District Not Recorded
The source did not name an office we could identify. These records remain unassigned rather than guessed.
Former U.S. Army Colonel Pleads Guilty to Accepting Illegal Gratuities Related to Contracting in Support of Iraq WarRead the Press Release
A retired colonel in the U.S. Army pleaded guilty today to accepting thousands of dollars in gratuities from a contractor during his deployment to Iraq as a contracting officer’s representative, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division.
Kevin A. Davis, 52, of Springdale, Md., pleaded guilty today before U.S. District Court Judge Reggie B. Walton in the District of Columbia to a criminal information charging him with three counts of accepting an illegal gratuity. According to the court document, Col. Davis served in 2004 as the senior member of the source selection board responsible for the award of a contract valued at nearly $12 million to build and operate several Department of Defense warehouses around Iraq. In the period during and after the solicitation of the warehouse contract, Davis accepted two airplane tickets and $50,000 in cash from the contractor who submitted the successful bid for the contract. Davis admitted that he accepted the airplane tickets and money with the understanding and belief that they were for or because of his assistance to the contractor who received the warehouse contract.
"Today’s guilty plea by a retired colonel in the U.S. Army is a powerful reminder that fraud can corrupt even those we think of as incorruptible," said Assistant Attorney General Lanny A. Breuer. "The Public Integrity Section and our law enforcement partners will continue to unravel these complex and wide-ranging contractor fraud schemes in Iraq, Afghanistan and Kuwait."
"This guilty plea by Kevin Davis, a co-conspirator in a large contract fraud scheme, is further evidence of SIGIR’S collective efforts to root out public corruption within the Iraq program," said Stuart W. Bowen Jr., Special Inspector General for Iraq Reconstruction (SIGIR). "SIGIR remains committed to investigating wrongdoing and enforcing accountability in concert with our partner law enforcement agencies."
"This case illustrates that the Defense Criminal Investigative Service (DCIS) and its law enforcement partners, in conjunction with the Department of Justice, will not stand to have the contracting process circumvented for personal gain. Cleaning up contract fraud in Southwest Asia, to include bribery and gratuities, is the highest priority for DCIS. While we applaud this result today, it also sets forth a good example of conduct that cannot - and will not - be tolerated," said James Burch, Deputy Inspector General for Investigations, DCIS.
"Today's plea is a perfect example of our collaborative and continued commitment to investigate and hold accountable all those who would commit fraud against the U.S. Army," said Brigadier General Colleen McGuire, the Provost Marshal General of the Army and the Commanding General of the U.S. Army Criminal Investigation Command. "The Army's Criminal Investigation Command continues to work in cooperation with our inter-agency law enforcement partners in theaters around the world to protect Army and National interests."
Davis faces up to two years in prison and a fine of $250,000 per charged count. In addition, Davis agreed to pay $62,500 in restitution to the United States. A sentencing date has not yet been scheduled by the court.
This case is being prosecuted by Trial Attorneys Richard B. Evans and Kevin O. Driscoll of the Criminal Division’s Public Integrity Section, and Trial Attorneys Mark W. Pletcher and Emily W. Allen of the Criminal and Antitrust Divisions. The case is being investigated by the Army Criminal Investigations Division, the Defense Criminal Investigative Service, the FBI, the Internal Revenue Service, the Special Inspector General for Iraq Reconstruction (SIGIR), U.S. Immigration and Customs Enforcement at the Department of Homeland Security, and members of the National Procurement Fraud Task Force and the International Contract Corruption Task Force (ICCTF).
Today’s charges are an example of the Department of Justice’s commitment to protect U.S. taxpayers from procurement fraud through the National Procurement Fraud Task Force. The National Procurement Fraud Initiative, announced in October 2006, is designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in contracting activity for national security and other government programs. The ICCTF is a joint law enforcement agency task force that seeks to detect, investigate and dismantle corruption and contract fraud resulting from U.S. Overseas Contingency Operations, including Afghanistan, Iraq and Kuwait.
Anyone with information concerning illegal conduct in the procurement of goods or services involving DOD contracts in Iraq or Afghanistan is urged to contact the National Procurement Fraud Task Force at 202- 514-7023 or the Public Integrity Section at 202-514-1412.
Former Owner and CEO of Kentucky Business Pleads Guilty for Role in Conspiracy to Inflate Personal Earnings as Part of Purchase AgreementRead the Press Release
The founder and chief executive officer of Image Entry Inc., pleaded guilty today for his role in a conspiracy to inflate his earnings resulting from the company’s 2001 acquisition by SourceCorp Inc., announced Assistant Attorney General of the Criminal Division Lanny A. Breuer and U.S. Attorney James T. Jacks of the Northern District of Texas.
Bill D. Deaton, 62, of Ocala, Fla., pleaded guilty before U.S. Magistrate Judge Paul D. Stickney to a one-count criminal information charging him with conspiracy to commit wire fraud. Image Entry is a London, Ky., data processing company with facilities located in the southeastern and midwestern United States. SourceCorp, a consulting and information management corporation located in Dallas, purchased Image Entry in March 2001.
According to court documents and evidence presented at the hearing, the purchase agreement between Image Entry and SourceCorp contained three elements: approximately $32.8 million paid to Deaton at closing; an additional approximately $11 million would be held back and paid during the three succeeding years if Image Entry met its earnings targets; and an additional amount, referred to as an "earn out," of up to $25 million to be paid in three annual installments if Image Entry exceeded its target earnings. Specifically, in the first and second years after the purchase, the earn out would be triple the amount by which Image Entry exceeded its earnings target. In year three, the earn out would be calculated at quadruple the amount by which Image Entry exceeded its earnings target.
Deaton admitted that he and others conspired to fraudulently inflate Image Entry’s reported earnings, and subsequently Deaton’s earn out payments, by failing to report and recognize operating expenses incurred by Image Entry. Instead, Deaton admitted that he and his co-conspirators diverted the operating expenses for payment by Deaton using funds drawn from non-Image Entry accounts under Deaton’s control. According to the plea agreement, up to $971,036 in Image Entry operating expenses were diverted and paid in this manner, thus fraudulently inflating the incentive payments Deaton received by $1.9 million.
Deaton also admitted that he and others fraudulently inflated Image Entry’s reported earnings, and thereby Deaton’s earn out payment, by causing Image Entry employees to limit or entirely omit certain quality control procedures for a customer, the U.S. Department of Commerce, National Oceanic and Atmospheric Administration. Deaton admitted that Image Entry continued to recognize revenues as if the quality control procedures were still being performed.
According to court documents, Michael Wayne Sulfridge was Image Entry’s former vice-president of corporate finance and reported directly to Deaton. Deaton admitted that he paid Sulfridge additional compensation and bonuses, beyond his established salary, from Deaton’s personally-owned funds drawn from non-Image Entry accounts. Deaton admitted that these payments were not reflected as part of Image Entry’s operating expenses.
Deaton admitted that he and Sulfridge signed false certifications and provided them to SourceCorp, which falsely represented that Image Entry’s financial statements and the results of its operations and cash flows were presented fairly and in accordance with generally accepted accounting principles.
Sulfridge pleaded guilty on May 15, 2009, to a criminal information charging him with one count of conspiracy to commit wire fraud and securities fraud, and one count of tax evasion. A sentencing date is not currently scheduled in this matter.
At sentencing Deaton faces a maximum penalty of five years in prison and a fine of $250,000. Sentencing has been scheduled for July 2, 2010.
The case was prosecuted by Assistant Chief William H. Stapleton Jr., of the Criminal Division’s Fraud Section and James Etri of the U.S. Securities and Exchange Commission, acting as a Special Attorney assigned to the Criminal Division. The case was investigated by the FBI. The U.S. Attorney’s Office for the Northern District of Texas provided assistance in this case.
The SEC and the Criminal Division are Co-Chairs of the Securities Fraud Working Group of the 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.
Federal Court Shuts Down Florida Tax PreparerRead the Press Release
WASHINGTON - A federal district court in Florida has permanently barred Jacksonville resident Shirley Clark from preparing tax returns for others, the Justice Department announced today. Judge Marcia Morales Howard of the U.S. District Court for the Middle District of Florida entered the permanent injunction against Clark and her firm, Nichet Corp. Clark consented to the injunction, which requires her to turn over her customer list to the Justice Department.
The government in the case alleged that Clark prepared at least 1,250 federal tax returns for her customers from 2004 until 2007 and claimed nearly $750,000 in fraudulent fuel tax credits on those returns. The complaint also alleged that Clark prepared returns that fabricated income and expenses for customers in order to fraudulently maximize the earned income tax credit.
The fuel tax credit is available only to taxpayers who use fuel to operate farm equipment or for other off-highway business uses. The complaint alleged that Clark fraudulently claimed this credit for truck drivers who were not qualified to receive the credit. The complaint also asserted that Clark claimed absurdly large credits by falsely reporting purchases of huge quantities of gasoline; in most cases, the cost of the gasoline was more than the customers’ annual income.
Fuel credit scams are on this year’s IRS list of the Dirty Dozen Tax Scams. In the past few years the Justice Department has obtained injunctions shutting down many tax preparers who claim the phony credits on customers’ returns.
In the past decade, the Justice Department’s Tax Division has obtained more than 465 injunctions against tax fraud promoters and tax return preparers. Information about these cases is available on the Justice Department’s Web site.
Wyoming Used Car Dealer Sentenced to 37 Months in Prison<br /> for Odometer Tampering Fraud SchemeRead the Press Release
WASHINGTON – Randy Lee (aka Jimmy Lee) was sentenced today in connection with an odometer tampering scheme that defrauded scores of victims in and around Colorado, the Justice Department announced. U.S. District Court Judge Alan B. Johnson in Cheyenne, Wyo., sentenced Lee to a term of 37 months in prison and a term of 3 years of supervised release during which he cannot be involved in the sale of motor vehicles. The court will determine the amount of restitution Lee owes within 90 days.
On Jan. 21, 2010, after a two-week trial, a federal jury in Cheyenne convicted Lee on eleven of fourteen felony counts with which he was charged. The jury convicted Lee of one count of conspiracy, five counts of odometer tampering, and five counts of securities fraud related to fraudulent motor vehicle titles. The jury acquitted Lee of two counts of providing false odometer certifications and one count of mail fraud. According to the charges and the evidence presented at trial, from as early as 2002 and through at least 2006, the defendant defrauded buyers of used motor vehicles by misrepresenting the mileage of the vehicles when sold.
On July 23, 2009, a Casper, Wyo., federal grand jury returned an indictment charging Lee and a co-defendant, Jay Lee, in a 28-count indictment alleging the above offenses, all of which related to an odometer tampering scheme. Jay Lee remains at large. Anyone with information on his whereabouts is asked to contact the law enforcement officials identified below.
At trial, the jury heard evidence that the defendants, who bought and sold vehicles on behalf of a Cheyenne used auto dealership, purchased pickup trucks in Wyoming and surrounding states, rolled back the odometers to false, lower mileages, obtained fraudulent Wyoming titles, and then resold the trucks to auto dealers and consumers in Wyoming and Colorado. The odometers were often rolled back more than 100,000 miles. While some of the vehicles were sold with notice of an odometer discrepancy, none were sold with information about the size of the discrepancy.
"This type of scheme defrauds consumers out of one of the biggest investments they will ever make. Dishonest dealers who roll back odometers cheat customers out of their hard-earned money, impede intelligent buying choices, and raise safety concerns by misrepresenting the true condition of the vehicles they sell," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "The Justice Department will seek tough sentences for those who engage in these illegal practices."
Assistant Attorney General West thanked the agencies that worked collaboratively to achieve this result. The underlying investigation was conducted by the Wyoming Department of Transportation’s Office of Compliance and Investigation and the U.S. Department of Transportation’s National Highway Traffic Safety Administration in Denver. The case was prosecuted by attorneys in the Office of Consumer Litigation in the Justice Department’s Civil Division. The case was prosecuted by David Sullivan and Alan Phelps of the Department of Justice’s Office of Consumer Litigation.
UBS Client Pleads Guilty to Failing to Report over $1 Million<br /> in Swiss Bank AccountsRead the Press Release
WASHINGTON - Harry Abrahamsen, a resident of Oradell, N.J., pleaded guilty today to failure to file a Report of Foreign Bank or Financial Accounts (FBAR), the Justice Department and Internal Revenue Service (IRS) announced. In his plea, Abrahamsen admitted that he concealed over $1 million in Swiss bank accounts.
Abrahamsen made his first appearance in federal court and pleaded guilty before U.S. District Judge Dennis M. Cavanaugh to a one-count Information which charges him with willful failure to file a report of foreign bank and financial accounts.
At his plea hearing, Abrahamsen admitted that he failed to file an FBAR for calendar year 2005. Abrahamsen also failed to report his account at UBS AG in Switzerland on his individual income tax return for that year and failed to report a second account opened in his daughter’s name. Additionally, Abrahamsen failed to report income deposited in and earned on the UBS bank accounts. The UBS accounts, originally opened in 1992, were transferred into the name of Primrose Properties S.A., a nominee Panamanian corporation, in 2000. Abrahamsen established Primrose in early 2000 with the assistance of a Swiss lawyer and Swiss banker, in order to hide these accounts from the IRS.
Abrahamsen also admitted that he funded the UBS accounts with approximately $1.3 million in false and inflated expenses paid by his pre-press printing business, SJT Imaging Inc., to a Swiss company. The inflated expenses were then deducted on SJT Imaging’s corporate tax returns, which allowed Abrahamsen to under report personal income for the years 1999 through 2003.
Judge Cavanaugh released the defendant on a $300,000 bond pending sentencing, which is scheduled for July 27, 2010. Abrahamsen faces a maximum potential penalty of five years in prison and a maximum fine of $250,000 or twice the amount of financial gain to the defendant or loss to the IRS. Additionally, Abrahamsen has agreed to pay a civil FBAR penalty based on 50% of the highest balance contained in his UBS account for calendar years 1999 through 2007.
Acting Assistant Attorney General John DiCicco and U.S. Attorney Paul J. Fishman commended the investigative efforts of the IRS agents involved in this case, as well as Trial Attorney Michael C. Vasiliadis, and Assistant U.S. Attorney Stacey A. Levine, who are prosecuting the case.
In February 2009, UBS entered into a deferred prosecution agreement pursuant to which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of their agreement, UBS provided the United States government with the identities of, and account information for, certain U.S. customers of UBS’s cross-border business.
United States citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, U.S. citizens much file an FBAR with the United States Treasury, disclosing any financial account in a foreign country with assets in excess of $10,000 for which they have a financial interest in or signature authority, or other authority over.
U.S. Sues Missouri Lawyer to Halt Alleged Tax-Fraud SchemesRead the Press Release
WASHINGTON – The United States has asked a federal court to permanently bar Philip A. Kaiser, a St. Louis tax lawyer, from promoting several allegedly fraudulent tax schemes, the Justice Department announced today. According to the civil injunction suit, filed in the U.S. District Court in St. Louis, Kaiser has sold schemes that help wealthy clients:
- Use sham transactions to claim massive charitable contribution deductions, with little or no money actually going to any legitimate charity;
- Evade income tax on business earnings by using sham transactions with sham corporations to reduce customers’ reported federal income tax liabilities;
- Illegally circumvent the contribution limits for Roth IRAs; and
- Evade federal income tax on gains from stock sales by using the Derivium tax scheme to disguise the sales as "loans."
In an example detailed in the government complaint, two Chesterfield, Mo., dentists allegedly used Kaiser’s charitable-contribution scheme to claim more than $750,000 in charitable tax deductions for purported contributions for the benefit of two St. Louis-area private schools when in fact, according to the complaint, the schools have received less than $2,000.
Under another scheme, referred to as the PIRAC scheme, Kaiser allegedly helps customers with existing businesses evade Roth IRA contribution limits, and later withdraw funds from their Roth IRAs without paying income tax. An example in the complaint alleges that a Clayton, Mo., couple who owned an executive search firm participated in Kaiser’s PIRAC scheme. The IRS allegedly audited the couple’s tax returns, and the couple agreed to pay additional tax, interest and penalties of $74,123, relating to their participation in Kaiser’s scheme. The complaint says that the couple has sued Kaiser alleging legal malpractice. Trial of that case in the Circuit Court for St. Louis County, Mo., is scheduled for May 3, 2010.
The complaint alleges that the IRS conducted an investigation of 75 self-directed Roth IRA accounts established under Kaiser’s direction. The investigation revealed that, for 56 of those accounts, approximately $145,000 in customers’ initial Roth IRA contributions grew to over $9,979,921. The other 19 customers were able to turn their initial contributions into $35.5 million.
The Internal Revenue Service’s recently announced list of the "Dirty Dozen" tax scams for 2010 includes abusive Roth IRA schemes.
Since 2001, the Justice Department’s Tax Division has obtained more than 460 injunctions to stop the promotion of tax fraud schemes and the preparation of fraudulent returns. Information about these cases is available on the Justice Department Web Site.
More Than $40 Million Worth of Gold, Silver and Jewelry Forfeited in International Money Laundering CaseRead the Press Release
More than $40 million worth of gold, silver and other jewelry forfeited in an international money laundering investigation have arrived in Austin, Texas, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division; Special Agent in Charge John P. Gilbride of the Drug Enforcement Administration’s (DEA) New York Field Division; and Eugene C. Corcoran, U.S. Marshal for the Eastern District of New York. The jewelry was originally seized as the result of a money laundering investigation that identified two companies in the Colon Free Zone in Colon, Panama, that were responsible for laundering narcotics proceeds from the United States.
"This forfeiture of more than $40 million in jewelry should remind criminals around the globe that they will be found, prosecuted and stripped of assets that are not theirs to keep," said Assistant Attorney General Lanny A. Breuer. "With increased international cooperation, we are steadfastly working to forfeit money launderers’ dirty assets and proving that, in fact, crime doesn’t pay."
"This unique seizure represents a model of international cooperation, persistence and diligence," said DEA Special Agent in Charge John P. Gilbride. "Criminals who attempt to thwart the efforts of international law enforcement through complex trade-based money laundering schemes will not triumph. The DEA along with our partners will continue to pursue all avenues to deny drug traffickers and money launderers the one thing they value the most – their profit."
"The U.S. Marshals Service is proud to support our partners in the Drug Enforcement Administration and international law enforcement community in this highly successful asset seizure operation. This seizure demonstrates extreme skill, utilizing technology and strategic outreach to our international partners spreading the footprints of justice and the rule of law across the globe," said Eugene C. Corcoran, U.S. Marshal for the Eastern District of New York.
The investigation that resulted in this forfeiture led to the first U.S. indictment of an offshore business engaged in the illicit black market peso exchange, a money laundering operation through which narcotics proceeds earned in the United States are exchanged for Colombian pesos and then used to purchase goods in the Colon Free Zone. During the course of the investigation, Yardena Hebroni and Eliahu Mizrani were identified as major money launderers based in Panama. Hebroni and Mizrani used a wholesale jewelry business, Speed Joyeros S.A., and a related company identified as Argento Vivo S.A., to facilitate their illegal money laundering activities. Based on a joint investigation conducted with the government of Panama, Speed Joyeros S.A., Argento Vivo S.A., Hebroni and Mizrahi were charged with laundering millions of dollars in narcotics proceeds through their companies in Panama. Hebroni and both companies pleaded guilty to money laundering in the Eastern District of New York. Mizrahi, who had been a fugitive, later pleaded guilty to money laundering and was sentenced in February 2008.
According to evidence presented in the case, Hebroni and her companies were involved in a money laundering conspiracy that included coordinating and receiving drug proceeds from the United States through cash pick-ups, wire transfers, cashiers checks and third party bank checks. Specifically, Hebroni and Mizrahi operated and built Speed Joyeros S.A. and Argento Vivo S.A., which together did more than $100 million in business annually, knowing that the primarily Colombian-based customers were laundering millions of dollars in drug money from the United States through bulk purchases of jewelry. According to court documents, Speed Joyeros S.A. and Argento Vivo S.A. were heavily involved in the black market peso exchange.
During the course of the investigation, more than $2 million in U.S. currency was seized in the form of cashier and/or bank checks. Four checks totaling more than $862,000 were issued to a Panamanian-based company identified as Speed Joyeros S.A. Numerous drug-related assets were identified in Panama and later seized by Panamanian authorities in accordance with a seizure order issued in the Eastern District of New York as part of these cases.
On May 17, 2006, U.S. District Court Judge Jack B. Weinstein signed a final order of forfeiture directing that the government of Panama transfer custody of the assets seized in Panama to the government of the United States. The assets transferred to the United States include approximately 468 boxes of gold and silver jewelry, as well as gemstones and watches, weighing ten tons, seized from Speed Joyeros S.A. and Argento Vivo S.A.
This case was the first bilateral U.S./Panama investigation resulting in a Colon Free Zone company being seized and brought to justice in the United States.
The seizure and investigation was led by the DEA’s New York Field Division, Long Island District Office; DEA’s Panama Country Office; and the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS). The cases were prosecuted by Justice Department Trial Attorneys Laurel Loomis Rimon and Armando Bonilla, formerly of AFMLS, and Trial Attorney Eric Snyder, formerly of the Criminal Division’s Narcotic and Dangerous Drug Section. In addition, the U.S. Marshals Service was instrumental in the transfer of assets from Panama to the United States. The Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office in the Eastern District of New York provided assistance throughout the investigation and prosecution of these cases. The Department of Defense was also instrumental by providing a C-130 aircraft from the U.S. Air Force’s 302nd Reserve Air Wing, Peterson Air Force Base in Colorado to transport the forfeited assets back to the United States.
The forfeited assets will be liquidated, with the final proceeds from those sales placed into the Department of Justice’s Assets Forfeiture Fund. The Assets Forfeiture Fund can be used to enhance future criminal investigations, recognize the critical assistance of our foreign law enforcement counterparts and support other law enforcement initiatives.
Los Angeles Business Owner Pleads Guilty to Submitting Nearly <br /> Half a Million Dollars in False and Fraudulent Claims to MedicareRead the Press Release
The owner and operator of a Los Angeles durable medical equipment (DME) company pleaded guilty today to submitting nearly one half of a million dollars in false claims to Medicare, announced the Departments of Justice and Health and Human Services.
Sylvester Ijewere, 49, pleaded guilty today before U.S. District Court Judge Dale S. Fischer in the Central District of California to one count of health care fraud. Ijewere, the owner of Maydads Medical Supply, admitted that between June 2007 and October 2009, he schemed with others to purchase fraudulent prescriptions and medical documents. Ijewere admitted that he used those documents to submit false claims to Medicare for expensive, high-end power wheelchairs and other DME. Approximately 50 percent of the Medicare beneficiaries to whom Ijewere claimed Maydads supplied with power wheelchairs and other equipment lived more than 100 miles from Maydads’ Los Angeles-area offices.
Ijewere admitted that he knew the beneficiaries who received the power wheelchairs did not need them or the other equipment they received from Maydads. Ijewere also admitted that he knew the doctor and beneficiary information he used to support Maydads’ false and fraudulent claims to Medicare came from fraudulent medical clinics and patient recruiters. As a result of this scheme, Ijewere admitted that he submitted or caused the submission of approximately $471,345 in false and fraudulent claims to Medicare through Maydads.
At sentencing, scheduled for Aug. 16, 2010, Ijewere faces a maximum penalty of 10 years in prison and a $250,000 fine.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney André Birotte Jr. for the Central District of California; Tony Sidley, Assistant Chief of the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse (Cal DOJ); Glenn R. Ferry, Special Agent-in-Charge for the Los Angeles Region of the HHS Office of Inspector General (OIG); and Steven Martinez, Assistant Director in Charge of the FBI’s Los Angeles Field Office.
The case is being prosecuted by Trial Attorney Jonathan T. Baum of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Kerry C. O’Neill of the Central District of California. The case is being investigated by Cal DOJ and HHS OIG . 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 seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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
Justice Department to Monitor Election in Walnut, CaliforniaRead the Press Release
WASHINGTON – The Justice Department today announced that it will monitor the municipal election on April 13, 2010, in the city of Walnut, Calif., to ensure compliance with the minority language requirements of the Voting Rights Act of 1965.
The Voting Rights Act requires certain jurisdictions with substantial language minority citizen populations to provide all voting materials and assistance in certain minority languages, as well as in English. In April 2007, the Justice Department brought a lawsuit against the city of Walnut alleging violations of the Voting Rights Act involving Korean-speaking and Chinese-speaking voters. The parties subsequently settled the lawsuit, and a federal court entered an order in the case in November 2007.
Under the Voting Rights Act, the Justice Department is authorized to ask the U.S. Office of Personnel Management (OPM) to send federal observers to areas that are specially covered in the act itself or by a federal court order. Federal observers will be assigned to monitor polling place activities for the election in Walnut according to the 2007 federal court order. The observers will watch and record activities during voting hours at polling locations in this jurisdiction, and Civil Rights Division attorneys will coordinate the federal activities and maintain contact with local election officials.
Each year, the Justice Department deploys hundreds of federal observers from OPM, as well as departmental staff, to monitor elections across the country. To file complaints about discriminatory voting practices, including acts of harassment or intimidation, voters may call the Voting Section of the Justice Department’s Civil Rights Division at 1-800-253-3931.
Visit www.usdoj.gov/crt/voting/index.htm for more information about the Voting Rights Act and other federal voting laws.
Former Jackson County Deputy Sentenced to 14 Years in Prison for Civil Rights ViolationRead the Press Release
WASHINGTON– A former Jackson County, Mo., sheriff’s deputy was sentenced in federal court today for violating the civil rights of a teenage girl whom he sexually assaulted in his patrol car, the Justice Department and the U.S. Attorney’s Office for the Western District of Missouri announced today.
Steven W. Burgess, 35, of Independence, Mo., was sentenced by U.S. District Judge Ortrie D. Smith this morning to 14 years in federal prison without parole.
On Nov. 12, 2009, Burgess pleaded guilty to depriving a 15-year-old girl of her Constitutional rights by sexually assaulting her while she was in his custody. Burgess was on-duty and in uniform when he encountered the victim and some friends in Haynes Park in Sibley, Mo., at approximately 2 a.m. on July 24, 2007. Burgess told the victim’s friends to leave the park, but ordered her to stay at the park with him.
Burgess then put the victim in handcuffs and, while patting her down, inappropriately touched her in a sexual manner. Burgess removed the handcuffs and told her to get into the car, keeping the door open and her feet touching the ground outside the car. Burgess stood in front of her and compelled her to perform oral sex on him while she sat in his patrol vehicle. At one point, Burgess made her get on her knees to perform oral sex on him.
Afterward, Burgess took the victim to her aunt’s house. He told her that she could not tell anyone about the forced oral sex, or he would disclose that she had been caught in the park drinking. Once inside the house, she told her family what had happened and was immediately taken to Children’s Mercy Hospital.
Burgess violated the victim’s right not to be deprived of liberty without due process of law, which includes the right to bodily integrity. Burgess used force against his victim and placed her in fear of death, serious bodily injury and kidnapping.
“A law enforcement officer who abuses his authority by sexually assaulting a child not only violates the law, but also the child’s civil rights and the public trust,” Assistant Attorney General Thomas E. Perez for the Civil Rights Division said. “Today’s sentence should remind any law enforcement officer inclined to violate the most basic Constitutional rights of our citizens that we will aggressively prosecute.”
“No one is above the law,” U.S. Attorney Beth Phillips said. “When a uniformed law enforcement officer violates the civil rights of a vulnerable victim, especially in such a repugnant manner, he must be held to the highest standard of justice. Today’s lengthy prison sentence holds this defendant accountable for violating the public trust and abusing his position of authority to victimize a young girl. We are sending a strong message to our community that civil rights violations won’t be tolerated.”
This case was prosecuted by Assistant U.S. Attorney K. Michael Warner and Trial Attorney Eric L. Gibson with the Criminal Section of the Civil Rights Division. It was investigated by the Jackson County Sheriff’s Department and the Federal Bureau of Investigation.
Clinic Owners Who Moved Medicare Fraud Scheme from Miami <br /> to Detroit Sentenced to Three Years in PrisonRead the Press Release
Miami residents Jose and Denisse Martinez were each sentenced today to three years in prison for their role in running a Canton, Mich.,-based drug infusion clinic designed to defraud Medicare, announced the Departments of Justice and Health and Human Services (HHS). U.S. District Court Judge Victoria Roberts also ordered Jose and Denisse Martinez to pay $649,000 in restitution, jointly with co-defendants, and to each serve three years of supervised release following their prison terms.
Jose Martinez, 33, and Denisse Martinez, 27, each pleaded guilty on Sept. 24, 2009, to one count of conspiracy to commit health care fraud. In approximately five months of operating the purported clinic, the defendants billed nearly $1 million in fraudulent claims to Medicare.
According to court documents, Jose Martinez opened RDM Centers Inc., a medical clinic purporting to specialize in providing injection and infusion services to Medicare beneficiaries, in September 2006. Jose Martinez’s then-wife, Denisse Martinez, managed and operated the clinic. According to court documents, the Martinezes came to Detroit from Miami for the sole purpose of committing Medicare fraud.
In their pleas, both defendants acknowledged that they hired Dr. Alan Silber and other employees to work at RDM Centers in order to create the appearance that the clinic was a legitimate health care facility providing necessary services to patients.
In their pleas, both Jose and Denisse Martinez admitted that during the time RDM Centers was open, the clinic routinely billed Medicare for services that were medically unnecessary or never provided. Both defendants admitted that they purchased only a small fraction of the medications for which the clinic billed the Medicare program. Both defendants also admitted that patients were prescribed medications at the clinic based not on medical need, but on which medications were likely to generate the highest Medicare reimbursements.
Denisse Martinez admitted in her plea that, despite having no medical training, she completed the clinic’s patient records by filling in, among other things, the "diagnosis" and "treatment" sections of the patient charts, which were then provided to Dr. Silber for his signature.
According to information contained in the plea documents, Medicare beneficiaries were not referred to RDM Centers by their primary care physicians, or for any other legitimate medical purpose, but rather were recruited to come to the clinic through the payment of kickbacks by co-defendant William Reeves. In exchange for their kickbacks, the Medicare beneficiaries would visit the clinic and sign false documents indicating that they had received the services billed to Medicare. Kickbacks came in the form of cash and prescriptions for controlled substances.
Jose Martinez stated in his plea that he provided cash to Reeves to use for the kickback payments to beneficiaries. Reeves recruited the Medicare beneficiaries from impoverished neighborhoods in central Detroit and drove them approximately 30 miles to RDM Centers. Denisse Martinez stated in her plea that she understood the patients at the clinic were induced to visit RDM Centers through the payment of kickbacks. Jose and Denisse Martinez also admitted to being aware that certain Medicare beneficiaries demanded that they be provided prescription drugs, including Vicodin, in exchange for their participation in the fraudulent scheme and that these drugs were in fact provided.
Between approximately November 2006 and March 2007, the Martinezes and their co-conspirators filed $970,631 in false and fraudulent claims with the Medicare program. According to court documents, Medicare paid more than $649,000 of those false claims.
Co-defendants Silber and Reeves were convicted by a federal jury on April 2, 2010, for their roles in the fraudulent scheme. Sentencing is scheduled for Aug. 6, 2010.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the 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.
The case was prosecuted by Special Assistant U.S. Attorney Thomas Beimers from the Eastern District of Michigan as well as Senior Trial Attorney John K. Neal and Trial Attorney Benjamin Singer of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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
Ponzi Scheme Operator<br /> Pleads Guilty to Tax ChargesRead the Press Release
WASHINGTON - John S. Lipton, formerly of Mission Viejo and Laguna Hills, Calif., pleaded guilty today before U.S. District Judge Dale S. Fischer in Los Angeles to conspiracy to defraud the United States and tax evasion, the Justice Department and Internal Revenue Service (IRS) announced.
Lipton and several co-defendants were indicted on charges stemming from the operation of the Genesis Fund, a bogus foreign currency exchange investment fund that operated as a Ponzi scheme from May 1998 to June 2002 and received investments of millions of dollars. The remaining defendants are scheduled to begin trial in September 2010.
According to a plea agreement, Lipton admitted that he used, and conspired with others to use, foreign trusts, corporations, and bank accounts to receive distributions from the Genesis Fund and did not report these distributions or income to the IRS. Lipton also admitted that he directed the transfer of approximately 19 boxes of Genesis Fund documents that were responsive to a grand jury subpoena to Costa Rica. Lipton also admitted that he did not file any federal individual income tax return from 1989 through 2005.
According to the indictment, the defendants falsely claimed that investors received monthly returns of 4 percent, when investments were actually used to make "profit" distributions to defendants and early investors. Lipton was one of the founding members of the Genesis Fund and its principal manager. The defendants promoted the Genesis Fund as having no reporting obligations to the IRS. Bank accounts in the names of trusts and offshore bank accounts were allegedly used to receive distributions from the Genesis Fund that were not reported to the IRS. Some of the defendants allegedly created "disclosed" and "undisclosed" Genesis Fund accounts for themselves and certain Genesis Fund investors in order to conceal from the IRS all but a small portion of Genesis Fund distributions. In addition, some Genesis Fund investors were allegedly advised to create nominee offshore corporations and bank accounts to receive distributions from the Genesis Fund.
The indictment further alleges that to obscure the operations of the Genesis Fund and to limit scrutiny of its operations by investors and the government, the defendants caused the Genesis Fund to maintain no financial statements or other statements of operation. Additionally, in or about April 2000, to conceal the true nature of its operations from investors and the government, Genesis Fund’s administrative operations were relocated from Anaheim, Calif., to Costa Rica. At about the same time, paper records were moved to Costa Rica and electronic data on computers was destroyed.
Judge Fischer scheduled a sentencing hearing for Aug. 2, 2010.
Three defendants, Richard B. Leonard, Victor H. Preston, and Teresa R. Vogt, have entered guilty pleas in this matter. The trial of the remaining four defendants on the tax fraud and conspiracy charges is set for September 2010. A separate trial on the severed charges related to the Ponzi scheme will be scheduled after the tax fraud trial.
"The government will continue to unravel schemes promoted and used by taxpayers to evade their federal tax obligations," said John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. "As April 15th approaches, taxpayers should be confident that those who promoted fraudulent tax evasion schemes will be investigated and prosecuted."
"The Genesis fund, that operated as a Ponzi scheme, led IRS agents on a financial trail from the Caribbean to Hong Kong to Costa Rica and numerous other offshore locations around the world," said Victor S O. Song, Chief, IRS Criminal Investigation. "This signals the new era of solving global financial fraud -- the veil of offshore secrecy has been lifted and the IRS will do what is necessary to expand international cooperation to obtain financial evidence."
Acting Assistant Attorney General DiCicco commended the special agents from the IRS - Criminal Investigation Division who investigated the case, as well as Tax Division trial attorneys Lori A. Hendrickson, Ellen M. Quattrucci, Danny N. Roetzel, and Matthew J. Kluge who are prosecuting the case. Acting Assistant Attorney General DiCicco also thanked the U.S. Attorney’s Office in Los Angeles for its valuable support throughout the litigation of this matter.
Phoenix Men Charged in Money Laundering <br /> and Tax Fraud SchemeRead the Press Release
WASHINGTON – Gino Carlucci and Wayne Mounts, both residents of Phoenix, were indicted today on money laundering and tax related charges, the Department of Justice and Internal Revenue Service (IRS) announced.
Carlucci was charged with conspiracy to commit money laundering, conspiracy to defraud the United States, filing a false income tax return, and witness tampering. Mounts was charged with conspiracy to commit money laundering and conspiracy to defraud the United States.
According to the indictment, Carlucci and Mounts created a scheme to defraud a tax return preparer named Joseph Flickinger as well as his taxpayer clients of funds and assets by operating a fraudulent casino investment scam. Carlucci and Mounts caused wire transfers from Flickinger and his clients to be made to bank accounts controlled by either Carlucci and Mounts that were purportedly related to an investment in a casino in Antigua. Carlucci and Mounts diverted these funds to themselves by using cash withdrawals, cashiers’ checks, and by otherwise causing their associates to give them the money.
According to the indictment, Carlucci filed a false income tax return for 2004 that failed to report any of the money he received in the scheme and used for his own benefit. Mounts failed to file a tax return for 2004 despite receiving substantial income from the scheme. Carlucci and Mounts used some of the money to buy a luxury boat that they hid from the government.
An indictment is merely a formal charge by the grand jury. Each defendant is presumed innocent unless and until proven guilty in a U.S. District Court.
If convicted, Carlucci faces a maximum potential sentence of 48 years in prison and a maximum fine of $1,250,000. If convicted, Mounts faces a maximum potential sentence of 25 years in prison and a maximum fine of $750,000.
The case is being prosecuted by Tax Division attorneys Richard Rolwing and Monica Edelstein. The case was investigated by the IRS - Criminal Investigation Division.
Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at www.usdoj.gov/tax/.
Justice Department Signs Agreement with the Unified Government of Wyandotte County and Kansas City, Kansas, to Ensure Civic Access for People with DisabilitiesRead the Press Release
WASHINGTON - The Justice Department today announced an agreement with the Unified Government of Wyandotte County and Kansas City, Kansas, to improve access to all aspects of civic life for persons 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).
"Civic access is a civil right, and individuals with disabilities must have the opportunity to participate in public programs, services and activities on an equal basis with their neighbors," said Thomas E. Perez, Assistant Attorney General of the Civil Rights Division. "I commend officials from the Unified Government for making this commitment to its residents with disabilities, and for working with us to attain equal access to all of its programs, activities and services."
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. This agreement is the 176th under the PCA initiative.
"We appreciate the commitment to accessibility and ADA compliance made by each of the 176 cities, counties, and other government entities who have entered into a PCA agreement with the Justice Department," said Assistant Attorney General Perez. "We hope that all local governments throughout the country are committed to achieving full compliance with the ADA, particularly as we prepare to celebrate the 20th anniversary of this landmark civil rights law in July."
Under the agreement announced today, the Unified Government of Wyandotte County and Kansas City, Kansas, will take several important steps to improve access for individuals with disabilities, such as:
- Making physical modifications to facilities surveyed by the department so that parking, routes into the buildings, entrances, service areas and counters, restrooms, public telephones, and drinking fountains are accessible to people with disabilities;
- Surveying other facilities and programs and making modifications wherever necessary to achieve full compliance with ADA requirements;
- Ensuring that buildings and outdoor facilities that will be built or altered by or on behalf of the Unified Government comply with the ADA’s architectural requirements;
- Posting, publishing and distributing a notice to inform members of the public of the provisions of Title II and their applicability to the Unified Government’s programs, services and activities;
- 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;
- 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;
- Developing a method for providing information for interested persons with disabilities concerning the existence and location of the Unified Government’s accessible services, activities and programs;
- Installing signs at any inaccessible entrance to a facility directing individuals with disabilities to an accessible entrance or to information about accessing programs and services at other accessible facilities; and
- Implementing a comprehensive plan to improve the accessibility of sidewalks, transportation stops, and pedestrian crossings by installing accessible curb ramps throughout Wyandotte County and Kansas City.
Located in northeast Kansas in the heart of the Midwest, Wyandotte County and its county seat, Kansas City, are home to an estimated 154,250 Kansans. According to census data, 24.6 percent of Wyandotte residents – about one in every four residents – is a person with a disability.
Today’s agreement was reached under Title II of the ADA, which prohibits discrimination against individuals with disabilities by state and local governments. The agreement requires most actions to be completed within 3 years. For the required accessibility modifications to sidewalks, pedestrian crossings, and transportation stops, which includes the installation of large numbers of curb ramps, the Unified Government will work with the disability community to prioritize and complete these modifications within 10 years. The department will actively monitor compliance with the agreement, which will remain in effect until the department has confirmed that all required actions have been completed.
People interested in finding out more about the ADA, today’s agreement with Wyandotte County and Kansas City, Kansas, the Project Civic Access initiative, or the ADA Best Practices Tool Kit for State and Local Governments can access the ADA Web page at www.ada.gov or call the toll-free ADA Information Line at (800) 514-0301 or (800) 514-0383 (TTY).
Idaho Businessman Pleads Guilty <br /> to Failure to Pay Employment TaxesRead the Press Release
WASHINGTON—Roberto Trevizo Corral, a resident of Nampa, Idaho, pleaded guilty today before U.S. Chief Magistrate Judge Candy W. Dale in Boise, Idaho, to one count of failure to collect and pay over employment taxes, the Justice Department and Internal Revenue Service (IRS) announced.
According to court documents, Corral is the president of AG Services Inc., also known as Corral Agriculture, Inc., an agricultural employer in Idaho that provides agricultural labor to area farmers.
According to the criminal information, during calendar year 2004 and continuing through Jan. 31, 2005, Corral willfully failed to truthfully account for and pay over to the IRS withheld income taxes and Federal Insurance Contributions Act (FICA) taxes owed on behalf of AG Services, Inc. and its employees.
According to the plea agreement, Corral admitted that he was responsible for paying over all of the payroll taxes his corporation was required to pay to the IRS, including AG Services, Inc.'s matching share of FICA tax, for calendar years 2002, 2003, 2004 and 2005. Corral admitted to willfully failing to pay over in excess of $700,000 in payroll taxes. Corral has agreed to pay restitution to the IRS of $771,252.
Sentencing is scheduled for June 28, 2010. Corral faces a maximum sentence of five years in prison and a maximum fine of $250,000.
Acting Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division commended the efforts of the special agents from IRS - Criminal Investigation Division who investigated the case, as well as Tax Division trial attorneys Christopher S. Strauss and John P. Scully who are prosecuting the case. Acting Assistant Attorney General DiCicco also thanked the United States Attorney’s Office in Boise, Idaho for its support in this matter.
Federal Court in Chicago Bars Tax Preparer <br /> from Preparing Returns for CustomersRead the Press Release
A federal judge in Chicago has permanently barred Matoi Rimes, individually and operating as Rimes Accounting Service, from preparing federal tax returns for anyone who is not a member of his immediate family, the Justice Department announced today. Rimes is also barred from owning, working for, or volunteering for a tax return preparation business.
The court also ordered Rimes to provide his customer lists to the government and to mail copies of the court order to his customers.
According to the government complaint, Rimes prepared 3,111 tax returns since Jan. 1, 2006. Court papers allege that Rimes inflated and fabricated deductions on his customers’ tax returns, and stole over $7,000 in improperly-claimed customer tax refunds using the Refund Anticipation Loan Program (RAL). On at least 16 customer returns submitted to RAL, Rimes falsely reported inflated refund amounts, compared to refund amounts actually claimed by customers. Rimes deposited the inflated refund amounts into his bank account and retained the difference between the inflated amount and the amount reported to his customers, without the consent or knowledge of those customers.
Based on examination results of a small portion of Rimes’ customers’ returns, court papers allege that actual government tax losses are over $230,000.
Since 2001, the Justice Department’s Tax Division has obtained more than 460 injunctions against tax-fraud promoters and tax preparers. Information about these cases is available on the Justice Department Web Site.
Federal Court Shuts Down Nebraska Tax PreparerRead the Press Release
WASHINGTON – A federal court in Lincoln, Neb., has issued a permanent injunction barring a Lexington, Neb., tax preparer, Donald R. Ondrak, and his company, Don Ondrak P.C., from preparing tax returns for others, the Justice Department announced today. Ondrak agreed to the injunction order.
The government complaint in the civil case alleged that Ondrak prepared federal income tax returns for customers that unlawfully understate income and employment tax liabilities by under-reporting income, overstating expenses and claiming improper deductions for non-deductible personal expenses.
The complaint said that Ondrak helped clients use sham entities and bogus transactions in order to fraudulently understate their tax liabilities. According to the complaint, the Internal Revenue Service examined approximately 400 returns that Ondrak prepared and found that a significant number of them understated the customer’s tax liability. The complaint said the tax loss from Ondrak’s alleged misconduct between 2004 and 2007 was estimated to be in the tens of millions of dollars.
In the past decade, the Justice Department’s Tax Division has obtained more than 460 injunctions against tax fraud promoters and tax return preparers. Information about these cases is available on the Justice Department’s Web Site.
Federal Court Permanently Bars McRae, Georgia Tax Preparer from Preparing Taxes for OthersRead the Press Release
WASHINGTON—A federal district judge in Dublin, Ga., has permanently barred James King of McRae, Ga., from preparing federal tax returns for others, the Justice Department announced today.
Court papers allege that King prepared tax returns through his business, "James King Tax Service." The court also ordered King to provide his customer lists, and copies of all tax returns prepared for customers, to the government, and to mail copies of the court order to his customers.
The government complaint alleges that King prepared returns that fabricate or inflate deductions and that he prepared returns that unlawfully claim the Earned Income Tax Credit. According to the complaint, the Internal Revenue Service has examined over 100 returns prepared by King and found that the great majority of those resulted in a tax deficiency. The total deficiencies of the audited returns is alleged to be greater than $400,000. Altogether, the government complaint alleges that James King’s activities may have resulted in the tax loss of tens of millions of dollars.
In the past decade, the Justice Department’s Tax Division has obtained more than 460 injunctions against tax fraud promoters and tax return preparers. Information about these cases is available on the Justice Department’s Web Site.
Clinic Manager and Patient Recruiter Plead Guilty for Roles <br /> in $2 Million Medicare Fraud SchemeRead the Press Release
Detroit-area residents Carlos Grana and Dwight Armstrong pleaded guilty today to engaging in a fraudulent medical testing scheme, announced the Departments of Justice and Health and Human Services (HHS).
Grana, 36, and Armstrong, 32, each pleaded guilty today to one count of conspiracy to commit health care fraud before U.S. District Court Judge Lawrence P. Zatkoff in the Eastern District of Michigan. At sentencing, scheduled for July 13, 2010, each defendant faces a maximum penalty of 10 years in prison and a $250,000 fine. Grana and Armstrong were indicted in December 2009, along with Price Marshall, who pleaded guilty on Feb. 23, 2010, for his role in the scheme.
According to the plea documents, Grana managed the day-to-day operations of Careplus LLC, a medical clinic in Livonia, Mich. Grana admitted he that while he managed Careplus, he paid patient recruiters for Medicare beneficiary referrals. According to court documents, the recruiters were expected to find and transport Medicare beneficiaries to Careplus. Grana admitted he paid the recruiters between $100 and $150 per patient referral, and instructed the recruiters to pay the patients $50 from that amount. According to court documents, nearly all of the patients treated at Careplus were secured through the payment of kickbacks.
Grana also admitted that in exchange for the payments, he and his co-conspirators expected the Medicare beneficiaries who received kickbacks to subject themselves to a medical examination and to medically unnecessary tests. Grana told the recruiters to instruct the patients to feign certain symptoms when they arrived at Careplus, which ultimately led to the patients’ medical records containing information about false symptoms. The falsified records then helped Careplus deceive Medicare about the legitimacy and medical necessity of the tests it performed. Between approximately February 2008 and October 2009, Grana and his co-conspirators at Careplus submitted approximately $2.2 million in claims to the Medicare program for unnecessary medical and testing services that were procured through the payment of kickbacks. Medicare paid approximately $2 million of those claims.
According to the plea documents, Armstrong was one of the patient recruiters for Careplus. Armstrong admitted that beginning in approximately June 2008 he began recruiting patients for the owners and/or operators of Careplus and that he paid kickbacks to the Medicare beneficiaries he recruited and later transported to Careplus using money provided by the owners/operators. Armstrong admitted he kept part of the funds he received as a kickback for referring the Medicare beneficiaries he recruited. According to court documents, the owners and operators of Careplus typically paid $100-$150 per patient Armstrong recruited, with Armstrong retaining $50-$75 of that amount as a kickback for the referral.
Armstrong admitted he instructed the beneficiaries he recruited, based on instructions from the owners and operators of Careplus, to claim they had certain symptoms to trigger medically unnecessary tests. The patients Armstrong recruited generated approximately 12 percent of the total amount fraudulently billed by Careplus to the Medicare program, or approximately $342,000 in claims. Medicare paid approximately $250,000 on those claims.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the 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.
The case was prosecuted by Senior Trial Attorney John K. Neal and Trial Attorney Gejaa T. Gobena of the Criminal Division’s Fraud Section. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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.
Stephen Schultz Sentenced in Connection with<br /> Costa Rica-Based Business Opportunity Fraud VenturesRead the Press Release
WASHINGTON – On April 7, 2010, defendant Stephen Schultzwas sentenced in connection with a series of Costa Rica-based business opportunity fraud ventures, the Justice Department and the U.S. Postal Inspection Service announced today. Schultz was sentenced by United States District Court Judge Paul C. Huck in Miami to a term of 86 months in prison and a term of five years of supervised release. A hearing to determine the amount of restitution owed by Schultz will be scheduled within 90 days.
On Jan. 21, 2010, Schultz entered a guilty plea in federal district court in Miami to 12 counts of an indictment pending against him. Schultz pleaded guilty to one count of conspiracy to commit mail and wire fraud, eight counts of mail fraud and three counts of wire fraud.
Schultz was arrested on Dec. 12, 2008, in Costa Rica following his indictment by a federal grand jury in Miami on Nov. 20, 2008. The indictment charged that he and a co-conspirator, Jeffrey Pearson, purported to sell beverage and greeting card business opportunities, including assistance in establishing, maintaining and operating such businesses. The charges form part of the government’s continued nationwide crackdown on business opportunity fraud. Following his arrest in Costa Rica on the charges in the indictment, Schultz was extradited to the United States.
Schultz worked for USA Beverages Inc., Twin Peaks Gourmet Coffee Inc., and Cards-R-Us Inc. Beginning in 2005, USA Beverages sold business opportunities to own and operate coffee beverage display racks. USA Beverages rented office space in Las Cruces, N.M., and otherwise made it appear to potential purchasers that USA Beverages’ operations were fully within the United States. However, USA Beverages actually operated from Costa Rica.
After USA Beverages, Schultz worked for Twin Peaks Gourmet Coffee Inc., which was a Florida and Colorado corporation. Twin Peaks sold business opportunities to own and operate coffee beverage sale display racks. Twin Peaks rented office space in Fort Collins, Colo., to make it appear to potential purchasers that Twin Peaks’ operations were fully within the United States. However, Twin Peaks was actually operated from Costa Rica.
Schultz also worked for Cards-R-Us Inc., which was a Nevada corporation that sold business opportunities to own and operate greeting card sale display racks. Cards-R-Us rented office space in Reno, Nev., to make it appear to potential purchasers that Cards-R-Us’ operations were fully within the United States. However, Cards-R-Us was actually operated from Costa Rica.
To fraudulently induce others to purchase the business opportunities, Schultz and his co-conspirators made, and caused others to make, numerous false statements to potential purchasers of the business opportunities. Potential purchasers were falsely told that the companies were established years earlier, had a significant number of distributors across the country, and had a track record of success. Potential purchasers were referred to references who told false tales of their success as business opportunity owners. In pleading guilty Schultz admitted that although the calls from potential investors in the United States to these references appeared to be domestic numbers, the calls generally were routed to Costa Rica. Through these and other misrepresentations, purchasers of the business opportunities were led to believe that they would likely earn substantial profits.
"Business opportunity fraud takes advantage of people trying to start their own business and make a living, or supplement their other income, but provides significant financial hardship instead of a new source of funds. Financial frauds as these operating from outside the United States are particularly insidious, but not beyond the reach of United States law," said Tony West, Assistant Attorney General for the Department of Justice’s Civil Division. "The Justice Department is committed to uncovering and vigorously prosecuting individuals who steal from our citizens using telephones and false promises of financial success."
Assistant Attorney General West commended the investigative efforts of the Postal Inspection Service, especially the offices based in Miami and Phoenix. Assistant Attorney General West also commended the Federal Trade Commission, which previously brought a related civil suit and made a criminal referral. This matter is being prosecuted by trial attorneys in the Justice Department’s Office of Consumer Litigation.
Six Miami Residents Charged in $13 Million Health Care Fraud SchemeRead the Press Release
Six Miami-area residents have been charged for their alleged role in a $13.6 million health care fraud scheme involving a Miami-area HIV infusion clinic, announced the Departments of Justice and Health and Human Services (HHS).
In a 16-count indictment returned on March 30, 2010, and unsealed today, the six defendants are charged with conspiring to submit $13.6 million in false and fraudulent claims to the Medicare program for HIV infusion services that were allegedly provided at T & R Rehabilitation Clinic (T&R Rehab) in Miami. Modesto De La Vega, 58; Rolando Nogueira, 48; Joaquin Vega, M.D., 73; Gladis Badia, 39; Jose Nogueira, aka "Tony Nogueira," 52; and Victoria De La Vega, 59, were each charged with one count of conspiracy to defraud the United States, to cause the submission of false claims and to pay health care kickbacks; one count of conspiracy to commit health care fraud; and three counts of submitting false claims to the Medicare program. In addition, Modesto De La Vega and Rolando Nogueira were each charged with one count of conspiracy to launder the proceeds of their crimes and multiple money laundering counts.
Modesto De La Vega, Dr. Joaquin Vega, Gladis Badia and Victoria De La Vega were taken into custody this morning and will make their initial appearances today at 2:00 p.m., before U.S. Magistrate Judge Stephen T. Brown. Ronald and Jose Nogueira are considered fugitives.
According to the indictment, Rolando Nogueira owned and operated T & R Rehab while Modesto De La Vega was the operator of T & R Rehab’s HIV infusion practice. The indictment alleges that Rolando Nogueira and Modesto De La Vega billed the Medicare program for HIV infusion therapy services that were medically unnecessary and were never provided. In addition, Modesto and Victoria De La Vega allegedly paid kickbacks to Medicare beneficiaries to induce them to sign logs at T & R Rehab stating that they had received the treatments that were billed to Medicare when, in fact, they had not. The indictment also alleges that Jose Nogueira managed T&R Rehab’s fraudulent HIV infusion operation.
The indictment alleges that Dr. Joaquin Vega maintained a Medicare provider number at T & R Rehab to submit Medicare claims for the medically unnecessary infusion treatments. Gladis Badia, a medical assistant at T & R, is alleged to have prepared the required documentation to make it appear that the injection and infusion treatments billed by T & R Rehab were medically necessary and provided when, in fact, they were not.
The charge of conspiracy to defraud the United States, to cause the submission of false claims, and to pay health care kickbacks carries a maximum sentence of five years in prison. The charges of conspiracy to commit health care fraud, conspiracy to engage in money laundering and money laundering each carry a maximum sentence of 10 years in prison. The charge of submitting false claims to the Medicare program carries a maximum penalty of five years in prison per count.
An indictment is merely a charge and defendants are presumed innocent until proven guilty.
Today’s indictment was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Jeffrey H. Sloman for the Southern District of Florida; Special Agent in Charge John V. Gillies of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the Miami Regional Office of the HHS Office of Inspector General (OIG).
The case is being prosecuted by Trial Attorneys Michael D. Padula and N. Nathan Dimock of the Criminal Division’s Fraud Section. The case is being investigated by the FBI and HHS-OIG. 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 Southern District of Florida.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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.
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Factual Basis for Plea
Plea Agreement
Learning Tree International Inc. Agrees to Pay $4.5 Million to Settle Allegations of Improper Billing Practices and Retention of Federal FundsRead the Press Release
WASHINGTON – Learning Tree International Inc. has agreed to pay the United States $4.5 million to resolve allegations that it violated the False Claims Act when it improperly invoiced federal agencies in advance for information technology training courses and kept federal funds for training courses that were never actually provided, the Justice Department announced today.
Under its contract with the General Services Administration ("GSA"), Learning Tree sells information technology training courses to the federal government in multi-course packages known as "vouchers" or "passports." To prevent the United States from paying for training services that are not actually rendered, the contract specifically requires that Learning Tree invoice the government only after services are provided.
The settlement resolves allegations that Learning Tree knowingly invoiced federal agencies in advance for multi-course training packages before employees of the purchasing agencies had attended the full number of courses available under each. The government further alleged that upon expiration of the training packages, Learning Tree retained federal funds that the company received in connection with unused courses without providing a refund or credit. As a result, Learning Tree received federal funds for training courses that were not, in fact, provided.
"Government contractors must deal fairly and honestly with the United States," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "When federal funds are being misused, we will take action to protect the taxpayers."
This matter was investigated by the General Service Administration Office of Inspector General, the Department of Agriculture Office of Inspector General, the Department of Commerce Office of Inspector General, and the Department of Justice, Civil Division.
Justice Department Highlights<br /> Tax Enforcement ResultsRead the Press Release
WASHINGTON—The Department of Justice today announced highlights of its work during the past year to defend and enforce federal tax laws. The Tax Division has assisted the Internal Revenue Service (IRS) in tracking down tax cheats who use offshore accounts, combating abusive tax shelters, stopping tax defiers and shutting down tax schemes and scams.
It has obtained nearly 500 civil injunctions to stop the promotion of tax scams and the preparation of false and fraudulent tax returns, and has criminally prosecuted numerous tax fraud scheme promoters. During FY 2009, the Tax Division successfully defended refund suits against the United States representing claims of over $665 million, and collected, through affirmative litigation, over $260 million. The division’s budget in that period was less than $102 million. Tax Division prosecutors obtained 135 convictions and guilty pleas during FY 2009. Additionally, Tax Division attorneys participated in sentencings for 133 defendants during FY 2009.
“The Department of Justice is strongly committed to promoting compliance with federal tax laws,” said John DiCicco, Acting Assistant Attorney General for the Tax Division. “The Department will continue to use all available law enforcement tools to recover tax revenue and to punish tax offenders. Those who promote, facilitate, or engage in tax fraud plans or schemes risk penalties and, where appropriate, criminal prosecution.”
“The IRS appreciates the strong support of the Justice Department in our continuing work to enforce the nation's tax laws,” IRS Commissioner Doug Shulman said. “In the past year, there has been an impressive list of actions taken on everything from offshore tax evasion to unscrupulous tax return preparers. The combined efforts of the Justice Department and the IRS make a real difference for the hard-working taxpayers who file and pay their taxes every year."
Shutting Down Offshore Tax Evasion
Over the past year, the Tax Division achieved unprecedented results in its efforts to obtain information about, and prosecute where appropriate, U.S. taxpayers who elected to hide their income and assets offshore. These efforts began in February 2009, in United States v. UBS AG, where UBS AG, Switzerland’s largest bank, entered into a groundbreaking deferred prosecution agreement, admitting guilt on charges of conspiring to defraud the United States by impeding the IRS. As part of the agreement, UBS agreed to immediately provide the United States with the identities and account information for certain United States customers of UBS’s cross-border business. UBS also agreed to exit the business of providing banking services to United States customers with undeclared accounts, and pay $780 million in fines, penalties, interest and restitution.
Immediately following on the heels of the deferred prosecution agreement, the division brought a civil action against UBS, seeking the names of more U.S. taxpayers. After approximately six months, the U.S., UBS and the Swiss government entered into an historic agreement that has put a large chink in the armor of Swiss bank secrecy. Under the settlement, the IRS is to receive account information for thousands of the most significant tax cheats among the U.S. taxpayers who maintain undeclared Swiss bank accounts.
As the UBS matter has generated tremendous publicity and strong forward momentum against bank secrecy worldwide, the division’s strategic successes have delivered an unmistakable message to all taxpayers that the days of hiding offshore funds from tax collection are over. The IRS credits the civil settlement and the deferred prosecution agreement with contributing to the huge increase in the number of taxpayers—to almost 15,000 from fewer than 100 in a typical year—who voluntarily came forward to disclose their foreign accounts and bring themselves back into compliance regarding their offshore holdings for many years to come.
As part of its continuing review of offshore account information, the Tax Division, working in conjunction with various U.S. Attorney’s Offices, is prosecuting bankers and taxpayers who held offshore accounts that they failed to report to the United States:
- In April 2009, Robert Moran pleaded guilty to filing a false income tax return and admitted to concealing more than $3 million in a secret bank account at UBS. He was sentenced to two months in prison.
- In July 2009, Jeffrey Chernick, of Stanfordville, N.Y., pleaded guilty to filing a false tax return, and was sentenced to three months in prison, six months of house arrest, and six months of probation
- In August 2009, former UBS banker Bradley Birkenfeld was sentenced to 40 months in prison for helping an American billionaire real estate developer evade taxes.
- In January 2010, Juergen Homann, of Saddle River, N.J., was sentenced to five years probation for failure to file a Report of Foreign Bank or Financial Accounts (FBAR). Homann concealed more than $6.1 million in Swiss bank accounts.
- In January 2010, Roberto Cittadini, of Bellevue, Washington, was sentenced to six months of home confinement for failing to report income from secret UBS bank accounts under his control.
- In February 2010, Dr. Andrew Silva of Sterling, Va., pleaded guilty to conspiracy to defraud the United States and making a false statement regarding an undeclared foreign bank.
In connection with its continuing investigation of U.S. taxpayers who use offshore accounts to evade their taxes, the Tax Division is aggressively pursuing taxpayers involved in abusive offshore transactions as well as tax professionals, promoters and others who facilitate these schemes. That includes taxpayers with hidden income in offshore banks and brokerage accounts and those using nominee entities, offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities and insurance plans. In furtherance of these efforts, in April 2009, a federal court in Colorado granted the United States authorization to request from First Data Corporation, a credit card processing firm, the names of merchants who request that credit card sales proceeds be deposited in offshore bank accounts. The IRS believes that many of these merchants are using offshore accounts to evade taxes.
Further success against offshore scheme promoters was achieved in May 2009 and February 2010, in United States v. Liddell and United States v. Bright, respectively, where the Ninth Circuit granted the IRS access to business records identifying customers who used offshore credit cards to shield income.
In March of 2010, a federal court in Texas allowed the IRS access to documents and financial records of the Stanford Financial Group, which contained information about offshore accounts in Antigua, a banking secrecy jurisdiction.
Halting Tax Scam Promotion and Fraudulent Return Preparation
The Justice Department has vigorously pursued tax fraud scheme promoters to stop their activity and to warn would-be promoters that promoting tax fraud schemes leads to a federal court injunction or to a long stay in jail. Because ongoing tax scams cause continuing harm to the U.S. Treasury and leave participants owing taxes, interest, and often penalties, the government does not wait until a criminal case has been developed to take action to stop the scam. Rather, the Justice Department brings civil injunction suits to stop both the promotion of tax scams and the preparation of false or fraudulent returns. In appropriate cases, the Justice Department brings criminal charges against the promoters, preparers and scam participants to punish them for their unlawful conduct. These injunctions have stopped promoters from selling tax-evasion schemes on the Internet, at seminars, or through other means.
In October 2009 the Justice Department filed seven cases across the nation seeking to shut down tax preparers who allegedly promoted the “OID” or “Redemption” scheme. Using this scheme, tax fraud promoters assist customers in filing fraudulent documents with the IRS claiming refunds for monies that the IRS never received.
- In September 2009, a Sacramento court found that preparer Teresa Marty had been using the same scheme to generate bogus refunds for her customers, and permanently barred her from preparing tax returns for others.
- In January 2010, an Idaho court shut down tax preparer Penny Lea Jones for using the OID scheme to claim $93 million in bogus refunds for customers.
- In March 2010, a federal court in Los Angeles permanently barred Nyla McIntyre of Covina, Calif. and her business, Approved Financial Services, Inc., from preparing tax returns for others and found that she had requested more than $23 million in fraudulent income tax refunds for customers.
The Tax Division has also targeted scheme promoters who falsely claim First-Time Home Buyer Credits on their customers’ returns. Congress enacted the First-Time Homebuyer Credit in 2008 to strengthen the real estate market and help the economy. It allowed persons who have not owned a home in the previous three years to claim a credit of up to $8,000 against their federal income taxes if they bought a home after April 8, 2008.
- In October 2009, a federal court in Texas permanently barred Ludivina Salinas of Mission, Texas, from preparing returns for others in a case where the Justice Department alleged abuse of the Home Buyer credit and other tax law provisions.
- In March 2010, a federal court in Miami issued a permanent injunction to stop Miami-based tax return preparer Paula Olivette Patrice and her business, To the Max Tax Professionals Inc., from improperly claiming the First-Time Home Buyer Credit.
- In March 2010, a federal court in Miami issued a permanent injunction to stop Miami-based tax return preparer Henry Ernesto Medina Jr. and his business, Medina Group Inc., from improperly claiming the First-Time Home Buyer Credit.
The Tax Division also continues to prosecute fraudulent return preparers:
- In December 2009, Daniel Gleason, the head of Renaissance, the Tax People, a multilevel marketing company, was sentenced to 78 months in prison and ordered to pay more than $3,000,000 in restitution to the IRS for conspiracy and aiding in the preparation of false tax returns.
- In December 2009, a federal court in Alabama sentenced Cardale Bates to 57 months in prison for preparing false tax returns.
- In February 2010, Ather Ali pleaded guilty to conspiracy to defraud the United States for filing fraudulent tax returns. Ali and others working with him filed false tax returns using deceased individuals’ identities, claiming fictitious withholding amounts, and seeking more than $2 million in fraudulent refunds.
- In March 2010, Fe Garrett, a San Diego tax return preparer, was sentenced to 65 months in prison for failing to report her business income and preparing fraudulent tax returns for customers containing false itemized deductions, child care expenses, and rental expenses.
Stopping Tax Defiers
The Tax Defier Initiative, which the Tax Division announced in April 2008, targets persons who attempt to undermine our entire tax system. Tax defier cases traditionally involve individuals who spout rhetoric denying the fundamental validity of the tax laws as an excuse for not paying taxes, while also availing themselves of the benefits and rights that the United States provides to its citizens and residents. Tax defier cases referred for investigation or prosecution continue to be a significant part of the work done by the Tax Division.
The success rate in tax defier prosecutions is very high:
- In November 2009, Las Vegas businessman Robert Kahre was sentenced to 190 months in prison for a payroll scheme that concealed and disguised income received by his employees and the employees of the companies for which he provided payroll services.
- During the scheme, Kahre failed to report to the IRS, and failed to withhold tax on, at least $120 million in cash payments made to his and contractors’ employees.
- In July 2009, tax defier Paul Arceneaux of Louisiana was sentenced to 46 months in prison for filing false tax returns, as well as filing fictitious liens and frivolous lawsuits against the Commissioner of Internal Revenue, an IRS employee, and others.
- In August 2009, Douglas Leiter of Minneapolis was sentenced to 121 months in prison for his role in a conspiracy to defraud the IRS by filing false tax returns and creating fictitious non-profit clubs that purported to eliminate taxable income.
- In January 2010, Bruce Mrusek and Bradley Brennecke, both dentists in Cincinnati, pleaded guity to conspiracy and tax evasion for filing false returns, concealing income and assets from the IRS, and fraudulently claiming credits against federal and local taxes.
- In January 2010, Robert Ledford of South Carolina was sentenced to 30 months in prison and ordered to repay back taxes in excess of $875,000 for not filing tax returns since 1991, and hiding income and assets from the IRS.
Curbing High-End Tax Shelters
During the past year, the Tax Division has continued its civil and criminal enforcement efforts against the promoters and facilitators of abusive tax shelters. Abusive shelters for large corporations and high-income individuals have cost the U.S. Treasury many billions annually, according to Treasury Department estimates. The Tax Division has had great success in federal court defending the U.S. Treasury against tax shelter-related claims of large companies and individual investors, and in prosecuting promoters of these abusive transactions. Among the successes during the past year in this area are the following:
- In January 2010, four former Ernst & Young partners, Robert Coplan, Martin Nissenbaum, Richard Shapiro, and Brian Vaughn, were sentenced to prison for their role in designing and marketing fraudulent tax shelter transactions sold by E&Y.
- In December 2009, Michael Parker, the chief operating officer of TransCapital Corporation, a Northern Virginia tax-advantaged investments company, pleaded guilty to conspiring with Daryl Haynor, a KPMG tax partner, and Jon Flask, a TransCapital attorney, to defraud the IRS with regard to tax shelter transactions.
- In August 2009, a federal court in New Jersey denied Schering-Plough’s $473 million refund claim, finding that its attempted repatriation of foreign-earned income using certain interest rate swap agreements was without economic substance.
- In October 2009, a federal court in Texas, found Southgate Master Fund’s claim to over $1 billion in losses relating to a distressed asset deduction shelter to be lacking economic substance. This was the first DAD shelter transaction to be tried.
- In January 2010, the Court of Federal Claims rejected Wells Fargo’s claim for millions of dollars of tax benefits from its participation in 26 Sale-In, Lease-Out tax shelters. In its opinion, the Court characterized the transactions as “offensive [to it] on many levels”, and expressed “little sympathy for those who have lost out as a result of this decision.”
- In May 2009, the Fifth Circuit denied Klamath Strategic Investment Fund substantial deductions concerning a tax shelter known as Bond Linked Issue Premium Structure (“BLIPS”), after finding the transaction lacked economic substance.
- In November 2009, the Fifth Circuit denied Enbridge Midcoast Energy, Inc. the sizeable tax benefits it sought involving a so-called “intermediary” tax shelter transaction.
- In March 2010, the Federal Circuit denied Jade Trading, LLC the substantial tax benefits it sought in connection with a Son of BOSS tax shelter, by finding that the transaction lacked economic substance.
Other Significant Tax Victories
In addition to our substantial success in combating offshore banking, abusive shelters, tax defiers and tax schemes and scams, the division has had several major victories against taxpayers taking aggressive tax positions:
- In August 2009, in United States v. Textron, Inc., the First Circuit held that tax-accrual workpapers generated by Textron, and the related workpapers of its independent auditor (Ernst & Young), were not protected from disclosure by the work-product privilege.
- In July 2009, a federal court in Texas denied AT&T’s requested $505 million tax refund claim, rejecting AT&T’s argument that payments from governmental entities were capital contributions instead of taxable income. If the United States had lost the case, the amount at stake for later years would exceed $2 billion.
- In June 2009, the Eighth Circuit, reversing a lower court, sustained the validity of a newly issued regulation and held that medical residents are subject to FICA taxes after the effective date of the regulations, in Mayo Foundation for Medical Education and Research v. United States.
Further details about these and other tax enforcement cases are available on the Tax Division’s Web site www.usdoj.gov/tax/, on the IRS’s Web site www.irs.gov, and on the IRS Criminal Division’s Web site www.irs.gov/compliance/enforcement/index.html.
The Department of Justice encourages anyone who has information about suspected tax fraud to report it to the IRS tip line at 1-800-829-0433 or visit the IRS at www.irs.gov and click on the links “Contact IRS” and “How Do You Report Suspected Tax Fraud Activity.”
Former Police Officer Pleads Guilty in Danziger Bridge CaseRead the Press Release
WASHINGTON – Michael Hunter, who until last week was an officer with the New Orleans Police Department (NOPD), has pleaded guilty to conspiracy to obstruct justice and misprision of a felony, for failing to report a crime, in connection with the federal investigation of a police-involved shooting on the Danziger Bridge, the Justice Department today announced.
The incident on the Danziger Bridge, which occurred on Sept. 4, 2005, in the days after Hurricane Katrina, involved one shooting on the east side of the bridge that resulted in the death of one civilian and the wounding of four others, and a second shooting on the west side that resulted in the death of Ronald Madison, a 40-year-old man who had severe disabilities. Ronald Madison’s brother, Lance, was arrested on eight counts of attempting to kill police officers, but he was later released without indictment. The police maintained that they fired at the civilians in self-defense, after the civilians fired at police. However, in the past months, a former Lieutenant and former Detective with NOPD have pleaded guilty to federal charges related to a cover up of the shooting incident. Today, Hunter admitted that he also knew of and participated in a conspiracy to obstruct justice in the investigation of the shooting, and that he knew and covered up that officers on the bridge had engaged in unjustified shootings. Hunter, 33, of Slidell, La., entered his plea in federal court in New Orleans today before U. S. District Court Judge Sarah Vance.
"In times of disaster, we look to our law enforcement officers to protect public safety and keep the peace. Today, this former NOPD Officer has admitted that amidst the devastation that followed in the wake of Hurricane Katrina he watched fellow officers shoot unarmed civilians. And, he admitted covering up about what they did," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "We will continue to aggressively investigate the incident that occurred on the Danziger Bridge and other post-Katrina incidents and we will continue to prosecute any officer who violates federal law."
"Today’s conviction and factual basis of supporting evidence reveal the ever-sharpening focus of our investigation, and a vastly-increasing picture of the conduct of certain officers which resulted in the deaths of two unarmed civilians, the serious injuries to four persons, and the unjust arrest of an innocent, unarmed man," said U.S. Attorney Jim Letten of the Eastern District of Louisiana. "We will forge ahead with our investigation and all necessary prosecutions until all who violated the law and the public trust are brought to justice. My special thanks go to New Orleans District Attorney Leon Cannizzaro for his cooperation and forbearance in making this conviction possible."
Assistant Director Kevin L. Perkins, FBI Criminal Investigative Division stated, "The citizens of New Orleans have the right to expect their law enforcement officers to act legally and in accordance with the Constitution. Nothing justifies or excuses the defendant’s conduct in this case. The FBI is committed to ensuring that violations of any citizen’s civil rights in this matter will continue to be aggressively investigated."
According to admissions the defendant made in a factual basis filed in court today, Hunter drove to the bridge on Sept. 4, 2005, in a large Budget rental truck carrying officers in response to a radio call that said officers on the nearby I-10 high-rise bridge had come under fire. In his factual basis, Hunter acknowledges the details of the shootings on the east side of the bridge, which resulted in the death of one civilian and serious injury to others. According to Hunter, officers fired at civilians even though the civilians did not appear to have any weapons. According to Hunter, one officer (referred to only as Sergeant A) at one point leaned over a concrete barrier, held out an assault rifle, and, in a sweeping motion, fired repeatedly at the civilians, who were at that point lying wounded and apparently unarmed on the ground.
Hunter also admits in his factual basis that he fired his weapon repeatedly at civilians who were running away over the bridge. He further admits that he did not see any weapons on these civilians, and that the civilians did not appear to pose a threat to officers as they ran up the bridge.
According to the factual basis, which the defendant admitted was true, Hunter was also present on the west side of the bridge when an officer, identified only as Officer A, shot and killed Ronald Madison, who was running away from officers with his hands in view, and did not have a weapon or pose a threat. Without warning, an officer fired a shotgun at Madison’s back as Madison ran toward a motel at the bottom of the bridge. Hunter also describes having watched as the officer identified as Sergeant A physically abused Ronald Madison as Madison lay on the ground, injured but still alive.
Hunter admitted in court today that, in the wake of the shootings on the bridge, he participated in a conspiracy to cover up the truth about what had happened on the bridge. Specifically, he admitted, among other things, that he and other officers provided false statements about what happened on the bridge; that before giving formal statements on tape, he and other officers met in a gutted-out police station and discussed their false stories; and that he lied to a state grand jury about what happened on the Danziger Bridge.
The two-count bill of information to which Hunter pleaded guilty charged him with conspiracy to obstruct justice and misprision of a felony. The defendant faces a possible maximum sentence of eight years in prison and a fine of $500,000.
This case, which is ongoing, is being investigated by the New Orleans Field Office of the FBI, and is being prosecuted by Deputy Chief Bobbi Bernstein and Trial Attorney Forrest Christian of the Justice Department’s Civil Rights Division, along with Assistant U.S. Attorney Julia K. Evans of the Eastern District of Louisiana.
Former Department of Labor Chief of Staff Pleads Guilty for Failing to Report Gifts from Former Lobbyist Jack AbramoffRead the Press Release
The former chief of staff for the U.S. Department of Labor (DOL) Employment Standards Administration pleaded guilty today to falsely certifying his Fiscal Year 2003 Executive Branch Personnel Public Financial Disclosure Report, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division. Horace M. Cooper, 44, of Lorton, Va., pleaded guilty before U.S. District Judge Ellen S. Huvelle in the District of Columbia to a criminal information charging him with making and using a false certificate or writing.
According to court documents, Cooper was the chief of staff for the DOL’s Employment Standards Administration from December 2002 through August 2005. In that position, Cooper was required by federal regulations to complete annual Executive Branch Personnel Public Financial Disclosure Reports. Cooper admitted that in 2003 he solicited and accepted gifts from Jack A. Abramoff and Neil G. Volz, former Washington lobbyists who had a client with business before the DOL. Cooper admitted he concealed his receipt of these gifts from DOL ethics officials and his supervisors.
Cooper was required to report the gifts he received from Abramoff and Volz on his annual financial disclosure form because the value of these gifts exceeded the limits established by federal regulation. According to court documents, DOL ethics officials and his supervisors were deprived of critical information as a result of Cooper’s failure to report these gifts, which was necessary to determine whether Cooper had an actual or potential conflict of interest between his public responsibilities and his private interests and activities.
The charge to which Cooper pleaded guilty carries a maximum sentence of one year in prison and a $100,000 fine. According to court documents filed in connection with his guilty plea, Cooper agreed that the guidelines for his sentencing should be increased due to his admitted effort to obstruct the government’s investigation into his relationship with and his receipt of gifts from Abramoff and Volz. Specifically, Cooper admitted that the government could prove that he made materially false and misleading statements and representations to FBI agents about his solicitation and receipt of gifts from Abramoff and Volz, and that he later repeated those false and misleading statements and representations in his testimony before a grand jury investigating this matter. Sentencing is scheduled for July 1, 2010.
To date, 19 individuals, including lobbyists and public officials, have pleaded guilty, been convicted at trial, or are awaiting trial in connection with the ongoing investigation into the activities of Abramoff and his associates. Abramoff pleaded guilty in January 2006 to conspiracy to commit honest services fraud, honest services fraud and tax evasion. Abramoff was sentenced in September 2008 to 48 months in prison. Neil Volz pleaded guilty in May 2006 to conspiracy to commit honest services fraud and was sentenced in September 2007 to two years probation.
This case was prosecuted by Trial Attorneys Armando O. Bonilla and Marc E. Levin of the Criminal Division’s Public Integrity Section. The case is being investigated by the FBI.
Indictment
Detroit Clinic Owner Sentenced to Prison <br /> for Role in $18 Million Medicare Fraud SchemeRead the Press Release
A Michigan man was sentenced today in Detroit to 81 months in prison for his role in a wide-ranging conspiracy to defraud the Medicare program, announced the Departments of Justice and Health and Human Services (HHS). U.S. District Court Judge Sean F. Cox also ordered Suresh Chand, of Warren, Mich., to pay $9,769,113 in restitution, jointly with co-defendants, and to serve three years of supervised release following his prison term.
Chand, 46, pleaded guilty on Sept. 2, 2009, to one count of conspiracy to commit health care fraud and one count of conspiracy to launder money. Between approximately January 2003 and March 2007, Chand and his co-conspirators submitted claims to the Medicare program totaling more than $18 million for physical and occupational therapy services that were never provided. Medicare actually paid approximately $8.5 million on those claims.
In addition, co-conspirator Jose Castro-Ramirez submitted approximately $1.2 million in claims to the Medicare program for "home visits" supposedly provided to beneficiaries recruited into the scheme by Chand and his co-conspirators. Medicare paid approximately $780,000 on those claims. After the proceeds of the fraud were obtained from Medicare, Chand acknowledged that he laundered the funds through a series of transactions using shell companies designed to conceal the nature, source, location, ownership and control of the tainted funds.
According to court documents, Chand owned and controlled a company operating in Warren called Continental Rehab Services, Inc. (CRS), which purported to provide physical and occupational therapy services to Medicare beneficiaries. He later started another corporation at the same address in Warren called Pacific Management Services Inc. (PM), which also purported to provide physical and occupational therapy services to Medicare beneficiaries. Chand admitted that, beginning in approximately January 2003, he and his associates at CRS, and later PM, began to create fictitious therapy files, appearing to document physical and occupational therapy services provided to Medicare beneficiaries, when in fact no such services were provided. The fictitious services reflected in the files were billed to Medicare through sham Medicare providers controlled by Chand and two of his co-conspirators.
In his plea, Chand admitted that in order to create the fictitious therapy files, he and his co-conspirators recruited and paid cash kickbacks and other inducements to Medicare beneficiaries, in exchange for the beneficiaries’ Medicare numbers and signatures on documents falsely indicating that they had visited CRS or PM for the purpose of receiving physical or occupational therapy. Chand acknowledged recruiting hundreds of Medicare beneficiaries for this purpose, and paying them for their signatures with cash and prescriptions for controlled substances, including Vicodin, Xanax and Soma. Chand and his co-conspirators obtained the prescriptions for these drugs from co-conspirator physician Jose Castro-Ramirez, who prescribed controlled substances for beneficiaries he had never seen, for the purpose of recruiting those beneficiaries into the scheme. Chand also prepared fictitious therapy prescriptions and other documents, which when signed by Castro-Ramirez, falsely indicated he had ordered and monitored physical or occupational therapy services that were provided to the Medicare beneficiaries. To complete the fictitious files, Chand admitted that he and his co-conspirators obtained signatures from licensed physical or occupational therapists on "progress notes" and other documents in the therapy files, falsely indicating that the therapists had provided therapy services to the Medicare beneficiaries on those dates. Chand recruited a number of licensed physical and occupational therapists into the scheme, and paid these therapists a set fee per file that they helped falsify.
On March 11, 2010, a federal jury convicted Dr. Jose Castro-Ramirez of conspiracy to commit health care fraud, health care fraud and money laundering for his role in the conspiracy.
At sentencing, scheduled for June 29, 2010, Castro-Ramirez faces a maximum penalty of 10 years in prison and a $250,000 fine on the health care fraud conspiracy and substantive health care fraud counts. He faces a maximum penalty of 20 years in prison and a $250,000 fine on the money laundering conspiracy count.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the 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 U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Chicago Regional Office.
This case is being prosecuted by Senior Trial Attorney John K. Neal and Trial Attorney Gejaa T. Gobena and Special Assistant U.S. Attorney Thomas Beimers from the Eastern District of Michigan. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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
Detention Officer Sentenced for Repeated Sexual Abuse of DetaineesRead the Press Release
WASHINGTON – The Justice Department announced today that U.S. District Judge Gray H. Miller sentenced Robert Luis Loya to three years in prison and five years of supervised release for violating the civil rights and the sexual abuse of females in his custody. Loya, a former guard at the Port Isabel Detention Center in Los Fresnos, Texas, pleaded guilty in September 2009, to a six-count criminal information charging him with three counts of abusive sexual contact and three counts deprivation of rights under color of law.
In his guilty plea, Loya, 43, who lives in Rio Honda, Texas, admitted that on several occasions in March and April 2008, he snuck into medical isolation rooms at the detention center infirmary to grope female patients. He frequently volunteered for infirmary duty so that he would be alone with the victims and his victims were usually asleep when he entered the room. Loya lied to his victims, assuring them that he had been ordered to examine them by a physician and instructing them to disrobe. He then touched intimate parts of their bodies in a sexual manner. Loya admitted that his actions caused the victims psychological pain and embarrassment.
Loya worked at the detention center for six and-a-half years as a guard and was employed by a private company that contracted with the United States government. When confronted by agents from U.S. Customs and Immigration Enforcement’s Office of Professional Responsibility, Loya admitted to sexually touching five different women.
"Correctional officers are given a great deal of power in order to carry out their critical responsibilities, but this officer abused that power to violate the civil rights of individuals under his supervision. Our laws protect the constitutional rights of all individuals, including those in state or local custody," said Assistant Attorney General Thomas E. Perez of the Civil Rights Division. "We will vigorously prosecute any guard or detention officer who uses his position of trust to prey upon vulnerable individuals."
"Loya flagrantly violated the most vulnerable of victims who have a right to expect to be safe and protected from harm while in custody and most certainly from one with the duty to provide those protections," said José Angel Moreno,U.S. Attorney for the Southern District of Texas. "This office will aggressively investigate and prosecute those who violate the civil rights of others to ensure that expectation. Nothing less can be tolerated."
The case was investigated by Senior Special Agent Arturo Martinez of the Office of Professional Responsibility of U.S. Immigration and Customs Enforcement. Trial Attorney Michael J. Frank of the Justice Department’s Civil Rights Division and Assistant U.S. Attorney Ruben R. Perez prosecuted this case.
Attorney General Holder Signs First Criminal Law Enforcement Agreement Between United States and AlgeriaRead the Press Release
Attorney General Eric Holder and Algerian Minister of Justice Tayeb Belaiz today signed a treaty between the United States and Algeria on mutual legal assistance in criminal matters, the first ever criminal law enforcement agreement between the two countries. The treaty strengthens the two countries’ common efforts in the fight against terrorism and transnational crime by enabling the most modern procedures for law enforcement cooperation.
"The proliferation of both terrorism and traditional criminal acts across national borders makes international cooperation essential to bringing to justice those who threaten our safety and security," said Attorney General Holder. "Algeria is an important partner in the fight against terrorism and transnational crime. This treaty will help us ensure that terrorists and other criminals are not able to avoid justice by simply hiding evidence beyond our borders."
The mutual legal assistance treaty, or MLAT, will be an effective tool in the investigation and prosecution of terrorism, cybercrime, white collar offenses and other crimes. Among other tools, the treaty will help law enforcement officials from the two countries obtain testimonies and statements; retrieve evidence, including bank and business records; provide information and records from governmental departments or agencies; and provide a means of inviting individuals to testify in a requesting country.
The formal treaty signing took place at the Ministry of Justice in Algiers, Algeria. Additional representatives from the Department of Justice and the Algerian Ministry of Justice attended today’s ceremony. To date, the United States has negotiated and signed more than 50 bilateral MLATs with law enforcement partners around the world.
Medical Assistant Pleads Guilty for Role in Detroit <br /> Infusion and Injection Therapy Scheme to Defraud MedicareRead the Press Release
A Detroit-area resident pleaded guilty today for her role in an infusion and injection therapy scheme to defraud Medicare, announced the Departments of Justice and Health and Human Services (HHS).
Miriam Freytes, 49, pleaded guilty today to one count of conspiracy to commit health care fraud before U.S. District Court Judge Denise Page Hood of the Eastern District of Michigan. At sentencing, scheduled for Aug. 5, 2010, Freytes faces a maximum sentence of 10 years in prison and a $250,000 fine.
According to the plea documents, Freytes entered into an agreement in approximately December 2005 to provide services to Dearborn Medical Rehabilitation Center (DMRC), a business that purported to provide infusion and injection therapy services to Medicare beneficiaries. According to court documents, the Medicare beneficiaries were recruited by co-conspirators and paid to sign paperwork stating that they had received infusions and injections of specialty medications that they did not receive.
Freytes admitted that as a medical assistant at DMRC she administered infusions and injections of specialty medications to Medicare beneficiaries billed by the clinic. Freytes also admitted she allowed co-conspirators at DMRC to submit fraudulent bills to Medicare using her and her son’s identification numbers for services that were not necessary or provided. Freytes’ conduct resulted in DMRC billing more than $1 million to Medicare and being paid approximately $727,000 for unnecessary services and for services that were never provided.
Today’s result was announced by Assistant Attorney General Lanny A. Breuer of the 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 U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Chicago Regional Office.
This case was prosecuted by Senior Trial Attorney John K. Neal and Trial Attorney Gejaa T. Gobena of the Criminal Division’s Fraud Section and Special Assistant U.S. Attorney Thomas Beimers from the Eastern District of Michigan. The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.
Since their inception in March 2007, Strike Force operations in seven districts have obtained indictments of more than 500 individuals who collectively have falsely billed the Medicare program for approximately $1.1 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
Former Purchasing Official at a New York City Hospital Indicted for Bid Rigging and Fraud ConspiracyRead the Press Release
WASHINGTON — A New York City federal grand jury returned an indictment against a former Mount Sinai Medical Center and School of Medicine purchasing official today for participating in bid-rigging and fraud conspiracies related to contracts for work performed at Mount Sinai, the Department of Justice announced.
The three-count indictment returned today in U.S. District Court in New York City, charges Mario Perciavalle, a former purchasing official at Mount Sinai, with engaging in a conspiracy to rig bids on Mount Sinai contracts for maintenance and insulation services between June 2004 and September 2005. Perciavalle and his co-conspirators took steps to create the appearance that Mount Sinai was awarding contracts based on competition, when, in fact, they submitted, or caused to be submitted, intentionally high, non-competitive bids to Mount Sinai on these contracts.
The indictment further charges that between March 2003 and September 2005, Perciavalle and a co-conspirator engaged in a mail fraud conspiracy, in which Perciavalle awarded work at Mount Sinai to that co-conspirator’s company at the same time he was asking for and receiving cash kickbacks from the co-conspirator. Perciavalle is also charged with mail fraud as a result of payments mailed by Mount Sinai to Percivalle’s co-conspirator for work done on the rigged contracts.
The bid-rigging violation that Perciavalle is charged with carries a maximum penalty of 10 years in prison and a $1 million fine. The fraud conspiracy that Perciavalle is charged with carries a maximum penalty of 20 years in prison and a $1 million fine. The maximum fine for both of the charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine.
The charges announced today resulted from an ongoing federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses relating to construction, maintenance and service contracts administered by the Engineering Department of Mount Sinai and the Facilities Operations Department and the Engineering Department at New York Presbyterian Hospital (NYPH). To date, eight individuals and three companies have pleaded guilty to charges arising out of this ongoing investigation. Additionally, two individuals were charged in a three-count indictment unsealed on March 31, 2010, for participating in bid-rigging and tax fraud conspiracies related to contracts at NYPH. The investigation is being conducted by the Antitrust Division’s New York Field Office, the FBI and the Internal Revenue Service Criminal Investigation’s New York Field Office.
Anyone with information concerning bid rigging, bribery, tax offenses or fraud related to contracts administered by the Facilities Operation Department at NYPH or the Engineering Departments at Mount Sinai or NYPH should contact the Antitrust Division’s New York Field Office at 212-264-9308 or the FBI’s New York Division at 212-384-1000 or visit http://www.justice.gov/atr/contact/newcase.htm.
U.S. Joins Lawsuit Against Waycross, Georgia, Medical Center & Physician for Alleged False Claims Billings to Medicare and MedicaidRead the Press Release
WASHINGTON - The United States has intervened in a False Claims Act lawsuit alleging that Satilla Health Services Inc., dba Satilla Regional Medical Center, and Dr. Najam Azmat submitted claims for medically substandard and unnecessary services to Medicare and Medicaid, the Justice Department announced today. Specifically, the complaint alleges, among other things, that the defendants submitted claims for medical procedures performed by Dr. Azmat in Satilla’s Heart Center that the physician was neither qualified nor properly credentialed to perform. As a result, at least one patient died and others were seriously injured.
The complaint states that Satilla placed Dr. Azmat on staff even after learning that the hospital where he previously worked had restricted his privileges as a result of a high complication rate on his surgical procedures. The complaint also states that after Dr. Azmat joined the Satilla staff, the hospital management allowed him to perform endovascular procedures in the hospital’s Heart Center even though he lacked experience in performing such procedures and did not have privileges to perform them. Endovascular procedures are complex medical procedures that are performed within arteries and veins accessed by a puncture site in the skin and require specialized training.
According to the complaint, at least one of Dr. Azmat's endovascular patients died as a result of his lack of training and competence. The complaint alleges that Dr. Azmat perforated the patient's renal artery, causing her to bleed to death. Dr. Azmat allegedly did not even recognize that he had perforated the patient’s artery and failed to take appropriate action to address the complication.
The complaint further states that the nurses in Satilla’s Heart Center recognized that Dr. Azmat was incompetent to perform endovascular procedures and repeatedly raised concerns with hospital management. Despite the nurse’s complaints and Dr. Azmat’s high complication rate, Satilla’s management continued to allow him to perform endovascular procedures and to bill federal health care programs for these services.
"In this case, the defendants allegedly not only provided substandard and unnecessary medical services - they caused harm to patients," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We are committed to bringing to justice those who put profits ahead of patient health and safety."
This lawsuit was originally filed by Lana Rogers, a nurse who formerly worked in Satilla’s Heart Center. Under the qui tam, or whistleblower, provisions of the False Claims Act, a private citizen can file an action on behalf of the United States and receive a portion of any recovery. The act permits the United States to recover three times the amount of its losses, plus civil penalties.
"The fraud alleged in this case not only caused financial loss to the government, but sadly also endangered the lives of federal health care program beneficiaries," said U.S. Attorney Edward Tarver.
The investigation in this case is being conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Southern District of Georgia, and the Office of Inspector General of the Department of Health and Human Services.
The United States’ intervention is part of the government’s emphasis on combating health care fraud. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover approximately $2.3 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 have topped $3 billion.
Mobil Oil Companies to Pay U.S. $32.2 Million to Resolve Allegations of Underpayment of Royalties from American Indian and Federal LandsRead the Press Release
WASHINGTON – Mobil Natural Gas Inc., Mobil Exploration & Producing U.S. Inc. and their affiliates have agreed to pay the United States $32.2 million to resolve claims that they violated the False Claims Act by knowingly underpaying royalties owed on natural gas produced from federal and American Indian leases, the Justice Department announced today. The Mobil companies are alleged to have systematically under reported the value of natural gas taken from the leases from March 1, 1988, to Nov. 30, 1999, and, consequently, paid less royalties than owed to the United States and various American Indian tribes.
The settlement with the Mobil companies arises from a lawsuit filed by Harold Wright on behalf of the United States. The qui tam or whistleblower provisions of the False Claims Act allow private citizens to file actions on behalf of the United States and to share in any recovery. Because Mr. Wright is deceased, his heirs will receive a $975,000 share of the settlement.
The Justice Department partially intervened against the Mobil defendants in the Wright lawsuit, and previously settled with Burlington Resources Inc. for $105.3 million, Shell Oil Co. for $56 million, Chevron Corporation, Texaco and Unocal Incorporated for $45.5 million and Dominion Exploration and Production Co. for $2 million. The Mobil companies were merged into and became subsidiaries of ExxonMobil, the world’s largest publically traded international oil and gas company in November 1999.
"The message to those who seek to evade their mineral royalty obligations is this: We will aggressively pursue you," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "We at the Justice Department are committed to protecting the public trust by ensuring that those who remove valuable minerals, some of which are non-renewable, from American Indian or public lands pay their full, fair, negotiated share for those assets."
The Minerals Management Service (MMS) of the U.S. Department of the Interior is responsible for overseeing the collection of royalties on federal and American Indian leases, as well as federal offshore lands on the Outer Continental Shelf. Each month, companies are required to report to MMS the value of the natural gas produced from their federal and American Indian leases and to pay a percentage of the reported value as royalties. The United States alleged that the Mobil companies used transactions with affiliated entities to falsely reduce the reported value of gas taken from federal and American Indian leases, to claim excessive deductions for the cost of transporting that gas, and to otherwise understate the value they reported each month for their natural gas production.
"This settlement closes another important portion of long-standing litigation that MMS participated in to ensure that taxpayers receive their fair share of royalty revenues from energy production that occurs on federal lands," said MMS Director Liz Birnbaum. "The revenues collected from the settlement will be disbursed to appropriate Federal, state and American Indian accounts that were affected by the underpayment of royalties."
The investigation of and settlement with the Mobil Defendants was jointly handled by the U.S. Attorney for the Eastern District of Texas and the Civil Division of the Department of Justice, with the assistance of the Department of the Interior’s Office of Inspector General, Minerals Management Service, and Office of the Solicitor.
The case is U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.)
Medical Device Manufacturer Guidant Pleads Guilty<br /> for Not Reporting Defibrillator Safety Problems to FDARead the Press Release
WASHINGTON – Guidant LLC pleaded guilty today in St. Paul, Minn., before U.S. District Court Judge Donovan W. Frank to criminal violations of the Federal Food, Drug and Cosmetic Act, the Justice Department announced. The medical device manufacturer’s admission of criminal wrongdoing is the result of a four-year investigation into Guidant’s handling of short-circuiting failures of three models of its implantable cardioverter defibrillators: the Ventak Prizm 2 DR (Model 1861) and the Contak Renewal (Models H135 and H155). Guidant’s Cardiac Rhythm Management division, which produced the defibrillators, is headquartered in Arden Hills, Minnesota.
Implantable cardioverter defibrillators are lifesaving devices used to detect and treat abnormal heart rhythms that can result in sudden cardiac death, one of the leading causes of mortality in the United States. The devices, once surgically implanted, constantly monitor the electrical activity in a patient’s heart for deadly electrical rhythms and deliver an electrical shock to the heart in an effort to return the heartbeat to normal. If they fail to operate properly when needed, a person can die within minutes.
Under the terms of the plea agreement with the Justice Department to resolve the charges, which must still be approved by Judge Frank, Guidant pleaded guilty today to withholding information from the U.S. Food and Drug Administration (FDA) regarding catastrophic failures in some of its lifesaving devices. Specifically, Guidant admitted to: (1) making a materially false statement in a required submission to the FDA with regard to the Ventak Prizm 2DR device; and (2) failing to notify the FDA of a "correction" to the Contak Renewal devices, which the company made to reduce a risk to health caused by the devices. As a result of these offenses, the agreement calls for Guidant to pay a combined criminal penalty in excess of $296 million.
"Guidant’s guilty plea today is about accountability," said Assistant Attorney General Tony West, who heads the Justice Department’s Civil Division. "This successful prosecution serves as an important wake up call to all those who seek to withhold vital information about public health and safety. We will continue our efforts to prosecute those who jeopardize public health by evading their reporting obligations to the FDA."
Guidant, a wholly-owned subsidiary of Boston Scientific Corporation, was charged in federal district court on Feb. 25, 2010. The guilty plea agreement was then filed with the court on March 11, 2010.
"The guilty plea today should serve as a reminder and deterrent to those who would break the laws requiring honesty and cooperation with government regulators whose mission is to protect the health and safety of the public," said Frank J. Magill, Acting U.S. Attorney in this case for the District of Minnesota . "The health care laws are as important as ever. When medical device and pharmaceutical companies fail to live up to their legal obligations, serious criminal consequences will follow."
Today's entry of a guilty plea by Guidant LLC and the proposed resolution would represent the largest criminal penalty ever imposed on a device manufacturer for violating the Food Drug and Cosmetic Act," said Commissioner of Food and Drugs Margaret A. Hamburg, M.D. "The FDA will continue to commit enforcement resources to seeking this type of criminal resolution and stiff sanctions when device manufacturers fail to adhere to the statutory and regulatory requirements that exist to ensure the safety and efficacy of their products."
The case was investigated by the FDA’s Office of Criminal Investigations and is being prosecuted by AUSA Robert M. Lewis of the U.S. Attorney’s Office for the District of Minnesota, and Justice Department Trial Attorneys Ross S. Goldstein and Matthew S. Ebert of the Civil Division’s Office of Consumer Litigation. Additional assistance is being provided by Steven Tave of FDA’s Office of Chief Counsel.
Cincinnati Area Return Preparer Charged with Tax CrimesRead the Press Release
WASHINGTON - Idrissa Bassoum, a former resident of Cincinnati, made his initial appearance in federal district court in Cincinnati on tax charges, the Justice Department and Internal Revenue Service (IRS) announced. In December 2009, a sealed indictment was returned charging Bassoum with fifteen counts of aiding in the preparation of false income tax returns, one count of filing a false tax return and one count of failure to file a tax return. The indictment was unsealed on March 18, 2010, following the defendant’s arrest in Atlanta.
According to the indictment, from February 2003 through 2005, Bassoum operated Bassoum’s Consulting Service (BCS), a tax preparation business run out of his residence catering primarily to immigrants. Bassoum prepared and electronically filed tax returns for his clients that included inflated or wholly fictitious deductions, such as moving expenses, which resulted in his clients claiming inflated fraudulent tax refunds.
According to the indictment, Bassoum received substantial tax preparation fees through BCS that were typically subtracted from the refund amounts obtained for his clients and were directly deposited into Bassoum’s personal bank account. Despite preparing hundreds of tax returns for clients during tax years 2003 and 2004, Bassoum failed to report any income derived from his tax preparation activities on his personal tax returns.
Judge S. Arthur Spiegel, who is presiding over the matter, has not scheduled a trial date. If convicted, Bassoum faces a maximum sentence of three years in prison and a maximum fine of $250,000 as to each of the fifteen counts of aiding in the filing of a false tax return. If convicted, Bassoum faces a maximum sentence of three years in prison and a maximum fine of $250,000 for filing a false tax return and a maximum sentence of one year in prison and a maximum fine of $100,000 for failure to file a tax return.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
The case was investigated by IRS - Criminal Investigation Division. The case is being prosecuted by Tax Division trial attorneys Jorge Almonte and Sean R. Delaney.
Women from Colorado and Pennsylvania Charged with Terrorism Violations in Superseding IndictmentRead the Press Release
A superseding indictment unsealed this afternoon in the Eastern District of Pennsylvania charges Jamie Paulin Ramirez, a U.S. citizen and former resident of Colorado, and Colleen R. LaRose, aka "Fatima LaRose," aka "JihadJane," a resident of Pennsylvania, with conspiracy to provide material support to terrorists. The superseding indictment adds Ramirez as a defendant to what was previously an indictment charging only LaRose.
The new charges were announced by David Kris, Assistant Attorney General for National Security; Michael L. Levy, U.S. Attorney for the Eastern District of Pennsylvania; and Janice K. Fedarcyk, Special Agent-in-Charge of the FBI in Philadelphia.
The superseding indictment charges that LaRose and Ramirez traveled to and around Europe to participate in and in support of violent jihad. According to the superseding indictment, Ramirez exchanged e-mail messages with LaRose during the summer of 2009, in which LaRose invited Ramirez to join her in Europe to attend a "training camp." Ramirez is charged with accepting the invitation and asking to bring along her minor male child. On Sept, 12, 2009, Ramirez traveled to Europe with her child with the intent to live and train with jihadists. The day she arrived in Europe, the indictment alleges, Ramirez married an unindicted co-conspirator whom she had never before met in person.
The superseding indictment charges Ramirez, age 31, with one count of conspiracy to provide material support to terrorists, which carries a maximum penalty of 15 years in prison and a $250,000 fine. The charges against LaRose remain unchanged, and carry a maximum potential sentence of life in prison and a $1 million fine.
Ramirez was arrested this afternoon in Philadelphia after voluntarily flying to the United States from abroad.
This case was investigated by the FBI’s Joint Terrorism Task Force in Philadelphia, the FBI Field Division in New York and the FBI Field Division in Denver. It is being prosecuted by Jennifer Arbittier Williams, Assistant U.S. Attorney from the Eastern District of Pennsylvania, and Matthew F. Blue, Trial Attorney from the Counterterrorism Section in the Justice Department’s National Security Division.
The public is reminded that an indictment is an accusation and a defendant is presumed innocent unless and until proven guilty.
Justice Department Launches Comprehensive Web Site for Tribal CommunitiesRead the Press Release
Attorney General Eric Holder today announced the redesign and enhancement of its Tribal Justice and Safety Web site: www.TribalJusticeandSafety.gov . The Tribal Justice and Safety Web site is a one-stop shop for tribal communities, developed to provide a user-friendly, updated and comprehensive resource for American Indian and Alaska Native tribal communities to help further improve public safety. The site’s enhancements continue the department’s commitment to increase communication and resources available to tribal governments and consortiums.
"Tribal communities have spoken and the Department of Justice has listened and responded. When I met with tribal leaders last year, during the Tribal Nations Listening Session, I pledged that the Justice Department would act quickly to address the issues they identified that could make significant improvements in tribal communities across the United States," said Attorney General Holder. "We have learned from our meetings with tribal leaders that difficulties accessing some of the Justice Department’s information, especially information about grant opportunities, have been an obstacle for many communities. This new Web site will remove this obstacle, and help the Justice Department work more effectively with tribal communities to improve public safety."
The new site features an easy to navigate format and access to the latest announcements, press releases, speeches and information regarding Department of Justice initiatives in tribal communities. It also provides comprehensive resources available through the Office of Tribal Justice and the department’s grant-making divisions: the Office of Justice Programs, Community Oriented Policing Services and the Office on Violence Against Women.
Access to the department’s Combined Tribal Assistance Solicitation (CTAS) is also available on the Web site. Last month, the department announced the creation of CTAS, a newly streamlined grant program for federally-recognized American Indian and Alaska Native tribal communities, governments and consortiums to apply for Fiscal Year 2010 funding opportunities.
Today’s announcement is another step in the Justice Department’s ongoing initiative to increase engagement, coordination and action on public safety in tribal communities.
Detroit-Area Doctor and Patient Recruiter Convicted in Medicare Fraud SchemeRead the Press Release
West Bloomfield, Mich., physician Alan Silber and Detroit resident Hassan Reeves were convicted today by a federal jury for their roles in an $1 million Medicare fraud scheme, announced Assistant Attorney General Lanny A. Breuer of the 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 U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Chicago Regional Office.
After a week-long trial, the jury convicted Silber of six counts of health care fraud. Reeves was convicted of one count of conspiracy to commit health care fraud and one count of conspiracy to pay health care kickbacks. Silber was acquitted on one count of conspiracy to commit health care fraud. Each substantive health care fraud charge and the conspiracy charge carry a maximum penalty of 10 years in prison and a $250,000 fine. The charge of conspiracy to pay health care kickbacks carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing has been scheduled for Aug. 6, 2010.
Evidence at trial established that beginning in approximately December 2006, Silber and Reeves began working at a purported infusion clinic called RDM Center Inc. RDM Center existed for the purpose of causing fictitious claims for injection and infusion therapy services to be billed to Medicare. Evidence at trial established that the owners of RDM Center, Miami residents Denisse and Jose Martinez, came to Detroit to start the clinic because of heavy law enforcement scrutiny in Florida of fraudulent infusion clinics. Evidence presented at trial showed that Silber was hired to be the physician at the clinic while Reeves was hired to recruit and pay kickbacks to Medicare beneficiaries to come to the clinic. Denisse and Jose Martinez have previously pleaded guilty for their roles in the scheme.
During the time that RDM Center was open, the clinic routinely billed the Medicare program for services allegedly performed, but in reality were medically unnecessary and/or never provided. Trial evidence showed that the clinic’s owners purchased only a small fraction of the medications for which the clinic billed the Medicare program. According to evidence presented at trial, medications at the clinic were prescribed based not on medical need, but based on what medications were likely to generate Medicare reimbursements. Denisse Martinez, despite having no medical training, completed the clinic’s patient records by filling in, among other things, the "diagnosis" and "treatment" sections of the patient charts, which were then provided to Silber for his signature. Evidence presented at trial showed that Silber signed the diagnosis and treatment forms even though he neither made the diagnosis nor made any independent medical judgment as to the course of treatment. Expert testimony established that there was no legitimate medical basis for the use of the medications that Silber approved at the clinic, and, that in several instances, the medications could have harmed the patients. Evidence at trial established that Silber routinely approved the use of medications for patients despite knowing that the medications were unnecessary.
Evidence at trial also established that Medicare beneficiaries were not referred to RDM Center by their primary care physicians, or for any other legitimate medical purpose, but rather were recruited by Reeves to come to the clinic through the payment of kickbacks. Reeves recruited the beneficiaries in downtown Detroit and drove them approximately 27 miles to RDM Center. Trial evidence showed that in exchange for the kickbacks Reeves paid them, the Medicare beneficiaries visited the clinic and signed documents indicating that they had received the services billed to Medicare. Kickbacks came in the form of cash and prescriptions for controlled substances.
Between approximately December 2006 and March 2007, Silber, Reeves and their co-conspirators caused the submission of approximately $970,631 in false and fraudulent claims to be submitted to the Medicare program for services supposedly provided by RDM Center. Medicare actually paid approximately $649,000 of those claims
The case was prosecuted by Trial Attorney Benjamin D. Singer of the Criminal Division’s Fraud Section and Special Assistant U.S. Attorney Thomas W. Beimers of the U.S. Attorney’s Office for the Eastern District of Michigan.
The FBI and HHS-OIG conducted the investigation. 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 Eastern District of Michigan.
Department of Justice Observes April as Sexual Assault Awareness Month<br />Read the Press Release
WASHINGTON – In recognition of Sexual Assault Awareness Month, the Department of Justice today reaffirmed its commitment to ending sexual violence. The month of April is observed as Sexual Assault Awareness Month around the country by advocates, victim service providers, law enforcement, the judiciary, prosecutors and survivors to raise public awareness about sexual violence. President Obama, who was the first U.S. president to proclaim April as Sexual Assault Awareness Month in 2009, made the official announcement in a proclamation distributed last night.
“The Department is proud to commemorate April as Sexual Assault Awareness Month and bring attention to this tragic issue that affects men, women, boys and girls in communities across the country,” said Attorney General Eric Holder. “We know the Department cannot do this work alone, and we stand committed to working with our federal, state, tribal and community partners who are doing critical work in this area every day.”
“Highlighting April as Sexual Assault Awareness Month provides all of us with an opportunity to recognize that through our combined efforts, we can end sexual violence,” said Judge Susan B. Carbon, Director of the Office on Violence Against Women (OVW). “In the fifteen years since the Violence Against Women Act (VAWA) was signed into law, we have made enormous progress combating domestic violence in intimate and family relationships. We have been able to equip communities with the resources to protect survivors and save lives. We are equally committed to making the same significant social and legal improvements around sexual assault so that no one will have to endure the pain and humiliation that accompanies sexual violence.”
The Justice Department’s 2006 National Violence Against Women Survey found that nearly 18 million women and three million men had experienced at least one incident of sexual assault. In 2008, according to the department’s Bureau of Justice Statistics, 57 percent of the sexual assaults against females were committed by an offender whom they knew, and one in five sexual assaults against females (20 percent) was committed by an intimate partner. Less than half (47 percent) of the sexual assaults against females in 2008 were reported to police.
On Sept. 14, 2009, the Department of Justice marked the fifteenth anniversary of VAWA and the creation of OVW. The department launched a year-long effort to raise public awareness, build stronger coalitions among federal, state, local and tribal communities, and redouble efforts to end domestic and dating violence, sexual assault and stalking for men, women and children across the country. Most recently, nine members of the Department of Justice leadership visited 11 universities around the nation throughout the month of March to raise awareness about violent crimes affecting college campuses.
President Obama’s FY2011 budget request provides $461 million for OVW to provide communities with resources to combat sexual assault and violence against women, a 6 percent increase from FY2010. This includes $30 million for the Sexual Assault Services Program (SASP), the first federal funding stream solely dedicated to the provision of direct intervention and related assistance for victims of sexual assault. In FY2009, OVW made the first grant awards under SASP, totaling more than $16 million.
OVW provides leadership in developing the nation’s capacity to reduce violence against women through the implementation of VAWA and subsequent legislation. Created in 1995, OVW administers financial and technical assistance to communities across the country that are developing programs, policies and practices aimed at ending domestic violence, dating violence, sexual assault and stalking. For more information, please visit www.ovw.usdoj.gov/vawa15.htm.
The department’s formal event observing Sexual Assault Awareness Month will be held on Monday, April 12.
U.S. Sues Kellogg, Brown & Root for Alleged False Claims Act Violations over Improper Costs for Private Security in IraqRead the Press Release
WASHINGTON – The United States has filed a lawsuit against Kellogg Brown & Root Services (KBR) alleging that the defense contractor violated the False Claims Act, the Justice Department announced today. The suit, filed in U.S. District Court in Washington, alleges that KBR knowingly included impermissible costs for private armed security in billings to the Army under the Logistics Civil Augmentation Program (LOGCAP) III contract. The LOGCAP III contract provides for civilian contractor logistical support, such as food services, transportation, laundry and mail, for military operations in Iraq.
The government’s lawsuit alleges that some 33 KBR subcontractors, as well as the company itself, used private armed security at various times during the 2003-2006 time period. KBR allegedly violated the LOGCAP III contract by failing to obtain Army authorization for arming subcontractors and by allowing the use of private security contractors who were not registered with the Iraqi Ministry of the Interior. The subcontractors using private security are alleged to have also violated subcontract terms requiring travel only in military convoys. The government’s lawsuit further alleges that at the time, KBR managers considered the use of private security unacceptable and were concerned that the Army would disallow any costs for such services. KBR nonetheless charged the United States for the costs of the unauthorized services.
“Defense contractors cannot ignore their contractual obligations to the military and pass along improper charges to the United States,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “We are committed to ensuring that the Department of Defense’s rules are enforced and that funds so vital to the war effort are not misused.”
This case is being brought as part of a National Procurement Fraud Initiative. In October 2006, the Deputy Attorney General announced the formation of a National Procurement Fraud Task Force designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force is chaired by the Assistant Attorney General for the Criminal Division and includes the Civil Division, U.S. Attorneys’ Offices, the FBI, the U.S. Inspectors General community, and a number of other federal law enforcement agencies.
Along with the Justice Department’s Civil Division, the Defense Criminal Investigative Service, Army Criminal Investigation Division and FBI participated in the investigation of this matter. This case, as well as others brought by members of the task force, demonstrates the Department of Justice’s commitment to helping ensure the integrity of the government procurement process.
Louisiana Civilian Charged in Danziger Bridge Case in New OrleansRead the Press Release
WASHINGTON – A two-count bill of information filed today in federal court charges David Ryder of Opelousas, La., with lying to the FBI and with illegally possessing a firearm, announced Thomas E. Perez, Assistant Attorney General for the Civil Rights Division; Jim Letten, U. S. Attorney for the Eastern District of Louisiana; and David Welker, Special Agent in Charge of the FBI New Orleans Field Office. The charges are in connection with the federal probe into a police-involved shooting that occurred on the Danziger Bridge in the days after Hurricane Katrina.
The Sept. 4, 2005, shooting on the Danziger Bridge left two civilians dead and four others seriously injured. Following the shooting, police arrested Lance Madison, whose brother Ronald had been shot and killed on the bridge, and charged him with shooting at and attempting to kill police officers.
The two-count bill of information filed today alleges that David Ryder, a convicted felon who has never worked as a law enforcement officer, was carrying a gun and wearing a law enforcement tee-shirt on the day of the shooting incident. Count one charges that Ryder lied to the FBI when he claimed that he had chased a group of people through a trailer park near the Danziger Bridge and that one of the people he was chasing had turned and fired a gun at him. Count two charges that Ryder violated federal law by possessing a firearm on Sept. 4, 2005, because he had previously been convicted of a felony.
The defendant faces a possible maximum sentence of 15 years in prison and a fine of $500,000.
This case, which is ongoing, is being investigated by the New Orleans Field Office of the FBI, and is being prosecuted by Deputy Chief Bobbi Bernstein and Trial Attorney Forrest Christian of the Justice Department’s Civil Rights Division, along with Assistant U.S. Attorney Julia K. Evans for the Eastern District of Louisiana. No further details or information will be made available at this time.
Key Member of International Human Trafficking Ring Sentenced to Twenty YearsRead the Press Release
ATLANTA - Francisco Cortes-Meza, 26, of Mexico, was sentenced today by U.S. District Judge Richard W. Story in the Northern District of Georgia for sex trafficking in an organization that targeted young Mexican women.
Thomas E. Perez, Assistant Attorney General for the Civil Rights Division, said, “This defendant preyed on vulnerable women who dreamed of a better life in the United States. Individuals who force women into prostitution commit a heinous crime that will not be tolerated. The Department of Justice is committed to holding accountable traffickers who seek to profit at the expense of the freedom, rights and dignity of others.”
U.S. Attorney for the Northern District of Georgia Sally Quillian Yates said, “Prosecuting human trafficking cases is a priority for the U.S. Attorney’s Office with the dual goals of punishing the traffickers and protecting the victims. Traffickers often prey upon those who may be vulnerable due to their immigration status, unfamiliarity with our legal system, or fear of law enforcement. Every victim of this heinous crime is protected by the laws of the United States, regardless of their citizenship status, and should not fear coming forward to report this criminal abuse. ”
“While we cannot undo the irreparable harm caused to these victims, we hope that today's sentence brings some closure allowing them to heal and move forward,” said Kenneth A. Smith, Special Agent in Charge of the ICE Office of Investigations in Atlanta. “Traffickers worldwide are selling terrible lies to young women luring them with promises of a better future. Through prosecutions like this, we are sending the message to traffickers that their crimes will not go unpunished.”
Cortes-Meza was sentenced to 20 years in prison to be followed by three years of supervised release, and ordered to pay restitution to the victim in the amount of $21,000. Cortes-Meza was convicted of these charges on Dec. 16, 2008 when he entered a guilty plea to one count of sex trafficking by means of force, fraud, or coercion.
According to U.S. Attorney Yates and the information presented in court:
From Spring 2006 through June 2008, Cortes-Meza, and others charged in the conspiracy, recruited and enticed approximately 10 victims to come to the Atlanta area from Mexico to engage in prostitution for the financial benefit of the members of the alleged conspiracy. Often the conspirators would lure the women to the U.S. by promising better lives, legitimate employment or romantic relationships with the defendants. Drivers collected the victims from the homes where they lived with the defendants in Norcross and drove them to apartments and homes where paying clients waited for commercial sex.
Specifically, Cortes-Meza lured one young woman to the United States under the false pretense that she would find a job in a restaurant. Cortes-Meza paid smugglers to bring the victim to the United States. Once she was here, Cortes-Meza compelled her to engage in commercial sex acts with 30-40 men every night, and to give him the money she collected. The evidence in the case showed Cortes-Meza controlled the victim’s daily life and was physically violent with her.
The Department of Justice has identified human trafficking prosecutions such as this one as a top priority in the Department. In order to bring defendants to justice, victims of crime may be eligible for immigration status in the United States to assist in the prosecution. Three women testified today at the sentencing hearing for Cortes-Meza, and spoke of physical threats, beatings and intimidation, forcing the victim to work as a prostitute, and that she was not allowed to speak to anyone. NOTE: The Department of Homeland Security Tip Line to report trafficking crimes is 1-866-347-2423.
This case was investigated by Special Agents of U.S. Immigration and Customs Enforcement (ICE).
Assistant U.S. Attorney Susan Coppedge and Trial Attorney Karima Maloney of the Civil Rights Division’s Human Trafficking Prosecution Unit prosecuted the case.
Department of Justice Supports<br /> the Associated Press’s Proposed Digital News RegistryRead the Press Release
WASHINGTON – The Department of Justice announced today that it supports a proposal by The Associated Press (AP) to develop and operate a voluntary news registry to facilitate the licensing and Internet distribution of news content created by the AP, its members, and other news originators. The department said that the development and operation of the registry is not likely to reduce competition among news content owners and could provide procompetitive benefits to both participating content owners and content users.
The Department of Justice’s position was stated in a business review letter to counsel for the AP from Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.
The registry would consist of a centralized digital database containing news content from multiple content owners. It would allow content owners to register and list individual items of news content, specify the uses others may make of that content, and detail the terms on which such content may be licensed. The registry would enable content users to determine quickly the licensing and use terms applicable to a specific content owner or to individual items of registered content.
“The AP’s registry may provide a new, efficient way for news content users to identify applicable terms of use and purchase licenses for Internet news content,” said Assistant Attorney General Varney. “The registry may benefit both news originators and content users by reducing the transaction costs associated with securing licenses for Internet use.”
The registry would be a non-exclusive method of accessing, licensing and using content on the Internet. It would be open, on nondiscriminatory terms, to all owners and users of Internet news content. Content owners would be free to select which, if any, content to include in the registry. They would be allowed to offer registered news content outside of the registry. They would also be free to join other competing Internet registry services.
Content owners, including the AP, would not set, formulate, benchmark or suggest any licensing terms for any other content owner’s news items listed in the registry. Each participating content owner would set unilaterally the licensing terms for its own content, without the involvement of either other owners or the AP.
The AP also would institute and maintain firewalls to prevent the registry from being used to disseminate revenue, use, traffic and transactional information among participating content owners. In addition, the AP intends to limit public information sharing among competitors by allowing only registered content users to access public licensing terms.
Under the department’s business review procedure, an organization may submit a proposed action to the Antitrust Division and receive a statement as to whether the division currently intends to challenge the action under the antitrust laws.
A file containing the business review request and the department’s response may be examined in the Antitrust Division’s Antitrust Documents Group, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 1010, Washington, D.C. 20530. After a 30-day waiting period, the documents supporting the business review will be added to the file, unless a basis for their exclusion for reasons of confidentiality has been established under the Business Review Procedure.
Daimler AG and Three Subsidiaries Resolve Foreign Corrupt Practices Act Investigation and Agree to Pay $93.6 Million in Criminal PenaltiesRead the Press Release
WASHINGTON – Daimler AG, a German corporation, and three of its subsidiaries have resolved charges related to a Foreign Corrupt Practices Act (FCPA) investigation into the company’s worldwide sales practices, the Department of Justice announced today.
At a hearing today before U.S. District Court Judge Richard J. Leon in the District of Columbia, Daimler AG’s Russian subsidiary DaimlerChrysler Automotive Russia SAO (DCAR), now known as Mercedes-Benz Russia SAO, and its German subsidiary, Export and Trade Finance GmbH (ETF), each pleaded guilty to criminal informations charging the companies with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of violating those provisions. As part of the plea agreements, DCAR and ETF agreed to pay criminal fines of $27.26 million and $29.12 million, respectively.
Daimler AG entered into a deferred prosecution agreement and agreed to the filing of a criminal information charging that company with one count of conspiracy to violate the books and records provisions of the FCPA and one count of violating those provisions. Daimler AG’s Chinese subsidiary DaimlerChrysler China Ltd. (DCCL), now known as Daimler North East Asia Ltd., also entered into a deferred prosecution agreement and agreed to the filing of a criminal information charging it with one count of conspiracy to violate the anti-bribery provisions of the FCPA and one count of violating those provisions. In total, Daimler AG and its subsidiaries will pay $93.6 million in criminal fines and penalties.
According to court documents, Daimler AG, whose shares trade on multiple exchanges in the United States, engaged in a long-standing practice of paying bribes to foreign government officials through a variety of mechanisms, including the use of corporate ledger accounts known internally as “third-party accounts” or “TPAs,” corporate “cash desks,” offshore bank accounts, deceptive pricing arrangements and third-party intermediaries. According to court documents, Daimler AG and its subsidiaries made hundreds of improper payments worth tens of millions of dollars to foreign officials in at least 22 countries – including China, Croatia, Egypt, Greece, Hungary, Indonesia, Iraq, Ivory Coast, Latvia, Nigeria, Russia, Serbia and Montenegro, Thailand, Turkey, Turkmenistan, Uzbekistan, Vietnam and others – to assist in securing contracts with government customers for the purchase of Daimler vehicles. The contracts were valued at hundreds of millions of dollars. In some cases, Daimler AG or its subsidiaries wire transferred these improper payments to U.S. bank accounts or to the foreign bank accounts of U.S. shell companies, in order for those entities to pass on the bribes. Within Daimler AG and its subsidiaries, bribe payments were often identified and recorded as “commissions,” “special discounts,” and/or “nützliche Aufwendungen” or “N.A.” payments, which translates to “useful payment” or “necessary payment,” and was understood by certain Daimler employees to mean “official bribe.” According to court documents, certain corrupt payments continued as late as January 2008, after the Department of Justice had begun its investigation. In all cases, Daimler AG improperly recorded these corrupt payments in its corporate books and records. Daimler AG admitted that it earned more than $50 million in profits from corrupt transactions with a nexus to the territory of the United States. Daimler AG also admitted that it agreed to pay kickbacks to the former Iraqi government in connection with contracts to sell vehicles to Iraq under the U.N.’s Oil for Food program.
“In a decade-long scheme involving tens of millions of dollars, Daimler AG and three of its subsidiaries brazenly offered bribes in exchange for business around the world,” said Principal Deputy Assistant Attorney General Mythili Raman of the Criminal Division. “Using offshore bank accounts, third-party agents and deceptive pricing practices, these companies saw foreign bribery as a way of doing business. The guilty pleas and deferred prosecution agreements entered today by Daimler AG and its subsidiaries should serve as a message to other companies subject to the FCPA and conducting business around the world that corrupt business is bad business.”
In connection with its guilty plea, DCAR admitted that it made improper payments to Russian federal and municipal government officials to secure contracts to sell vehicles by over-invoicing the customer and paying the excess amount back to the government officials, or to other designated third parties that provided no legitimate services to DCAR or Daimler AG. When requested, DCAR or Daimler AG employees caused the wire transfer of payments from Daimler AG’s bank accounts in Germany to, among other destinations, U.S. and Latvian bank accounts held by shell companies with the understanding that the money, in whole or in part, was for the benefit of Russian government officials.
In connection with its guilty plea, ETF admitted that it made corrupt payments directly to Croatian government officials and to third parties, including two U.S.-based corporate entities, with the understanding that the payments would be passed on, in whole or in part, to Croatian government officials, to assist in securing the sale of 210 fire trucks.
In connection with its deferred prosecution agreement, DCCL admitted that it made improper payments in the form of commissions, delegation travel, and gifts for the benefit of Chinese government officials or their designees in connection with sales of commercial vehicles and Unimogs to various Chinese government customers. DCCL admitted that in certain cases it used U.S.-based agents to facilitate the bribe payments.
Under the terms of its deferred prosecution agreement, Daimler AG agreed to retain an independent compliance monitor for a three-year period to oversee the company’s continued implementation and maintenance of an FCPA compliance program, and to make reports to the company and the Department of Justice. DCAR, ETF and DCCL are covered by the monitoring provisions of the deferred prosecution agreement with their parent company Daimler AG. Daimler AG also agreed to fully cooperate with investigations by U.S. and foreign authorities of the company’s corrupt payments.
Today, Judge Leon also entered a separate judgment against Daimler AG resolving a related civil complaint filed by the U.S. Securities and Exchange Commission (SEC). Daimler AG agreed to pay $91.4 million in disgorgement of profits relating to those violations.
The criminal case is being prosecuted by Assistant Chief John S. (Jay) Darden and Deputy Chief Mark F. Mendelsohn of the Criminal Division’s Fraud Section. The department acknowledges and expresses its appreciation for the significant assistance provided by the staff of the SEC during the course of this investigation. The department also acknowledges the significant contributions to this investigation by former Fraud Section Trial Attorney Amanda L. Riedel.
Two Shell Chemical Companies Agree to Reduce Harmful Emissions Under Comprehensive Clean Air Act SettlementsRead the Press Release
WASHINGTON - Shell Chemical L.P. and Shell Chemical Yabucoa have agreed to install pollution reduction equipment on two petroleum refining facilities at an estimated cost of $6 million as part of two comprehensive Clean Air Act settlements, the Justice Department and the Environmental Protection Agency today announced.
The two companies will also pay a combined $3.3 million civil penalty to the United States as well as Alabama and Louisiana and $200,000 to Louisiana organizations for environmental education and emergency operations.
Under the settlements, Shell Chemical L.P. will apply new air pollution control technologies and implement other measures to reduce emissions from some of the largest emitting units at its petroleum refining facilities in Saraland, Ala. and St. Rose, La.
“These two settlements are excellent examples of businesses working with government to achieve compliance at their facilities around the country, which will benefit the health of local communities and the environment,” said Ignacia S. Moreno, Environment and Natural Resource Division Assistant Attorney General. “We will continue to work with industry to achieve compliance under the Clean Air Act to remove harmful pollution from the air we breathe.”
“These settlements demonstrate EPA’s continuing commitment to increase compliance and reduce emissions from this industrial sector” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance. “As a result of today’s actions, the communities living nearby these refineries can look forward to cleaner, healthier air.”
Shell Chemical Yabucoa operates a facility in Yabucoa, Puerto Rico. For independent business reasons, Shell Chemical Yabucoa decided to shut down its refining operations at the facility in Puerto Rico in the summer of 2009. The company still continues to operate the existing gasoline terminal there. Collectively the three facilities had a combined production capacity of approximately 235,000 barrels per day.
In addition, the two refineries in Alabama and Louisiana, and the terminal operations in Puerto Rico will upgrade their leak-detection and repair practices to reduce harmful emissions from pumps and valves, implement programs to minimize the number and severity of flaring events and adopt new strategies for ensuring continued compliance with benzene waste requirements under the Clean Air Act.
Together, both settlements will reduce air emissions of sulfur dioxide (SO2), nitrogen oxides (NOx) and other harmful pollutants by more than 1,450 tons per year.
The annual emission reductions from all three refineries, including the emissions associated with the shutdown at Yabucoa, are estimated to be approximately 645 tons of SO2 and approximately 813 tons of NOx, as well as additional reductions of volatile organic compounds and benzene.
The settlements are the 25th and 26th in a series of “global” multi-issue, multi-facility settlements being pursued by EPA under its National Petroleum Refinery Initiative. With today’s settlements, 102 refineries operating in 30 states and territories are now covered by global settlements, representing more than 89 percent of the nation’s refining capacity.
For more information on EPA’s Petroleum Refinery Initiative, please visit http://www.epa.gov/compliance/resources/cases/civil/caa/oil/index.html.
The states of Alabama and Louisiana actively participated in and are joining in the settlement with Shell Chemical, which was filed with the U.S. District Court for the Southern District of Texas. The settlement with Shell Chemical Yabucoa was filed with the U.S. District Court for the District of Puerto Rico. Each settlement is subject to a 30-day public comment period and approval by the federal court. Copies of the proposed consent decrees are available on the Justice Department Web site at http://www.justice.gov/enrd/Consent_Decrees.html.
Two Baton Rouge, Louisiana, Tax Preparers Indicted<br /> for Aiding in Preparation of False Tax ReturnsRead the Press Release
WASHINGTON – Two Baton Rouge, La., tax return preparers were indicted today on charges of aiding in the preparation of false tax returns, the Justice Department and Internal Revenue Service (IRS) announced. Cynthia Peters, who worked at Jasmine and Melissa’s Tax Service in Baton Rouge, was charged with seven counts of aiding in the preparation of false tax returns for clients. In a separate indictment, Melissa Edwards, who also worked at Jasmine and Melissa’s Tax Service, was charged with ten counts of aiding in the preparation of false tax returns for clients.
According to the indictment filed against her, Peters prepared fraudulent tax returns for seven clients that reported false amounts of telephone excise tax refund (TETR) credits. The TETR credit was a one-time credit available to taxpayers for the 2006 year. The credit was available in standard amounts ranging from $30 to $60 or in the amount of actual excise tax paid, which was 3% of the cost of long distance and bundled service over the period beginning after Feb. 28, 2003, and before Aug. 1, 2006. According to the indictment, Peters filed taxpayer returns claiming fraudulent TETR credits in amounts ranging from $1,190 to $4,900.
According to the indictment filed against her, Edwards prepared fraudulent tax returns for 10 clients that reported false amounts of TETR credits. The fraudulent TETR credit amounts ranged from $4,800 to $7,475.
An indictment is merely a formal charge by the grand jury. Each defendant is presumed innocent unless and until proven guilty in a U.S. District Court. If convicted, Peters faces a maximum potential sentence of 21 years in prison and a maximum fine of $1,750,000. If convicted, Edwards faces a maximum potential sentence of 30 years in prison and a maximum fine of $2,500,000.
Both cases are being prosecuted by Tax Division attorneys Kevin Lombardi and Matthew Mueller. The cases were investigated by the IRS, Criminal Investigation Division.
Additional information about the Justice Department’s Tax Division and its enforcement efforts may be found at www.usdoj.gov/tax/. Additional information about tax fraud schemes to watch out for may be found on the IRS Criminal Investigation Web site.
Settlement Reached at Allied Chemical and Ironton Coke Superfund Site in OhioRead the Press Release
WASHINGTON - A settlement with Honeywell International Inc. estimated to be worth more than $10 million will ensure that cleanup of the remaining areas of the Allied Chemical and Ironton Coke Superfund Site in Ironton, Ohio, will move forward, the Justice Department and U.S. Environmental Protection Agency (EPA) announced today.
The agreement, lodged in U.S. District Court in Cincinnati, resolves federal liability claims against Honeywell for cleanup of the remaining areas of the site. As a result of this settlement with Honeywell and the previous agreements with Honeywell and another potentially responsible party, Amcast Industrial Corp., the United States will recover substantially all of the costs incurred by the government in responding to the contamination at the site. This settlement and the previous agreements will result in cleanup work estimated to cost in excess of $75 million.
The Allied Chemical and Ironton Coke site lies on the banks of the Ohio River near the point where the Ohio, Kentucky and West Virginia borders converge. The facility produced a number of products during its operations including phthalic anhydride, pitch, creosote, naphthalene, anthracene and carbolic acids. The process wastes included anthracene residue, anthracene salts, phthalic anhydride residue and coal tar pitch scrap. The result of operations and waste disposal practices was extensive contamination of soil, sediment (mud) in nearby Ice Creek and ground water.
Under the settlement, Honeywell International Inc. will be responsible for cleanup and containment of the former tar plant area of the site. Honeywell will also pay for all of the United States’ response costs relating to the tar plant area, including oversight costs incurred by EPA. Contaminants released at the tar plant area include polycyclic aromatic hydrocarbons, benzene, toluene, and naphthalene.
The remedy will address soil, soil vapor and Ohio River sediment contaminated by the former tar plant. Contaminated soil in this area will be covered with a cap that complies with Ohio solid waste regulations; land use controls will be put in place to ensure the cap remains intact and thereby protects people from remaining contaminated soil and soil vapor; and dredging, off-site disposal and/or capping will address contaminated sediment in the Ohio River adjacent to the tar plant’s loading dock. The total cost for the selected remedy is estimated to be approximately $10 million.
The tar plant, located on South Third Street, manufactured products from the crude tar produced in the coking process at the now-closed coke plant. During its period of operation, the plant contained approximately 124 above-ground storage tanks and process tanks varying in size from several hundred to 750,000 gallons. The site contains three areas that are major sources of contamination: the tar plant area, which is the subject of this agreement; the coke plant/lagoon area, a dismantled former coke plant; and the Goldcamp disposal area, a former sand and gravel pit used as a disposal area for chemical process wastes. Cleanup activities associated with the coke plant/lagoon area and the Goldcamp disposal area have been performed and response costs related to these areas recovered under separate agreements. The contaminated site-wide groundwater beneath the three source areas is continuously being treated by an on-site waste water treatment plant and monitored for compliance.
“We are pleased that under this agreement Honeywell will perform cleanup of the remaining areas of the Allied Ironton Site and reimburse the government’s costs of overseeing the cleanup. I remind those who are responsible for polluting the environment that they will be held accountable for not only cleanup costs but also for future response and oversight costs,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division.
“The cleanup required by this consent decree will complete all work at the site and open the door for the potential reuse of some portions of the property,” said Richard Karl, Superfund Director for EPA Region 5.
The consent decree, lodged in the U.S. District Court for the Southern District of Ohio, is subject to a 30-day public comment period and approval by the federal court. A copy of the consent decree is available on the Justice Department Web site at http://www.justice.gov/enrd/Consent_Decrees.html.
More information on the Allied Ironton Superfund Site can be found at http://www.epa.gov/region5/superfund/sites/alliedironton.
Complaint
Consent Decree
Former Tennessee Corrections Captain Pleads Guilty to Civil Rights Violation and LyingRead the Press Release
WASHINGTON – Harold Hutcheson, a former captain at the Northwest Correctional Complex (NCC), in Tiptonville, Tenn., pleaded guilty today in federal court in Jackson, Tenn., to violating the civil rights of an inmate and then lying about it during the state and federal investigations, the Justice Department announced.
During his guilty plea, Hutcheson admitted that on April 15, 2008, while working as a corrections officer at the NCC, he used unreasonable force when he repeatedly kicked a handcuffed inmate without provocation. Hutcheson agreed that his assault violated the inmate’s constitutional right to be free from cruel and unusual punishment by law enforcement officers. Additionally, Hutcheson admitted that he obstructed justice when he provided false information about the incident to federal investigators.
Hutcheson faces a maximum sentence of six years in prison and a maximum fine of $350,000.
Previously, Ryan Joshua Jones and Roger Forrester, both former corrections officers at NCC, each pleaded guilty for their roles in the assault of the inmate and for lying during the investigation. Jones and Forrester are scheduled to be sentenced on July 22, 2010.
“Correctional officers are given a great amount of authority to effectively carry out their critical public safety responsibilities. The Justice Department will aggressively prosecute those officers who abuse that authority by violating the rights of those under their supervision,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.
Today’s plea resulted from the investigative work of the FBI and the Civil Rights Division’s Criminal Section. The case is being prosecuted by Civil Rights Division Trial Attorneys Jared Fishman and Chris Lomax.
Former Contractor Indicted in Bid-Rigging Conspiracy at New York City Hospital and for Tax FraudRead the Press Release
WASHINGTON — An indictment by a Manhattan grand jury was unsealed today charging a former contractor for participating in a bid-rigging conspiracy related to contracts at New York Presbyterian Hospital (NYPH) and for filing a false tax return. The indictment also charges the former contractor and a co-conspirator for their participation in a conspiracy to defraud the Internal Revenue Service (IRS), the Department of Justice announced today.
The three-count indictment, originally filed under seal on Feb. 18, 2010, was unsealed today in the U.S. District Court in Manhattan. The indictment charges David Porath, a former owner of a maintenance and insulation company, with engaging in a conspiracy to rig bids on NYPH contracts for re-insulation services. According to the indictment, between approximately 2000 and March 2005, NYPH awarded a number of contracts for re-insulation services to Porath’s company. Porath and his co-conspirators created the false appearance that NYPH was awarding contracts based on competitive bids by submitting fraudulently high bids by competitor companies, which allowed Porath’s company to appear to be the low bidder and thus win the contracts.
The indictment further charges Porath and another individual, Andrzej Gosek, with participating in a conspiracy to defraud the IRS. Gosek was the owner of a Langhorne, Pa., company that provides asbestos abatement services. According to the indictment, between October 2000 and February 2005, Porath gave Gosek checks made out to companies in Brooklyn, N.Y., purportedly for work done at NYPH by those companies as sub-contractors to Porath’s company when, in fact, the companies had not performed such work. The Brooklyn companies cashed the checks and Gosek delivered the cash back to Porath. Based upon these checks to the Brooklyn companies, Porath took false deductions on his company’s and his personal federal tax returns, allowing Porath to fraudulently reduce his taxable income. Porath is also charged with filing a false federal tax return on or about Feb. 17, 2005, which substantially understated his income.
The bid-rigging violation that Porath is charged with carries a maximum penalty of 10 years in prison, and a $1 million fine. The tax fraud conspiracy violation that Porath and Gosek are charged with carries a maximum penalty of five years in prison, and a $250,000 fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime, if either of those amounts is greater than the statutory maximum fine. Porath’s violation of false subscription on his tax return carries a maximum penalty of three years in prison and a $100,000 fine.
The charges announced today resulted from an ongoing federal antitrust investigation of bid rigging, fraud, bribery and tax-related offenses relating to contracts administered by the Facilities Operations Department and the Engineering Department at NYPH and the Engineering Department at Mount Sinai Medical Center. To date, eight individuals and three companies have pleaded guilty to charges arising out of the same investigation.
The investigation is being conducted by the Antitrust Division’s New York Field Office, the FBI and the IRS Criminal Investigation’s New York Field Office. Anyone with information concerning bid rigging, bribery, tax offenses or fraud related to contracts administered by the Facilities Operation Department or the Engineering Department at NYPH or the Engineering Department at Mount Sinai should contact the Antitrust Division’s New York Field Office at 212-264-9308 or the FBI’s New York Division at 212-384-1000 or visit http://www.justice.gov/atr/contact/newcase.htm.
Federal Government Announces Removal of Obsolete Ships from Suisun BayRead the Press Release
WASHINGTON—The federal government announced today that it would remove the remaining 52 ships that currently sit in the Suisun Bay as part of an agreement with environmental groups that was filed in federal court in Sacramento, Calif., the Department of Justice and Department of Transportation announced today.
The Department of Transportation’s Maritime Administration (MARAD) has already begun removing obsolete ships from Suisun Bay for recycling including four ships that have been removed since November 2009 and a fifth that was removed today.
The agreement outlines MARAD’s commitment to remove 20 of the ships that are in the poorest condition prior to Sept. 30, 2012. Before their removal, these ships will be sent to a local dry-dock for cleaning that involves removing marine growth from the underwater hull and removing flaking paint from areas above the water. All other ships at the site will be cleaned of flaking paint within two years and removed from the fleet by Sept. 30, 2017.
Additionally, MARAD will clean the horizontal surfaces of the ships every 90 days to prevent peeling paint from dropping into the water, inspect the ships on a monthly and quarterly basis and collect water runoff samples for testing. No new ships with excess flaking will be admitted to the site.
“This agreement is evidence of the Obama Administration’s pledge to work with our local partners toward a common goal of better protecting the environment,” said U.S. Secretary of Transportation Ray LaHood.
“The Department of Justice is pleased to have negotiated a resolution of this matter that is good for the environment and a demonstration of effective state and federal cooperation,” said Ignacia S. Moreno, Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “All the parties are to be commended for developing a comprehensive program for the management of the Suisun Bay Reserve Fleet.”
“We are following through on our commitment to clean and maintain these vessels in an environmentally sound manner, said David Matsuda, Acting Administrator of the USDOT’s Maritime Administration, the agency tasked with managing the fleet. “We are moving expeditiously to remove the worst-polluting ships first and diligently moving to clean the rest.”
The Suisun Bay Reserve Fleet Site serves as a reserve of ships for national defense and national emergency purposes. MARAD’s two other fleet storage sites are in James River, Va. and Beaumont, Texas.
Eight Promoters of Sham Tax Elimination Scheme Convicted of Tax Fraud Charges in FloridaRead the Press Release
WASHINGTON - Eight promoters of a fraudulent tax and debt elimination scheme were convicted of tax, wire fraud and money laundering charges by a federal jury following a month long trial in Pensacola, Fla., the Justice Department and Internal Revenue Service (IRS) announced today. The defendants, who were indicted in September 2008, promoted fraudulent schemes through Pinnacle Quest International, also known as PQI and Quest International.
The charges and convictions were as follows:
Claudia Constance Hirmer and Mark Steven Hirmer of Niceville, Fla., were each convicted of conspiracy to defraud the United States and to commit wire fraud, conspiracy to commit money laundering, and tax evasion.
Eugene “Gino” Joseph Casternovia of Ashland, Ore., Arnold Ray Manansala of Renton, Wash., Dover Eugene Perry of Renton, Wash., and Michael Guy Leonard of Troy, N.Y., were each convicted of conspiracy to defraud the United States and to commit wire fraud, and conspiracy to commit money laundering.
Mark Daniel Leitner of Fairport, N.Y., and Arthur Ramirez Merino of Renton, Wash., were each convicted of conspiracy to defraud the United States and to commit wire fraud.
According to the evidence presented during trial, PQI was an umbrella organization for numerous vendors of tax and credit card debt elimination scams. Some of the PQI vendors, such as Southern Oregon Resource Center for Education (SORCE), sold bogus theories and strategies for tax evasion. For fees starting at $10,000, SORCE assisted its customers in the creation of a series of sham business entities in the United States and Panama. Other tax-related PQI vendors denied the legitimacy of the income tax system on various theories and provided customers with a purported “reliance defense” that consisted of a paper trail of frivolous correspondence which a client could allegedly use as evidence of good faith if the client were prosecuted.
At trial, the government established that other PQI vendors sold fraudulent schemes for eliminating credit card debt, the most successful of which was Financial Solutions, owned and operated by defendant Arthur Merino. Financial Solutions charged its customers thousands of dollars for a series of letters to send to credit card companies disputing the lawfulness of the underlying debt. The product was wholly ineffective, and customers typically were sued by their creditors and often forced into bankruptcy.
According to the evidence, another PQI vendor, MYICIS, operated as a sophisticated, computerized “warehouse bank.” MYICIS was a single bank account in which customers pooled their money. MYICIS was promoted to PQI’s clients as a method to hide their assets from the IRS as a result of the pooled nature of the account. MYICIS had 3,000 clients and approximately $100 million in deposits over a three year period.
According to the evidence presented during trial, PQI purported to sell only CDs and tickets to offshore conferences. However, PQI acted as a gateway to its fraudulent vendors. PQI clients seeking the tax evasion and debt elimination vendors could only access the product if they joined PQI first. The cost of membership ranged from $1,350 to $18,750, depending on the level of access. In May 2008, a federal district court issued a preliminary injunction against the promoters of Pinnacle Quest International.
As established at trial by the government, defendants Claudia Hirmer, Dover Perry, Arnold Manansala, Michael Leonard and Arthur Merino were members of the executive council of PQI. The executive council selected vendors, guided the day-to-day operations of the company, planned offshore conferences, and fielded customers complaints, which were voluminous. Defendant Mark Hirmer managed PQI’s finances on a day-to-day basis. Between 2002 and 2008, PQI had over 11,000 members throughout the United States. Executive council member Joseph McPhillips pleaded guilty prior to trial.
According to the evidence presented, none of the defendants filed tax returns while they were involved in the PQI conspiracy. Claudia Hirmer and Mark Hirmer were convicted for evading the payment of over $2 million in income taxes, penalties, and interest for years 1996 through 2001. The Hirmers sought to evade the payment of their tax liability in numerous ways, including extensive use of cashier’s checks and cash and extensive use of nominee companies and offshore accounts. Additionally, the Hirmers attempted to strip the equity out of one of their homes by granting a bogus mortgage to a Panamanian nominee entity they controlled.
Judge Rodgers scheduled sentencing for July 6, 2010. Claudia Hirmer and Mark Hirmer each face a maximum sentence of 30 years in prison and a maximum fine of $1 million. Casternovia, Manansala, Perry, and Leonard each face a maximum sentence of 25 years in prison and a maximum fine of $750,000. Leitner and Merino each face a maximum sentence of five years in prison and a maximum fine of $250,000.
“Today’s convictions send a powerful and unequivocal message to those who seek to evade and help others evade their taxes,” said Acting Assistant Attorney General John A. DiCicco of the Justice Department’s Tax Division. “Those who promote tax fraud schemes will be investigated, prosecuted and convicted, and they also face substantial prison sentences.”
“The use of abusive trust schemes and fraudulent debt elimination tactics intended to conceal income from the IRS isn't tax planning; it’s criminal activity. There is no secret formula that can eliminate a person's tax obligations,” said Victor S. O. Song, Chief, IRS Criminal Investigation. “Today's verdict reinforces our commitment to every American taxpayer that we will identify and prosecute those who promote illegal financial transactions designed to evade the payment of taxes.”
Judge Rodgers set aside the jury verdict as to a ninth defendant, Robert Pendell, and acquitted him of all counts.
Acting Assistant Attorney General DiCicco commended the IRS - Criminal Investigation Division special agents who investigated the case, as well as Tax Division trial attorneys Michael J. Watling, Adam F. Hulbig, and Jonathan R. Marx, who prosecuted the case.