Eastern District of Texas
Press releases recorded for this federal judicial district.
USAO News: U.S. Attorneys, Texas AG Warn Consumers of Scams Involving Counterfeit, Mislabeled, Non-Existent PPERead the Press Release
U.S. Attorney for the Northern District of Texas Erin Nealy Cox – in partnership with U.S. Attorneys Ryan K. Patrick (Southern District of Texas), John F. Bash (Western District of Texas), and Stephen J. Cox (Eastern District of Texas) as well as Texas Attorney General Ken Paxton – today informed the public about several fraudulent schemes involving masks, personal protection equipment (PPE), and other COVID-19 related gear. They urged everyone to exercise increased due diligence and caution when dealing with new suppliers or vendors, especially when using a third-party broker.
As demand for PPE increases, scammers may advertise equipment they do not actually have in attempts to make a quick profit. These PPE products may be counterfeit and mislabeled, and some may not exist at all. Some fraudsters reach out directly to consumers and government entities through email or social media to push their products.
Red flags that a seller may be engaging in a scam include:
- Unusual payment terms
- Last-minute price changes
- Last-minute excuses for delay in shipment
- Unexplained source of a large quantity of material
- Evidence of re-packaging or mislabeling
There are ongoing federal and state prohibitions on charging exorbitant prices for PPE during this time of national emergency.
Texans who believe they have encountered scams or price gouging can call the Office of the Attorney General’s toll-free complaint line at (800) 621-0508 or file a complaint online. For additional information on disaster scams, please visit their disaster scams website.
More information on unapproved or counterfeit PPE can be found at cdc.gov/niosh. If you have information about PPE-related fraud, or about hoarding or price gouging of critical supplies, you can report it without leaving your home to the National Center for Disaster Fraud by calling the National Hotline at (866) 720-5721 or by submitting the NCDF Web Complaint Form.
U.S. Attorney Stephen Cox Hails 30th Anniversary of the Americans with Disabilities ActRead the Press Release
BEAUMONT, Texas – The Americans with Disabilities Act (ADA) was signed into law on July 26, 1990, and remains the nation’s preeminent civil rights law for providing access and equal opportunities for people with disabilities. The U.S. Attorney’s Office for the Eastern District of Texas is proud to play a critical role in enforcing the ADA in order to protect people with disabilities from discrimination. Today, on the 30th anniversary of President George H.W. Bush signing the ADA into law, U.S. Attorney Stephen J. Cox reiterates the Eastern District of Texas’ continued commitment to investigate and litigate significant ADA cases.
“Thirty years ago, President George H.W. Bush invoked our founding fathers when celebrating the passage of the ADA. He stated the ADA ‘brings us closer to that day when no Americans will ever again be deprived of their basic guarantee of life, liberty, and the pursuit of happiness,’” said U.S. Attorney Stephen J. Cox. “Unfortunately, the ADA’s promise has not been fully realized. Individuals with disabilities continue to face unlawful barriers, which prevent them from fully participating in all society has to offer. The U.S. Attorney’s Office for the Eastern District of Texas will continue to work to remove these barriers and ensure all individuals are afforded equal opportunity, freedom from discrimination, and the ability to fully participate in society.”
The Civil Rights Enforcement Coordinator for the Eastern District of Texas is Assistant U.S. Attorney Aimee M. Cooper. Currently, her work involves negotiating settlements to require commercial facilities and private entities to remove architectural barriers that prohibit persons with mobility disabilities from gaining access; assisting state and local governments in revising policies and procedures to provide effective communication and appropriate auxiliary aids and services for persons who are deaf, hard of hearing, or deaf-blind; and ensuring that employers are providing reasonable accommodations for employees and job applicants with disabilities.
The promise of the ADA is its wide-ranging efforts to eliminate disability discrimination across the range of services, programs, and activities that most Americans take for granted, but for too long were largely inaccessible to individuals with disabilities. Whether in employment; areas of civic life; or in the day-to-day activities and access to goods and services that we all enjoy—the ADA requires that we take those steps necessary to ensure access for all.
Over the past 30 years, our country has undertaken the hard work of changing attitudes about disability, tearing down barriers to equality, and dismantling the systems that have historically excluded people with disabilities. Today, we commemorate the many ways that the ADA has transformed our society—by replacing exclusion with access, segregation with integration, and limitations with self-determination. The ADA has advanced the promise of the American dream, ensuring that people with disabilities can write their own stories. And as a society, we are better and stronger because of the contributions that people with disabilities make.
For more information about the 30th Anniversary of the ADA, please visit www.ada.gov
To file a complaint with the Department, please visit the Civil Rights Division’s portal at https://civilrights.justice.gov/report/
For more information about the ADA, call the Department’s toll-free ADA Information Line at 800-514-0301 or 800-514-0383 (TTY).
Federal Inmate Sentenced for Murdering CellmateRead the Press Release
BEAUMONT, Texas – A federal inmate has been sentenced for murdering his cellmate in a Federal Bureau of Prisons facility in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Carroll Ellis Hayes, 40, of Mobile, AL, pleaded guilty on Jan. 27, 2020 to 2nd degree murder and was sentenced to 360 months in federal prison today by U.S. District Judge Marcia A. Crone today.
According to information presented in court, Hayes was serving a sentence for federal firearms violations and was in the Special Housing Unit (SHU) at the Federal Correctional Complex’s Medium Facility in Beaumont, Texas. On Feb. 9, 2018, another prisoner moved into the same cell as Hayes, and within an hour, a correctional officer discovered the new cellmate motionless on the floor—he had been beaten and strangled. Correctional officers attempted CPR before the cellmate was taken to a local hospital, where he was pronounced dead.
This case was investigated by the Bureau of Prisons and prosecuted by Assistant U.S. Attorney Michael Anderson.
Tarrant County Man Sentenced for Attempting to Coerce and Entice a ChildRead the Press Release
PLANO, Texas – A 48-year-old Saginaw, Texas man has been sentenced to federal prison for attempted child coercion and enticement in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox and FBI Special Agent in Charge Matthew J. DeSarno today.
Adam Rene Rodriguez was found guilty by a jury on Oct. 18, 2019, of attempted coercion and enticement of a minor and was sentenced to 210 months in federal prison today by U.S. District Judge Sean D. Jordan.
According to information presented at trial, on May 3, 2019, Rodriguez was arrested by members of the FBI Dallas Field Office and the Plano Police Department when he traveled to Plano to engage in sex acts with an individual he believed to be a 14-year old child.
During the 4-day trial, jurors heard that an undercover agent entered a sexually-oriented messaging group that was run by Rodriguez. Between April 10, 2019 and May 3, 2019, Rodriguez engaged in continuing messages with the undercover persona, even after being repeatedly advised of the persona's age. In the messages, Rodriguez (as username "Texasarod") continued to ask for photos of the child, sent the child sexually explicit material, and offered to "train" the child to engage in various sex acts. Evidence presented to the jury also included messages in which Rodriguez instructed the child on how to conceal her online activities and avoid detection by her parents. The exchanges continued until May 3, 2019. On that day, Rodriguez drove to a pre-arranged meeting place with condoms in order to engage in illegal sex acts with the child. Rodriguez testified on his own behalf, contending that he believed that he was communicating with an adult who was role playing or fantasizing about pretending to be a child.
This case was brought as part of Project Safe Childhood, a nationwide initiative launched in May 2006 by the Department of Justice to combat the growing epidemic of child sexual exploitation and abuse. Led by U.S. Attorneys’ Offices and the Child Exploitation and Obscenity Section (CEOS), Project Safe Childhood marshals federal, state and local resources to better locate, apprehend and prosecute individuals who exploit children via the Internet, as well as to identify and rescue victims. For more information about Project Safe Childhood, please visit www.justice.gov/psc.
This case was investigated by the Federal Bureau of Investigation’s Dallas Field Office and the Plano Police Department and prosecuted by Assistant U.S. Attorneys Marisa Miller and Lesley Brooks.
Florida Woman Sentenced for Federal Drug Trafficking ViolationsRead the Press Release
BEAUMONT, Texas – A 35-year-old St. Petersburg, Florida woman has been sentenced to federal prison for drug trafficking crimes in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Erica Ann Lang pleaded guilty on Feb. 10, 2020, to conspiracy to distribute and possess methamphetamine and was sentenced to 37 months in federal prison today by U.S. District Judge Marcia A. Crone. Ryan Andrew Davis, 35, of Clearwater, Florida pleaded guilty to the same charge on Jan. 16, 2020, and was sentenced to 162 months in federal prison on July 9, 2020.
According to information presented in court, on Oct. 24, 2019, Lang and Davis were stopped for a traffic violation on Interstate Highway 10 East in Beaumont, Texas. A certified narcotics detection dog alerted on the car and a search was performed revealing approximately one kilogram of methamphetamine hidden in the trunk of the vehicle.
This case was investigated by the Jefferson County Sheriff’s Office and the U.S. Drug Enforcement Administration and prosecuted by Assistant U.S. Attorney John B. Ross.
Federal Inmate Sentenced for Escaping from Beaumont FacilityRead the Press Release
BEAUMONT, Texas –A 26-year-old federal inmate has been sentenced for escaping from a Bureau of Prisons facility in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Leo Martinez of Miami, Florida, pleaded guilty on March 11, 2020, to escaping from federal custody and was sentenced to an additional 18 months in federal prison by U.S. District Judge Marcia Crone today.
According to information presented in court, on Oct. 11, 2019, the Jefferson County Sheriff’s Office received an anonymous tip alerting them that inmates at the Bureau of Prisons Camp Facility in west Jefferson County were planning to escape from the facility in order to retrieve contraband that had been left for them in a field off Hillebrandt Road. Law enforcement officers surrounded the area in concealed locations and within several hours observed four inmates approaching on foot. All four inmates were apprehended after attempting to flee. After they were captured, a search of the inmates revealed several cellular telephones and a bottle of whisky. All four were indicted by a federal grand jury on Nov. 6, 2019.
Martinez was serving a federal prison sentence for a drug trafficking conviction out of the Western District of Oklahoma. Martinez’s new prison sentence will begin once he has served the remainder of his original prison sentence.
This case was investigated by the Jefferson County Sheriff’s Office and the U.S. Marshals Service and prosecuted by Assistant U.S. Attorney Joseph R. Batte.
Panola County Felon Sentenced for Firearms PossessionRead the Press Release
TYLER, Texas – A 38-year-old Carthage, Texas, man has been sentenced to federal prison for firearms violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
On Jan. 22, 2020, a jury found Timothy Earl Brown guilty of being a felon in possession of a firearm and ammunition following a two-day jury trial before U.S. District Judge Jeremy D. Kernodle. Brown was sentenced to 60 months in federal prison today by Judge Kernodle.
According to information presented in court, on Oct. 14, 2016, law enforcement responded to a report of a prowler at a rural residence in Panola County. There, officers observed Brown in the wooded area near the home, carrying a rifle. Brown was later discovered to be also armed with a revolver. Brown was convicted in Panola County in 2000 for theft, in 2000 for escape, and in 2011, for sexual assault. As a felon, Brown is prohibited by federal law from owning or possessing firearms or ammunition. Brown was also previously convicted in the Eastern District of Texas for being a felon in possession of a firearm in 2004.
This case was prosecuted as part of the Project Safe Neighborhoods Initiative. Project Safe Neighborhoods is aimed at reducing gun and gang violence; deterring illegal possession of guns, ammunition, and body armor; and improving the safety of residents in the Eastern District of Texas. Participants in the initiative include community members and organizations as well as federal, state, and local law enforcement agencies.
This case was investigated by the Panola County Sheriff’s Office and the Bureau of Alcohol, Tobacco, Firearms and Explosives and prosecuted by Assistant U.S. Attorneys Jim Noble and Alan Jackson.
The Department of Justice Announces Takedown of Key MS-13 Criminal LeadershipRead the Press Release
WASHINGTON – Today, President Donald J. Trump and Attorney General William P. Barr announced significant cases related to Joint Task Force Vulcan (JTFV), an initiative launched in August 2019 aimed at disrupting, dismantling, and ultimately, destroying MS-13.
President Trump and Attorney General Barr announced a number of significant cases associated with JTFV, including the first time an MS-13 member has been charged with terrorism related offenses, a coordinated multi-district takedown of the leadership of the Hollywood clique of MS-13, and the Attorney General’s decision to seek the death penalty against an MS-13 defendant.
“In 2017, the President directed the Department of Justice to go to war against MS-13, and we did just that,” said Attorney General Barr. “In coordination with our partners at the Department of Homeland Security, the Justice Department’s law enforcement components have successfully investigated, charged, and arrested command and control elements of MS-13 responsible for murder. Joint Task Force Vulcan’s operations have significantly degraded MS-13’s capabilities. While there is still work to be done, the Department of Justice remains committed to protecting Americans threatened by MS-13, and we will not rest until we have successfully defeated this transnational criminal organization.”
“Today’s announcements are the result of tremendous teamwork and coordination between prosecutors and law enforcement officers across the United States and Central America,” stated JTFV Director John Durham. “MS-13 is a violent transnational criminal organization, whose criminal activities respect no boundaries. The only way to defeat MS-13 is by targeting the organization as a whole, focusing on the leadership structure, and deploying a whole-of-government approach against a common enemy.”
“The Eastern District of Texas is proud to support Joint Task Force Vulcan, and we are happy to lend one of our finest prosecutors to the effort,” said U.S. Attorney Stephen J. Cox. “Our district is fully committed to the President’s goal of disrupting and dismantling MS-13.”
In an indictment unsealed yesterday, Melgar Diaz was charged in the Eastern District of Virginia with conspiring to provide material support to terrorists; conspiring to kill or maim persons overseas; conspiring to commit acts of terrorism transcending national boundaries; conspiring to finance terrorism; and conspiring to engage in narco-terrorism, in addition to racketeering conspiracy and drug trafficking. This is the first time that an MS-13 member has been charged with terrorism related offenses.
Alexi Saenz was indicted in 2017 in the Eastern District of New York. It is alleged that between 2016 and 2017 he committed seven murders: the Jan. 28, 2016, murder of Michael Johnson; the April 29, 2016, murder of Oscar Acosta; the Sept. 13, 2016, murders of Kayla Cuevas and Nisa Mickens; the Oct. 10, 2016, murder of Javier Castillo; the Oct. 13, 2016, murder of Dewann Stacks; and the Jan. 30, 2017, murder of Esteban Alvarado-Bonilla. Two of the victims were Brentwood high school students killed with a machete and baseball bat. The Attorney General has filed a Notice of Intent to Seek the Death Penalty for Saenz.
In a 24 count indictment unsealed yesterday, the Eastern District of New York, charged eight MS-13 members, including leaders of the East Coast Hollywood Program, with Racketeer Influenced and Corrupt Organization (RICO) and Violent Crimes in Aid of Racketeering (VICAR) charges related to six murders, two attempted murders, kidnapping, narcotics and related firearms offenses.
In a 21-count indictment unsealed yesterday in the District of Nevada, 13 MS-13 members, including leaders of the “Hollywood Locos” clique and “Los Angeles Program,” were charged with various offenses including Continuing Criminal Enterprise (CCE), narcotics distribution and weapons charges.
In August 2019, Attorney General Barr created JTFV to carry out the recommendations of the MS-13 subcommittee formed under the Attorney General’s Transnational Organized Crime Task Force, which was the result of President Trump’s February 2017 Executive Order directing the Departments of Justice, State, and Homeland Security, and the Office of the Director of National Intelligence to coordinate a whole-of-government approach to dismantle transnational criminal organizations, such as MS-13, and restore safety for the American people. The principal purpose of JTFV is to coordinate and lead the efforts of the Justice Department and U.S. law enforcement agencies against MS-13 in order to dismantle the group.
The JTFV has successfully implemented the whole-of-government approach to law enforcement relating to MS-13; increased coordination and collaboration with foreign law enforcement partners, including El Salvador, Mexico, Honduras and Guatemala; designated priority MS-13 programs, cliques and leaders, who have the most impact on the U.S., for targeted prosecutions; and coordinated significant MS-13 indictments in United States Attorney’s Offices across the country, such as the Eastern District of New York, the Eastern District of Virginia, and the District of Nevada.
Federal prosecutors from the Department of Justice’s National Security Division and the Criminal Division, as well as 10 United States Attorney’s Offices have been assigned to serve JTFV in full-time capacities: the Eastern District of New York; the Eastern District of Virginia; the District of Nevada; the Southern District of California; the District of Massachusetts; the Northern District of Ohio; the District of New Jersey; the Eastern District of Texas; the District of Utah; and the District of Columbia. In addition, all Department of Justice law enforcement agencies are involved in the effort – the Federal Bureau of Investigation; the Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, Firearms and Explosives; the U.S. Marshals Service; and the Bureau of Prisons. The Department of Homeland Security’s Homeland Security Investigations has also played a critical role in JTFV.
Attorney General Barr would also like to thank Attorney General Raul Melara of El Salvador for the assistance of his office, as well as investigators from El Salvador’s Policia Nacional Civil, Centro Antipandilla Transnacional unit for their assistance.
Eight Arrested in Connection with Jake’s Fireworks Drug Trafficking ConspiracyRead the Press Release
BEAUMONT, Texas - U.S. Attorney Stephen J. Cox announced today that eight individuals have been arrested in the Eastern District of Texas pursuant to a federal indictment which alleges drug and money laundering violations.
A federal grand jury returned the 24-count indictment on June 3, 2020, charging the following individuals with drug trafficking and money laundering crimes:
Jake Ellis Daughtry, 34, of Nederland, Texas;
Joseph Ellis Daughtry, 64, of Nederland;
Kip William Daughtry, 46, of Vidor, Texas;
Sandra Miller Daughtry, 72, of Nederland;
Jordan Lee King, 31, of Nederland;
Tanner John Jorgensen, 28, of Nederland;
Austin Wayne Dial, 28, of Nederland; and
Jesse Lee Hackett, 37, of The Woodlands, Texas.
The defendants were arrested by a joint law enforcement task force today and will make initial appearances in federal court this afternoon, July 15, 2020, and tomorrow, July 16, 2020. A ninth defendant is already in custody.
According to court documents, the defendants are charged with conspiracy to possess with intent to distribute, and distribution of, a controlled substance analogue resulting in death; conspiracy to possess with intent to distribute, and distribution of, a date rape drug over the internet to an unauthorized purchaser; maintaining a drug-involved premises; possession with intent to distribute, and distribution of, a controlled substance analogue; and money laundering.
The defendants are alleged to be the head of a Chemical Trafficking Organization (“CTO”) cell operating on a national scale. Investigation of the organization began in 2018 when DEA West Palm Beach, Florida intercepted mail parcels of a chemical identified as 1,4 butanediol, commonly referred to as “BDO.” BDO is a chemical manufactured only for industrial or laboratory use as a floor stripper or vehicle wheel cleaner and is not intended for human consumption. Investigators determined that when BDO is ingested, it immediately metabolizes into GHB (a known date-rape drug) with the same effects, causing potential overdoses, addiction, and death.
DEA traced the seized parcels to their origination point, Right Price Chemicals, a business located on Twin City Highway in Nederland, Texas, and owned by Jake Daughtry, Joe Daughtry and Sandra Daughtry. Also located at Right Price Chemicals is a seasonal fireworks business called “Jake’s Fireworks.” Agents determined that since 2016, Right Price Chemicals has distributed approximately 7,000 gallons of BDO over thousands of orders, and that those sales generated $4.5 million.
Agents additionally determined that Jake’s Fireworks operated as a front for Right Price Chemicals, allowing individuals to purchase BDO on a walk-in basis. Customers could also obtain BDO from Jake’s Fireworks through internet orders, and have the chemical shipped to their home. Right Price Chemicals also distributed bulk quantities BDO to mid-level dealers, who, in turn, sold or distributed the chemical to users. Investigators determined that at least two deaths—one in Virginia and one in Florida—were directly caused by BDO sold by Right Price Chemicals. Right Price Chemicals distributed BDO in 48 states across the country.
Investigators have also determined that the proceeds from the distribution and sale of BDO, which total over $1 million, have been laundered through several bank and retirement accounts throughout Southeast Texas. Those accounts have now been seized.
If convicted of the criminal charges, the defendants face a minimum term of 20 years, and up to life, in federal prison.
In addition to pursuing criminal charges, on July 13, 2020, the Eastern District sought and obtained a temporary restraining order against Jake’s Fireworks and any other businesses housed within the Twin City Highway location in Nederland. This civil injunctive relief immediately shuts down operations of the business and any further distribution of BDO and other chemicals. Jake Daughtry, Joe Daughtry, Sandra Daughtry, and Kip Daughtry also face civil penalties under the Controlled Substance Act.
“I am proud of our team’s investigation and interdiction of this dangerous chemical trafficking organization,” said U.S. Attorney Steve Cox. “The joint efforts of our Criminal and Civil Divisions led to the arrest of suspected drug traffickers, the seizure of bank accounts, and the shutdown of a suspected drug front, making the Eastern District of Texas a safer place for all.”
“The DEA Miami and Houston Field Divisions combined forces to target and neutralize a Chemical Trafficking Organization that was responsible for the nationwide distribution of a chemical product, that when consumed, is immediately metabolized into GHB. This chemical, often used by sexual predators as a date-rape drug, can cause overdose, addiction and death,” stated DEA Special Agent in Charge Steven S. Whipple. “This investigation highlights DEA’s commitment to the protection of our communities by working alongside our state, federal and local law enforcement partners to identify the most significant threats to the public safety.”
This is an Organized Crime Drug Enforcement Task Force (OCDETF) case and is being investigated by the Drug Enforcement Administration West Palm Beach, Florida, and Beaumont; United States Postal Service; Internal Revenue Service-Criminal Investigation; Bureau of Alcohol, Tobacco, Firearms and Explosives; and the Jefferson County Sheriff's Office. Essential support and coordination was provided by numerous components of DEA headquarters and the Department of Justice’s multi-agency Special Operations Division (SOD), including assigned attorneys from the Narcotic and Dangerous Drug Section (NDDS). This case is being prosecuted by Assistant U.S. Attorneys Michelle S. Englade and Robert Wells.
An indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Kemah Man Guilty of Liberty County Attempted Bank RobberyRead the Press Release
BEAUMONT, Texas – A 59-year-old Kemah, Texas man has pleaded guilty to federal violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Jimmy James Mamoth, Jr., pleaded guilty to attempted bank robbery before U.S. District Judge Thad Heartfield on July 13, 2020.
According to information presented in court, on Sep. 27, 2019, a witness observed Mamoth approach the entrance to the Texas First Bank in Hull, Texas, wearing a dark hooded jacket, gloves, a Halloween-style mask on his face, and carrying a duffle bag. The witness honked his vehicle’s horn to draw attention to Mamoth, who subsequently fled into the nearby woods. Law enforcement was able to locate and arrest Mamoth, and from him recovered an Airsoft-style replica gun meant to resemble a Beretta 9mm pistol. Mamoth was indicted by a federal grand jury on Oct. 9, 2019.
As part of his plea agreement, Mamoth admitted his participation in a string of other robberies and attempted robberies, specifically, the robbery of the Arbor 8 movie theater in Austin, Texas, on March 17, 2019; an attempted robbery of the Benchmark Bank in West Lake Hills, Texas, on June 4, 2019; the robbery of the Broadway Bank in Wimberley, Texas, on June 19, 2019; and the robbery of the First National Bank of Hughes Springs in Kilgore, Texas, on June 28, 2019. Mamoth further agreed to pay restitution for the above crimes.
This case is being investigated by the Federal Bureau of Investigation, the Liberty County Sheriff’s Office, the Austin Police Department, the West Lake Hills Police Department, the Hays County Sheriff’s Office, and the Gregg County Sheriff’s Office and is prosecuted by Assistant U.S. Attorneys Christopher Rapp and Rachel Grove.
Fannin County Woman Sentenced for Tax FraudRead the Press Release
SHERMAN, Texas – A 40-year-old Honey Grove, Texas woman has been sentenced to federal prison for tax fraud in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Kristi Michelle Finney, also known as Kristi Michelle Fry, pleaded guilty on Aug. 29, 2019 to five counts of tax fraud. On July 2, 2020, U.S. District Judge Amos Mazzant sentenced Finney to 33 months in federal prison. Finney was also ordered to pay restitution of $359,733 to the Internal Revenue Service.
According to information presented in court, from 2013 to 2018, Finney offered tax services from her home, where she would complete and file tax returns for others at a fee of around $200. An IRS investigation linked 147 suspicious tax returns to Finney, many of which contained false employment, income, and expense information. Specifically, Finney would claim large financial losses for businesses that never existed, resulting in a larger tax refund for her clients than they would otherwise be entitled to. Finney would then divert portions of the fraudulent tax refund to herself by placing the refunds on prepaid debit cards. Finney concealed her involvement by falsely claiming that the fraudulent returns were personally prepared by her clients, rather than her. The IRS was ultimately able to identify Finney as the filer of these returns through internet protocol addresses and email addresses associated with the electronic returns, as well as through witness interviews.
This case was investigated by the Internal Revenue Service, Criminal Investigation, and prosecuted by Assistant U.S. Attorney Wes Wynne.
Combating CARES Act Fraud: Ensuring Economic Relief for Americans Through Law Enforcement EffortsRead the Press Release
Opinion Editorial by Stephen J. Cox, United States Attorney
Published in the Texas Lawyer
July 8, 2020
https://www.law.com/texaslawyer/2020/07/07/combating-cares-act-fraud-ensuring-economic-relief-for-americans-through-law-enforcement-efforts/
Millions of Americans and small businesses are suffering the economic effects caused by the COVID-19 pandemic. In response, Congress passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. This historic legislation, which included over $2 trillion in emergency financial assistance, was designed to provide immediate help for small businesses, healthcare providers, and individuals.
The CARES Act includes the Paycheck Protection Program (“PPP”), which provides nearly $650 billion in loans to small businesses, as well as Economic Impact Payments (“EIPs”) to provide relief to individual taxpayers and families. The CARES Act also included other programs to help small and medium-sized businesses, and assistance to hospitals and other healthcare providers on the front lines of the coronavirus response.
This federal response to the current crisis is vital to the economy, but like many good federal programs, there is risk of fraud. For example, the PPP requires borrowers to make certain certifications regarding their eligibility and the use of the funds, but some borrowers make misrepresentations in bad faith. When fraudsters unlawfully take money to which they are not entitled, they deplete the program and divert funds from those who need it most. The Department of Justice (“DOJ”) is committed to pursuing wrongdoing related to COVID-19, including these fraudulent schemes. The U.S. Attorney’s Office for the Eastern District of Texas (“EDTX”) shares this priority and will deploy all criminal and civil enforcement tools available to combat such misconduct.
In the few short months since passage of the CARES Act, we have initiated multiple criminal actions and investigations. We are pursuing individuals who used stolen identities to obtain EIPs. We also have partnered with the DOJ’s Criminal Division to charge several individuals who, as alleged, knowingly provided false information to obtain millions of dollars in PPP loans. In one case, rather than using PPP funds for purposes authorized by the CARES Act, the funds were allegedly used to purchase luxury vehicles and to fund personal investment accounts. In addition to criminal efforts, we are looking to the False Claims Act (“FCA”), a powerful civil statute that allows the United States to recoup money that has been lost due to fraud. The FCA allows the government to obtain treble damages and civil penalties from those who defraud federal programs, such as the CARES Act.
We will be vigorous in our enforcement efforts. Even so, we recognize that some businesses have voiced concerns about increasingly complicated program rules and regulations creating traps not only for the unwary, but for the many companies that sought assistance in good faith. For example, some have predicted False Claims Act litigation based on inadvertent foot faults or regulatory defects—a risk that could increase with additional disclosures of funding recipients, investigative reporting, and public criticism. Rest assured that we will be careful not to discourage legitimate businesses from accessing the important financial resources that Congress made available through the CARES Act. We will not punish companies that accessed stimulus funds in good faith compliance with the rules. Nor, will we seek out applicants who made technical mistakes in processing paperwork or honestly misunderstood regulatory or certification requirements. Our focus is on fraud.
So, what can the public do? Simply put, if you see something, say something. Report borrowers who knowingly provided false information in loan applications, individuals who unlawfully obtained EIPs, and those who knowingly misused CARES Act funds. We are working with banks and other financial institutions to help identify potential fraudsters. But we also need the public’s assistance. If you know of, or suspect, fraud related to the CARES Act, please contact the National Disaster Fraud Hotline at (866) 720-5721.
The EDTX and our law enforcement partners are ready to take on those who attempt to illegally profit from the coronavirus pandemic. And we need your help to wage this fight.
Stephen J. Cox is the 39th U.S. attorney for the Eastern District of Texas (EDTX). As the chief federal law enforcement officer in EDTX, Cox supervises the prosecution of all federal crimes and the litigation of all civil matters in which the United States has an interest. As U.S. attorney, Cox leads a staff of over 120 prosecutors, civil litigators, and support personnel located in Beaumont, Plano, Tyler, Sherman, Lufkin, and Texarkana.
Former Executive Director of Tyler Non-Profit Guilty of Embezzling Funds from Disabled ClientsRead the Press Release
TYLER, Texas – A 33-year-old Shreveport, Louisiana woman has pleaded guilty to embezzling over $500,000 from an East Texas non-profit organization in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Jessica Rottab pleaded guilty today to a one-count criminal information charging her with federal program theft before U.S. Magistrate Judge John D. Love.
According to information presented in court, from about June 24, 2017 through September of 2018, Rottab, who was residing in Flint, Texas at the time, worked as the Interim Executive Director of the East Texas Center for Independent Living (ETCIL) in Tyler, Texas. ETCIL is a non-profit corporation with a mission of helping people with disabilities achieve greater independence, self-sufficiency, and full participation in their communities.
ETCIL receives benefits in excess of $10,000.00 from the U.S. Department of Health and Human Services every year. From Sep. 9, 2017 through July 23, 2018 ETCIL maintained an operating checking account at Southside Bank in Tyler, Texas. During this time, Rottab made 369 unauthorized cash withdrawals for her personal financial benefit, totaling $118,224.24. From June 24, 2017 and continuing until Sep. 11, 2018 by various additional means, such as using ETCIL’s corporate credit card for unauthorized expenditures for her personal financial benefit, Rottab embezzled a total of $526,690.83 from ETCIL.
“This case exemplifies the great results we can achieve when we bring together our federal and state and investigative resources,” said U.S. Attorney Stephen J. Cox. “The U.S. Attorney’s Office in the Eastern District of Texas will continue to aggressively prosecute those who abuse their position of trust to steal from those who receive public assistance.”
Acting Assistant Special Agent in Charge of the Dallas Field Office, Gerardo Gomez, commended the cooperative efforts of our law enforcement partners in the successful resolution of this investigation. "The IRS enforces the nation's tax laws, but also takes particular interest in financial schemes that victimize our most vulnerable citizens and taxpayers. In those instances be assured IRS-CI will pursue any and all legal avenues in pursuit of justice.”
Under federal statutes, Rottab faces up to 10 years in federal prison at sentencing. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office. Rottab has agreed to pay restitution of $526,690.83 to ETCIL and their disabled clients.
This case was investigated by the Texas Department of Public Safety Criminal Investigations Division, Tyler Office, the Internal Revenue Service-Criminal Investigation, Tyler Office and prosecuted by Assistant U.S. Attorney Jim Noble.
North Texas Doctor to Pay $210,000 to Settle False Claims Act Allegations of Accepting Illegal InducementsRead the Press Release
SHERMAN, Texas – Bibi Tasleyma Sattar, D.O., and her practice, Oakmont Wellness Center, PA, (collectively, “Dr. Sattar”) have agreed to pay $210,000 to resolve False Claims Act allegations involving accepting payments for patient referrals in violation of the Anti-Kickback Statute, as well as claims otherwise improperly billed to federal healthcare programs for laboratory testing, announced Eastern District of Texas U.S. Attorney Stephen J. Cox today.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. The Anti-Kickback Statute intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.
The settlement announced today resolves allegations that Dr. Sattar conspired with others to receive remuneration disguised as “process and handling fees” in exchange for referring laboratory tests to True Health Diagnostics, LLC (“True Health”) from June 2015 to November 2017. Specifically, Dr. Sattar referred her Medicare patients to Onsite Draw Station, Inc. (“ODS”), a company owned and/or operated by Dr. Sattar’s parents, Sultan Sattar and Bibi Zabeda Sattar, to perform blood draws when Dr. Sattar ordered True Health tests for her patients. When Dr. Sattar ordered diagnostic testing from True Health, and ODS performed the blood draws, True Health paid a $25 “process and handling fee” per each patient that Dr. Sattar referred to True Health. True Health then submitted the claims to the Medicare program for payment. Dr. Sattar’s decision to order these laboratory tests was based in part on True Health’s payment of “process and handling fees” to ODS, in violation of the Anti-Kickback Statute.
The claims resolved by the settlement are allegations only and there has been no determination of liability.
In connection with this scheme, Sultan Sattar, 64, and Bibi Zabeda Sattar, 61, of Fort Worth, Texas, and Jeffrey Paul Cornwell, a/k/a "Boomer," 43, of McKinney, Texas, were indicted by a federal grand jury on December 11, 2019. If convicted, the Sattars and Cornwell each face up to 5 years in federal prison.
“A pillar of our medical system is trust between a patient and a physician,” said U.S. Attorney Stephen J. Cox. “The Eastern District of Texas is committed to protecting that trust and ensuring that those whose medical judgment is corrupted by illegal financial agreements are held accountable.”
The civil settlement was the result of an investigation by the Commercial Litigation Branch of the Justice Department’s Civil Division, OIG-HHS, DCIS, and the U.S. Attorney’s Office for the Eastern District of Texas. The case is being handled by Assistant U.S. Attorneys James Gillingham and Adrian Garcia.
The government’s pursuit of these matters illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services, at 1-800-HHS-TIPS (800-447-8477).
Morris County Man Sentenced to Federal Prison for Drug Trafficking ViolationsRead the Press Release
MARSHALL, Texas – A 36-year-old Daingerfield, Texas man has been sentenced to federal prison for drug trafficking crimes in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Michael Leon Wood pleaded guilty on May 5, 2020, to possession with intent to distribute methamphetamine and was sentenced to 108 months in federal prison today by U.S. District Judge Rodney Gilstrap. Wood also agreed to forfeiture of $3,625, which he received from selling methamphetamine.
According to information presented in court, on March 1, 2018, Wood delivered an ounce of methamphetamine to another person in exchange for $600. On Jan. 15, 2019, law enforcement officers executed a search warrant at Wood’s residence in Morris County and recovered approximately 50 grams of methamphetamine, $1,150 in cash, a rifle, a pistol, and a shotgun. Wood admitted to being responsible for distributing approximately 96 grams of methamphetamine.
Wood was indicted by a federal grand jury on Oct. 16, 2019 and charged with drug trafficking violations.
This case was investigated by the Texas Department of Public Safety, Franklin County Sheriff’s Office, and the Morris County Sheriff’s Office and prosecuted by Assistant U.S. Attorney Jim Noble.
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Collin County Man Indicted for Theft of Covid Economic Impact PaymentsRead the Press Release
SHERMAN, Texas – A 50-year-old Plano, Texas man has been indicted and charged with federal violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
James Mwanza was indicted by a federal grand jury on June 18, 2020 and charged with wire fraud, theft of government money, and aggravated identity theft. Mwanza went before U.S. Magistrate Judge Christine A. Nowak today for an initial appearance.
According to information presented in court, from at least January 2020 through April 2020, Mwanza, claiming to be a tax preparer, allegedly prepared and filed fraudulent income tax returns with the IRS. To do so, he unlawfully obtained the personal identification information of other individuals, including names, birth dates, and Social Security numbers. Mwanza used Electronic Filing Numbers assigned to other tax preparation firms who were not affiliated with him, to file the returns and claim false tax refunds. The filing of the false returns also triggered payment of Economic Impact Payments (EIPs) provided for under the CARES Act.
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. The CARES Act authorized over $2 trillion in relief programs, including approximately $560 billion for benefits to individuals. An estimated $300 billion of that total was allocated for Economic Impact Payments (EIPs).
Under the CARES Act, qualifying individuals may receive up to $1,200 in EIPs per adult, up to $2,400 for married couples filing jointly, and $500 per child under 17 years old. Individuals with income exceeding $99,000 or joint filers whose income exceeds $198,000 do not qualify for any payment.
“Fraudsters engaged in identity theft to steal taxpayer refunds have now turned their attention to stealing Economic Impact Payments,” said U.S. Attorney Stephen J. Cox. “The Eastern District of Texas is working with our law enforcement partners to utilize all available tools to ensure that government payments get to the taxpayers who need this economic relief.”
“The Treasury Inspector General for Tax Administration remains committed to investigating and pursuing attempts to corruptly interfere with Federal tax administration, including tax preparer misconduct involving the theft of tax refunds and Economic Impact Payments,” said J. Russell George, the Treasury Inspector General for Tax Administration. “We appreciate the hard work of our law enforcement partners in this investigation.”
“IRS Criminal Investigation has seen a variety of Economic Impact Payment scams and other financial schemes looking to take advantage of unsuspecting taxpayers,” said IRS Criminal Investigation Special Agent in Charge Tamera Cantu of the Dallas Field Office. “IRS Criminal Investigation is dedicated to working with our law enforcement partners and the U.S. Attorney’s Office to combat fraud schemes that harm innocent taxpayers.”
If convicted, Mwanza faces up to 20 years in federal prison. A grand jury indictment is not evidence of guilt.
This case is being investigated by the Treasury Inspector General for Tax Administration (TIGTA) and the Internal Revenue Service-Criminal Investigations and prosecuted by Assistant U.S. Attorney Frank Coan.
Texarkana Rapper “Band Aid” Convicted of Drug Trafficking ViolationsRead the Press Release
TEXARKANA, Texas – A 31-year-old Bowie County, Texas, man has been convicted of federal violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Justin Rashad Young was found guilty of drug trafficking today, following a four-day jury trial before U.S. District Judge Robert W. Schroeder, III.
According to information presented in court, on June 28, 2017, Young and his fellow drug trafficker, Joshea Cardwell, a.k.a. “Too Tall,” were found in the Magnuson Hotel near North State Line Avenue in Texarkana, Texas, with more than 400 grams of methamphetamine, 1.6 kilograms of marijuana, drug distribution materials, and a Taurus 9 mm pistol. When officers arrived on the scene, Young slammed the hotel room door on one of the responding officers. Before that day, Young had been shot at the drug house he had been operating on Waterman Street in Texarkana. On another occasion, Young was found in possession of marijuana after he left a drug house. At trial, a cooperating witness described how Cardwell and Young had been working together for months to sell marijuana from California and methamphetamine. Young and Cardwell were indicted by a federal grand jury on Nov. 14, 2018, and again on July 24, 2019.
On June 4, 2020, Cardwell pleaded guilty to conspiring with Young to possess and distribute marijuana and methamphetamine and to possessing a firearm in furtherance of drug trafficking.
Under federal statutes, Young and Cardwell face up to 40 years in federal prison at sentencing. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
This case was investigated by the Special Operations Division of the Texarkana Texas Police Department, the Texarkana office of the Texas Department of Public Safety, Criminal Investigation Division, and the Bureau of Alcohol, Tobacco, Firearms and Explosives. The case was prosecuted by Assistant U.S. Attorneys Jonathan R. Hornok and Lucas R. Machicek.
Jefferson County Doctor Indicted for Health Care Fraud ViolationsRead the Press Release
BEAUMONT, Texas — A 43-year-old physician practicing in Beaumont has been indicted on federal health care fraud violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Grigoriy T. Rodonaia, of Port Neches, Texas, was indicted on March 18, 2020 and charged with 35 counts of health care fraud and other related violations. Rodonaia appeared before U.S. Magistrate Judge Keith Giblin today for an initial appearance.
According to the indictment, beginning in January 2015, Rodonaia is alleged to have participated in a health care fraud scheme by issuing prescriptions for specially compounded scar creams using the names, dates of birth, and Health Insurance Claim Numbers of TRICARE beneficiaries and caused the prescriptions to be forwarded directly to Memorial Compounding Pharmacy in Houston, Texas without the specific knowledge of the beneficiary and without having examined or consulted with the beneficiary. The prescriptions were billed to the military health care program, TRICARE, by the pharmacy at the approximate cost of $9,000 - $13,000 per prescription and the prescriptions authorized multiple refills. Over 600 prescriptions in the names of approximately 140 beneficiaries were issued by Rodonaia in this manner outside the usual course of professional practice and without medical necessity. Before the scheme could be detected, TRICARE paid approximately $6.7 million in TRICARE funds to Memorial Compounding Pharmacy. The indictment also alleges Rodonaia created patient files and records of the TRICARE beneficiaries as though he had examined or consulted with those patients and submitted those false records to the Defense Health Agency as part of an audit of the prescription scheme.
The indictment also alleges the defendant violated the Anti-kickback statute by requiring Medicare and Medicaid beneficiaries seeking opioid treatment to pay cash for an office visit in excess of the amount which would have been reimbursed by the Medicare and Medicaid programs. The indictment further alleges that Rodonaia dispensed a Schedule IV controlled substance, Adipex-P or Phentermine, a weight control drug, outside the course of standard medical practice.
If convicted, Rodonaia faces up to 10 years in prison for each count of health care fraud and a mandatory 2 years in prison for each count of aggravated identity theft. A grand jury indictment is not evidence of guilt.
This case is being investigated by the Defense Criminal Investigative Service, the Drug Enforcement Administration, Health and Human Services – Office of Inspector General, and the Texas Medicaid Fraud Control Unit. Assistant U.S. Attorney Robert L. Rawls is prosecuting this case.
Federal Inmate Sentenced for Escaping from Beaumont FacilityRead the Press Release
BEAUMONT, Texas –A 46-year-old federal inmate has been sentenced for escaping from a Bureau of Prisons facility in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Robert Lloyd Young of Bruceville, Texas, pleaded guilty on Jan. 9, 2020, to escaping from federal custody and was sentenced to 18 months in federal prison by U.S. District Judge Thad Heartfield on June 23, 2020.
According to information presented in court, on Oct. 11, 2019, the Jefferson County Sheriff’s Office received an anonymous tip alerting them that inmates at the Bureau of Prisons Camp Facility in west Jefferson County were planning to escape from the facility in order to retrieve contraband that had been left for them in a field off Hillebrandt Road. Law enforcement officers surrounded the area in concealed locations and within several hours observed four inmates approaching on foot. All four inmates were apprehended after attempting to flee and detained. A search of the inmates revealed several cellular telephones and a bottle of whisky. All four were indicted by a federal grand jury on Nov. 6, 2019.
“These prison escapes have plagued Jefferson County for a long time. They are unacceptable, and we are committed to working with BOP to better secure the prison,” said U.S. Attorney Stephen J. Cox. “In the meantime, federal prison inmates are on notice that if they escape from prison, they will be caught and prosecuted and will spend additional time in a higher security prison.”
Young was serving a federal prison sentence for a drug trafficking conviction out of the Western District of Texas. Young’s new prison sentence will begin once he has served the remainder of his original prison sentence.
This case was investigated by the Jefferson County Sheriff’s Office and the U.S. Marshals Service and prosecuted by Executive Assistant U.S. Attorney Brit Featherston.
Texas Man Charged with COVID-Relief Fraud, False Statements and Money LaunderingRead the Press Release
A Texas man was charged in an indictment unsealed today with wire fraud, false statements to a financial institution and money laundering for his alleged participation in a scheme to file fraudulent loan applications seeking more than $3 million in forgivable Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Stephen J. Cox of the Eastern District of Texas, Special Agent in Charge Donald Abram of SBA Office of Inspector General (OIG) Central Region, Inspector General J. Russell George of the Treasury Inspector General for Tax Administration’s Cybercrime Investigations Division, Acting Deputy Inspector General Richard Parker of the Federal Housing Finance Agency, Assistant Special Agent in Charge Kevin Caramucci of the IRS Criminal Investigation (CI) Dallas Field Office, and Inspector General Jay N. Lerner of Federal Deposit Insurance Corporation (FDIC) made the announcement.
Fahad Shah, 44, of Murphy, Texas, was charged in an indictment filed in the Eastern District of Texas with three counts of wire fraud, one count of false statements to a bank, and four counts of money laundering. Shah was arrested this morning and appeared today before U.S. Magistrate Judge Christine A. Nowak of the Eastern District of Texas.
The indictment alleges that Shah submitted fraudulent applications for over $3 million in PPP loans to two different SBA-approved lenders filed under the name of WBF Weddings by Farah Inc. In these applications, Shah claimed to have over 120 employees earning wages when, in fact, no employees worked for his business at the time, the indictment alleges. The indictment also alleges that Shah submitted fraudulent documentation in support of his applications. Shah ultimately received over $1.5 million in PPP loan funds and used the funds primarily for personal purposes, including purchasing a Tesla, personal investments, and home mortgage payments, the indictment alleges.
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal on the PPP loan to be forgiven if the business spends the loan proceeds on these expense items within a designated period of time after receiving the proceeds and uses at least a certain percentage of the PPP loan proceeds on payroll expenses.
A federal criminal indictment is merely an accusation. A defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
This case was investigated by the SBA OIG’s Houston Division, Treasury Inspector General for Tax Administration Southern Field Division, Federal Housing Finance Agency OIG Dallas Field Office, IRS-CI Dallas Field Office, and FDIC OIG Dallas Regional Office.
Trial Attorneys Della Sentilles and Louis Manzo of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Frank Coan and Robert Wells for the Eastern District of Texas are prosecuting the case.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
Collin County Man Charged with Covid-Relief Fraud, False Statements and Money LaunderingRead the Press Release
SHERMAN, Texas – A 44-year-old Murphy, Texas man was charged in an indictment unsealed today with wire fraud, false statements to a financial institution and money laundering for his alleged participation in a scheme to file fraudulent loan applications seeking more than $3 million in forgivable Paycheck Protection Program (PPP) loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Stephen J. Cox of the Eastern District of Texas, Special Agent in Charge Donald Abram of SBA Office of Inspector General (OIG) Central Region, Inspector General J. Russell George of the Treasury Inspector General for Tax Administration’s Cybercrime Investigations Division, Acting Deputy Inspector General Richard Parker of the Federal Housing Finance Agency, Assistant Special Agent in Charge Kevin Caramucci of the IRS Criminal Investigation (CI) Dallas Field Office, and Inspector General Jay N. Lerner of Federal Deposit Insurance Corporation (FDIC) made the announcement.
Fahad Shah was charged in an indictment filed in the Eastern District of Texas with three counts of wire fraud, one count of false statements to a bank, and four counts of money laundering. Shah was arrested this morning and appeared today before U.S. Magistrate Judge Christine A. Nowak of the Eastern District of Texas.
The indictment alleges that Shah submitted fraudulent applications for over $3 million in PPP loans to two different SBA-approved lenders filed under the name of WBF Weddings by Farah Inc. In these applications, Shah claimed to have over 120 employees earning wages when, in fact, no employees worked for his business at the time, the indictment alleges. The indictment also alleges that Shah submitted fraudulent documentation in support of his applications. Shah ultimately received over $1.5 million in PPP loan funds and used the funds primarily for personal purposes, including purchasing a Tesla, personal investments, and home mortgage payments, the indictment alleges.
“This is the third time our District has charged an individual for perpetrating a fraud on the Paycheck Protection Program,” said U.S. Attorney Stephen J. Cox. “The Paycheck Protection Program is a vital tool for American small businesses and their employees who are struggling with the economic fallout from this pandemic. The Eastern District of Texas is committed to pursuing fraudsters who exploit this program to the detriment of others.”
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal on the PPP loan to be forgiven if the business spends the loan proceeds on these expense items within a designated period of time after receiving the proceeds and uses at least a certain percentage of the PPP loan proceeds on payroll expenses.
A federal criminal indictment is merely an accusation. A defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
This case was investigated by the SBA OIG’s Houston Division, Treasury Inspector General for Tax Administration Southern Field Division, Federal Housing Finance Agency OIG Dallas Field Office, IRS-CI Dallas Field Office, and FDIC OIG Dallas Regional Office.
Trial Attorneys Della Sentilles and Louis Manzo of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Frank Coan and Robert Wells for the Eastern District of Texas are prosecuting the case.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
U.S. Attorney Announces Hiring of First Assistant for the Eastern District of TexasRead the Press Release
BEAUMONT – U.S. Attorney Stephen J. Cox announced the hiring of Nicholas Ganjei as the First Assistant U.S. Attorney for the Eastern District of Texas.
First Assistant U.S. Attorney (FAUSA) Nicholas Ganjei arrived in Texas this week where he will assume the role as second in command in the Eastern District of Texas, which includes 43 counties stretching from the Oklahoma border to the Gulf of Mexico. The district includes six fully staffed offices in Beaumont, Plano, Tyler, Sherman, Texarkana, and Lufkin with 120 employees, including 55 prosecutors.
Nick Ganjei has served as an Assistant United States Attorney for twelve years, most recently prosecuting fraud, public corruption, and other white-collar matters. Prior to that, Mr. Ganjei prosecuted organized crime, narcotics, and human trafficking cases, as well as border offenses. He comes to the office from the District of New Mexico, where he served in both the Albuquerque main office and the Las Cruces border office. Mr. Ganjei also worked at the Department of Justice in Washington as Nominations and Policy Counsel in the Office of Legal Policy, where he maintained a portfolio related to nominations and criminal justice matters. Prior to joining the Department of Justice, Mr. Ganjei clerked for the Honorable Richard Allen Griffin of the Sixth Circuit Court of Appeals and Ralph R. Erickson of the Eighth Circuit Court of Appeals (previously of the United States District Court for the District of North Dakota). Mr. Ganjei has also taught on the subjects of civil, criminal, and constitutional law, at both the collegiate and law school level. Mr. Ganjei is a graduate of the University of California, Berkeley School of Law.
“Nick is a great addition to the Eastern District of Texas and will do a wonderful job working with our team, our law enforcement partners, and our judges,” said U.S. Attorney Stephen J. Cox. “He comes to Beaumont with all the qualities that we admire – he is hard-working and smart, he has sound judgment, and he is a servant leader who excels in personal diplomacy.” Cox also commended Assistant U.S. Attorney Heather Rattan for her valued service as First Assistant U.S. Attorney. “Heather is a terrific litigator whose passion for the work of the District is invaluable.” AUSA Rattan will continue to serve the Eastern District of Texas as a seasoned and highly competent federal prosecutor.
“Over the past decade, Nick has established a reputation as a dedicated and talented prosecutor in the District of New Mexico,” said District of New Mexico U.S. Attorney John C. Anderson. “While we will miss his many contributions to our office, I am confident that Nick’s leadership skill and litigation experience will be put to good use in the service of the Eastern District of Texas.”
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Cass County Man Sentenced to 22 Years for Federal Drug Trafficking ViolationsRead the Press Release
MARSHALL, Texas – A 41-year-old Hughes Springs, Texas man has been sentenced to federal prison for drug trafficking crimes in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Oscar Dean Davis pleaded guilty on Feb. 4, 2020, to conspiracy to distribute and distribution of methamphetamine and was sentenced to 264 months in federal prison today by U.S. District Judge Rodney Gilstrap.
According to information presented in court, Davis was the leader of an illegal drug distribution network responsible for obtaining multiple-kilogram quantities of methamphetamine from a Mexican-based supplier and selling them throughout East Texas. Davis admitted to acquiring large numbers of firearms, including pistols, rifles, and high-caliber weapons, and transporting them to the U.S.-Mexico border as a medium of exchange for methamphetamine. Finally, Davis admitted to directing others to use money services businesses to wire transfer proceeds from methamphetamine sales to his supplier in Mexico.
Seventeen other individuals have previously pleaded guilty to their involvement in the drug and firearms trafficking organization. Stephanie Bennett Mata, 35, of Daingerfield, Gary O'Neal Gibson, 62, of Henderson, Felix Antonio Jaime, 37, of Mt. Pleasant, Charlie Jake Porter, 34, of Marietta, Tony King, 41, of Daingerfield, and Gerald Wayne Furlow, 55, of Hughes Springs, each pleaded guilty to possessing or conspiring to possess with the intent to distribute methamphetamine. Raymond Danny Moore, 43, of Avinger, Jennifer Michelle Kirkham, 39, of Jena, Louisiana, Donna Gail Sertuche, 53, of Hughes Springs, Jamie Nicole Browning, 40, of Gilmer, Joshua Nickie Soto, 35, of Leesville, Johnny Duayne Tucker, 52, of Hughes Springs, and James Drakeford Scholl, 41, of Naples, pleaded guilty to either unlawfully obtaining firearms from licensed dealers or transporting firearms to the U.S.-Mexico border in furtherance of the drug trafficking conspiracy. Christina Felipe, 37 of Hughes Springs, Nohemi Aniceto, 39, of San Diego, California, Randall Dean Harper, Jr., 42, of Daingerfield, and Angelica Arreola, 28, of El Paso, have pleaded guilty to conduct including transferring or transporting money from the U.S. to Mexico.
This case is the result of a two-year joint investigation by the Organized Crime Drug Enforcement Task Force (OCDETF). The principal mission of the OCDETF program is to identify, disrupt and dismantle the most serious drug trafficking, weapons trafficking and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply.
Davis was indicted by a federal grand jury on Oct. 10, 2018 and charged with drug trafficking violations.
This case was investigated by the Federal Bureau of Investigation and the Bureau of Alcohol, Tobacco, Firearms and Explosives and prosecuted by Assistant U.S. Attorney Lucas Machicek.
Jefferson County Man Sentenced to 78 years in Federal Prison for Arson and Insurance Fraud SchemeRead the Press Release
BEAUMONT, Texas – A 52-year-old Groves, Texas man has been sentenced to 78 years in federal prison for violations related to an arson and insurance fraud scheme in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Patrick Wayne Bronnon was found guilty on Oct. 21, 2019 of 40 charges including conspiracy to commit mail fraud and use of a fire in commission of a felony. Bronnon was sentenced to 940 months in federal prison today by U.S. District Judge Marcia A. Crone.
Breakdown: 16 counts of mail fraud and conspiracy to commit mail fraud—100 months on each count to run concurrently.
First count of Use of a Fire in commission of mail fraud (Arson)—120 months consecutive to the 100 months above.
Second count of Use of a Fire in commission of mail fraud—240 months consecutive to the 220 months above
Third count of Use of a Fire in commission of mail fraud—240 more months consecutive to the 460 months above
For a total of 940 months.
“This sentence is deserved not only because of the tremendous loss to insurance companies, but also in light of the danger Bronnon imposed on our first responders every time he set a fire,” said U.S. Attorney Stephen J. Cox. “That he put his own greed ahead of the lives of others has cost him his freedom for a long time.”
According to information presented in court, beginning in 2011, Bronnon, and others, began executing a scheme to defraud various insurance companies through fraudulent claims on homes and vehicles. The scheme involved identifying a low value property and purchasing it through a co-defendant straw purchaser. Within a few weeks of a down payment being made, Bronnon or an associate would intentionally damage the home, typically by fire or water, in order to collect insurance proceeds. In total, nine fraudulent fire claims, three fraudulent water damage claims, and two fraudulent theft claims were filed with various insurance companies on nine different addresses, totaling approximately $1.7 million in fraudulent payments. The properties were located in Port Arthur, Port Neches, Beaumont, and Sugarland, Texas.
This case was investigated by the U.S. Postal Inspection Service, National Insurance Crime Bureau and prosecuted by Assistant U.S. Attorney Joseph R. Batte.
Jasper County Brothers Sentenced for Federal Drug Trafficking ViolationsRead the Press Release
BEAUMONT, Texas – Two Buna, Texas brothers have been sentenced to federal prison for drug trafficking crimes in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
James Joseph Fabela, 41, and Benjamin Jason Fabela, 36, each pleaded guilty on Nov. 15, 2019, to conspiracy to distribute and to possess with intent to distribute methamphetamine and were each sentenced to 135 months in federal prison today by U.S. District Judge Marcia A. Crone today. Ownership of their residence in Buna, Texas was also forfeited.
According to information presented in court, from as early as July 2016, the defendants have been involved in a drug trafficking enterprise trafficking methamphetamine in the Buna, Texas area. James Fabela and Benjamin Fabela have supervised, managed and controlled the drug trafficking organization with personal knowledge of the distribution of methamphetamine. In total, the organization sold more than 700 grams of methamphetamine in the Southeast Texas area. The defendants were indicted by a federal grand jury on Sep. 5, 2018.
This case is the result of an extensive joint investigation by the Organized Crime Drug Enforcement Task Force (OCDETF). The principal mission of the OCDETF program is to identify, disrupt and dismantle the most serious drug trafficking, weapons trafficking and money laundering organizations, and those primarily responsible for the nation’s illegal drug supply. Six other defendants have been convicted and sentenced for their roles in the conspiracies.
This case was investigated by the U.S. Drug Enforcement Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Texas Department of Public Safety, the Jefferson County Sheriff’s Office and the Jasper County Sheriff’s Office. This case was prosecuted by Assistant U.S. Attorney Christopher Rapp.
Beaumont Family Sentenced for Tax Evasion and Laundering of Gambling ProceedsRead the Press Release
BEAUMONT, Texas – A Beaumont businessman, his wife, and son have been sentenced for federal violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Larry Earnest Tillery, 70, Judy Kay Tillery, 63, and Brian Tillery, 47, all of Beaumont, pleaded guilty on June 25, 2019 to federal charges and were sentenced today by U.S. District Judge Thad Heartfield.
Larry Tillery pleaded guilty to engaging in monetary transactions in property derived from specified unlawful activity and tax evasion. Today he was sentenced to 33 months in federal prison. Tillery was ordered to pay restitution in the amount of $1,000,040.00 and to forfeit approximately $2 million in cash, jewelry, and sports memorabilia that were proceeds of his illegal gambling enterprise. A money judgment of $32,758,541.00 was also ordered by the court.
Judy Tillery pleaded guilty to structuring of financial transactions to evade reporting requirements and was sentenced to serve two years federal probation. Judy Tillery shares the forfeiture judgment with her husband.
Brian Tillery pleaded guilty to engaging in monetary transactions in property derived from specified unlawful activity and was sentenced to two years of federal probation. Brian Tillery was ordered to forfeit approximately $245,477.00 and a residence on Christina Court in Beaumont with an appraised value of approximately $600,000.00 that was determined to be proceeds of the illegal gambling enterprise. Additionally, a money judgment of $700,000.00, which represents the proceeds of the illegal gambling enterprise.
According to information presented in court, Larry Tillery was engaged in the business of accepting illegal wagers on sporting events from 1985 until April - 2017. Tillery owned and operated Daylight Motors, a used car dealership, and Lamar Capital, a holding company for Daylight Motors, and used these two companies as a front to launder illicit proceeds from his illegal gambling enterprise.
Larry Tillery used a website to receive and track wagers from his betting clients, allowing his bettors to place wagers on sporting events, including professional and collegiate basketball, baseball, and football games. Judy assisted her husband in laundering cash proceeds of his illegal gambling activities by depositing cash into her personal bank account at Beaumont Community Credit Union in Beaumont, Texas, and then writing checks to bank accounts controlled by her husband. Judy Tillery structured these cash deposits in amounts under $10,000 in an attempt to evade federal currency transaction reporting requirements.
Brian Tillery, Larry Tillery’s son, aided the bookmaking enterprise by collecting money from sports bettors; making payments to bettors on Larry’s behalf; checking the online wagers on a regular basis to make Larry aware of what bets were placed on which games; accepting illegal gambling funds from Larry and making wire transfers to pay illegal gambling debts for Larry; and mailing packages of currency in excess of $10,000 – derived from illegal gambling activities – via the United States Postal Service at the request of Larry.
Larry Tillery knew that despite the fact he was violating Texas state and federal law, federal tax law nonetheless required him to register as a bookmaker with the Internal Revenue Service and to file monthly excise tax returns to report total wagers he accepted during the month. Larry also knew that he was required to pay gross wagering excise taxes of 2% on wagers he accepted each month, but he failed to report or pay taxes to the IRS based on the wagers he accepted each month. From September through November of 2016, Larry Tillery accepted at least 450 wagers totaling $5,060,150. These wagers are subject to the 2% federal gross wagering excise tax, and Larry evaded gross excise wagering taxes of $29,717 in September 2016, $34,423 in October 2016 and $37,063 in November 2016 for a three month total of $101,203.
Between 2011 and 2016, Larry Tillery accepted at least $52 million in illegal wagers on sporting events. Larry did not report these wagers to the IRS or pay gross excise taxes. The gross wagering taxes that resulted from wagers Larry Tillery accepted between 2011 and 2016 total $1,040,000.
The investigation traced a total of 125 financial transactions in excess of $10,000 derived from illegal gambling that utilized the United States banking system. These financial transactions total $32,383,841 and occurred between 2010 and 2016.
“These sentences imposed today on the Tillery family demonstrate the Department’s commitment to hold criminal enterprises accountable,” said U.S. Attorney Stephen J. Cox. “Illegal gambling activity and tax evasion will not be tolerated in the Eastern District of Texas.”
“Today’s sentencing and forfeiture order are the culmination of a six-year multi-agency criminal investigation into one of the largest illegal sports gambling and money laundering operations in U.S. history,” said Mark Dawson, special agent in charge of Homeland Security Investigation (HSI) Houston. “Working together with our federal partners, we have successfully disrupted the Tillery family criminal enterprise and sent a message that we are united in our efforts to investigate and prosecute financial crimes.”
“Most individuals file truthful and accurate tax returns voluntarily and pay their fair share of taxes," said Gerardo Gomez, Acting Assistant Special Agent in Charge, IRS Criminal Investigation. "IRS Special Agents will continue to investigate individuals like Mr. Tillery, who gain illicit profits and evade their taxes at the expense of law-abiding taxpayers.”
This case was investigated by Homeland Security Investigations and the Internal Revenue Service, Criminal Investigation, and is being prosecuted by Assistant U.S. Attorney Joseph R. Batte.
Starr County Man Sentenced to Federal Prison, Titus County Man Guilty in East Texas Drug Trafficking OperationRead the Press Release
TEXARKANA, Texas – A 31-year-old Starr County, Texas, man has been sentenced to federal prison for drug trafficking, and a 27-year-old Titus County, Texas, man has pleaded guilty to drug trafficking in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Armando Moreno Jr. pleaded guilty on Feb. 27, 2020, to conspiring to distribute controlled substances and was sentenced to 108 months in in federal prison by U.S. District Judge Robert W. Schroeder III on June 10, 2020. He was also ordered to forfeit $350,000.00 in drug proceeds.
According to information presented in court, Moreno was stopped for a traffic violation on Oct. 29, 2019, in George West, Texas, in Live Oak County. A search of the vehicle revealed almost $350,000.00 in U.S. currency hidden in a secret compartment built into the vehicle. Moreno, traveling with his wife and two children, admitted to conspiring with his co-defendant, Jose Armando Rosales-Bernal and others to distribute cocaine. Moreno described how he had trafficked at least 15 kilograms of cocaine from Mexico to his co-conspirators in Dallas, and that the money hidden in his car was drug proceeds destined for Mexico.
Gerardo Cabrera Ramirez pleaded guilty to conspiring to distribute controlled substances before U.S. Magistrate Judge Caroline M. Craven on June 11, 2020. Ramirez agreed to forfeit $7,500.00 in drug proceeds.
According to information presented in court, Ramirez conspired with Rodolfo Javier Falcon, Eleazar Martinez Reyes, and others to distribute cocaine and methamphetamine. Ramirez admitted that he is personally responsible for distributing more than 500 grams of methamphetamine, which he had obtained from Falcon and Reyes. Specifically, on Sep. 11, 2018, and on Jan. 1, 2019, Ramirez led police on a foot chase and a dangerous vehicle pursuit when officers attempted to stop him while trafficking methamphetamine. Ramirez also admitted that his flight from police in a vehicle recklessly created a substantial risk of death or serious bodily injury to others.
Under federal statutes, Ramirez faces a minimum of 10 years and up to life in federal prison at sentencing. The statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
Operation Dirty Bird is a long-term drug trafficking and money-laundering investigation that has already led to the seizure of more than $500,000.00 in U.S. Currency, almost 40 kilograms of cocaine, more than a quarter kilogram of methamphetamine, nine firearms, and multiple vehicles.
Rosales-Bernal, Julio Villarreal, Falcon, Claudia Claribel Gardea, Jose Geraldo Ornelas-Pineda, Dalia Janes Campos Rosales, and Reyes were previously charged and arrested as a result of this investigation. Ornelas-Pineda has pleaded guilty and has been sentenced. Gardea has pleaded guilty and is awaiting sentencing. Rosales-Bernal, Villarreal, Falcon, Campos Rosales, and Reyes have pleaded not guilty and are awaiting trial. This case is pending in the Texarkana Division of the Eastern District of Texas.
If convicted, Rosales-Bernal, Villarreal, Falcon, Campos Rosales, and Reyes, face a minimum of 10 or 15 years and as much as life in federal prison.
This case is being investigated by the Mount Pleasant office of the Texas Department of Public Safety, Criminal Investigation Division. In addition, the following agencies have played critical roles in this investigation: the Dallas office of Homeland Security Investigations; the Mesquite, Texas, Police Department SWAT team; the Texas National Guard; the Texas Department of Public Safety, Highway Patrol Division and Aircraft Division; the George West, Texas, Police Department; the 23rd Judicial Drug Task Force in Dickson, Tennessee; and the Mount Pleasant, Texas, Police Department. The case is being prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.
New Boston Man Sentenced for East Texas Drug Trafficking CrimesRead the Press Release
TEXARKANA, Texas – A 48-year-old New Boston, Texas, man has been sentenced to federal prison for drug trafficking violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Armando Moya was found guilty on Oct. 18, 2019, of conspiracy to possess with intent to distribute and distribution of heroin, fentanyl, and cocaine. Moya was sentenced to 320 months in federal prison today by U.S. District Judge Robert W. Schroeder III. Moya was also ordered to submit to forfeiture of $4 million and an additional $198,184.00 which had been seized during this law enforcement operation.
According to information presented in court, on June 7, 2018, law enforcement officers from the Drug Enforcement Administration and supporting law enforcement agencies executed a search warrant at Moya’s home. During the search, law enforcement officers located $198,184.00 in rubber-banded bundles of cash hidden in boxes in Moya’s closet with a pistol. Moya then confessed to being part of an international drug-trafficking ring: smuggling large quantities of drugs from Mexico to cities across the United States and returning with large quantities of United States currency. Moya described how he received drugs from his brother, Jose Roberto Moya. He also explained that the bulk currency hidden in his house was drug proceeds from New York that was destined for Mexico. In addition to his brother, Armando Moya identified multiple people involved in their drug-trafficking conspiracy, including their boss in Mexico named Don Roberto. The defendant’s brother, Jose Roberto Moya, was arrested earlier on his way to Armando Moya’s New Boston residence with eight kilograms of heroin and one kilogram of fentanyl. Testimony and extensive digital evidence at trial established that Armando Moya was responsible for delivering as much as 150 kilograms of heroin, fentanyl, and cocaine from November 2017 through June 2018 to Illinois, New York, Ohio, Tennessee, and Pennsylvania. Special Agents from the DEA also testified at trial regarding the deadly role that heroin and fentanyl are currently playing in the nation-wide opioid epidemic.
Armando Moya was indicted by a federal grand jury on June 21, 2018 and charged with federal drug trafficking crimes.
The case was investigated by the Drug Enforcement Administration’s Tyler, Corpus Christi, and Chicago offices and prosecuted by Assistant U.S. Attorneys Jonathan R. Hornok and D. Ryan Locker.
Delta County Bank President Guilty of Bank Fraud and Arson ViolationsRead the Press Release
SHERMAN, Texas – A 57-year-old former bank president has pleaded guilty to federal violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Anita Gail Moody, of Cooper, Texas, pleaded guilty to conspiracy to commit bank fraud and arson today before U.S. Magistrate Judge Christine A. Nowak.
According to information presented in court, Moody was President of Enloe State Bank in Cooper, Texas. On May 11, 2019, the bank had a fire that was determined to be arson. The fire was contained to the bank’s boardroom, but the entire bank suffered smoke damage. Several files had been stacked on the boardroom table, all of which were burned in the fire. Coincidentally, the bank was scheduled for a review by the Texas Department of Banking the next day. Further investigation into the fire and the bank revealed that Moody had been creating false nominee loans in the names of several people, including some actual bank customers. Moody eventually admitted to setting the fire in the boardroom to cover up the criminal activity concerning the false loans. She also admitted to using the fraudulently obtained money to fund her boyfriend’s business, other businesses of friends, and her own lifestyle. The fraudulent activity, which began in 2012, resulted in a loss to the bank of approximately $11 million.
Moody has agreed to a sentence of 84 months in federal prison and will pay restitution in the amount of $11,136,241.82 A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
This case was investigated by the FDIC-OIG and the Bureau of Alcohol, Tobacco, Firearms, and Explosives and prosecuted by Assistant U.S. Attorneys Maureen Smith and Wes Wynne.
Arkansas Inmate Indicted for Threatening to Kidnap and Kill Federal JudgesRead the Press Release
LITTLE ROCK, Arkansas – A 36-year-old Arkansas Department of Corrections inmate has been indicted for federal violations in the Eastern District of Arkansas, announced Eastern District of Texas U.S. Attorney Stephen J. Cox today.
Jeffrey S. Williams was indicted by a federal grand jury in Little Rock, AR, on June 4, 2020 and charged with mailing threatening communications.
According to the indictment, in March 2018, Williams is alleged to have mailed a letter to the federal courthouse in Memphis, TN, in which he threatened a U.S. District Judge. Then in May 2018, February 2019, and March 2020, Williams is alleged to have mailed letters to the federal courthouse in Little Rock in which he threatened two U.S. District Judges and an Assistant U.S. Attorney. Each threatening letter was mailed in violation of the laws of the United States.
Williams is currently an inmate in the Arkansas Department of Corrections as a result of a robbery and theft conviction in the Pulaski County Circuit Court.
If convicted, Williams faces up to 40 years in federal prison.
This case is being investigated by the Little Rock office of the U.S. Postal Inspection Service and prosecuted by Eastern District of Texas Assistant U.S. Attorney Jonathan R. Hornok.
A grand jury indictment is not evidence of guilt. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Whitewright Accountant Sentenced for Federal Violations in Embezzlement SchemeRead the Press Release
SHERMAN, Texas – A 50-year-old Whitewright, Texas woman has been sentenced to federal prison for violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox and FBI Dallas Special Agent in Charge Matthew J. DeSarno today.
Beverly Diane Cross pleaded guilty on Dec. 4, 2019, to wire fraud and was sentenced to 102 months in federal prison today by U.S. District Judge Amos L. Mazzant III. She was also ordered to pay restitution in the amount of $620,408.14.
According to information presented in court, from 2015 through June 2019, Cross worked at MicroFab as its accountant. Cross abused her position of trust as the company’s accountant to embezzle funds from MicroFab. Cross falsified payroll data and other company documents to pay herself unearned salary amounts and undue expense reimbursements over a four-year period. During the last two years of her fraud scheme, the average monthly amount of money she embezzled from the company totaled around four times her monthly salary. In one instance, Cross bought a car from another MicroFab employee for her son, but stole the precise amount of money from MicroFab to purchase the car. Cross’s fraudulent actions resulted in a loss of approximately $620,000 to MicroFab and caused a considerable negative impact to the company and its employees, many of which suffered salary reductions, and two of which lost their jobs.
“The defendant methodically planned and executed a scheme to steal from her employer with total disregard for the company or her co-workers,” said U.S. Attorney Stephen J. Cox. “However, she failed to account for the tenacity and perseverance of not only our federal agents, but the very employers who trusted her.”
“The defendant’s decision to steal from her employer caused salary reductions, job loss, and erased the earnings the company worked to accumulate for over 35 years,” said FBI Dallas Special Agent in Charge Matthew J. DeSarno. “Financial crime is not a victimless crime. The FBI and our law enforcement partners will pursue anyone who uses their position of trust for personal gain.”
This case was investigated by the Federal Bureau of Investigation’s Frisco Resident Agency of the Dallas Field Office and prosecuted by Special Assistant U.S. Attorney Todd M. Blessing and Assistant United States Attorney Christopher A. Eason.
Florida Man Sentenced for Federal Violations in East Texas Investment Fraud SchemeRead the Press Release
SHERMAN, Texas – A 42-year-old Navarre, Florida man has been sentenced to federal prison for violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox and FBI Dallas Special Agent in Charge Matthew J. DeSarno today.
Ivan T. Navarro-Jusino pleaded guilty on Dec. 18, 2019, to three counts of wire fraud and was sentenced to 120 months in federal prison today by U.S. District Judge Amos L. Mazzant III. The defendant was also ordered to pay restitution in the amount of $482,000.
According to information presented in court, from August 2012 through May 2018, Navarro-Jusino lied to an individual in the Eastern District of Texas, telling him that Navarro-Jusino had a high-performing investment fund and could invest the victim’s money in that fund. Navarro-Jusino also represented to the victim that there were a limited number of investors, leading the victim to believe that the fund was both exclusive and profitable. The victim eventually gave the defendant over $500,000, his life savings, believing that the defendant would invest this money. Instead, the defendant spent the funds on personal expenses such as tickets to a professional football game, a trip to Puerto Rico, and personal items such as a vehicle, jewelry, electronics, a car stereo, and furniture. Additionally, Navarro-Jusino spent approximately $43,000 of the victim’s funds to repay loans that relatives had made and to purchase a local business, which ultimately failed. Following receipt of the funds Navarro-Jusino lied about the status of the money in several emails that he sent to the victim telling him his money had grown to over $800,000 while in the investment fund—which was entirely false. The victim of Navarro-Jusino's scheme lost $482,000.
“The U.S. Attorney's Office and the FBI are focused on rooting out fraud and financial crime targeting individuals such this victim, who trusted the defendant with his life's savings," said U.S. Attorney Stephen J. Cox. "We will prosecute these crimes vigorously and to the full extent of federal law."
“The FBI will continue to investigate businesses or individuals that use deceptive schemes to steal money from investors,” said FBI Dallas Special Agent in Charge Matthew J. DeSarno. “We urge the public to use caution when researching investment opportunities and to contact us immediately if they become a victim of financial fraud.”
This case was investigated by the Federal Bureau of Investigation’s Frisco Resident Agency of the Dallas Field Office and prosecuted by the U.S. Attorney’s Office in Plano.
Former Administrator of Texarkana Assisted Living Facility Sentenced for Federal ViolationsRead the Press Release
TEXARKANA, Texas – A 43-year-old Little Rock, AR man has been sentenced to federal prison for federal violations in the Eastern District of Texas, announced U.S. Attorney Stephen J. Cox today.
Antonio Otero pleaded guilty on Oct. 29, 2019 to charges of equity skimming and was sentenced to 46 months in federal prison today by U.S. District Judge Robert W. Schroeder III. Otero was also ordered to pay restitution in the amount of $2 million to the U.S. Department of Housing and Urban Development.
According to information presented in court, from before 2011 until October 2015, Otero was the administrator of the Magnolia Alzheimer’s Assisted Living facility in Texarkana, Texas, and was instrumental in the founding and operation of the facility. In order to secure millions of dollars in necessary funding, Otero obtained a loan that was insured by the U.S. Department of Housing and Urban Development (HUD.) The HUD insured loan provided a favorable interest rate and did not require the owners of the Magnolia to take personal responsibility for the loan in the event of a default. Instead, HUD would suffer the financial loss in the event that the Magnolia defaulted on the loan. As a condition of this federal benefit, Otero and the owners of the Magnolia agreed to be bound by a regulatory agreement with HUD that prohibited them from removing equity from the Magnolia unless the loan was being paid and the Magnolia had surplus cash.
Instead of paying the HUD insured loan, Otero engaged in a scheme to skim equity from the Magnolia. For example, Otero took money from the Magnolia to pay for $3,952 of camera equipment, a $3,247 watch, $2,520 in landscaping for his personal residence, a $27,408 personal mortgage payment, a $12,750 down payment on a personal vehicle, and $1,540 tickets to a Dallas Cowboys football game. Additionally, he took money from the Magnolia and gave it to other individuals, including $13,000 for cosmetic surgery, $5,500 for a loan repayment, and $30,000 in equity distributions. In total, Otero took personal responsibility for causing a loss to the United States in the amount of $2 million.
This case was investigated by the Fort Worth Office of the U.S. Department of Housing and Urban Development’s Office of Inspector General and prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.
Stephen J. Cox Sworn in as Eastern District of Texas United States AttorneyRead the Press Release
BEAUMONT, Texas – Stephen J. Cox has taken the oath of office to become the United States Attorney for the Eastern District of Texas. Cox was appointed to the position by Attorney General William P. Barr pursuant to 28 U.S.C. § 546. Cox took the oath of office today from U.S. District Judge Michael Truncale.
“I am grateful to the Attorney General for appointing me to serve as the United States Attorney for the Eastern District,” said U.S. Attorney Cox. “That I will be working alongside the talented and dedicated men and women of this office and our partners in law enforcement is a distinct privilege. I look forward to leading the office during these challenging times, as we endeavor to protect the safety and security of our community while promoting and defending the rule of law.”
Cox, 42, of Houston, is the chief federal law enforcement official in the Eastern District of Texas, which includes 43 counties stretching from the Oklahoma border to the Gulf of Mexico. The district includes six fully staffed offices in Beaumont, Plano, Tyler, Sherman, Texarkana, and Lufkin with 120 employees, including 55 prosecutors. Cox is responsible for the prosecution of federal criminal offenses in the district, and will represent the United States in all civil litigation in the district.
Before being appointed as U.S. Attorney, Cox served as Deputy Associate Attorney General and Chief of Staff within the Department’s Office of the Associate Attorney General. In this role, Cox spearheaded numerous policy reforms relating to corporate enforcement and regulatory reform, as well as overseeing several Department matters relating to financial fraud and healthcare fraud. He also served as vice chair of the Deputy Attorney General’s working group on corporate enforcement and accountability, and as executive director of the Department’s regulatory reform task force.
Previously, Cox served on the William H. Webster Commission on the FBI, Counterterrorism, Intelligence, and the Events of Fort Hood, and as a senior advisor to the Director of U.S. Immigration and Customs Enforcement. Cox has also spent time in private practice, dealing with white collar investigations, ethics and compliance, and regulatory matters.
Cox has a B.S. degree from the Texas A&M University and J.D. degree from the University of Houston Law Center. He is a member of the Texas and District of Columbia bars. Cox and his family will make their home in Beaumont.
For more information about the U.S. Attorney’s Office for the Eastern District of Texas, please visit https://www.justice.gov/usao-edtx.
Attorney General William P. Barr Announces the Appointment of Stephen J. Cox as U.s. Attorney for the Eastern District of TexasRead the Press Release
WASHINGTON – Attorney General William P. Barr announced today the appointment of Stephen J. Cox as U.S. Attorney for the Eastern District of Texas, pursuant to 28 U.S.C. § 546, effective June 1, 2020.
As U.S. Attorney, Cox will serve as the chief federal law enforcement officer in the Eastern District of Texas. He will be in charge of overseeing 55 Assistant U.S. Attorneys and 65 support staff, across six offices. Cox will be responsible for the prosecution of federal criminal offenses in the district, and will represent the United States in all civil litigation in the district.
“I am pleased to appoint Stephen J. Cox as U.S. Attorney of the Eastern District of Texas. Steve has been a consummate professional and dedicated leader throughout his time in the Office of the Associate Attorney General,” said Attorney General William P. Barr. “Steve’s vast experience in areas ranging from regulatory reform to fraud to corporate compliance, and his reputation for fairness, sound judgment, and management, will serve him well in Eastern Texas.”
Before being appointed as U.S. Attorney, Cox served as Deputy Associate Attorney General and Chief of Staff within the Department’s Office of the Associate Attorney General. In his role, Cox spearheaded numerous policy reforms relating to corporate enforcement and regulatory reform, as well as overseeing several Department matters relating to financial fraud and healthcare fraud. He also served as vice chair of the Deputy Attorney General’s working group on corporate enforcement and accountability, and as executive director of the Department’s regulatory reform task force.
Previously, Cox served on the William H. Webster Commission on the FBI, Counterterrorism, Intelligence, and the Events of Fort Hood, and as a senior advisor to the Director of U.S. Immigration and Customs Enforcement. Cox has also spent time in private practice, dealing with white collar investigations, ethics and compliance, and regulatory matters.
Cox has a B.S. degree from the Texas A&M University and J.D. degree from the University of Houston Law Center. He is a member of the Texas and District of Columbia bars.
For more information about the U.S. Attorney’s Office for the Eastern District of Texas, please visit https://www.justice.gov/usao-edtx.
U.S. Attorney Brown Announces Departure from OfficeRead the Press Release
SHERMAN, TX - The United States Attorney’s Office for the Eastern District of Texas announced today the resignation of United States Attorney Joseph D. Brown, effective May 31, 2020.
“It has been the honor of a lifetime to serve as United States Attorney and to work with some of the finest prosecutors and support staff in the country. I am very proud of our accomplishments,” said Brown.
Under Brown’s leadership, the Eastern District played a major national role in carrying out President Trump’s “Initiative to Stop Opioid Abuse” by focusing prosecution resources on the illegal prescribing and dispensing drugs by doctors and pharmacies and cracking down on the international and domestic drug supply chains that have devastated communities, both urban and rural, throughout the United States.
In 2018, the Eastern District of Texas led the nation in the extradition of defendants out of Colombia for drug related crimes. “Our efforts to stop the deadly supply of drugs before they reached U.S. soil also extended into Mexico and other parts of South America,” said Brown. In 2019, Brown’s office led the state of Texas and was fourth in the nation in the number of high-level, sophisticated organized crime cases indicted pursuant to the Justice Department’s Organized Crime Drug Enforcement Task Forces (OCDETF) program. By 2020, the number of criminal defendants prosecuted in the Eastern District increased 24% from levels of just two years before, with a 40% increase in violent crime prosecutions and a 100% increase in the number of illegal immigration prosecutions.
Additional drug enforcement efforts included the prosecution of numerous “pill mill” physicians involved in the illegal distribution of opioid prescriptions. Brown successfully prosecuted Dr. Howard Diamond of Sherman for illegally distributing opioids, securing a 20-year prison sentence in 2018.
“We must win the fight against opioid abuse in order to save our country. But in order to be effective, we must be willing to prosecute all facets of the expansive network that feeds these destructive drugs into our communities. Players both big and small must meet equal justice under the law,” said Brown.
Brown secured a Project Safe Neighborhood grant of $100,000 for the Paris Police Department, stood up Violent Crime Task Forces in the Sherman and Beaumont divisions of the District and created an Appellate Section within the United States Attorney’s Office.
Brown’s tenure as United States Attorney also included increased disaster preparedness trainings for law enforcement, public corruption prosecutions, and strengthening relations between, local, state, and federal law enforcement through the Eastern District.
Brown will be pursuing opportunities in the private and public sectors. “I’m excited about the next chapter,” said Brown. There are many exciting opportunities on the horizon and some of those will become apparent in the coming days.”
Brown, 50, was appointed by President Trump to the position of United States Attorney in 2018. He had previously served as Grayson County District Attorney.
“I want to thank President Trump for allowing me the honor of serving as United States Attorney,” said Brown. “The President has led important efforts to fight crime and keep us safe, and I fully support those pro-law enforcement measures. I also want to express my deep gratitude to Senators John Cornyn and Ted Cruz for their support.”
Brown currently resides in Grayson County with his wife Megan and their two daughters.
Jefferson County Man Indicted for Soliciting Murder-For-HireRead the Press Release
BEAUMONT, Texas – A 46-year-old Port Arthur, Texas man has been indicted for federal violations in the Eastern District of Texas, announced U.S. Attorney Joseph D. Brown today.
Santos Orellana-Hernandez was indicted by a federal grand jury on May 20, 2020 and charged with the use of interstate commerce facilities in the commission of murder-for-hire.
According to the indictment, from January 17, 2020 until March 18, 2020, in the Eastern District of Texas and elsewhere, Orellana-Hernandez used a telephone to solicit the murder of two persons in violation of the laws of the United States.
If convicted, Orellana-Hernandez faces up to 10 years in federal prison.
This case is being investigated by the Federal Bureau of Investigation and the Port Arthur Police Department and prosecuted by Assistant U.S. Attorney John B. Ross.
A grand jury indictment is not evidence of guilt. A defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Texas Man Charged with $5 Million COVID-Relief FraudRead the Press Release
A Texas man has been charged in the Eastern District of Texas with allegedly filing bank loan applications fraudulently seeking more than $5 million dollars in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Samuel Yates, 32, of Maud, Texas, allegedly sought millions of dollars in forgivable loans guaranteed by the SBA from two different banks by claiming to have over 400 employees earning wages when, in fact, no employees worked for his purported business.
Yates is charged by way of a federal criminal complaint with violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the SBA.
“This defendant allegedly sought to steal millions of dollars in loans intended to aid legitimate small businesses grappling with the economic effects of COVID-19,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “The department and our law enforcement partners will use all the tools at our disposal to investigate and prosecute frauds against the Paycheck Protection Program.”
“Any time the government provides large amounts of money to the public there are people who will try to cheat the system,” said U.S. Attorney Joseph D. Brown of the Eastern District of Texas. “We encourage lenders to be very careful, and to report suspicious applications. It is a priority of the Department of Justice to deter and prosecute this type of fraud.”
“The Treasury Inspector General for Tax Administration will aggressively pursue those who try to use the Internal Revenue Service to facilitate their schemes to defraud coronavirus relief programs,” said Special Agent in Charge Dale Forrester of the Treasury Inspector General for Tax Administration’s Cybercrime Investigations Division. “Our successes today would have not been possible without the joint efforts of the Small Business Administration Office of the Inspector General, the Department of Justice and other law enforcement partners.”
“Providing false statements to gain access to SBA’s programs will be aggressively investigated by our office,” said Special Agent in Charge Donald Abram of SBA OIG’s Central Region. “SBA OIG and its law enforcement partners are poised to root out wrongdoers in the Paycheck Protection Program and maintain its integrity. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”
“Today’s arrest should serve as a strong deterrent to anyone considering exploiting the COVID-19 pandemic to enrich themselves through fraud. These individuals have no concern for legitimate businesses whose employees and their families are hurting financially during these unprecedented times,” said Special Agent in Charge Ryan L. Spradlin of U.S. Immigration and Custom’s Homeland Security Investigations (HSI) Dallas. “HSI stands at the ready to utilize its ample investigative mandate to assist in rooting out such unscrupulous individuals, and hold them accountable for their crimes.”
According to court documents unsealed today in U.S. District Court in Texarkana, Yates allegedly made two fraudulent applications to two different lenders for loans guaranteed by the SBA for COVID-19 relief through the Paycheck Protection Program (PPP). In the application submitted to the first lender, Yates allegedly sought $5 million in PPP loan proceeds by fraudulently claiming to have 400 employees with an average monthly payroll of $2 million. In the second application, Yates claimed to employ over 100 individuals and was able to obtain a loan over $500,000. With each application, Yates submitted a list of purported employees that he obtained from a publicly available random name generator on the internet. He also submitted forged tax documents with each application.
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75 percent of the forgiven amount for payroll.
A federal criminal complaint is merely an accusation. A defendant is presumed innocent unless and until proven guilty.
Trial Attorney Louis Manzo of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Frank Coan for the Eastern District of Texas are prosecuting the case.
The Justice Department acknowledges and thanks the SBA Office of Inspector General, and U.S. Postal Inspection Service for their efforts investigating this matter.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
U.S. Attorney J. Douglas Overbey Announces $349,956 Award to Address Covid-19 Pandemic in TennesseeRead the Press Release
Knoxville, Tenn. – U.S. Attorney J. Douglas Overbey of the Eastern District of Tennessee today announced that the City of Knoxville received $349,956 in Department of Justice grants to respond to the public safety challenges posed by the outbreak of COVID-19.
The grant is available under the Coronavirus Emergency Supplemental Funding program, authorized by the recent stimulus legislation signed by President Trump. Other jurisdictions can determine if they are eligible for funds and may apply immediately by visiting this website. The Justice Department is moving quickly, awarding grants on a rolling basis and aiming to have funds available for drawdown as soon as possible after receiving applications.
“As this country continues to fight COVID-19, our office remains committed to deterring, investigating, and prosecuting those who seek to take advantage of the COVID-19 pandemic. This funding will help many of the communities struggling in these trying times and provide some much-needed relief to our district,” said U.S. Attorney Overbey.
“The outbreak of COVID-19 and the public health emergency it created are sobering reminders that even the most routine duties performed by our nation’s public safety officials carry potentially grave risks,” said Katharine T. Sullivan, Principal Deputy Assistant Attorney General for the Office of Justice Programs. “These funds will provide hard-hit communities with critical resources to help mitigate the impact of this crisis and give added protection to the brave professionals charged with keeping citizens safe.”
The law gives jurisdictions considerable latitude using these funds for dealing with COVID-19. Potential uses include hiring personnel, paying overtime, purchasing protective equipment, distributing resources to hard-hit areas and addressing inmates’ medical needs.
Agencies eligible for the fiscal year 2019 State and Local Edward Byrne Memorial Justice Assistance Grant Program are candidates for the emergency funding. Local units of government and tribes will receive direct awards separately according to their jurisdictions’ allocations.
The Office of Justice Programs, directed by Principal Deputy Assistant Attorney General Katharine T. Sullivan, provides federal leadership, grants, training, technical assistance and other resources to improve the nation’s capacity to prevent and reduce crime, assist victims and enhance the rule of law by strengthening the criminal and juvenile justice systems. More information about OJP and its components can be found at www.ojp.gov.
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Engineer Charged in Texas with COVID-Relief FraudRead the Press Release
An engineer has been charged in the Eastern District of Texas with allegedly filing bank loan applications fraudulently seeking more than $10 million dollars in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Shashank Rai, 30, of Beaumont, Texas, allegedly sought millions of dollars in forgivable loans guaranteed by the SBA from two different banks by claiming to have 250 employees earning wages when, in fact, no employees worked for his purported business.
Rai is charged by way of a federal criminal complaint with violations of wire fraud, bank fraud, false statements to a financial institution, and false statements to the SBA.
“As alleged, Rai fraudulently pursued millions of dollars in loans intended for legitimate small businesses suffering the economic hardships of the COVID-19 pandemic,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “The department and our law enforcement partners will remain vigilant in our efforts to protect critical CARES Act relief programs from fraud and abuse.”
“The behavior in this case was very brazen,” said U.S. Attorney Joseph D. Brown of the Eastern District of Texas. “Those who submit these applications for loans or other assistance need to understand that there are people checking on the representations made, and those representations are made under oath and subject to the penalties of perjury. Federal agencies are watching for fraud, and people who lie and try to cheat the system are going to be caught and prosecuted.”
“To support small and community banks, the Federal Home Loan Banks can accept Paycheck Protection Program (PPP) loans as collateral when making loans to their members,” said Richard Parker, Acting Deputy Inspector General for Investigations for the Federal Housing Finance Agency, Office of Inspector General. “The Office of Inspector General is proud to work with our partners in law enforcement to prevent, detect, and deter attempts to perpetrate fraud in the Federal Home Loan Bank System and steal the assistance intended for small business owners and employees under this important part of the CARES Act.”
“Today’s charges hold the defendant responsible for his actions to swindle money out of a federal program intended to help those in need during a pandemic crisis,” said Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC OIG). “When an individual cheats the Paycheck Protection Program out of money, it deprives hard-working Americans and deserving small businesses. The FDIC OIG is committed to working with our law enforcement partners to investigate financial crimes in order to preserve the integrity of the nation’s banking sector.”
“SBA OIG and its law enforcement partners will aggressively investigate fraud in the Paycheck Protection Program,” said SBA Inspector General Hannibal “Mike” Ware. “The nation’s small businesses are counting on this program, and we will safeguard it to maintain the public trust. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”
“While the government is trying to help out small businesses, scammers are out there trying to help themselves,” said Inspector in Charge Delany De Leon-Colon of the Criminal Investigations Group. “Postal Inspectors are proud to work alongside the Department of Justice and our other law enforcement partners to identify and investigate anyone who capitalizes on this pandemic to commit fraud. The U.S. Postal Inspection Service is committed to protecting small business owners, and the American public, from those who seek to do financial harm.”
According to court documents unsealed today in U.S. District Court in Beaumont, Rai allegedly made two fraudulent claims to two different lenders for seek loans guaranteed by the SBA for COVID-19 relief through the PPP. In the application submitted to the first lender, Rai allegedly sought $10 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of $4 million. In the second application, Rai allegedly sought approximately $3 million in PPP loan proceeds by fraudulently claiming to have 250 employees with an average monthly payroll of approximately $1.2 million.
According to court documents, the Texas Workforce Commission provided information to investigators of having no records of employee wages having been paid in 2020 by Rai or his purported business, Rai Family LLC. In addition, the Texas Comptroller’s Office of Public Accounts reported to investigators that Rai Family LLC reported no revenues for the fourth quarter of 2019 or the first quarter of 2020.
According to court documents, materials recovered from the trash outside of Rai’s residence included handwritten notes that appear to reflect an investment strategy for the $3 million, which is the amount of money that Rai allegedly sought from the second lender.
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.
The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within eight weeks of receipt and use at least 75 percent of the forgiven amount for payroll.
A federal criminal complaint is merely an accusation. A defendant is presumed innocent unless and until proven guilty.
Assistant Chief L. Rush Atkinson and Trial Attorney Lou Manzo of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Frank Coan for the Eastern District of Texas are prosecuting the case.
The Justice Department acknowledges and thanks the FHFA Office of Inspector General, FDIC Office of Inspector General, SBA Office of Inspector General, and U.S. Postal Inspection Service for their efforts investigating this matter.
Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
U.S. Attorney and IRS Advise Caution Regarding IRS Economic Impact PaymentsRead the Press Release
SHERMAN, TX – The Internal Revenue Service will begin making COVID-19 economic impact payments in a matter of weeks. For most Americans, this will be a direct deposit into your bank account. For the unbanked, elderly or other groups who have traditionally received tax refunds via paper check, they will receive their check in this same manner.
United States Attorney Joseph D. Brown and IRS-Criminal Investigation Special Agent in Charge Tamera Cantu want to warn local Texans that criminals are well-aware of these payments and will be actively attempting to steal these funds when they are most needed. Unsolicited phone calls, emails, text messages or other communications pretending to be from the IRS are likely a scam.
“We want the public to be very careful as these checks and payments go out,” said United States Attorney Joe Brown. “We want these funds to be used for the right purposes. People need to use healthy skepticism about any contact they receive that deals with the payments they will soon be receiving.”
IRS-CI Special Agent in Charge Tamera Cantu of the Dallas Field Office offers the following information and tips to spot a scam and how citizens can report fraudulent activities:
- The IRS will NOT call and ask you to verify your payment details. Do NOT give your bank account, debit account, or PayPal account information to anyone - even if someone claims it's necessary to get your check. It's a scam.
- If you receive a call, do NOT engage with scammers, even if you want to tell them that you know it's a scam. Just hang up.
- If you receive texts or emails claiming that you can get your money faster by sending personal identifying information or clicking on links, delete these texts and emails. Do NOT click on any links in those texts or emails.
- If you receive a “check” for an odd amount (especially one with cents), or a check that requires you to verify the check online or by calling a number, it’s a scam.
- Remember, scammers change tactics. Callers can be aggressive and threatening. Do not be bullied into disclosing information or in making any payment.
- You can get the most up-to-date information directly from the IRS at irs.gov/coronavirus.
- Residents of Eastern Texas can contact the local IRS-CI field office with violations and suspected fraud at [email protected].
Special Agent in Charge Cantu warns the public, “As the agency responsible for issuing economic impact payments, the IRS unfortunately expects some bad actors to execute fraud schemes in an attempt to take advantage of the situation. IRS-CI will work diligently with the United States Attorney’s Office, Eastern District of Texas, and all of our law enforcement partners to disrupt and dismantle any fraud schemes related to the COVID-19 pandemic. This is the time for every American to be vigilant in this fight against criminals and safeguard your personal and other privileged information.”
To report suspected fraud, please contact the National Center for Disaster Fraud by calling 866-720-5721 or sending an email to [email protected].
Justice Department Protects Eastern District of Texas from COVID-19 FraudstersRead the Press Release
SHERMAN, Texas - On March 13, 2020, President Donald J. Trump declared the outbreak of COVID-19 (the coronavirus) in the United States to be a national emergency. Unfortunately, criminals and scammers are trying to take advantage of the crisis for their own profit. The U.S. Attorney’s Office for the Eastern District of Texas through its United States Attorney, Joseph D. Brown, has made it a top priority to detect, investigate, and prosecute anyone who attempts to exploit the anxiety and uncertainty surrounding the COVID-19 outbreak to defraud other people.
“The public needs to be careful during the coming weeks to not fall victim to criminals who will try to take advantage of this health crisis,” said United States Attorney Brown. “The Justice Department has made it a priority to stop scams and frauds, and we will move aggressively against anyone who does that. We encourage anyone who becomes aware of a potential fraud, to report it.”
Scammers have already devised numerous methods for defrauding people in connection with COVID-19. They are setting up websites, contacting people by phone and email, and posting disinformation on social media platforms. To report fraud, please contact:
- National Center for Disaster Fraud (NCDF):
Telephone hotline:1-866-720-5721
Email address: [email protected]
- Federal Bureau of Investigation (FBI):
- Submit a complaint online at https://tips.fbi.gov/
For cyber or internet related scams, submit your complaint at https://www.ic3.gov/default.aspx
Telephone: 1-800-CALL-FBI (225-5324)
- EDTX COVID-19 Fraud Coordinator, Assistant U.S. Attorney Frank Coan
Telephone: 903-590-1400
Some examples of scams linked to COVID-19 include:
- Treatment scams: Scammers are selling fake vaccines, medicines, tests, and cures for COVID-19.
- Supply scams: Scammers are claiming they have in-demand products, like cleaning, household, health, and medical supplies. When an order is placed, the scammer takes the money and never delivers the order.
- Charity scams: Scammers are fraudulently soliciting donations for non-existent charities to help people affected by the COVID-19 crisis. Scammers often use names that are similar to the names of real charities.
- Phishing scams: Scammers, posing as national and global health authorities such as the World Health Organization (WHO) and the Centers for Disease Control and Prevention (CDC), are sending fake emails or texts to trick the recipient into sharing their personal information, including account numbers, Social Security numbers, or login IDs and passwords.
- App scams: Scammers are creating mobile apps designed to track the spread of COVID-19 to insert malware that will compromise users’ devices and steal personal information.
- Provider scams: Scammers pretending to be doctors and hospitals that have treated a friend or relative for COVID-19 and demand payment for that treatment.
- Investment scams: Scammers are promoting the stock of small companies, which have limited publicly-available information, using false or misleading claims that the companies’ stock will increase dramatically due to the COVID-19 outbreak, such as claims that a company can prevent, detect, or cure COVID-19.
- Price gouging: Individuals and businesses selling essential goods, like hand sanitizer, for significantly higher prices than in a non-emergency setting.
The public can take the following steps to help protect against these scams:
- Independently verify the identity of any company, charity, or individual that contacts you regarding COVID-19.
- Check the websites and email addresses offering information, products, or services related to COVID-19. Be aware that scammers often employ addresses that differ only slightly from those belonging to the entities they are impersonating. For example, they might use “cdc.com” or “cdc.org” instead of “cdc.gov.”
- Be wary of unsolicited emails offering information, supplies, or treatment for COVID-19 or requesting your personal information for medical purposes. Legitimate health authorities will not contact the general public this way.
- Do not click on links or open email attachments from unknown or unverified sources. Doing so could download a virus onto your computer or device.
- Make sure that the anti-malware and anti-virus software on your computer is operating and up to date.
- Ignore social media and email offers for a COVID-19 vaccine, cure, or treatment. Remember, if there is a medical breakthrough, you will not hear about it for the first time through an email, online ad, or unsolicited sales pitch.
- Check online reviews of any company offering COVID-19 products or supplies. Avoid companies whose customers have complained about not receiving items.
- Research any charities or crowdfunding sites soliciting donations in connection with COVID-19 before giving. Remember, an organization may not be legitimate even if it uses words like “CDC” or “government” in its name or has reputable looking seals or logos on its materials. For online resources on donating wisely, visit the Federal Trade Commission (FTC) website (https://www.consumer.ftc.gov/features/how-donate-wisely-and-avoid-charity-scams).
- Be wary of any business, charity, or individual requesting payments or donations in cash, by wire transfer, gift card, or through the mail. Do not send money through any of these channels.
- Be cautious of “investment opportunities” tied to COVID-19, especially those based on claims that a small company’s products or services can help stop the virus. If you decide to invest, carefully research the investment beforehand. For information on how to avoid investment fraud, visit the U.S. Securities and Exchange Commission (SEC) website (https://www.investor.gov/protect-your-investments/fraud/how-avoid-fraud/what-you-can-do-avoid-investment-fraud).
The United States Attorney’s Office also cautions against individuals or businesses that may have accumulated medical supplies or devices beyond what they reasonably need on a daily basis for the purpose of selling them in excess of prevailing market prices. It is illegal to acquire medical supplies and devices designated by the Secretary of Health and Human Services as scarce in order to hoard them or sell them for excessive prices. Although no items have yet been so designated, the process for such designation is underway, and it is anticipated that certain supplies will be designated in the near future.
This does not mean that the Justice Department will pursue regular Americans who are stocking up on the necessities of daily life or businesses acquiring materials reasonably needed for their own use. Similarly, no action will be taken against manufacturers or suppliers who are working with the government and health care providers to combat this crisis. However, bad actors who amass critical supplies either far beyond what they could use or for the purpose of profiteering will be aggressively pursued. Scarce medical supplies need to be going to hospitals for immediate use in care, not to warehouses for later overcharging.
For the most up to date information on the COVID-19 outbreak and the federal response, check https://www.cdc.gov/coronavirus/2019-ncov/index.html
- National Center for Disaster Fraud (NCDF):
Limestone County Man Indicted for Possession of 14 Kilos of Cocaine in Titus CountyRead the Press Release
TEXARKANA, Texas –A 45-year-old Mexia, Texas man has been indicted for possession of cocaine with intent to distribute in the Eastern District of Texas, announced U.S. Attorney Joseph D. Brown today.
Cedric Ellis was named in an indictment returned by a federal grand jury on March 18, 2020. Ellis appeared in federal court today in Texarkana and will be held in custody until the resolution of this case.
According to the indictment and other court documents, on Feb.21, 2020, Ellis was driving east on Interstate 30 through Titus County when a Trooper with the Texas Department of Public Safety, Highway Patrol Division stopped him for following too closely. After the trooper’s interactions with Ellis and his passengers—an adult female and a minor—raised his suspicion, the trooper deployed his canine partner, who alerted to the presence of a controlled substance. Inside the vehicle, the trooper found 14 kilogram-sized bundles of cocaine. Ellis took responsibility for the cocaine and was arrested.
If convicted, Springer faces a minimum of ten years and up to life in federal prison, a fine of up to $10 million, and forfeiture of $420,000.00 in U.S. currency.
This case is being investigated by the Tyler Resident Office of the Dallas Division of the Drug Enforcement Administration with assistance from the Texas Department of Public Safety, Highway Patrol and Criminal Investigation Divisions in Mt. Pleasant. The case is being prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.
An indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Bowie County Sex Offender Indicted for Possession of Child PornographyRead the Press Release
TEXARKANA, Texas –A 60-year-old Bowie County man has been indicted for possessing child pornography in the Eastern District of Texas, announced U.S. Attorney Joseph D. Brown today.
William Johnson Springer was named in an indictment returned by a federal grand jury on March 18, 2020. Springer appeared in federal court today in Texarkana and will be held in custody until the resolution of this case.
According to the indictment, on Sep. 18, 2019, Springer possessed child pornography on a cell phone. Included among the images of child pornography were videos that depict the rape of a prepubescent minor, an infant, and a child in bondage.
Springer was previously convicted of possession of child pornography in the U.S. District Court for the Northern District of Oklahoma. On Feb. 9, 2009, he was sentenced to 67 months in federal prison and five years of supervised release as a result of that conviction. Springer also has pending charges for failure to comply with registration requirements in the 202nd District Court in Bowie County.
If convicted, Springer faces not less than ten and not more than 20 years in federal prison.
This case is being investigated by the Texarkana Resident Agency of the Dallas Field Office of the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Jonathan R. Hornok.
An indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Van Zandt County Man Sentenced for Federal ViolationsRead the Press Release
TYLER, Texas – A 56-year-old Grand Saline, Texas man has been sentenced to federal prison for drug trafficking violations in the Eastern District of Texas announced U.S. Attorney Joseph D. Brown today.
Andrew Mark Harris pleaded guilty on Aug. 26, 2019, to conspiracy to distribute and possess with intent to distribute methamphetamine and was sentenced to 71 months in federal prison by U.S. District Judge Jeremy D. Kernodle on March 17, 2020. Judge Kernodle also ordered forfeiture of $1500, representing proceeds received by the defendant because of his drug distribution.
According to information presented in court, on July 14, 2018, Harris was stopped in Van Zandt County, Texas, for a traffic violation. At the time of the stop, he possessed approximately 1.4 grams of a mixture or substance containing methamphetamine, which he possessed with intentions to distribute to others.
Harris admitted to being involved in a conspiracy with others to obtain and distribute methamphetamine from July 2018 through at least May 2019. As part of that conspiracy, he obtained methamphetamine for resale and sold methamphetamine to others. He admitted that he was responsible, directly, for the possession with intent to distribute of at least 50 grams of a mixture or substance containing methamphetamine, and that the value of that methamphetamine was at least $1,500.
This case was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Van Zandt County Sheriff’s Office and the Texas Department of Public Safety and prosecuted by Assistant U.S. Attorney Alan Jackson.
Three Marshall Men Arrested for Trafficking MethamphetamineRead the Press Release
MARSHALL, Texas - U.S. Attorney Joseph D. Brown announced today that three individuals have been arrested pursuant to a federal indictment charging them with drug and firearms violations in the Eastern District of Texas.
A federal grand jury returned the 15-count indictment on Feb. 19, 2020, charging Danny Brian Hernandez, 27; Ronald Charles Parker, 31; and Armando Ivan De La Torre, 24, all of Marshall, with being involved in a conspiracy to traffic methamphetamine in the area.
According to court documents, the defendants have been charged with one count of conspiracy to distribute methamphetamine, 13 counts of possession with intent to distribute methamphetamine, and one count of carrying a firearm during a drug offense. Hernandez, Parker, and De La Torre were arrested today in Marshall. If convicted, the defendants face up to life in federal prison.
This case is the result of a joint investigation by the Federal Bureau of Investigation, Bureau of Alcohol, Tobacco, Firearms and Explosives; Texas Department of Public Safety; Marshall Police Department, and Harrison County Sheriff's Office. The case is being prosecuted by Assistant U.S. Attorney Lucas Machicek.
An indictment is not evidence of guilt. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
Smith County Man Sentenced to over 19 years for Federal Drug TraffickingRead the Press Release
TYLER, Texas – A 27-year-old Tyler, Texas man has been sentenced to federal prison for drug trafficking violations in the Eastern District of Texas announced U.S. Attorney Joseph D. Brown today.
Dakota Allen pleaded guilty on Sep. 12, 2019, to possession with intent to distribute methamphetamine and was sentenced to 235 months in federal prison by U.S. District Judge Jeremy D. Kernodle on March 17, 2020. Judge Kernodle also ordered forfeiture of $5,000 seized from the defendant.
According to information presented in court, on March 7, 2019, Allen and co-defendant, Haleigh Morris, were stopped in Smith County, Texas, for a traffic violation. At the time of the stop, they were in possession of approximately one kilogram of methamphetamine located in a camo zipper bag, along with $6,250 in cash, ziplock bags, a digital scale, and drug paraphernalia. Another $956 cash was in the center console. During the traffic stop, Allen attempted to drive off and evade arrest. During this time, the defendants threw the camo zipper bag out the window before Allen wrecked the vehicle. They were both indicted on April 17, 2019.
This case was investigated by the Bureau of Alcohol, Tobacco, Firearms and Explosives, the Drug Enforcement Administration, and the Smith County Sheriff’s Office and prosecuted by Assistant U.S. Attorney Allen Hurst.
Collin County Man Sentenced for Sending Threatening Social Media TextsRead the Press Release
PLANO, Texas – A 23-year-old Richardson, Texas man has been sentenced to prison for federal violations in the Eastern District of Texas announced U.S. Attorney Joseph D. Brown and FBI Special Agent in Charge Matthew J. DeSarno.
Rahul Ramesh Joshi pleaded guilty on Oct. 3, 2019 to sending threatening communications to injure another, in interstate commerce, and was sentenced to 48 months in federal prison by U.S. District Judge Amos Mazzant on March 6, 2020.
According to information presented in court, in December 2018, a federal law enforcement agent began investigating a complaint from a female Snapchat user. She allegedly received threatening messages on different messaging apps from several different users that all seemed to be connected. Further investigation revealed at least four confirmed victims in different states all receiving similar threatening messages. Joshi had lived in Michigan before attending the University of Texas and eventually moving to Richardson, Texas.
This case was investigated by the Federal Bureau of Investigation’s Dallas Field Office, University of Pittsburgh Police Department, University of Texas Police Department, and Wellesley Police Department in Massachusetts.
Houston Nurse Guilty in East Texas Health Care Kickback SchemeRead the Press Release
TYLER, Texas – A 54-year-old Houston Registered Nurse has pleaded guilty to federal violations in the Eastern District of Texas, announced U.S. Attorney Joseph D. Brown today.
Beryl-Anne Tufon Lobe pleaded guilty to conspiracy to pay for patient referrals in violation of the Anti-Kickback Statute today before U.S. Magistrate Judge John D. Love.
According to information presented in court, Lobe, a registered nurse, was the sole owner of Axion Healthcare Services, LLC. Based in Missouri City, Texas, Axion provided home health services to Medicare beneficiaries in the Eastern District of Texas and elsewhere. From approximately May-August 2015, Lobe engaged in a conspiracy to pay for patient referrals, in violation of the Anti-Kickback Statute. To find eligible Medicare beneficiaries, Lobe made illegal kickback payments to community liaisons – also known as “recruiters” or “marketers” – who recruited and referred Medicare beneficiaries to Axion. Kickbacks were also paid to Medicare beneficiaries for the purpose of arranging for home health services. Axion then billed Medicare more than $225,000 for home health services purportedly provided to those beneficiaries who had been obtained through these kickback arrangements.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by federally-funded programs, including Medicare, TRICARE, and Medicaid. The Anti-Kickback Statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.
Under federal statutes, Lobe faces up to 5 years in federal prison at sentencing. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
This case was investigated by the U.S. Department of Health and Human Services, Office of Inspector General, and the State of Texas Medicaid Fraud Control Unit. This case is being prosecuted by Assistant U.S. Attorney L. Frank Coan, Jr.
Smith County Man Guilty of Federal Drug Trafficking ViolationsRead the Press Release
TYLER, Texas – A 29-year-old Tyler, Texas, man has pleaded guilty to federal drug trafficking crimes in the Eastern District of Texas, announced U.S. Attorney Joseph D. Brown today.
Victor Hernandez, Jr., pleaded guilty to possession with intent to distribute methamphetamine before U.S. Magistrate Judge K. Nicole Mitchell on March 5, 2020.
According to information presented in court, on July 26, 2019, Hernandez distributed approximately 25 grams of methamphetamine to another person for $400 in an undercover transaction. During a later search of his residence, officers discovered ammunition. Hernandez admitted to being responsible for the distribution of between 20 and 35 grams of methamphetamine.
Under federal statutes, Hernandez faces up to 40 years in federal prison at sentencing. The statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
This case was investigated by the Federal Bureau of Investigation, the Smith County Sheriff’s Office, and the Tyler Police Department and prosecuted by Assistant U.S. Attorney Alan Jackson.