this case sends a message that this type of activity will not be taken lightly.”

This case was investigated by the FBI and prosecuted by Senior Litigation Counsel Mark Blumberg and Trial Attorney Christine M. Siscaretti of the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Mary J. Mudrick for the Western District of Louisiana.

WASHINGTON – A Los Angeles-area man was sentenced yesterday to 77 months in prison for organizing and leading a medical clinic fraud scheme that used the stolen identities of physicians to submit more than $18.9 million in fraudulent claims to Medicare, the Department of Justice, the FBI and the Department of Health and Human Services (HHS) announced.

 

Eduard Aslanyan, 38, of Sherman Oaks, Calif., was sentenced by U.S. District Judge Consuelo B. Marshall in the Central District of California. In addition to his prison term, Aslanyan was sentenced to three years of supervised release and was ordered to pay $10.8 million in restitution.

 

Aslanyan pleaded guilty in April 2011. He admitted that between March 2007 and September 2008, he established a series of fraudulent medical clinics in and around Los Angeles to defraud Medicare. Carolyn Vasquez, who previously pleaded guilty to conspiring with Aslanyan to defraud Medicare, recruited physicians to serve as the medical directors of Aslanyan’s fraudulent medical clinics. The physicians did not perform services at the clinics and were rarely present at the clinics. Physician assistants were hired by Aslanyan and Vasquez and were complicit in the fraud scheme at the clinics.

 

According to court documents, Aslanyan hired patient recruiters to find Medicare beneficiaries who were willing to provide the recruiters with their Medicare billing information in exchange for expensive, high-end power wheelchairs and other medical equipment which the patient recruiters told the beneficiaries they could receive for free. Often, the Medicare beneficiaries did not have a legitimate medical need for the power wheelchairs and equipment. The patient recruiters then provided the beneficiaries’ Medicare billing information to Aslanyan or brought the beneficiaries to Aslanyan’s clinics. Aslanyan paid the patient recruiters cash kickbacks in exchange for recruiting the Medicare beneficiaries.

 

In court documents, Aslanyan admitted that he and Vasquez instructed and paid physician assistants who worked at his clinics to prescribe medically unnecessary power wheelchairs, medical equipment and diagnostic tests for the Medicare beneficiaries. The physician assistants used stolen identities of physicians who did not supervise them or work at the clinics.

 

According to court documents, Aslanyan profited from the scheme at his fraudulent medical clinics in several ways. Aslanyan admitted that he allowed fraudulent diagnostic testing facilities to use the Medicare billing information he purchased from patient recruiters to submit false claims to Medicare for tests ordered at the clinics. In exchange, the fraudulent diagnostic testing facilities paid Aslanyan cash kickbacks that were disguised as rent payments to Aslanyan.

 

Aslanyan also profited from the scheme by selling fraudulent prescriptions and documents generated at his clinics to the owners and operators of fraudulent durable medical equipment (DME) supply companies, which used the prescriptions and documents to submit false claims to Medicare. Aslanyan also used the fraudulent prescriptions and documents to submit false claims to Medicare through his own fraudulent DME supply companies, Vila Medical Supply Inc. and Blanc Medical Supplies.

 

According to court documents, as a result of Aslanyan’s conduct, he and his co-conspirators submitted approximately $18.9 million in fraudulent claims to Medicare.

 

Currently, Aslanyan is serving a three-year state sentence for assault. On Jan. 9, 2012, Judge Marshall sentenced Vasquez to 60 months in prison for her role in the fraud scheme and ordered her to pay more than $6.2 million in restitution to Medicare. A second co-defendant, David James Garrison, a physician assistant who worked at the fraudulent medical clinics with Vasquez and Aslanyan, is scheduled for trial on Feb. 7, 2012. Defendants are presumed innocent until proven guilty at trial.

 

The sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney André Birotte Jr. for the Central District of California; Glenn R. Ferry, Special Agent-in-Charge for the Los Angeles Region of the HHS Office of Inspector General (HHS-OIG); Steven Martinez, Assistant Director in Charge of the FBI’s Los Angeles Field Office; and Tony Sidley, Assistant Chief of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse.

 

The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section.  Former Special Trial Attorney Joseph Hudzik participated in the prosecution.  The case is being investigated by the FBI.  The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California.

 

Since their inception in March 2007, strike force operations in nine districts have charged more than 1,160 defendants who collectively have falsely billed the Medicare program for more than $2.9 billion.  In addition, the HHS Centers for Medicare and 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 & Enforcement Action Team, go to: www.stopmedicarefraud.gov .

Fourteen hospitals located in New York, Mississippi, North Carolina, Washington, Indiana, Missouri and Florida have agreed to pay the United States a total of more than $12 million to settle allegations that the health care facilities submitted false claims to Medicare, the Justice Department announced today.

 

The settling facilities include the following: Plainview Hospital, Plainview, N.Y. ($2,307,265); North Shore Syosset Hospital, Syosset, N.Y. ($192,735); North Mississippi Medical Center, Tupelo, Miss. ($1,894,683.30); Mission Hospital, Asheville, N.C. ($1.5 million); Wenatchee Valley Medical Center, Wenatchee, Wash. ($1,224,709.96); Community Hospital Anderson, Anderson, Ind. ($500,561.36); St. John’s Mercy Hospital, Creve Coeur, Mo. ($365,000); Gulf Coast Hospital, Fort Myers, Fla. ($173,005.86); Lee Memorial Hospital, Fort Myers, Fla. ($159,571.87); and Cape Coral Hospital, Cape Coral, Fla. ($73,279.47). Four hospitals affiliated with Adventist Health System/Sunbelt Inc. in Florida will pay a total of $3.9 million, and these include Florida Hospital Orlando, Florida Hospital-Oceanside, Florida Hospital Fish Memorial and Florida Hospital Heartland Medical Center.

The settlements resolve allegations that these hospitals overcharged Medicare between 2000 and 2008 when performing kyphoplasty, a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis. In many cases, the procedure can be performed safely as a less costly outpatient procedure, but the government contends that the hospitals performed the procedure on an inpatient basis in order to increase their Medicare billings.

 

“Patients want reassurance that their health care provider is making treatment decisions based on the patient’s best interests, not an interest in maximizing profits,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “By recovering taxpayer dollars lost to improper billing, this settlement will help support the vital public health care programs we depend on.”

 

The Justice Department has now reached settlements with more than 40 hospitals totaling over $39 million to resolve false claims allegations related to kyphoplasty claims submitted to Medicare. These settlements follow the government’s 2008 settlement with Medtronic Spine LLC, corporate successor to Kyphon Inc., which paid $75 million to settle allegations that the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as an inpatient procedure even though the minimally-invasive procedure should have been done in many cases on an outpatient basis.

 

“These hospitals put profits ahead of sound medical judgment, making decisions based on a desire to maximize Medicare reimbursement rather than on individualized assessments of medical necessity,” said William J. Hochul Jr., U.S. Attorney for the Western District of New York in Buffalo. “The U.S. Attorney’s Office is committed to protecting the Medicare program by ensuring that medicine, and not financial profit, is used to determine the best course of medical care in all cases.”

 

All of the settling facilities were named as defendants in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens, known as “relators,” to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant. The lawsuit was filed in 2008 in federal district court in Buffalo, N.Y., by Craig Patrick and Charles Bates. Mr. Patrick is a former reimbursement manager for Kyphon, and Mr. Bates was formerly a regional sales manager for Kyphon in Birmingham, Ala. The relators will receive a total of approximately $2.1 million from the settlements.

 

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. 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 that effort is the False Claims Act, which the Justice Department has used to recover more than $6.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are more than $8.8 billion.

 

The settlement with these hospitals was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of New York, the Commercial Litigation Branch of the Justice Department’s Civil Division, and the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General.

WASHINGTON – Dover Chemical Corporation has agreed to pay $1.4 million in civil penalties for the unauthorized manufacture of chemical substances at facilities in Dover, Ohio, and Hammond, Ind., the Department of Justice and the U.S. Environmental Protection Agency (EPA) announced today.  The settlement resolves violations of the Toxic Substances Control Act (TSCA) premanufacture notice obligations for Dover Chemical’s production of various chlorinated paraffins.  Dover Chemical produces the vast majority of the chlorinated paraffin products sold in the United States.

As part of the settlement, Dover Chemical has ceased manufacturing short-chain chlorinated paraffins, which have persistent, bioaccumulative and toxic (PBT) characteristics.  PBTs pose a number of health risks, particularly for children, including genetic impacts, effects on the nervous system and cancer. Dover Chemical will also submit premanufacture notices to EPA for various medium-chain and long-chain chlorinated paraffin products.

“This settlement will require Dover to participate in an EPA review of all types of chlorinated paraffin products sold by the company and bring Dover into compliance with the Toxic Substances Control Act,” said Ignacia S. Moreno, Assistant Attorney General for the Environment and Natural Resources Division of the Department of Justice.  “By halting production of short-chain chlorinated paraffins, this settlement will reduce undue risks to human health and the environment.”

“Assuring the safety of chemicals is one of EPA’s top priorities,” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance.  “Today’s action reinforces the need for chemical manufacturers to follow the law and protects Americans from chemicals that could be harmful to their health.”

Chlorinated paraffins are a family of chemical substances with different properties depending on their carbon chain lengths and are generally identified as short, medium or long-chain.  Chlorinated paraffins are used as a component of lubricants and coolants in metal cutting and metal forming operations, as a secondary plasticizer and flame retardant in plastics, and as an additive in paints.  Short-chain chlorinated paraffins, however, have been found to be bioaccumulative in wildlife and humans, persistent and transported globally in the environment, and toxic to aquatic animals at low concentrations.  EPA has developed an action plan for these chemicals based on the potential for significant impacts on the environment. The environmental and health concerns relating to medium-chain chlorinated paraffins and long-chain chlorinated paraffins may be similar to those associated with short-chain chlorinated paraffins.  Those chemicals may also be persistent and bioaccumulative based on their physical-chemical properties, bioaccumulation modeling, and because they are also found in the environment.

In 1978, EPA compiled the initial TSCA Inventory of chemical substances from industry submissions and those substances were grandfathered onto the TSCA Inventory without additional human health or environmental review.  Chemical substances not on the TSCA Inventory constitute “new chemical substances” for which a premanufacture notice (PMN) must be submitted to EPA at least 90 days before a company begins producing the substance.  A PMN includes information such as the specific chemical identity, use, anticipated production volume, exposure and release information and existing available test data.  EPA identifies risks associated with new chemicals through the PMN process.  In the PMN process, EPA can require additional testing or issue orders prohibiting or limiting the production or commercial use of such substances.

The proposed settlement agreement, lodged in the U.S. District Court for the Northern District of Ohio, is subject to a 30-day public comment period and approval by the federal court.

More information on the settlement: www.epa.gov/compliance/resources/cases/civil/tsca/doverchemical.html.

WASHINGTON – An Omaha, Neb., man pleaded guilty today to committing wire fraud for trying to solicit corrupt payments from an individual in return for a promised reduction in the individual’s ultimate prison sentence, announced Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

 

Austin Galvan, 30, was charged in a two-count indictment unsealed on Aug. 29, 2011, with wire fraud and obstruction of justice. According to court documents filed in U.S. District Court for Nebraska, Galvan told an associate, who was facing federal criminal charges in the District of Nebraska, that he had a law enforcement contact in Nebraska who could secure a substantial reduction in his associate’s prison sentence in exchange for corrupt payments. Galvan, in fact, had no such contact.

 

According to court documents, in subsequent conversations, Galvan urged his associate not to cooperate with federal authorities. Galvan admitted that he assured his associate that his contact was in a position to help secure a reduction in the associate’s prison sentence, contingent upon corrupt payments. Galvan also admitted that he gave his associate what he claimed was official material given to him by his purported law enforcement contact. Specifically, Galvan provided his associate with an audio recording of a court hearing and claimed that his purported law enforcement contact had given it to him. In fact, Galvan had downloaded the recording from the Public Access to Court Electronic Records system, or PACER. Moreover, Galvan had provided his associate with what he claimed to be the business card of a federal judge who would assist in securing the sentence reduction, when in fact the federal judge was not handling the case.

 

Wire fraud carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing is scheduled for May 11, 2012.

 

The case is being prosecuted by Trial Attorneys Kevin Driscoll and Barak Cohen of the Criminal Division’s Public Integrity Section. The case is being investigated by the FBI.

WASHINGTON – Smith & Nephew Inc. has entered into a deferred prosecution agreement with the Department of Justice to resolve improper payments by the company and certain affiliates in violation of the Foreign Corrupt Practices Act (FCPA), the Department of Justice announced today.  The matter is part of an investigation into bribery by medical device companies of physicians employed by government institutions.

 

Smith & Nephew, a Delaware corporation, is headquartered in Memphis, Tenn., and is a wholly-owned subsidiary of Smith & Nephew plc, an English company traded on the New York Stock Exchange.  The company manufactures and sells medical devices worldwide.

 

Smith & Nephew acknowledged responsibility for the actions of its affiliates, subsidiaries, employees and agents who made various improper payments to publicly-employed health care providers in Greece from 1998 until 2008 to secure lucrative business. 

 

According to the criminal information filed today in U.S. District Court in the District of Columbia in connection with the agreement, Smith & Nephew, through certain executives, employees and affiliates, agreed to sell products at full list price to a Greek distributor based in Athens, and then pay the amount of the distributor discount to an off-shore shell company controlled by the distributor. These off-the-books funds were then used by the distributor to pay cash incentives and other things of value to publicly-employed Greek health care providers to induce the purchase of Smith & Nephew products. In total, from 1998 to 2008, Smith & Nephew, its affiliates and employees authorized the payment of approximately $9.4 million to the distributor’s shell companies, some or all of which was passed on to physicians to corruptly induce them to purchase medical devices manufactured by Smith & Nephew.

 

The agreement recognizes Smith & Nephew’s cooperation with the department’s investigation, thorough self-investigation of the underlying conduct, and the remedial efforts and compliance improvements undertaken by the company. As part of the agreement, Smith & Nephew will pay a $16.8 million penalty and is required to implement rigorous internal controls, cooperate fully with the department and retain a compliance monitor for 18 months. 

 

In a related matter, Smith & Nephew reached a settlement today with the U.S. Securities and Exchange Commission, under which Smith & Nephew agreed to pay $5.4 million in disgorgement of profits, including pre-judgment interest.

 

This case is being prosecuted by Trial Attorney Kathleen M Hamann of the Criminal Division’s Fraud Section with assistance from the FBI Washington Field Office’s dedicated FCPA squad. 

 

The Justice Department acknowledges and expresses its appreciation for the assistance provided by the authorities of the 8th Ordinary Interrogation Department of the Athens Court of First Instance and the Athens Economic Crime Squad in Greece, as well as the significant coordination with and assistance by the Securities and Exchange Commission’s Division of Enforcement.

WASHINGTON – A Baton Rouge, La.,-area resident pleaded guilty today for his role in a Medicare fraud scheme involving false claims for unnecessary durable medical equipment (DME), announced the Department of Justice, the FBI, the Department of Health and Human Services (HHS) and the Louisiana State Attorney General’s Office.

 

Rodney D. Taylor, 45, pleaded guilty before U.S. District Judge James J. Brady of the Middle District of Louisiana to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the United States and to pay and receive health care kickbacks.

According to court documents, Taylor worked as a recruiter for Healthcare 1 LLC, Medical 1 Patient Services LLC and Lifeline Healthcare Services Inc., Louisiana-based companies that fraudulently billed DME to the Medicare program from 2004 to 2009. He and other recruiters were hired to obtain prescriptions for DME such as leg braces, arm braces, power wheel chairs and wheel chair accessories. Taylor obtained information from Medicare beneficiaries as well as prescriptions for medical equipment from the beneficiaries’ physicians. Taylor then sold these prescriptions so they could be used by Healthcare 1, Medical 1 Patient Services and Lifeline Healthcare Services to submit fraudulent claims to the Medicare program.

 

The indictment alleges that from 2004 to 2009 Medicare was billed more than $21 million as part of this conspiracy.

 

Taylor faces a maximum penalty of 10 years in prison on the conspiracy to commit health care fraud count and five years in prison on the conspiracy to defraud the United States count.  A sentencing date has not yet been set.

Today’s plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Donald J. Cazayoux Jr. of the Middle District of Louisiana; Mike Fields, Special Agent-in-Charge of the Dallas Region for the HHS Office of the Inspector General (HHS-OIG); David Welker, Special Agent-in-Charge of the FBI’s New Orleans division; and Louisiana State Attorney General James Buddy Caldwell.

 

The case is being prosecuted by Trial Attorneys David Maria and Abigail Taylor and Assistant Chief William Pericak of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG and the Medicaid Fraud Control Unit of the Louisiana State Attorney General’s Office (MFCU), 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 Middle District of Louisiana.

 

Since its inception in March 2007, the Medicare Fraud Strike Force operations in nine locations have charged more than 1,160 defendants that collectively have billed the Medicare program for more than $2.9 billion. In addition, HHS’s Centers for Medicare and 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 .

WASHINGTON – The Justice Department announced today the filing of a lawsuit against Lee County, Fla., alleging that the county discriminated against three Hispanic employees on the basis of race and national origin in violation of Title VII of the Civil Rights Act of 1964, as amended.  Title VII is a federal statute which prohibits employment discrimination on the basis of gender, race, color, national origin or religion. 

The suit, filed in U.S. District Court in Fort Myers, Fla., alleges that Lee County discriminated against tradesworkers Marco Ferreira, Eduardo Rivera and Leonides Sepulveda by subjecting them to racial and ethnic harassment over a period of approximately two years beginning in 2007 and ending in 2009.  According to the complaint, these employees were subjected to the discriminatory actions of several of their co-workers who regularly used racial and ethnic slurs, repeatedly mocked Ferreira’s and Rivera’s accents, refused to perform work assigned by Rivera and made false accusations against Ferreira and Rivera to Lee County’s Office of Equal Opportunity in an effort to have the county terminate the two employees. 

The United States alleges that despite timely complaints about the harassment by the workers to their supervisors, as well as direct observation of the harassment on several occasions by county supervisory employees, Lee County failed to take any meaningful steps to stop the harassment or discipline the harassers until January 2009, when the harassers were terminated.  Through this lawsuit, the United States is seeking declaratory and injunctive relief requiring Lee County to develop and implement policies that would prevent its employees from being subjected to harassment based on race or national origin as well as monetary damages for the victims of the county’s discriminatory actions.   

“No one should have to endure harassment because of his or her race or national origin in the workplace,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.  “The Civil Rights Division is committed to enforcing this nation’s employment discrimination laws.”
 
Ferreira, Rivera and Sepulveda initially filed charges of discrimination with the Equal Employment Opportunity Commission (EEOC), which investigated the matter, determined there was reasonable cause to believe discrimination occurred and referred the matter to the Justice Department.

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.justice.gov/crt/ and www.justice.gov/crt/about/emp/.

WASHINGTON – A former U.S. Marine Corps (USMC) gunnery sergeant was sentenced today to 18 months in prison for conspiring to steal at least 55 electrical generators from USMC bases in Iraq in 2008, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division and U.S. Attorney Bill Nettles for the District of South Carolina.

 

Eric Scott Hamilton, 40, of Carrollton, Ga., also was sentenced today by U.S. District Judge J. Michelle Childs in Greenville, S.C., to three years of supervised release following his prison term. In addition, Hamilton was ordered to pay $124,944 in restitution to the U.S. Department of Defense. Hamilton pleaded guilty on Aug. 10, 2011, to a criminal information charging him with two counts of conspiracy to steal public property.

 

According to court documents and information presented at his plea hearing, Hamilton was stationed from May to September 2008 at Camp Fallujah, Iraq, where he was in charge of a military storage yard containing electrical generators and other equipment for use by USMC units in Iraq. Hamilton admitted that while he was stationed at Camp Fallujah, he entered into a scheme with a USMC officer to facilitate the theft of electrical generators from the base by private Iraqi contractors. Hamilton admitted that he identified the generators to be stolen, painted markings on them to designate them for theft by Iraqi contractors, and facilitated access to the storage yard by the contractors’ trucks to load and remove the generators. Hamilton also entered into a separate scheme with a private Iraqi contractor to facilitate that contractor’s theft of electrical generators from the base. Both of these theft schemes continued after the USMC closed Camp Fallujah in approximately October 2008 and relocated personnel there to Camp Ramadi, Iraq. According to court documents, Hamilton was assigned at Camp Ramadi from October to December 2008.

 

In pleading guilty, Hamilton admitted that he received more than $124,000 in payments from the USMC officer and the Iraqi contractor in return for facilitating the theft of at least 55 generators from Camps Fallujah and Ramadi. Hamilton received the funds through cash payments in Iraq, checks issued to Hamilton’s wife in the United States by the USMC officer’s wife and wire transfer payments to a bank account in the United States. Hamilton sent home approximately $43,000 of the cash he received from the thefts at Camp Fallujah by concealing it among American flags contained in foot lockers that he mailed from Iraq to his wife. The investigation in this case continues.

 

This case is being prosecuted by Assistant U.S. Attorney William C. Lucius from the U.S. Attorney’s Office for the District of South Carolina and Special Trial Attorney Mark Grider of the Criminal Division’s Fraud Section, on detail from the Special Inspector General for Iraq Reconstruction (SIGIR). The case is being investigated by SIGIR and the Defense Criminal Investigative Service.

William H. Nurick, of Camarillo, Cal., was sentenced to 60 months in prison and ordered to pay $286,443 in restitution by U.S. District Judge Dale S. Fischer in Los Angeles, the Justice Department and Internal Revenue Service (IRS) announced today. On September 14, 2011, Nurick was convicted of evading the payment of more than $150,000 in taxes following a five-day jury trial.

Nurick’s conviction arises from his involvement with the Genesis Fund. According to evidence presented at trial and summarized in the government’s sentencing memorandum, the Genesis Fund was an investment fund that operated from approximately 1994 through 2002. Genesis Fund literature described foreign currency trading as the principal activity of the fund. The evidence at trial proved that Nurick received approximately $1.1 million in distributions from the Genesis Fund between 1995 and 2002. During this time, he used eight different entities to conceal his control over bank accounts, vehicles, and real property.

The evidence at trial further demonstrated that in May 2000, Nurick filed an amended 1995 individual income tax return admitting he owed $106,542 related to his investment in the Genesis Fund. Thereafter, Nurick deliberately and systematically attempted to conceal assets between May 2000 and April 2001 in order to evade payment of the balance owed to the IRS for his 1995 income taxes. Following a notice of balance due from the IRS, Nurick transferred approximately $133,000 from an offshore bank account that he controlled to a witness’s offshore bank account. Nurick also submitted a false “Offer in Compromise” to the IRS, offering to pay less than one tenth of his outstanding debt. Nurick’s Offer in Compromise, signed under penalties of perjury, falsely understated his net worth and income, and failed to indicate a bank account in Costa Rica with a balance in excess of $200,000, which consisted primarily of distributions he had received from the Genesis Fund. Nurick also falsely claimed on this document that he would receive no further distributions from the Genesis Fund, when in fact, he received over $350,000 from it through distributions to multiple entities that he controlled.

Of the nine defendants originally charged in this case, eight defendants pleaded guilty to charges including tax fraud, obstruction of justice, and securities violations. Judge Fischer sentenced many of the defendants to significant prison terms and ordered restitution payments totaling millions of dollars. The last of the eight guilty pleas was entered in court on December 12, 2011, by defendant Marlyn D. Hinders. Hinders was a fugitive until June 2011 when he was deported from Mexico and arrested by the United States Marshal’s Service. After a detention hearing in July 2011, Judge Fischer ordered Hinders held without bond pending trial. Hinders, formerly a resident of Colorado, pleaded guilty to tax fraud and is scheduled to be sentenced on April 2, 2012.

This complex fraud case was investigated by special agents of the IRS - Criminal Investigation in Laguna Niguel and prosecuted by Trial Attorneys Lori A. Hendrickson, Matthew J. Kluge, Ellen M. Quattrucci, and Danny N. Roetzel of the Justice Department’s Tax Division, with the assistance of the United States Attorney’s Office in Los Angeles.

WASHINGTON – Seafood Solutions Inc., a California corporation, was sentenced in federal court in Los Angeles today to pay $1 million in fines and community service payments for its role in the false labeling of frozen fish fillets. The corporation was fined $700,000 and ordered to make a community service donation of $300,000 to the National Fish and Wildlife Foundation. The money is to be used to fund projects related to methodologies, databases and other research into the identification of marine organisms. In addition, the company was sentenced to three years of probation, was ordered to forfeit all remaining inventory of the falsely labeled fish and to develop and implement a corporate compliance plan.

The sentence stemmed from the conviction of Seafood Solutions on July 25, 2011, on a single count of trafficking in fish knowing that the fish had been transported and sold in violation of the U.S. Lacey Act. Specifically, the fish was Pangasius hypophthalmus, a species in the catfish family that were misleadingly labeled as “Paradise Grouper” and “Falcon Baie Grouper.” Seafood Solutions was one of three defendants named in the same charging document. Co-defendants Chau-Shing (Duke) Lin, and Christopher Ragone also entered guilty pleas on July 25, 2011, according to plea agreements.

Duke Lin, 64, of Rancho Palos Verdes, Calif., pleaded guilty to one count of trafficking in fish when in the exercise of due care he should have known that the fish had been transported and sold in violation of the Lacey Act. Duke Lin also pleaded guilty to one count of misbranding food. Christopher Ragone, 50, of Santa Ana, Calif., pleaded guilty to two counts of misbranding food. The sentencing hearing for the individuals is set for Feb. 13, 2012.

According to the plea agreements, in approximately June 2004, Seafood Solutions began to sell a fish it declared to customs as “ponga.” The fish being imported as ponga was Pangasius hypophthalmus, a species in the catfish family. The fish was then sold under the brand names, and in boxes labeled in part as, “Paradise Grouper” and “Falcon Baie Grouper.”

Between July 2005 and February 2006, a wholesale distributor that had purchased this product returned approximately $411,194 worth of the product labeled as “Paradise Grouper” and “ponga” or “Falcon Baie Grouper” and “ponga” because the wholesale distributor’s customer mistakenly believed that the fish product was grouper. Seafood Solutions agreed to be invoiced for and received the returned product, knowing that it had been inaccurately labeled. Defendants Lin, Ragone and Seafood Solutions knowingly again sold and transported the fish in interstate commerce even after its return from the customer, knowing that it was misleadingly labeled. From February 2006 to April 2006, Defendant Ragone sold approximately $2 million worth of Pangasius fillets knowing that the product bore the “Paradise Grouper” and “ponga” labels and was thus misleadingly labeled.

The case was investigated by the National Oceanic and Atmospheric Administration, Office of Law Enforcement and the Department of Homeland Security, Immigration and Customs Enforcement. The case is being prosecuted by the Environmental Crimes Section of the Department of Justice and the U.S. Attorney’s Office for the Central District of California.

WASHINGTON – An owner of multiple Baton Rouge medical equipment companies pleaded guilty today for her role in a Medicare fraud scheme involving false claims and illegal kickback payments for unnecessary durable medical equipment (DME), announced the Department of Justice, the FBI, the Department of Health and Human Services (HHS) and the Louisiana State Attorney General’s Office.

 

Chikenna D. Jones, 36, pleaded guilty before U.S. District Judge James J. Brady of the Middle District of Louisiana to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the United States and to pay and receive health care kickbacks.

 

According to court documents, Jones owned and operated Healthcare 1 LLC, Medical 1 Patient Services LLC, Lifeline Healthcare Services Inc., and Rose Medical Inc., Louisiana-based companies that fraudulently billed DME to the Medicare program from 2004 to 2009. She and Henry Jones, who was her husband at the time, hired patient recruiters to obtain prescriptions for DME such as leg braces, arm braces, power wheel chairs and wheel chair accessories. Specifically, the patient recruiters obtained information from Medicare beneficiaries and used the information to acquire prescriptions for DME from the beneficiaries’ primary care physicians. Chikenna Jones paid the recruiters illegal kickbacks for the DME prescriptions, which she knew were not medically necessary.

 

Court documents allege that the companies owned and operated by Chikenna Jones billed Medicare for more than $21 million.

 

Jones faces a maximum penalty of 10 years in prison on the conspiracy to commit health care fraud count and five years in prison on the conspiracy to defraud the United States count. A sentencing date has not yet been set.

 

Today’s plea was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney Donald J. Cazayoux Jr. of the Middle District of Louisiana; Mike Fields, Special Agent-in-Charge of Dallas Region for the HHS Office of the Inspector General (HHS-OIG); David Welker, Special Agent-in-Charge of the FBI’s New Orleans division; and Louisiana State Attorney General James Buddy Caldwell.

 

The case is being prosecuted by Trial Attorneys David Maria and Abigail Taylor and Assistant Chief William Pericak of the Criminal Division’s Fraud Section. The case was investigated by the FBI, HHS-OIG and the Medicaid Fraud Control Unit of the Louisiana State Attorney General’s Office (MFCU), 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 Middle District of Louisiana.

 

Since its inception in March 2007, the Medicare Fraud Strike Force operations in nine locations have charged more than 1,160 defendants that collectively have billed the Medicare program for more than $2.9 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

 

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

The Department of Justice today announced that Luke J. McCormack will become its new chief information officer (CIO), arriving in late March. McCormack will provide leadership and oversight of the department’s information technology programs and services in support of the department’s technology-intensive law enforcement mission.

 

McCormack will replace Vance Hitch who left the department in August 2011. Eric R. Olson, deputy CIO, has served as acting CIO since Hitch’s departure. Olson will continue to serve as deputy CIO.

 

“Luke has the expertise needed to oversee the Justice Department’s information management and technology programs, and I am pleased to welcome him in this new role,” said Deputy Attorney General James M. Cole. “I’m confident that under his leadership the department will continue to enhance its cybersecurity, enterprise network and law enforcement sharing programs in a cost-effective way – while fulfilling our most critical missions. I would also like to thank Eric Olson, our acting CIO, for his hard work and outstanding dedication to these efforts during this transition.”

 

The Office of the CIO provides strategic direction, management services, and oversight to cross-component information technology efforts, and provides IT infrastructure services such as telecommunications, desktop and data center services, and IT security.

 

Prior to joining the department, McCormack was the CIO of the Department of Homeland Security’s (DHS) Immigration and Customs Enforcement (ICE) since July 2005. In that capacity, he was responsible for all aspects of the information technology portfolio, including strategic planning, enterprise architecture and cybersecurity. During his tenure at ICE, he strengthened the agency’s cybersecurity and infrastructure operations and modernized a variety of business systems.

 

McCormack served as acting director of DHS Customs and Border Protection’s (CBP) infrastructure services division from January 2004 to July 2005. While there, he managed the design, implementation and operation of the customer information technology infrastructure. McCormack has served in other roles in CBP, including director of architecture and engineering, and as director of systems engineering.

 

He has received numerous awards and honors, including the Secretary of Homeland Security’s silver award–the second highest award at DHS–and a presidential meritorious award for his outstanding efforts in information technology. McCormack received his M.B.A. from the University of Maryland’s Smith School of Business in 2005. A native of Long Island, N.Y., Mr. McCormack has two sons and resides in Virginia.

WASHINGTON – Attila Nemeth, 26, a Hungarian citizen, was sentenced today by U.S. District Judge J. Frederick Motz to 30 months in prison for transmitting a malicious code to Marriott International Corporation computers and threatening to reveal confidential information obtained from the company’s computers if Marriott did not offer him a job.

The prison sentence was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge David Beach of the U.S. Secret Service, Washington Field Office.

Judge Motz also ordered Nemeth to serve three years of supervised release following his prison term. Nemeth pleaded guilty in the District of Maryland on Nov. 23, 2011.

According to court documents, on Nov. 11, 2010, Nemeth emailed Marriott personnel, advising that he had been accessing Marriott’s computers for months and had obtained proprietary information. Nemeth threatened to reveal this information if Marriott did not give him a job maintaining the company’s computers. On Nov. 13, 2010, after receiving no response from Marriott, Nemeth sent another email containing eight attachments, seven of which were confirmed as documents stored on Marriott’s computer system. These documents included financial documentation and other confidential and proprietary information. Nemeth admitted that through an infected email attachment sent to specific Marriott employees, he was able to install malicious software on Marriott’s system that gave him a “backdoor” into the system.  Using the “backdoor,” Nemeth was able to access proprietary email and other files belonging to Marriott.

According to the plea agreement, on Nov. 18, 2010, Marriott created the identity of a fictitious Marriott employee for the use by the U.S. Secret Service in an undercover operation to communicate with Nemeth. Nemeth, believing he was communicating with Marriott human resources personnel, continued to call and email the undercover agent, and demanded a job with Marriott in order to prevent the public release of the Marriott documents. Nemeth emailed a copy of his Hungarian passport as identification and offered to travel to the United States. 

On Jan. 17, 2011, Nemeth arrived at Washington Dulles Airport for an “employment interview.”  A Secret Service agent conducted the interview by assuming the role of the Marriott employee with whom Nemeth believed he had been communicating. During the course of the interview, Nemeth admitted that he accessed Marriott’s computer systems; stole Marriott’s confidential and proprietary information; and initiated the emails to Marriott threatening to publicly release Marriott’s data unless he was given a job on his terms by Marriott. To further prove his identity as the perpetrator, Nemeth demonstrated exactly how he accessed the Marriott network, his continued ability to access the Marriott network, and the location of the stolen Marriott proprietary data on a computer server located in Hungary.

As a result of the compromise of its computer network, Marriott was compelled to engage more than 100 of its employees in a thorough search of its network to determine the scope of the compromise and to identify the data that may have been compromised. The loss to Marriott as a result of the intentional damage caused by Nemeth was approximately $1 million in salaries, consultant expenses and other costs associated with Nemeth’s intrusion.

The case is being investigated by the U.S. Secret Service and prosecuted by Special Assistant U.S. Attorney Anthony V. Teelucksingh assigned from the Computer Crime and Intellectual Property Section of the Justice Department’s Criminal Division. The Criminal Division’s Office of International Affairs provided assistance in this matter.

WASHINGTON – A former soldier pleaded guilty today to conspiracy to obtain a total of at least approximately $240,000 in fraudulent recruiting bonuses from various U.S. military components and their contractor, and to one count of aggravated identity theft for unlawfully using the means of identification of a potential soldier, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.

 

Former Specialist Xavier Aves, 40, of San Antonio, Texas, was indicted on Sept. 13, 2011, along with former Corporal Christopher Castro, 30, of San Antonio; former Staff Sergeant Grant E. Bibb, 40, of Eagle Pass, Texas; Sergeant First Class Jesus Torres-Alvarez, 31, of El Paso, Texas; Specialist Paul Escobar, 32, of San Antonio; and Specialist Richard Garcia Jr., 28, of San Antonio.

 

According to court documents filed in U.S. District Court for the Western District of Texas, between approximately 2005 and 2008, the U.S. Army, the U.S. Army Reserves and the National Guard Bureau entered into contracts with Document and Packaging Broker Inc., to administer recruiting programs designed to offer monetary incentives to U.S. soldiers who referred others to join the Army, the Army Reserves and the Army National Guard. In addition, the Army managed its own recruiting programs to offer bonuses to soldiers who referred other individuals to join the Army or the Army Reserves.

 

Through these recruiting programs, a participating soldier could receive up to $2,000 in bonus payments for every person referred to join the U.S. military. Based on certain milestones achieved by the referred soldier, a participating soldier would receive payments in the form of direct deposits and pre-paid debit card payments.

 

According to court documents, Aves enlisted in the Army National Guard in approximately January 2004. Aves admitted that, between approximately December 2005 and February 2010, he and certain U.S. soldiers who participated in the recruiting programs agreed to pay active duty and civilian contract military recruiters – including, among other recruiters, Castro and Torres-Alvarez – for the names and Social Security numbers of potential soldiers, many of whom were “walk-ins” or people who had decided to join the U.S. military without any referral.

 

Aves admitted that he and his co-conspirators used the means of identification for these potential soldiers to claim that they were responsible for referring these potential soldiers, when in fact Aves and his co-conspirators had not referred them.

 

As a result of these fraudulent representations, Aves and his co-conspirators collected at least approximately $244,000 in fraudulent recruiting bonus payments from the various recruiting programs. Aves personally received at least approximately $69,000 in fraudulent bonuses. Aves admitted that he and other participating soldiers split the payments with the active duty and civilian contract military recruiters who provided them with the information concerning the new recruits.

 

The charge of conspiracy to commit wire fraud carries a maximum penalty of five years in prison and a maximum fine of $250,000 or twice the pecuniary gain or loss. The charge of aggravated identity theft carries a mandatory sentence of two years in prison, which must be imposed consecutively to any prison term imposed on the conspiracy count, and a maximum fine of $250,000 or twice the pecuniary gain or loss. Sentencing has been scheduled for May 25, 2012, before Chief U.S. District Judge Fred Biery in San Antonio.

 

The case against Aves arises from an investigation involving allegations that former and current military recruiters and U.S. soldiers in the San Antonio area engaged in a wide-ranging scheme to obtain fraudulent recruiting bonuses. To date, the investigation has led to charges against seven individuals, five of whom have pleaded guilty.

 

On Jan. 28, 2010, Sergeant Ernest Gonzales, 50, of San Antonio, pleaded guilty to a one-count criminal information charging him with conspiracy to commit wire fraud for his role in the scheme.

 

On Nov. 3, 2011, Castro pleaded guilty to one count of conspiracy to commit wire fraud for his role in the scheme. On Jan. 26, 2012, Torres-Alvarez pleaded guilty to one count of conspiracy to commit wire fraud. According to court documents, Torres-Alvarez, an active duty recruiter, admitted that he sold the names and Social Security numbers of potential soldiers to Aves and others involved in the scheme. On Jan. 30, 2012, Bibb pleaded guilty to one count of conspiracy to commit wire fraud.

 

The case against Escobar and Garcia is scheduled for trial on April 23, 2012, in San Antonio. These defendants are presumed innocent until proven guilty in a court of law.

 

The case is being prosecuted by Trial Attorneys Edward J. Loya Jr. and Brian A. Lichter of the Criminal Division’s Public Integrity Section. The case is being investigated by agents from the San Antonio Fraud Resident Agency of the Major Procurement Fraud Unit, U.S. Army Criminal Investigation Command.

A federal grand jury in Salt Lake City has returned an indictment charging Michael Lavery with one count of presenting a false claim to the United States and one count of structuring a currency transaction to avoid the reporting requirements, the Justice Department and Internal Revenue Service (IRS) announced.

According to the indictment, in February of 2009, Michael Lavery, a resident of Sandy, Utah, filed a joint 2008 income tax return, claiming an income tax refund of over $249,000 that was based on the use of false IRS Forms 1099-OID. The indictment further alleges that Lavery attempted to structure a transaction, by making withdrawals of $10,000 or less from the proceeds of his false income tax return, in order to evade the laws that require financial institutions to report currency transactions that exceed $10,000.

The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt. If convicted, Lavery faces a maximum prison sentence of 10 years.

The case is being investigated by IRS-Criminal Investigation and is being prosecuted by Trial Attorneys Michael Romano and Stuart Wexler of the Justice Department’s Tax Division.

Wegelin & Co., a Swiss private bank, was indicted today for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret accounts and the income these accounts generated from the Internal Revenue Service (IRS), the Justice Department announced today. This is the first time an overseas bank has been charged by the United States for facilitating tax fraud by U.S. taxpayers.

 

At the same time, the U.S. government seized more than $16 million from Wegelin’s correspondent bank account in the United States, in accordance with a civil forfeiture complaint and seizure warrant. Wegelin is charged in a superseding indictment with Michael Berlinka, Urs Frei and Roger Keller, three client advisers at the bank who were previously charged with the same conspiracy. The case is pending before U.S. District Judge Jed S. Rakoff. The civil forfeiture case has been assigned to U.S. District Judge Laura Taylor Swain.

 

The following allegations are based on the Superseding Indictment and civil forfeiture Complaint unsealed today in Manhattan federal court:

 

Wegelin, founded in 1741, is Switzerland’s oldest bank. At all times relevant to the superseding indictment, Wegelin provided private banking, asset management and other services to clients around the world, including U.S. taxpayers living in the Southern District of New York. Wegelin had no branches outside Switzerland, but it directly accessed the U.S. banking system through a correspondent bank account that it held at UBS AG in Stamford, Conn. As of December 2010, Wegelin had approximately $25 billion in assets under management. Berlinka, Frei and Keller began working as client advisers at the Swiss bank in 2008, 2006 and 2007 respectively.

 

From 2002 through 2011, Wegelin, Berlinka, Frei and Keller conspired with various U.S. taxpayers and others to hide the existence of bank accounts held at Wegelin and the income generated in those secret accounts from the IRS. Among other things, in 2008 and 2009, Wegelin, Berlinka, Frei and Keller opened and serviced dozens of undeclared accounts for U.S. taxpayers in an effort to capture clients lost by UBS in the wake of widespread news reports that the IRS was investigating UBS for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts. By mid-2008, UBS had stopped servicing undeclared accounts for U.S. taxpayers.

 

In the wake of the IRS investigation, members of Wegelin’s senior management affirmatively decided to capture the illegal business that UBS exited. To capitalize on the business opportunity this presented and to increase the assets under management, along with the fees earned from managing those assets, Berlinka, Frei, Keller and others, acting on behalf of Wegelin, told various U.S. taxpayer-clients that their undeclared accounts would not be disclosed to U.S. authorities because the bank had a long tradition of secrecy. They also persuaded U.S. taxpayer-clients to transfer assets from UBS to Wegelin by emphasizing, among other things, that unlike UBS, Wegelin did not have offices outside of Switzerland and was therefore less vulnerable to U.S. law enforcement pressure. Members of the Swiss bank’s senior management approved efforts to capture the clients who were leaving UBS and also participated in some meetings with U.S. taxpayer-clients who were fleeing UBS. In February 2009, UBS entered into a deferred prosecution agreement with the Justice Department on charges of conspiring to defraud the United States by impeding the IRS. As part of the deferred prosecution agreement, UBS paid $780 million in fines, penalties, interest and restitution.

 

To further the goals of the conspiracy, Wegelin, acting through Berlinka, Frei, Keller and/or others, took steps that included the following:

 

·          Opening and servicing undeclared accounts for U.S. taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong and other jurisdictions for the purpose of concealing some clients’ identities from the IRS;

 

·          Accepting, as part of Wegelin’s client files, documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact the accounts were owned by U.S. taxpayers;

 

·          Permitting certain U.S. taxpayer-clients to open and maintain undeclared accounts at Wegelin using code names and numbers to minimize references to the actual names of the U.S. taxpayers on Swiss bank documents;

 

·          Ensuring that account statements and other mail for U.S. taxpayer-clients were not mailed to them in the United States;

 

·          Communicating with some U.S. taxpayer-clients using their personal email accounts to reduce the risk of detection by law enforcement; and

 

·          Issuing checks drawn on, and executing wire transfers through, its U.S. correspondent bank account for the benefit of U.S. taxpayers with undeclared accounts at Wegelin and at least two other Swiss banks. In doing so, the bank sometimes separated the transactions into batches of checks or multiple wire transfers in amounts that were less than $10,000 to reduce the risk that the IRS would detect the undeclared accounts.

 

U.S. taxpayers are required to report the existence of any foreign bank account on their federal income tax returns if it holds more than $10,000 at any time during a given year, as well as any income it earns. By 2010, the collective maximum value of the assets in undeclared accounts beneficially owned by U.S. taxpayer-clients of Wegelin was more than $1.2 billion, with many accounts holding more than $10,000 in any one year.

 

The civil forfeiture complaint and the related seizure warrant arise out of Wegelin’s use of its correspondent bank account to help U.S. taxpayers with undeclared accounts repatriate money that they had hidden at the Swiss bank. This was often done in a manner designed to evade detection by U.S. authorities. For example, U.S. taxpayers routinely asked Wegelin to issue and send them checks, which were drawn off the bank’s correspondent bank account, that represented funds held in their secret accounts at the bank. Further, Wegelin permitted at least two other Swiss banks to issue checks drawn on its correspondent bank account for the benefit of U.S. taxpayers holding undeclared accounts at these other Swiss banks. The sheer volume of transactions in Wegelin’s correspondent bank account served to conceal the repatriation of money from U.S. taxpayers’ undeclared accounts at Wegelin and the other banks.

“As alleged, Wegelin Bank aided and abetted U.S. taxpayers who were in flagrant violation of the tax code,” said Preet Bharara, U.S. Attorney for the Southern District of New York. “And they were undeterred by the crystal clear warning they got when they learned that UBS was under investigation for the identical practices.  Today’s indictment makes clear that we will seek to punish not only those U.S. taxpayers who violate the law in an effort to avoid paying their fair share of taxes, but also the individuals and entities who facilitate their crimes.”

IRS Commissioner Douglas Shulman said, “ Today's indictment is another step in our ongoing effort to pursue hidden offshore assets – no matter where they are located. We are continuing our work to crack down on offshore tax evasion. Through our efforts, we are gaining access to more and more information on institutions and individuals involved in offshore tax evasion, and you can expect us to pursue all avenues to stop this abuse.”

 

Wegelin is headquartered in St. Gallen, Switzerland, and faces a fine of the greatest of $500,000, or twice the gross gain derived from the offense or twice the gross loss to the victims.

 

Berlinka, Frei, and Keller, 41, 51 and 47, respectively, reside in Switzerland. They each face a maximum term of five years in prison, a maximum term of three years of supervised release and a fine of the greatest of $250,000, or twice the gross gain derived from the offense or twice the gross loss to the victims.

 

Wegelin has been summoned to appear before Judge Rakoff on Feb. 10, 2012, at 3 p.m. Berlinka, Frei and Keller have not been arrested.

Mr. Bharara praised the outstanding efforts of IRS-CID in the investigation. He also thanked U.S. Department of Justice's Tax Division for their significant assistance in the investigation.

 

This criminal case is being handled by the Office’s Complex Frauds Unit and the civil forfeiture proceeding is being handled by the Office’s Asset Forfeiture Unit. Assistant U.S. Attorneys David B. Massey, Daniel W. Levy and Jason H. Cowley are in charge of the prosecution and civil forfeiture proceeding.

 

The charges and allegations contained in the superseding indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty. The allegations contained in the civil forfeiture complaint and seizure warrant are merely accusations.

Indictment (PDF)
Verified Complaint (PDF)

WASHINGTON - The owner of a rehabilitation agency in Dearborn, Mich., was convicted today by a federal jury in Detroit for his leading role in a fraudulent Medicare therapy scheme, announced the Department of Justice, FBI and the Department of Health and Human Services (HHS).
 
Detroit-area resident Tariq Mahmud, 55, was convicted of one count of conspiracy to commit health care fraud and six counts of health care fraud. At sentencing, Mahmud faces a maximum penalty of 10 years in prison on the conspiracy count and each count of health care fraud, as well as a $250,000 fine per count. A sentencing date has not yet been set by the court.    
 
According to evidence presented during the four-day trial, Mahmud was the owner of Comprehensive Rehabilitation Services Inc (CRS), a fraudulent rehabilitation agency located in Dearborn. Between January 2003 and February 2007, CRS purchased pre-packaged, falsified physical and occupational therapy files from more than 30 therapy and rehab companies and used them to fraudulently bill Medicare for more than $2 million. 

As part of the scheme, Medicare beneficiaries were paid cash kickbacks and given prescription drugs to sign forms and visit sheets that were later falsified to indicate that they received therapy service that they had never received. Physical and occupational therapists created false evaluations, progress notes and discharge papers indicating that the therapy services were given, when in fact they never were. Evidence at trial showed that the therapists never met the beneficiaries and Mahmud never provided or supervised the therapy billed to Medicare. 

In addition to submitting more than $2 million in false therapy claims, Mahmud made additional false statements to Medicare regarding services that were never rendered. For instance, when Medicare inquired regarding a beneficiary who complained that he had not received the services for which CRS billed Medicare, Mahmud returned the payment and told Medicare that he consulted with his professional staff and the beneficiary had not been satisfied with services. In fact, CRS had no professional staff; the therapists who signed the beneficiary’s file never rendered any services; and the beneficiary never received services. Evidence at trial established that the beneficiary’s identity was stolen and used by CRS and a fraudulent file-making company to bill Medicare.
 
Today’s conviction was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (OIG) Chicago Regional Office.
 
This case was prosecuted by Assistant Chief Benjamin S. Singer and Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section.  It 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 Eastern District of Michigan.  
 
Since their inception in March 2007, the strike force operations in nine districts have charged more than 1,160 individuals who collectively have falsely billed the Medicare program for more than $2.9 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

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

WASHINGTON – Nine men have been indicted in the Western District of Virginia for allegedly conspiring to receive, distribute, possess and access with intent to view child pornography, Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Timothy J. Heaphy of the Western District of Virginia and Assistant Director Gordon M. Snow of the FBI’s Cyber Division, announced today.

 

An indictment returned under seal on Jan. 25, 2012, and unsealed today, charges Jesse Leon Coleman, 47, of Lynchburg, Va.; Thomas Syfor, 71, of Bethlehem, Pa.; Matthew Ackerman, 49, of Bethlehem, Pa.; Peter Franklin Ortiz, 56, of Greenville, S.C.; Manuel Antonio Mares, 56, of Miami; Jeremy Hart Yost, 25, of West Bend, Ore.; Richard Phillip Allen, 65, of Redondo Beach, Calif.; and James Calvin Boyd, 58, of Pell City, Ala., with one count of conspiring to receive, distribute, possess and access with the intent to view child pornography. Coleman is also charged with one count of receiving child pornography and one count of accessing with intent to view child pornography. The ninth defendant, known as “Andy Danilov,” is believed to reside in Russia.

 

Coleman, Ortiz, Yost and Boyd were arrested yesterday, and Allen self-surrendered to authorities yesterday. Syfor, Ackerman and Mares were arrested at earlier dates.

 

According to the indictment, beginning in August 2010, Danilov distributed emails to a group of individuals, including the defendants, that allegedly contained links to compressed files and file attachments depicting minors engaged in sexually explicit conduct. Danilov often used the screen name “Cinemaboy” in the emails.

 

If convicted, each defendant faces a maximum penalty of 20 years in prison, a $250,000 fine and lifetime supervised release on the conspiracy count. In addition, Coleman faces a maximum penalty of 20 years in prison, a $250,000 fine and lifetime supervised release on the receipt count and 10 years in prison, a $250,000 fine and lifetime supervised release on the access count.

The investigation of the case was conducted by the FBI Innocent Images Operations Unit. The case is being prosecuted by Assistant U.S. Attorney Nancy Healey of the Western District of Virginia and Trial Attorney Chantel Febus of the Child Exploitation and Obscenity Section in the Justice Department’s Criminal Division.

 

An indictment is only a charge and not evidence of guilt. Defendants are innocent until proven guilty beyond a reasonable doubt.

Teresa Witthar, 43, of Independence, Mo., pleaded guilty today in U.S. District Court in Kansas City to federal hate crime charges in connection with the vandalism and arson of a bi-racial man’s mobile home in 2006.

Witthar was indicted by a federal grand jury in August 2011, on one count of conspiracy, one count of violating the Fair Housing Act, one count of using fire to commit a felony, two counts of obstruction of justice and two counts of making false statements for her role in the vandalism and fire of Nathaniel Reed’s mobile home.  Witthar entered a guilty plea to one count of conspiracy, one count of violating the Fair Housing Act and one count of obstruction of justice. 

According to the indictment, in the summer of 2006, Witthar, Charles Wilhelm and David Martin conspired to intimidate and scare Nathaniel Reed, a bi-racial man, into moving out of the Highland Manor Mobile Home Park in Independence, Mo., in part because of his race.  On or about June 6, 2006, Witthar, along with Wilhelm and Martin, entered Reed’s mobile home, without his permission, and vandalized it by writing at least fifteen racially derogatory slurs on the walls of his trailer.  Two days later, Witthar drove Martin and Wilhelm to a neighbourhood behind Reed’s mobile home so that they could set fire to Reed’s trailer without being detected.   Witthar waited in her vehicle while they set the fire and then provided them a ride back to the Highland Manor Mobile Home Park.

In the spring of 2011, Witthar unsuccessfully attempted to persuade another individual to testify falsely in front of a grand jury about her role in the vandalism and fire.  

“Every American has the right to enjoy their home free from racially-motivated violence, threats and intimidation,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division of the United States Department of Justice. “The Civil Rights Division will aggressively prosecute those who violate this right.”

“When threats and vandalism failed to drive their victim out of the neighborhood, these conspirators escalated their racially-motivated campaign by burning down his home,” said Beth Phillips, U.S. Attorney for the Western District of Missouri. “The Constitution protects each of us from racially-motivated intimidation, and this defendant will be held accountable for violating Mr. Reed’s civil rights.”

“Today’s guilty plea exemplifies the FBI’s continued long term commitment to aggressively pursue justice for those who are victims of racially motivated crimes,” said Brian A. Truchon, Special Agent in Charge of the Kansas City Division of the FBI.

The guilty plea was the result of a cooperative effort between the U.S. Attorney’s Office for the Western District of Missouri, the Civil Rights Division of the Department of Justice, and the Kansas City Division of the FBI.   The case is being prosecuted by First Assistant U.S. Attorney David Ketchmark for the Western District of Missouri and Trial Attorney Sheldon L. Beer of the Civil Rights Division’s Criminal Section.